Corporate Overview

GTIS Partners is a leading real estate investment firm in the Americas, headquartered in New York with offices in São Paulo, San Francisco, Los Angeles, Atlanta, Paris and Munich. GTIS was founded in 2005 and is managed by President Tom Shapiro and Senior Managing Directors Thomas Feldstein, Josh Pristaw, João Teixeira, Rob Vahradian and Amy Boyle.

The leadership team is comprised of seasoned real estate professionals with deep expertise in investment, development, asset management, legal and operations across multiple economic cycles. The collective experience of the leadership team allows GTIS to pursue and lead vertically integrated operating businesses in each of its chosen markets in the United States and Brazil. Most recently in 2018, GTIS established a Brazil Renewable Energy Infrastructure platform to pursue investment opportunities in i) onshore wind development; ii) solar pv development, and iii) operational renewable energy assets.

GTIS’ dedicated research professionals work hand-in-hand with its investment teams to identify macro trends early, including investing in Brazil in 2005, United States residential in 2009 and single-family rental as an emerging asset class in 2010. GTIS has emerged as a leading residential investor in the US post-crisis, with a portfolio footprint in 40 major markets in the ‘smile’ of the country with above average fundamentals. The US residential portfolio comprises 130- plus assets across four primary strategies: homebuilding, land development, urban infill acquisition and development, and single-family rental.

GTIS takes a local approach to real estate investing with on-the- ground teams in six key markets with 84 employees and $4.1bn of gross real estate assets under management. With broad expertise in structuring, design, development and asset management, GTIS professionals oversee projects in residential, office, industrial/logistics and hospitality from concept to completion.

Sector forecasts

US MACRO THESIS:

Pandemic’s Impact on Real Estate is Mixed

  • COVID -19 will accelerate some existing trends and has spurred new ones that have large implications for real estate markets
  • The impact of COVID -19 varies but has created clear winners and losers by geography and sectors
  • Historic support from the Federal Reserve (Fed) and massive fiscal stimulus packages have helped soothe the acute financial distress, but a full recovery will require a solution to the virus
  • The pandemic, combined with election, spells elevated uncertainty and volatility into the new year
  • Policy-shift by the Fed towards holding interest rates lower for longer will be a tailwind for real estate for the foreseeable future

US MARKET OUTLOOK:

Residential

  • Demographics and COVID -19 have fuelled demand for suburban single- family homes and garden apartments with health-focused amenities
  • More affordable markets with a more diverse set of outdoor amenities, mainly those on the Sun Belt, have benefited from this shift
  • Urban markets facing distress with social amenities shut down and high-income households working remotely. However, urban gateways attract buyers from around the world and periods of distress have been temporary

Logistics

  • E-commerce adoption has been steadily rising over the past decade and was greatly accelerated by the pandemic
  • This, combined with expanding inventories to prevent future product shortages, will be a consistent driver of logistics real estate demand
  • Companies competing to capture e-commerce market growth and invest- ing to improve delivery times/operations will drive strong absorption
  • E-commerce operations require 2–3x the space of a similar brick and mortar operation, further bolstering the demand for more square footage

Office

  • While short-term office demand is likely to feel the effects of forced remote work adoption, the longer-term prospects are less clear
  • Companies shrinking their footprint in favour of a remote working model will be offset by increased square footage per employee
  • Calls for the end of the office are greatly exaggerated as many businesses have realised the value of an office for creativity and collaboration post-COVID. Major tech companies have expanded their footprints
  • Office using sectors have been more insulated from job loss, while some have even benefited like IT

GTIS Assessment: Residential real estate remains one of the most attractive sectors in the post pandemic world in GTIS’ view. The large millennial population hitting family formation years has combined with COVID -19 drivers to create a massive surge in demand for both rental and for-sale homes in lower density areas. Record low mortgage rates have added to this positive fundamental backdrop, creating a ‘goldilocks’ environment for residential real estate investing.

Logistics real estate benefits from the growing importance of e-commerce and the need for additional distribution space to meet consumers’ needs. COVID - 19 has also forced many operators to re-evaluate their supply chain to promote “resiliency over efficiency,” per Prologis, pointing to the need for modern distribution facilities adjacent to strategic population centres.

Capital markets have been stressed post-COVID with traditional lenders dialing back risk and alternative lenders focused on distress in their existing portfolio or new opportunities in retail and hospitality. Private homebuilders (over 60% of the market) continue to rely on higher-cost financing where capital availability has pulled back, while multifamily construction projects are faced with capital structure distress. Urban distress has presented deep value opportunities due to COVID -19, but should recover once social amenities return.

Investment principles & strategy

US INVESTMENT STRATEGY OVERVIEW

1. Underwrite greater margins of safety and focus on downside protection.

2. Focus on long-term growth drivers.

3. Invest in cash flowing assets to take advantage of attractive financing spreads.

COMPONENTS OF GTIS US STRATEGY

1) Focus on sectors strengthened by COVID -19

Residential/Homebuilding

  • Equity joint ventures in projects with demonstrated new home demand and positive market fundamentals driven by demographics
  • Provide high-yield structured debt and equity financing to underbanked homebuilders needing capital solutions due to the pullback in lending
  • Single-family build-to-rent supported by operating efficiencies, more favourable capital markets, and supportive long-term tailwinds

Industrial/Logistics

  • Develop high-quality assets focused on local demand
  • Focus on key distribution hubs with strong strategic regional importance
  • Target markets with growing consumer demand informed by migration and population growth

2) Take advantage of dislocated capital markets High-Yield Credit and Preferred Equity Opportunities

  • Homebuilders rely on higher-cost financing even during strong economies, and the opportunity has increased post-COVID
  • Traditional lenders have pulled back, especially for construction, creating capital distress and a need for a capital solution
  • Certain urban markets have been severely challenged by COVID 19, creating a distressed opportunity and an ability to enter at a deeply discounted basis

Attractive Financing Spreads

  • Record low interest rates and stable cap rates have created an opportunity to acquire cash flowing assets with historically wide financing spreads
  • Favour residential and industrial sectors assets due to cash flow upside from positive long-term trends accelerated by COVID -19

3) Early Mover in Areas with Positive Transformative Development Opportunity Zone Focus

  • Geographically defined areas with proven growth potential balanced between established gateway cities and growth markets
  • Diversified strategy to manage market and sector-specific risk
  • Not all opportunity zones are created equal – deep market research and submarket selection is critical to identify successful opportunities

Supporting documents

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