The Insider's Edge: Why Contrarian Investors are Betting Big on NYC Multifamily

You might think that successful real estate investing relies on following the herd, piling into the "hot" markets everyone talks about. But what if the key to superior returns lies in deliberately running the opposite direction?

In a recent episode of The Insider's Edge to Real Estate Investing, hosts James Nelson and Kim Troller sat down with Billy Haddad, Managing Director of Partners Path, to dive deep into exactly this philosophy: contrarian capital. Billy’s approach, honed through years in finance and his leadership at a private family office, offers a powerful lesson on where real opportunities hide when others are scared away.

Finding the Empty Room

If you want to know where Billy Haddad is investing, the trick is to find out where everyone isn't. He humorously refers to this strategy as looking for "the empty rooms".

Partners Path, a family office based in New York, follows two distinct strategies: direct ownership in local markets like Brooklyn and Queens, and an "emerging sponsors program" where they partner with specialized operators in other geographies and asset classes. They typically focus on deals ranging from $2 million to $7 million—a niche that is often too large for local individual investors but too small for institutional giants, allowing them to find "alpha" (excess returns) in that less competitive middle ground.

This contrarian lens is why Partners Path has remained active in New York City multifamily over the past three years. While many investors flee due to regulatory and political headwinds, Billy sees that market sentiment as overblown. He views New York as "undefeated" over the long term, noting that compared to sunbelt markets still selling multifamily at cap rates around five or five-and-a-quarter, they are able to buy in New York City sometimes above a six-and-a-half cap.

The core strength of New York multifamily, Billy argues, is resilience driven by supply constraints. Despite consistent demand from people wanting to live there, it remains incredibly difficult to build new units that could match that demand. This barrier to entry acts as an "insulating factor" for existing assets.

The Secret Life of Industrial Real Estate

Beyond their local New York bets, Partners Path has been leaning heavily into industrial real estate across the country, but with a highly specific filter.

If you've followed industrial headlines, you might think the market is saturated with vacancy. However, Billy points out that when you dig into the data, most of that massive vacancy is concentrated in “big bombers”—huge buildings over a million square feet.

Partners Path avoids that fray, focusing instead on small bay industrial (buildings between 50,000 and 150,000 square feet). Why? Because the supply increase hasn't hit this smaller sector in the same way. Developers naturally gravitate toward massive projects where they can earn larger fees, leading to an oversupply in the big box market and leaving opportunities in the niche small bay segment.

Real Estate is a Team Sport

Finding these hidden opportunities requires more than just capital; it requires the right partners. Real estate, Billy and the hosts agree, is very much a team sport. It requires diverse players—the equity, the debt, the broker, the buyer—all working together to get the deal across the line.

For Partners Path's joint venture (JV) deals, they need partners who have "boots on the ground" knowledge in those specific non-local markets. While investing directly means internalizing all operational costs, partnering allows them to tap into the partner's expertise and efficiency.

A crucial element of their partnership strategy is incorporating negative control rights into their LP investments. This mechanism gives Partners Path the right to consent on major decisions like sales or refinancing. Billy explains that this isn't about running the sponsor’s job for them; it’s a necessary protection against the potential for misaligned incentives, ensuring that the investor’s long-term returns are prioritized.

Ultimately, the firm aims for high net returns, even if that means paying a promote to a successful partner. They want to reward partners who execute well—a philosophy embodied when they willingly sold a deal only 18 months in, resulting in a "huge promote" for their partner, because it was the best financial decision for the deal.

--------------------------------------------------------------------------------

Easy Takeaway:

Don't just look at the top-line data like overall market vacancy rates or average cap rates. Successful investors must apply a "Moneyball" approach by digging one or two levels deeper into the data to understand the real story and find specialized niches, like small bay industrial or supply-constrained local multifamily.

Favorite Quote:

“If I’m wrong on that, I guess I’ll look like an idiot. But I think over many time periods in the past, people have said New York is dead. And I think we’ve seen otherwise.”

Relevant Question from the Podcast:

Billy Haddad advises that there is "no best path" for getting into real estate investing, just the need to take a step and work hard. Given the current shifts in technology and market cycles, how can aspiring investors best use networking and their unique non-business backgrounds to gain a competitive edge in real estate?

--------------------------------------------------------------------------------

Source: Excerpts from the transcript of the video "Contrarian Capital with Billy Haddad" uploaded on the YouTube channel "James Nelson NYC".