Many investors may be wondering about the implications of the Brexit on investments in US real estate. As an investor and partner with OpenPath, a real estate investment company that focuses on large apartment complexes, I have been paying close attention to this situation and asking the same question.
A Goldman Sachs analysis out today supports what the top financial experts across the industry have concluded. Here is a summary of the findings:
The UK decision to leave the EU is likely to be long (several years) and is creating significant and continued uncertainty in the UK, Europe and globally. The uncertainty is expected to hurt economic activity in the UK and to a lesser extent the Eurozone. However the Brexit is likely to have little impact on the US economy.
Similarly at OpenPath we expect the Brexit to have little to no impact on the financial performance of our existing properties — both in the short-term and over time. Going forward, the situation in Europe many instead create further opportunities for OpenPath. As a result of the Brexit’s drag on UK and European economies, we should see globally that already low interest rates (and mortgage rates in the US) will remain low for a considerable time — and may indeed go even lower.
OpenPath buys properties financed by low-cost 10-year fixed loans. Stable and increasing rents in supply constrained metro markets coupled with low-cost fixed mortgages creates steady and increasing net operating income (NOI) at our properties and in turn market-beating returns for our investors. Further, the uncertainty and economic drag of the Brexit will continue to weigh on the stock market on bond returns for some time. These poor returns should make OpenPath’s returns even more attractive to investors seeking both short-term and long-term returns.
Many of us, including me, hold equities. So it’s not good or inconsequential to see the Brexit’s negative impact on the stock market. However, it does serve as yet another reminder of the continued uncertainty and volatility of equities — as well as a continued lack of expectations from bonds which builds an even stronger case for diversification via real estate investment. At OpenPath we see opportunity in both our existing properties and new acquisitions.
Looking forward to hearing your thoughts. Let me know if you would like to discuss any of this. I can be reached at david at openpathinvestments.com.
OpenPath has a proven 10-year track record delivering 18%+ IRR. Now we are looking forward to the next 10 years. Interested in learning more? This short video does an excellent job of explaining what we’re all about.
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Note: OpenPath investment opportunities are for accredited investors.