Interview: Paul Sloate of Green Drake Advisors on Upcoming Market Changes

These are uncertain times.

Markets have been volatile, with December 2018 marking Wall Street’s worst month since the Great Depression. The news tells us the economy is doing well, but home sales are down and new manufacturing orders have seen a substantial drop.

So where does all of this leave the real estate investment world?

That’s the question Paul Sloate will answer at DIG’s general membership meeting on February 28.

He’s the founder and CEO of Greek Drake Advisors, a full-service Registered Investment Advisor who has spent 35 years helping families, businesses and institutions make strong financial decisions.

We’ve invited him to speak to our members about upcoming changes to the real estate market.

Sloate sees two critical things investors need to be aware of:

  1. We’ve hit the late cycle stage for this economic cycle, and that has implications for things like interest rates, where the economy grows and how it grows.
  2. The next two years will inevitably see a recession, which means investors need to adjust their expectations before making investments.

What does a recession mean for new investors? Sloate said recessions typically bring a rise in unemployment and a drop in commercial building occupancy, except for perhaps situations where there are long-term leases.

“And even long-term leases could be at risk if a business goes out of business,” Sloate said.

At the same time, Sloate said real estate investors need to be careful about making assumptions.

“In 2009, most people assumed the U.S.” would grow 3.5 percent over the next decade, the way it grew for the last 40 years. That didn’t happen,” Sloate said.

“So you have to be careful about the basic assumptions you’re making, especially for an asset class like real estate, which is a long-term asset.”

Long-term vs. short-term

The question of how long a view real estate investors should take can depend on the type of investing you’ve undertaken, Sloate said.

If you’re in the business of flipping properties, you need to be focused on the short term, while someone hoping to fill up a building then sell it can look two to three years in the future.

“If you’re a buy-and-hold-forever type of investor, that requires a different kind of viewpoint,” he said. “And that is really looking at the economics of the building and then the long-term economics of the area in which you’re building the building or you’re acquiring the building.”

In addition to his work with Green Drake Advisors, Slaote has held senior positions with Wellington Management and BlackRock Financial Management. You might have seen him on TV at some point, as the host of Money Matters.

We’re honored to have him on board for our meeting, scheduled for Thursday, Feb. 28 at 6 p.m. at the North Hills Country Club in Glenside. We hope to see you there.