Live At IMN Family Office Forum 2022: DJ Van Keuren

The Real Estate Family Office and Private Wealth Management Forum (East) is organized annually by IMN, with the 2022 conference taking place in Miami, Florida.

DJ Van Keuren, co-managing member of Evergreen Property Partners, joined Andy Hagans during the conference to discuss how family offices view current opportunities in the market.

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IMN Family Office Real Estate Forum (East) 2022 (IMN.org)

Today’s Guest: DJ Van Keuren, Evergreen Property Partners

About The Alternative Investment Podcast

The Alternative Investment Podcast is a leading voice in the alternatives industry, covering private equity, venture capital, and real estate. Host Andy Hagans interviews asset managers, family offices, and industry thought leaders, as they discuss the most effective strategies to grow generational wealth.

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Show Transcript

Andy: Welcome to AltsDb. I’m your host, Andy Hagans. We are live at the IMN Family Office Real Estate Forum, East, here in beautiful Miami, Florida. We’ve been live on the conference floor. We’ve attended several sessions. We also had a chance to attend DJ Van Keuren’s keynote address this morning, and DJ is here with me. DJ, are you enjoying the conference today?

DJ: I am. It’s nice to be back. Even though we’ve been back from COVID for a while, it’s still nice to be among people, and especially when it has to do with real estate and family offices.

Andy: Yeah. And you know, families, obviously, they’re a little bit more private. So, it’s great to just get face time and talk one to one. There’s really no substitute for that, even though we do a lot of things online. And, you know, I picked up several themes from your keynote this morning, one of which, the major problem that families have in the long run, which is that most of them, you know, lose their wealth by the second generation. But what about more pressing problems? What’s the most urgent problem that they’re facing right now in 2022?

DJ: Really understanding where we are in the market. You know, I mean, you hear the media and it’s always negative. And on the real estate side, there’s so many fundamentals that are still there from the quality of life, cost of living, migration, indexes, and whatnot. But really understanding which way to go is what the short-term issue is. And obviously, like you brought up, the big problem is there’s a very high probability that there’s not going to be money for future generations, which goes back to them being so careful now because they know if they make a bad decision, they might be losing their wealth.

Andy: Yeah, and it’s obviously a very turbulent time in the markets. We’re in a bear market, obviously, in the stock market. Bonds have just been in a bloodbath all year, and we could see further interest rate increases. Historically in higher inflationary periods, real assets have performed very, very well. Do you anticipate that’s going to be the case over the next cycle? Do you think families anticipate that that will be the case?

DJ: I think that on the real estate side, for sure, I think it will be the case. I think we’re back to families being concerned. You know, there’s been a pullback from families investing into real estate, but also the institutions as well, right? We’ve seen a change in the interest rate hikes, which has happened a number of times over a short period of time. You’ve got cap rate expansion with properties that are actually, you know, being less valued than they were before. And so, there’s a lot of, you know, uneasiness but, you know, I’ll still go on the record, which I have been for years, is that we’re not going to see a recession real estate wise until like 27, 28. So, we’ve got a very good runway as long as the fundamentals stay the same. That’s really what should be focused on, it’s not, you know, what the media is necessarily saying, and you can make money in every kind of market, and you need to remember that. Just have to make good decisions.

Andy: So, I got the sense from a few families that I talked to that they’re in a little bit of a holding period where they are essentially waiting for assets to reprice, you know, institutional quality assets or investment real estate assets to reprice. Do you think that a lot of assets will be repricing as we get through the winter into the new year?

DJ: Yes, it’s already happening. There’s a lot of re-trading that’s been happening. And so, that’s going to reprice things. You know, so we’ll definitely see that but it’s, you know, the definition of a recession is two down quarters, right? That’s not that long a time. Six months is not that long at all.

Andy: Right.

DJ: So, there will be some opportunities, but it’s more from re-trading than properties that are coming to market that’s going to be better priced.

