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, Phoenix, Dallas, Charlotte, Paris and Munich. 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 United States and Brazil. GTIS is active across a wide range of real estate sectors including build to rent, single-family, multifamily housing, 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. GTIS has emerged as a leading residential investor in the US post-crisis, with a portfolio footprint in 42 major markets in the ‘smile’ of the country with above-average fundamentals. The US residential portfolio comprises 172 assets across four primary strategies: multifamily/homebuilding, build-to rent, industrial/logistics and opportunity zones.

GTIS takes a local approach to real estate investing with on-the- ground teams in 10 key markets with 96 employees and $4.3bn 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 remains in a decidedly mixed state. GDP contracted for the first two quarters of the year, the commonly accepted (though unofficial) definition of a recession. However, the drop in Q1 stemmed primarily from a whopping 3.2-percentage point drag from real net exports (as exports fell 5.9 percent, while imports jumped 17.7 percent). The large increase in imports was a result of economic reopening as Covid restrictions were largely lifted at the beginning of the year and supply chain problems eased. In a convoluted way, the GDP drop was thus a sign of economic rebound. The smaller drop in Q2 GDP was ‘real’ in the sense that it reflected decreases in private inventory investment, residential fixed investment, and government spending, partly offset by a positive growth in personal consumption expenditures (PCE). As negative job growth typically accompanies the designation of an official recession, the National Bureau of Economic Research is unlikely to call a recession until at least another negative quarter.

Even as the economy contends with a slowdown, job growth remains robust, with unemployment reaching its lowest level in the last 50 years in Q2. Consumer spending has also stayed strong, with services outlays returning to pre-pandemic levels. Thanks to this strength, supported by large government stimulus handed out over the two years of the pandemic, inflation has risen at an unprecedented rate. Despite a series of aggressive rate hikes, inflation is stuck near four-decade highs. The Fed raised the reference rate by 75 basis points (bps) in September to a 3%-3.25% range, a steep increase from 0.25% in March when the current tightening cycle began. The 30-year fixed mortgage rates have increased in tandem from 3.1% at the end of 2021 to 6.7% in September; along with continued home price appreciation, this has sent housing payments skyward.

 

US MARKET OUTLOOK:

Residential

  • The housing market has seen a dramatic drop in sales volume in the last few months, with prices starting to show weakness in some markets. While negative for for-sale market, the growing unaffordability along with the rapid increase in mortgage rates, have created a more favorable environment for the rental market
  • Single-family rental (SFR) market in particular has grown more attractive as it offers the same suburban lifestyle that can be ‘rented’ without a need for large down-payment or expensive mortgage
  • Within SFR, build-to-rent (BTR) homes offer an excellent value proposition for renters than apartments, frequently offering more space and amenities akin to a suburban lifestyle

Industrial

  • The sector continues to see remarkable rent growth, as tight supply and accelerated e-commerce expansion remain strong drivers of sector activity
  • Space absorption may set record highs this year, while vacancies have fallen to record lows.
  • There are still potential headwinds, particularly higher construction costs and a slowdown in lease activity from higher interest rates

Office

  • The US office market has improved but is most likely to be the ultimate victim of structural changes brought on by the pandemic
  • Even as US office-using employment has increased by 1.9%, adding 635,000 jobs in the first half of the year, absorption of office space was negative
  • There are now about one million more supposedly office using workers as of June 2022 compared to pre-pandemic, yet the utilization data seems to indicate that they are not really ‘using’ the office after all
  • As current leases expire, many firms will likely reconsider the amount of office space they need and the resulting vacancy will put pressure on the value of the underlying real estate

Investment principles & strategy

SUSTAINABILITY: A CORE GTIS INVESTING PRINCIPLE

GTIS has demonstrated an ongoing commitment to responsible practices and ESG considerations since first establishing our policy to ESG and relevant practices in 2012. With the novelty of the fund, this year marks our first fund submission to GRESB, several other GTIS-managed funds have participated in the GRESB Real Estate Assessment since 2012, and GTIS has consistently received high scores with improvement each year. In 2021, GTIS received Gold level recognition by Green Lease Leaders, a programme of the Institute for Market Transformation (IMT) and the US Department of Energy (DOE), for our efforts to incorporate green leasing clauses into our lease agreements and our work with tenants to adopt environmental best practices. As the fund properties move from the development to the operational phase, we plan to institute green leasing practices as practicable.

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 stabilized 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.

 

 

 

Supporting documents

Click link to download and view these files