(Featuring William Maher, Director of Strategy, RCLCO Fund Advisors, and Ben Maslan, Managing Directors, RCLCO Fund Advisors)
Though leverage is an important part of capital funding, it’s important to ask LPs if (and how) they should take control of their real estate leverage.
https://www.afire.org/podcast/leveragingcontrolrclco/
Leverage is widely used in real estate as an important part of the capital funding, and real estate and leverage have gone hand-in-hand since mortgages originated in England in the Middle Ages. When used wisely, it can enhance returns and provide other portfolio benefits. Institutional investors manage real estate leverage in a variety of ways, but typically utilize relatively low levels of leverage for low-risk investments and higher levels of leverage for higher risk investments. In general, this has worked out in terms of overall returns, but may not be the most efficient strategy.
In this episode of the AFIRE Podcast, RCLCO Fund Advisors’ Director of Strategy and Research William Maher and Managing Director Ben Maslan discuss how institutional investors should continue to use moderate levels of leverage on a portfolio-wide basis but also explore ways to minimize the cost and maximize the flexibility of real estate leverage. In particular, overall fund-level leverage can offer investors lower interest rates while not encumbering specific properties held in their portfolios.
This podcast is based on the article “Confronting the Myth” from Summit Journal.