At the unset of the COVID-19 pandemic, no one could have predicted the dramatic monetary and fiscal policy responses implemented by the US government. Just when everybody thought we’d be entering one of the longest and darkest recessionary periods in history, the United States Federal Reserve took an aggressive “whatever it takes” stance and pumped large amounts of liquidity into the market to support the economy. The US government supplemented those efforts with some of the largest fiscal stimulus packages in history, helping the American people and businesses stay afloat in such an unprecedented time.
What followed was periods of extreme volatility in all sorts of markets such as commodities, stocks, bonds, and commercial real estate. It is during such times that there is a generational opportunity to make economic gains by predicting market movements accurately. Arash Barati who at the time was working for Drake Real Estate Partners, a real estate private equity fund manager based in New York, was prepared to help his firm navigate the times using his advanced econometric models.
Arash has spent the last six years working for US institutional investors in the world of commercial real estate, which is at the intersection of his quantitative undergraduate background and graduate studies in real estate. His economic analysis and modeling allow his firms to make decisions in real time. Arash was previously working at AIG, a large multinational financial institution who itself only survived the last financial recession with a large bailout package from the US government. A lot of lessons were learned from those times that allowed him to predict the potential implications of such drastic government fiscal and monetary policies exceptionally well. His research on the impact of inflationary pressures on market rents and growth rates were critical in assisting his firm make investment decisions at the time.
At the onset of the COVID-19 pandemic, Arash’s work determined that the large government support programs and low interest rates should support the housing market, allowing Drake to quickly increase its allocations to the rental sector. “There is significant fiscal and monetary support with interest rates near zero and the Federal Reserve purchasing $120 billion of assets per month, which has led inflation to a decades high of 6.8%. Multifamily properties have historically performed well in inflationary environments given the shorter duration of leases, and so have been a favored asset class” says Arash.
Drake Real Estate Partners is a real estate private equity fund manager that was founded by two Harvard Business School alumni who had met through a professor back in 2012. The firm’s mission is to generate outsized risk-adjusted returns for its investors by investing in smaller real estate markets where more under the radar opportunities can be uncovered. When Arash joined the firm, assets under management were $1.2 billion and that number is now approaching $2 billion, an astounding 67% increase with his essential help. His praised work for the firm has allowed it to achieve outstanding results, consistently ranking in the first quartile amongst global real estate private equity performance benchmarks.
