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In large part, the investment strategy of ElmTree Funds LLC, a private equity real estate firm based in Clayton, Mo., aligns with the millennial mindset.
ElmTree Funds focuses on single-tenant net lease properties occupied by investment-grade tenants (such as Caterpillar, FedEx, GE and United Technologies) in the industrial, office and health care sectors. ElmTree’s funds draw investments from high-net-worth individuals, family offices and institutional investors.
The firm’s industrial properties largely serve the millennial-propelled e-commerce movement, while its office properties seek to appeal to millennial workers and its health care properties fit the millennial-driven mold of quick, convenient medical treatment.
The ElmTree Funds portfolio comprises 64 total properties, with $1.4 billion in assets under management. In 2017, ElmTree Funds forged a $950 million joint venture with China Life Insurance Group comprising 50 single-tenant properties. ElmTree Funds retains a 5 percent ownership stake in the JV properties and continues to manage those assets.
Jim Koman, founder and managing principal of ElmTree Funds, says his firm concentrates primarily on industrial properties, and secondarily on office and health care assets.
“We think these are going to be the drivers for real estate, especially net lease, over the foreseeable future,” he says, adding that the firm avoids the highly competitive and “finicky” retail segment.
In a Q&A with NREI, Koman explains his firm’s specialization in net lease properties, its approach to buying industrial assets, its take on the office and health care sectors and its emphasis on cultivating and maintaining relationships.
NREI: Why does ElmTree Funds have a singular focus on net lease properties?
Jim Koman: For us, it’s all about the predictability and the certainty of the yield. When you look at what has gone on in the past economic cycles of real estate, a lot of people at the end of the day look in the rearview mirror of 2007 and 2008...