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Real estate investors circle as property funds offload offices and warehouses

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Property investors are gearing up for discount deals as property funds come under pressure to sell offices and warehouses following last month’s government ‘mini’ budget.

property Funds are facing a wave of withdrawals and need to sell assets to meet redemption demands. Large asset managers and deep-pocketed private investors are on the move, preparing to buy up the assets that have been pushed to the market as a result.

“We may intervene in the next month on suitable assets,” said Tom Betts, director of structured finance at Topland Group, an investment firm founded by real estate entrepreneurs Sol and Eddie Zakay. said.

“Pension funds have already started contacting companies that they believe you can provide that can perform quickly and not have to go into debt,” Betts said.

Airbus UK pension plan administrators have said the fund is looking to sell most of its asset portfolio in the near future, but the plan will not sell illiquid holdings at a discount. claimed.

The head of real estate at the global investment manager said he already sees an opportunity from the squeeze on real estate funds and is “considering a purchase.” Last week, his company bid on a warehouse sold by a real estate fund at a steep discount from its valuation earlier this year.

Expectations of a recession are growing year by year across the commercial real estate market as rising interest rates and inflation weigh on investors. Goldman Sachs predicts that prices could fall by 20% between June 2022 and the end of 2024. Other analysts are more bearish.

However, according to multiple market participants, there is a gap between buyers and sellers as to what constitutes fair value.

“The market is half-frozen. Investor costs are rising and we need to push prices higher. Sellers can show you the door or they can show you their blood,” said a large private investment group. real estate manager said.

Many landlords are choosing to wait until interest rates stabilize before testing the market. But real estate funds may have little choice but to sell assets to meet redemption demands that have surged in recent weeks.

Rising gold coin yields since the ‘mini’ budget have forced pension funds implementing liability-driven investment strategies to sell assets, including real estate fund holdings, to meet collateral demands.

Since the accounts report, just under £190m has been withdrawn from a sample of real estate funds targeted by fund trading provider Karastone, with the pace of withdrawals accelerating over the past week.

The individual UK-based property investor with a multi-billion pound portfolio explained that he would come to him with a menu of buildings for the property fund manager to buy.

“What the fund does to people it knows and trusts is to give them a list of all the assets and see if they need them,” he said.

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