THE NEW YORK TIMES BUSINESSSATURDAY, OCTOBER 17, 2020 Y B5
Personal Finance
Peter Starrett and Sharon Arthofer are
wealthy investors who come from dif-
ferent business backgrounds, but both
are looking to put more of their money
into an asset that has suffered during
the pandemic: real estate.
For many investors, that would mean
choosing funds that buy scores of build-
ings around the country. Instead, Mr.
Starrett, who ran several retail compa-
nies before becoming a private equity
executive, and Ms. Arthofer, an entre-
preneur, are investing directly in spe-
cific buildings in just a few places.
The strategy is riskier — putting
several million dollars, for instance,
into one residential building versus
using that same amount to invest in
dozens of buildings. If the investment
works out, however, it will offer greater
returns and tax benefits.
That’s a big if, especially in the pan-
demic, when certain classes of proper-
ties, like offices, stores and restaurants,
have been hit particularly hard by
vacancies and tenants unable to pay
their rent. But people like Mr. Starrett
and Ms. Arthofer argue that they have
more control when they invest in par-
ticular buildings with a group of other
individuals.
“There’s no doubt this has really
been an eye opener,” Ms. Arthofer, of
San Marino, Calif., said. “Brick-and-
mortar retail has completely changed.”
Or as Mr. Starrett, who lives in Los
Angeles, put it: “I had big questions
about it in March when I couldn’t do
anything. But I’ve been through a few
of these downturns in the past, and I’ve
learned patience.”
Real estate is likely to remain a fa-
vorite of wealthy investors because it
can be owned indefinitely, has predict-
able cash flow and usually appreciates
in value. But investors are looking for
different types of real estate than they
were at the beginning of the year, ac-
cording to a report released on Monday
by Withersworldwide, an international
law firm. The firm talked to people who
work in property and land development
as well as academics, architects and
hospitality workers about what the
future of real estate might look like.
Before the pandemic, investors
wanted to be in cities like New York
and London, where retail and resi-
dential properties profited because
people lived close together. With co-
ronavirus flare-ups in many cities
around the world, investors now are
looking for the opposite, said Vasi Yian-
noulis-Riva, a partner in the real estate
group at Withersworldwide.
Commercial property deals in big
urban areas have stalled, and she has
been working with wealthy individuals
buying estates outside cities like New
York.
“I’ve done more residential deals in
Connecticut in the last few months than
in the past couple of years,” Ms. Yian-
noulis-Riva said. “We’re seeing a lot
more ultra-high-net-worth folks inter-
ested in larger properties that have
offices and pools. Their belief is even
when people return to work, they prob-
ably won’t commute five days a week
anymore.”
As a result, she said, some of thesavviest and most risk-tolerant invest-
ors have been looking at commercial
buildings in the suburbs. These build-
ings could be part of a new model for
companies that want employees to
return to the office but can’t accommo-
date them all with social distancing at
their headquarters.
Investors are also looking at resi-
dential developments that reimagine
how business can use their ground
floors. Instead of being anchored by
restaurants or stores, as they were at
the start of the year, these properties
may have tenants, like a pharmacy or a
doctor’s office, that will remain through
future pandemics. Investors are also
looking at industrial spaces that can
serve as a warehouses for shippers and
e-commerce companies.
For people who own retail or office
space where the tenants are struggling
to pay rent, Ms. Yiannoulis-Riva has
blunt advice: Hold on, if you can.
“Right now, it’s going to be hard to sell
unless you’re selling at a discount or it’sa distressed property with a lender
who’s putting pressure on you to unload
it at a discount,” she said.
Ms. Arthofer said she had focused on
multifamily buildings ever since she
helped her mother manage a real estate
portfolio that her father had build up in
the Washington area. Ms. Arthofer and
her husband now have 40 percent of
their investments in real estate.
“I’m a great believer in multifamily,”
Ms. Arthofer said. “People pay their
rent. They don’t want to lose their
homes. In our strip retail centers,
there’s roughly 75 percent who are
paying and 25 percent who are not. But
in our apartment buildings, 95 percent
are paying their rent.”
Ms. Arthofer and Mr. Starrett in-
vested through a sponsor, Lion Real
Estate Group, which finds the build-
ings. The group is betting that an
emerging trend before the coronavirus
— the attraction of young people to
apartments in cities like Austin, Texas,
and Nashville — will be a long-termwinner.
That strategy has benefited from the
uneven spread of the coronavirus,
which has left those cities relatively
spared, and from the drop in mortgage
rates.