Andy: Okay. And I talked to a couple of families, and I even heard in a panel some family execs talking about having dry powder, and they are essentially hoarding cash. I don’t know if… I don’t know necessarily liquidating assets because it’s not a great time to be liquidating assets. Do you think that’s just a couple of families that I’ve talked to and maybe, you know, a couple of people here that are maybe ahead of the curve in terms of having that dry powder, or do you think that’s industry-wide? Do you think there’s a lot of dry powder, you know, among families right now that’s just waiting to be deployed?

DJ: Yeah, it’s not only families, it’s also institutions. So, there’s a lot of dry powder that is sitting there once again waiting for, like you said, a repricing or other opportunities, which is interesting because back in the recession, a lot of families just sat on the sideline. They waited until things really started on the uptick. And just like during COVID, there’s a lot of families that were ready to pounce, never really came about, that opportunity never really came about, but they were ready to go. Same thing now, right? So, it’s like they learned from the last period of time, right, where they missed out on a lot during that recession. So, yeah, there’s a lot of dry powder waiting to see what happens. You know, I still go back to… you still have to look at the opportunity and what those fundamentals are and, you know, there still is good buying opportunities. It’s just that you just want to be more careful.

Andy: And DJ, I know you’ve been in the family office industry for a long time, I believe over a decade now, obviously the founder of the institute. So, I know you’ve seen it all, you’ve heard it all, but has there been anything today in any of the sessions, or maybe anyone that you’ve talked to that has actually surprised you?

DJ: You know, we were just on the panel a minute ago, and we were talking about bridge, you know, providing bridge for whether it’s multifamily, value-add, and whatnot, and that really hasn’t been something that’s necessarily been on our radar. It is now because, you know, this is when they thrive during times like this because you’re going to have a lot of banks that are decreasing, not as much capital that’s available. And you can get some really good yields on that debt. You can be in first position. And so, for me, that’s something that, in fact, you know, the first thing I did is I went back to my partners, said, “Hey, we got to look at this.” And so, that was something that definitely came to my attention for sure.

Andy: So, bridge financing. Are we seeing that in the double digits now? Are we seeing, you know, yields that even after tax are going to exceed the rate of inflation?

DJ: Yes, some of the rates are, you know, before. I know families that were going out getting 12%, 13%. That’s come down a little bit, especially if they’re bigger funds. But you can still get some good yields between 8 to 10, you know, double digits for sure, which is a great, you know, after if you go to a loan to cost of about 65%, once that value is added, I mean, you still have a 30, 35 point gap, which is great, you know, and if you do the proper underwriting [SP] for those properties and you have to take them back, you’re getting it at a pretty good discount.

Andy: Absolutely. One other thing I wanted to briefly ask you about, and I know you’re pressed for time, but I’ve heard a little bit of buzz about the strong dollar and some opportunities that might be creating in Europe. Obviously, there’s a lot of fear, uncertainty in Europe right now. How much attention do you think a lot of families have in Europe, globally, versus in the United States right now? Is there a sense that maybe there’s more attractive opportunities overseas, or is it just depend on the sector and the segment?

DJ: You know, there’s still a lot of money that’s wanting to come into the U.S. And I get this asked all the time, and there’s opportunities, you know, in Saudi Arabia and the U.K. and Spain, and my comment is always, you know, there’s too much opportunity here in the States still, so why look overseas? You know, I spent a number of years in Asia, and you have to make sure you have a good local partner. It’s harder because it’s so far away. And when we can still make a great return and have the opportunities here, there’s really no reason to look elsewhere. And so, it would be really, really large families that would consider that or if they live over there part-time.

Andy: Yeah, that’s a good point. Plenty of investors, plenty of money that’s still trying to come into the United States. So, once again, I want to thank IMN for having AltsDb as an official media partner. And DJ, I want to thank you for being the keynote at the event, and also for taking the time to talk with us at AltsDb today.

DJ: Thanks for having me.