John Norris is the director of private wealth at CrowdStreet Advisors. Norris is responsible for expanding relationships with wealth managers, including RIAs, family offices, broker-dealers and fintech platforms. CrowdStreet Advisors provides advisors and their clients with access to curated, private commercial real estate opportunities selected from CrowdStreet’s proprietary deal flow source from a deep network of 300 real estate sponsors, developers, and operators.
Russ Alan Prince: Tell us about CrowdStreet Advisors and what is different or unique about your strategy for investing in commercial real estate.
John Norris: We are a boutique alternative investment manager focused on providing advisors and their clients access to unique, private commercial real estate projects. The genesis of CrowdStreet Advisors was to fill a gap that we saw in the market. A majority of capital being deployed into private real estate funds by advisors has been put towards core and core-plus-focused strategies. We felt that advisors and their clients were potentially missing opportunities to add a growth-oriented element to their portfolios.
At CrowdStreet Advisors, we created a solution that allows advisors access to value-add, opportunistic, distressed and ground-up development deals that can be a complement to core strategies and potentially provide exposure to additional growth. To access direct, growth-oriented, middle-market private commercial real estate, advisors can utilize C-REIT, our flagship REIT. Or they can access our thematic funds—Multifamily, Life Sciences, etc.—or work with us to create custom funds where we can be much more tailored in the strategies.
Prince: How should advisors think about allocations for their clients with regard to commercial real estate under the traditional 60/40 model?
Norris: For decades, the 60/40 allocation between stocks and bonds has served as the foundation for many investment portfolios. But as interest rates continued to decline and returns from equities became more correlated and volatile, advisors began to recognize the benefits of a 50/30/20 portfolio that included alternative investments.
Real estate is more than an alternative investment, it’s a tangible, long-term asset that, historically, has been less correlated to public markets and known for its potential to help mitigate overall volatility and the effects of inflation when added to an investment portfolio. So where does CrowdStreet Advisors fit in? If half of the 20% allocation has been invested in private real estate, it has typically been in core strategies, but now advisors can provide their clients with additional opportunities for potential growth beyond core strategies through funds such as C-REIT.
Private real estate is, by nature, generally less volatile than the stock market. This lack of volatility does not necessarily translate to private real estate not fluctuating in or losing value. Further, the value of private real estate investments will fluctuate, and the value of real estate often lags behind general market conditions.
Prince: There are a few sectors within commercial real estate that are out of favor, but where does CrowdStreet Advisors see opportunities right now?
Norris: Commercial real estate has been getting a bad reputation lately, largely in part due to some poorly performing sectors that are being treated as a proxy for the entire asset class. The important thing to remember is that commercial real estate is more nuanced.
All real estate is local, and there is not a single national real estate market. You have individual markets and their submarkets. And each sector within the market and submarket are diverse, so you can usually find opportunities to put your money to work whether it is multifamily, industrial or life sciences, in markets across the country.
A few of the opportunities we see are shopping centers anchored by grocery stores, which we are attracted to due to the non-discretionary nature of grocery shopping. Hospitality also has strong fundamentals that continue to improve, and multifamily, specifically within the Sunbelt, is in a reasonably good position because of the job and population growth the region is seeing.
Prince: How is CrowdStreet’s C-REIT fund structured to help advisors and their clients access private commercial real estate?
Norris: As CrowdStreet Advisor’s flagship fund and first REIT, CrowdStreet REIT I Inc. (C-REIT) is uniquely structured and offers investors a way to invest in multiple CRE projects focused on growth and capital appreciation in middle markets. C-REIT was created to be an entry point for investors looking for a simple way to invest in multiple private CRE investments: 20+ underlying properties, a $25K investment minimum, and simple 1099 tax reporting. Ultimately the goal of the fund is to help advisors balance real estate portions of their portfolios which often already have an income component from traditional REITs.
Russ Alan Prince is the executive director of Private Wealth magazine and chief content officer for High-Net-Worth Genius. He consults with family offices, the wealthy, fast-tracking entrepreneurs and select professionals.
