GTIS Partners (Real Estate - North America)

Corporate Overview

GTIS Partners is a global real estate investment firm in the Americas, headquartered in New York with 10 offices across the US, Europe, and Brazil. GTIS was founded in 2005 and is managed by President Tom Shapiro and partners Tom Feldstein, Rob Vahradian, João Teixeira, Peter Ciganik, Maristella Diniz, Ed McDowell and Robert McCall. 

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 US and Brazil. GTIS is active across a wide range of real estate sectors including including land development/ homebuilding, build-to-rent, single-family, multifamily, office, industrial/logistics and hospitality as well as opportunity zones investments. The firm invests at various points in the capital structure, including credit, common equity and structured equity. 

GTIS’ dedicated research professionals work hand-in-hand with its investment teams to identify macro trends early, including investing in Brazil in 2005, US residential in 2009 and single-family rental as an emerging asset class in 2010. In the US, GTIS has invested in over 200 assets across 40+ markets, including cities such as Phoenix, Dallas, Houston, Denver, Atlanta, Tampa and Charlotte. The US residential portfolio comprises assets across four primary strategies: land development, homebuilding, multifamily, and build-to-rent. 

GTIS takes a local approach to real estate investing with on-the-ground teams with over 100 employees and $4.5bn 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 OUTLOOK

The US economy continues to defy what had been widespread expectations of a recession. GDP grew at an annualised pace of 2.4% in Q2, above the 2% consensus estimate from Dow Jones. The better-than-expected growth is occurring in tandem with falling inflation. The annualised CPI reading for August was 3.7%, a steep decline from its peak at 9% in June of 2022, which was the highest rate since November 1981. ‘Core’ prices excluding food and energy costs are also falling significantly, with the core CPI rising just 0.3% month-over-month in August and 0.2% in July, an indication that inflation is not showing signs of resurgence. Together, these growth and inflation figures have bolstered optimism that the Federal Reserve can in fact engineer a ‘soft landing’ for the economy that will lower inflation while keeping the country out of a recession. At one point, this possibility seemed remote – as recently as May, almost 60% of economists surveyed by the National Association for Business Economics gave greater-than-even odds that the US would enter a recession in the next 12 months. However, by the July edition of the survey, that share was down to 29%.

The solid economic growth was powered by consumer spending, which increased 1.6% in the second quarter and made up about two-thirds of all economic output. Americans have more cash on hand than before the COVID- 19 pandemic, according to JPMorgan Chase data from 19m bank customers. In turn, consumer balance sheets and spending are supported by the continued strength of the job market and wage growth. The September addition of 336,000 jobs was roughly double the expected total, indicating that the economy continues to persevere in the face of multiple headwinds. Unemployment currently sits at 3.8%, very close to the lowest level in over half a century. Moreover, the number of unemployed US workers for every job opening, a ratio closely monitored by the central bank, has hovered in the 0.5-0.7 range since late 2021, which is not only well below the pre-pandemic level (around 1) but in fact the lowest level since at least 2000 when the data first became available. The tightness of the labour market is reflected in wage increases, up 4.2% year-over-year in September. Wage growth is now exceeding the rate of inflation, boosting household purchasing power and reinforcing the consumer spending outlook. Productivity also rebounded in Q2, rising sharply at a 3.7% annualised rate and helping to offset the increase in labour costs. 

Conflicting signals have complicated the Federal Reserve’s decision-making process on rates and inflation. The central bank last raised interest rates on 26 July to the highest level in 22 years, with Chairman Powell making it clear that another increase in 2023 was possible. Despite a significant drop, inflation remains higher than the Fed’s target rate of 2%, with core prices roughly double that threshold. One of the main drivers is the strength of the labour market, which has likely contributed to inflationary pressures. Yet, falling prices and growing hope for a soft landing are increasing the odds in the minds of many investors that the Fed is done raising rates for the year. As of early October, the CME’s FedWatch tool, which assigns probabilities based on 30-day Federal Funds futures pricing data, gives the bank just a 12% chance of raising rates during its November meeting and 26% for its December meeting.

US Real Estate Market Outlook 

Industrial 

• The sector has seen signs of demand normalising after two years of record growth, with absorption being less than a third of what it was this time last year. 
• Rents, however, have continued to show strength despite the slowing market. Long-term drivers of this include e-commerce expansion, manufacturing surges, and post-COVID supply chain realignment.

Office 

• The office sector continues to struggle, as work-from-home policies dictate a decreased need for corporate office space 
• Amid the overall slump, however, the market has become significantly bifurcated with a flight to newer, high-quality properties occurring 
• Offices built from 2015 onwards show direct vacancy levels 4% lower than that of the overall market and steady improvement quarter-to-quarter. 
• Asking rents for assets built in the past 10 years were 34% higher as of June 2023 than the overall national average. 

Residential 

• Multifamily: Strong waves of supply continue to come to market, with net absorption as of June 2023 enough to turn the sector net absorption positive on a rolling four-quarter basis. 
• Single-family: The sector has continued to show steady growth through 2023. With mortgages at their highest levels in decades, would-be homebuyers turn to the more affordable option. 
• Build-to-rent: Within SFR, build-to-rent communities show lower turnover relative to apartments. A robust pipeline coming to market indicates high demand, with 700 properties in some phase of development across the US as of June 2023. 

Investment principles & strategy

GTIS understands its role in social and environmental stewardship, and the impact of its real estate investments on the environment and surrounding communities. ESG considerations, including renewable energy and decarbonisation, are an important component of our investment approach, as sustainability has a vital role in minimising risk and protecting asset value. 

Since the initial publication of our ESG Policy in 2012, we have demonstrated an ongoing commitment to responsible environmental practices, with several of the firm’s funds placing in the top three of the Global Real Estate Sustainability Benchmark (GRESB) among their peers. In 2022, GTIS received the 10-year Founding member award from GRESB. 

US INVESTMENT STRATEGY OVERVIEW 

• Focus primarily on logistics and residential, or ‘beds and sheds’, two sectors with healthy long-term fundamental tailwinds 
• Focus primarily on development to take advantage of the spread between development yields and stabilised yields 

COMPONENTS OF GTIS US STRATEGY 

Multifamily/Homebuilding 

• Equity joint ventures in projects with demonstrated demand and positive market fundamentals driven by demographics  

Build-to-rent 

• Take advantage of GTIS’ in-house development capabilities by self-developing purpose built single-family rental communities 
• Build-to-rent is supported by operating efficiencies, deepening 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

Opportunity Zones 

• 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