“Phenomenal returns” for some distressed real estate investors in stocks

Private market slowed by holdouts, so buyers look to public exchanges

TRD NATIONAL /
Jun.June 23, 2020 11:00 AM
Blackstone’s Jonathan Gray, Starwood Capital Group’s Barry Sternlicht, and Oaktree Capital co-chairman Howard Marks (Getty)
Blackstone’s Jonathan Gray, Starwood Capital Group’s Barry Sternlicht, and Oaktree Capital co-chairman Howard Marks (Getty)

While investors in distressed properties are frustrated by sellers holding out for more favorable pricing, some seeking real estate on the cheap are turning to the public markets.

Big firms including Blackstone Group, Starwood Capital and Oaktree Capital have been buying up real estate-backed securities in recent months in the belief that they are undervalued, the Wall Street Journal reported.

“These are opportunities that just don’t exist in the private markets,” Madison International Realty president Ronald Dickerman told the Journal. Madison invested tens of millions of dollars in REIT stocks such as Mack-Cali Realty Corp. in March and April when prices were down more than 50 percent for the year.

But public markets’ opportunities also carry extra risks, as prices are prone to swing more dramatically in response to economic data and shifts in the broader markets.

Blackstone and Starwood Capital’s acquisition of shares in hotel chain Extended Stay America this spring was driven by a similar strategy.

“We are already seeing actionable opportunities appearing from the dislocation, initially in structured credit and liquid markets,” Blackstone president Jonathan Gray said on the firm’s latest earnings call.

Other investors have already seen “phenomenal” returns from buying up distressed real estate debt as mortgage REITs have faced margin calls from lenders. [WSJ] — Kevin Sun


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