“You have to say, ‘I don’t know what
is going to happen in three to five
years,’ ” said Jeff Weller, managing
principal and a founder of Lion Real
Estate Group. But if you can lock in a
2.5 percent interest rate, he added, this
is the lowest your rents are going to be,
so you can also say, “My cash flow in
Year 6 or 7 could be phenomenal.”
Unlike investors in real estate funds,
which often look to sell properties by a
certain time and even unload their
best-performing assets earlier to in-
crease their rates of return, individual
investors who buy buildings them-
selves can choose when or if they want
to sell.
In group deals, though, they’re lim-
ited partners, so while they receive
many of the benefits of owning a prop-
erty outright, the final say on when it is
going to be sold is up to the general
partners who brought the investors
together.
Mark Holdsworth, founder and man-
aging partner at Holdsworth Group, a
family office, invested heavily in real
estate after BlackRock bought the
investment firm he helped found in
2018, Tennenbaum Capital Partners, in- His focus has been on apartment
buildings, and now real estate accounts
for around 30 percent of his family
office’s investment portfolio, an amount
he said he hoped to increase.
Mr. Holdsworth has often invested
through sponsors who pull together
other wealthy individuals to buy a
building. Some of the properties have
been sold sooner than he would have
liked.
“Generally, I’ve been fortunate in
that sponsors have gotten good premi-
ums on the ones they’ve sold,” Mr.
Holdsworth said. “I’m always sorry to
see the cash flow go. But I can put that
money into another 1031 exchange.”
That number refers to a section in
the Internal Revenue Code that is the
basis for most commercial real estate
transactions. Section 1031 allows sellers
of a property to avoid paying tax on the
gains by buying a new property within
a set amount of time. Real estate invest-
ors have used that section to build
wealth for decades. But it could come to
an abrupt end. Joseph R. Biden Jr. has
vowed to end the preferential tax treat-
ment if elected president.
And that has added urgency in an
uncertain time. “If you’re going to do
it,” Ms. Yiannoulis-Riva said, “get it
done.”
Ground Shifts for Real Estate Investing
More people are putting money into specific buildings and moving it away from cities and retail.
Wealth Matters
By PAUL SULLIVAN
Sharon Arthofer, an entrepreneur from San Marino, Callf., says the pandemic “has really been an eye opener” and has changed priorities.ROZETTE RAGO FOR THE NEW YORK TIMESA strategy for the risk
tolerant that can offer
greater returns and tax
benefits than funds.
Open enrollment season is here again
for workers fortunate enough to have
health insurance through their job.
Workers could pay 4 to 5 percent
more for their health premiums next
year, according to various estimates of
cost increases.
That’s in line with increases in recent
years, even as the pandemic continues
to bring economic challenges and un-
certainty for workers and their employ-
ers. People may use more medical
services in 2021 because they put off
routine care this year during the pan-
demic shutdowns. And the costs of
treating coronavirus cases continue
while the country awaits a vaccine.
Still, many employers have indicated
that they are trying to avoid major
changes in health benefits for next year,
to avoid jarring workers already
stressed by the pandemic. Some em-
ployers may absorb much of the cost
increase so workers pay about the
same in premiums as they do this year,
said Steve Wojcik, vice president for
policy with the Business Group on
Health.
“Quite a number are recognizing the
financial challenges employees face,”
said Mr. Wojcik, whose organization
represents employers on health care
and benefit matters.
Of more than 1,100 employers re-
sponding to a survey by the benefits
consultant Mercer since early July,
more than half said they would make
no changes of any kind that would
reduce their costs in 2021. Just 18 per-
cent said they would take steps to shift
more costs to employees, like increas-
ing co-payments and raising de-
ductibles — the amount workers pay
out of pocket for care before the plan
starts paying.
“That’s very good news for employ-
ees,” said Tracy Watts, a senior consult-
ant at Mercer.
This year, the average annual family
health premium increased 4 percent to
more than $21,000, according to the
Kaiser Family Foundation. Workers, on
average, contributed about $5,600
toward the cost, and employers paid the
rest. (Kaiser surveyed 1,765 randomly
selected employers with three or more
workers. About half of the interviews
were done before employers had felt
the full effect of the pandemic.)
Most Americans have employer-
provided health insurance. But during
the pandemic, millions lost their jobs
and related benefits. Estimates vary,
but a study from the Commonwealth
Fund published this month suggests
that as many as 14.6 million people —
7.7 million workers and nearly seven
million dependents — had lost employ-
er-based coverage as of June because
of the pandemic-induced recession.
