Globes, Wall Street Journal, 03.05.2020
Investors pour billions of dollars into new real estate funds created to buy debt-backed hotels, malls, office buildings and other commercial properties that suffered heavy losses due to the Corona epidemic.
Companies such as KKR, Kayne Anderson Real Estate and Terra Capital Partners have already graduated or are still recruiting from wealthy families, sovereign wealth funds and other sources hoping to profit from the outbreak. Because commercial real estate market transactions are virtually non-existent, these funds focus on real estate debts that are put on the market by real estate borrowers and others.
The possibilities are popping up so fast that companies are raising money at a rate that was unimaginable before the epidemic.
Kayne Anderson, a Florida-based fund, has raised about $ 1.3 billion in two weeks in a fund that focuses on the debts of cash-strapped sellers, according to Al Rabil, who heads the fund. It usually takes a year and a half to raise such an amount, he said.
"We had to discourage investors," says Rabil. "There is still fear and uncertainty in the market, but there are investors who say, we want to play offensively."
In early April, there were 939 commercial real estate funds around the world raising money - that's a record - and named $ 297 billion, according to a report by information company Preqin.
"People have seen these rapid recession periods in the past, and the possibilities they embody," says Justin Berge, an analyst at Preqin.
Real estate is especially common among wealthy families and sovereign wealth funds, says Michael Stark, co-CEO of PJT Park Hill Real Estate Group, which serves as an intermediary between investors and fund managers.
Other big investors like pension funds or nonprofit funds, at the moment, tend to be more cautious about entering the real estate market. They are more concerned about whether their stock portfolios could fall further.
Some investors hope to make up for the losses they have incurred in their existing portfolios. Many are familiar with the stories of the capital they made during previous recession periods in commercial real estate, investors like Sam Zell in the 1990s, and the Blackstone Group after the 2008 crisis.
Some investment managers were lucky - they finished raising a fund just before the crisis, giving them ammunition to make asset purchases in the coming months. Blackstone, for example, completed a $ 10.6 billion fundraiser earlier this month to invest in European assets.
IP Capital Partners, a Florida-based Boca Raton investment firm that buys Florida office and logistics assets, has completed a $ 51 million fund this month that will invest alongside institutional money. Along with the debt to take on, she and her partners will have $ 700-800 million to make purchases, says Jason Isaacson, president of the company.
"It's an enviable position to be in - sitting on cash that allows you to go out into the market and take advantage of opportunities that arise due to the situation," he said.
Terra Capital Partners already has $ 50 million in commitments to the $ 300 million fund it raises to invest in troubled assets. The company has $ 650 million of managed assets.