Sara Cassidy is an Executive Director at J.P. Morgan Asset Management – Real Estate Americas. Sara is an acquisition officer and is responsible for the origination and structuring of real estate investment transactions in the Northeast. Her role focuses on acquiring core, value-add and opportunistic office, residential, retail and industrial real estate. Sara has worked in the metro New York market and currently focuses on Boston and the New England region. Sara has been involved with the origination and structuring of over $3.5 billion of transactions in all product types on behalf of institutional investors.
- The building boom in the Boston metropolitan area has had a healthy run this cycle. As the cycle continues to stretch out, how are institutional investors approaching CRE investments in the region?
Boston’s impressive apartment and office construction activity leads us to view the two sectors differently. Since we expect apartment starts to continue at a very elevated pace, we are underwriting below inflation rent growth for luxury assets – especially within Boston’s city boundaries where supply has been particularly strong. Apartment construction continues as low cap rates on stabilized assets (helped by low interest rates) have kept development profits elevated. While this is also true in the office sector, speculative office construction is much riskier than apartment development and so new speculative office starts have slowed in the city (as they have in other CBDs). Office tenant demand in the city continues to face headwinds from the financial sector, however Boston’s diverse tech market (bio and info) has been a little more resilient than downtown San Francisco’s. In addition to better venture capital flows recently, Boston offers a less expensive environment than either San Francisco or New York, shorter commute times and a great repository of young workers who are now willing to stay in the city after college. It’s no surprise that Boston has been considered a strong contender for Amazon’s HQ2. Boston and Cambridge are also attracting substantial business relocations from the suburbs. Our overall feeling about Boston office is that after current under-construction assets are delivered, the market may enjoy above inflation rent increases before the cycle ends.
- With an elongated cycle in CRE, what is the appetite for risk in the current market?
We still like building apartments – even if a recession hits, rents could be set to drive occupancy. Additionally, as discussed above, with speculative office construction slowing down as we get further into the cycle, we do expect to continue to see potential opportunities for office construction most likely with some level of pre-leasing requirements.
- What is your most memorable investment transaction and how did it shape your professional practice?
One of the more memorable transactions that I worked on in the greater Boston market was the acquisition of a three-building office portfolio – 225 Franklin Street and 60 State Street, located in the Downtown Boston and One Memorial Drive in Cambridge. The acquisition was a considerable CBD office investment that increased our overall exposure to the Boston office market; however our platform recognized the strength of the urbanization of Boston and the diversified office users that was driving market demand. There were many complications structuring and closing multiple assets at the same time as well as simultaneously negotiating a joint venture with our operating partner, Oxford Properties. Overall, the success of the transaction is due contributions of the team that I work with at JPMAM as well as our partner’s expertise and focus. Every transaction is different – which is one of the reasons I love my job – but what is most valuable is the ability to take something away from each transaction that makes you a better investor.
- Why ULI?
ULI was one of the first professional organizations I was exposed to early on in my career and I have had the benefit of participating at a greater level in recent years. ULI provides access to information and forums for conversation that bridge investment perspective with what is needed locally in urban development. The diverse membership allows for exceptional networking opportunities and has ultimately expanded my knowledge base and prompted me to think differently about certain issues. Finally, my participation in Urban Plan has been personally rewarding. I have really enjoyed working with high school students to help them think through the struggle of balancing demands within the case study and the impact on the urban environment. The students offer such a different perspective on how they see their neighborhoods and where their priorities lie.
- What are your personal and professional hopes for 2018?
Professionally, I am looking forward to continuing to be an active investor and owner within the greater Boston market. We have strong relationships with local developers that provide access to opportunities and insight into the local market. I hope to continue to develop and expand that network as the year progresses. Personally, for the upcoming year, I am hoping to maintain the organized chaos that exists in our household. I have two young children in school and sports, so there will always be a fine balance of work, schoolwork, activities and family time. To focus on family time, over this next year we have a few trips planned to explore the U.S. as I hope to continue to expose and educate my kids on how different (and wonderful) other parts of this country are.