It’s unclear how many of those peo-
ple lost coverage permanently. Some
job losses may have been temporary,
and some workers may have continued
paying the full cost of their group cov-
erage through the federal COBRA pro-
gram. Others may have found coverage
through Medicaid, the government
health plan for the poor, or under the
Affordable Care Act, which expanded
Medicaid coverage in some states and
authorized the sale of subsidized, pri-
vate health plans through federal and
state marketplaces.(The future of the Affordable Care
Act’s safety net is uncertain, as a court
challenge to the law awaits a hearing
before the Supreme Court, scheduled
for the week after the Nov. 3 presiden-
tial election.)
Like many workplace meetings,
benefits discussions are moving online
during the pandemic. Many employers
are shifting to virtual enrollment fairs,
instead of holding traditional gather-
ings in the office cafeteria.
In some employer offerings, Mercer
said, workers can earn points for “vis-
iting” online information booths and
earn the chance to win gifts, like an
iPad.
Care itself is also increasingly mov-
ing online. About half of large employ-
ers will offer more virtual care options
in 2021, according to the Business
Group on Health. Many people became
more comfortable with seeing doctors
remotely during the pandemic, whether
for an online visit with their own doctor
or a session with an independent tele-
health provider, said Ellen Kelsay, pres-ident and chief executive of the group.
Employers also expect to expand virtu-
al options for mental health treat-
ments, via online sessions, videos and
apps.
Many employers said they expected
to add on-site health clinics next year,according to the Business Group on
Health. Some types of businesses,
including manufacturing and health
care companies, have found that on-site
clinics have been useful for coronavirus
screening and testing as well as for
telehealth services, Ms. Kelsay said.Reducing the Pain of a New Insurance Year
Many employers indicate that they will take on more of the costs of health coverage for workers.
Your Money Adviser
By ANN CARRNS How should I choose a health plan?
Open enrollment periods vary by em-
ployer, but typically last several weeks.
When evaluating options, employees
should be careful to review a plan’s
network of doctors and hospitals, said
Cheryl Fish-Parcham, director of access
initiatives with Families USA, a health
care advocacy group. Some employers
may offer “narrow” network plans at
lower cost, but those plans typically
include a limited number of doctors and
a single hospital. Some plans are “open,”
meaning you can go outside the network
for a fee, but others pay nothing unless
you are within the network, she said.
You may want to call to confirm that
your regular doctor participates in the
plan. “Make sure it includes the
providers you want,” Ms. Fish-Parcham
said.
If you take medication regularly for a
chronic condition, she added, make sure
the plan’s prescription benefit covers it.
If your employer offers multiple plan
choices, said Tracy Watts, a senior con-
sultant at Mercer, you should take the
time to compare the total cost of cover-
age for each option — don’t just look at
the premiums. She advises taking the
total premium and subtracting any
contributions made by your employer,
such as to a health savings account, to
compare the cost of different plans.
“Do the math,” she said.
To see your total potential financial
exposure, add the plan deductible. If you
are generally healthy and don’t take
regular medication, a plan with a higher
deductible may save you money. If you
can’t afford unexpected costs, a lower
deductible — typically with a higher
premium — may be the best option. The
average deductible for an individual is
$1,644, Kaiser found.
Theresa Adams, senior knowledgeadviser at the Society for Human Re-
source Management, said many workers
didn’t take enough time to evaluate
benefits. She encouraged them to make
use of online tools offered by their em-
ployers to help choose options and to
reach out with questions.. ................................................................................
How much can I contribute to a health
savings account in 2021?
Contribution limits ticked up for next
year, the Internal Revenue Service
announced. The maximum contribution
is $3,600 for an individual and $7,200 for
family coverage. (People 55 and older
can save an extra $1,000.) H.S.A.s, how-
ever, are available only with specific
types of health plans with high de-
ductibles — at least $1,400 for individual
coverage and $2,800 for family coverage
for 2021. Typically, your employer will
specify if a plan is H.S.A. qualified.
Some plans have a different option,
called a health care flexible spending
account. You can contribute to it before
taxes, via paycheck withdrawals, to pay
for care and products that your health
plan doesn’t cover. Contribution limits
are lower than with an H.S.A., and if you
change jobs, your flexible spending
account doesn’t go with you, as an
H.S.A. does.
. ................................................................................
When is open enrollment for the Afford-
able Care Act marketplace?
According to Healthcare.gov, open en-
rollment for coverage starting on Jan. 1
runs from Nov. 1 through Dec. 15. Open
enrollment for state-run marketplaces
may vary.
The legal challenge to the health law
before the Supreme Court isn’t expected
to affect this year’s open enrollment, as
the court’s decision probably wouldn’t
come before next summer.
Q. and A. About Open EnrollmentTILL LAUER