In this episode of Strategic Investor Radio, host Charley Wright interviews James Hanson, the president and CEO of Morristown, NJ-based Hampshire Real Estate Company. Mr. Hanson is co-chair of the Rutgers University Center of Real Estate Studies and an advisor to multiple endowment funds and pension plans throughout the company. Hampshire is a third-generation family company, founded by Mr. Hanson’s grandfather in 1922, and it currently has more than 100 employees managing 259 properties in 28 states.
Mr. Hanson offers a very sobering view on the future of real estate. He’s concerned that the U.S. is likely to enter another recession in the next four years, and that “yield chasing” has made attractive investment opportunities more difficult to find. He’s bearish on multi-family real estate, for which he says supply has outstripped demand; and even industrial properties, previously a favorite area of his firm, may be overbought.
The areas Hanson likes include triple-net leases, necessity-based retail, and self-storage.
1. The first refers to single-tenant leases to investment-grade corporations, with 15-20-year terms, that are net of taxes, insurance, and operating income.
2. The second refers to retailers that deal in the necessities of life: i.e., grocery stores.
3. The third, self-storage, is part of what Hanson refers to as real estate “alternatives,” along with senior living and student housing.
Hampshire has experience in a wide array of real estate properties, but not senior living and student housing. Hanson says he likes self-storage because it addresses life emergencies that happen during economic good times and bad (i.e., divorce).
When asked what investors should look for when investing with a real estate company, Mr. Hanson listed three things:
- Track record (in good times and bad)
- Depth of operational experience
- Strength of the team
When asked what keeps him up at night, Hanson’s answer was simple: “The economy.” With no real trend or pattern, but plenty of volatility, it’s difficult to plan. He also noted that the supposed recovery from the previous recession has been much weaker than previous recoveries.