Coronavirus distress is “opportunity of the century” for real estate investors

Opportunistic and distressed-asset funds have $142B in dry powder

TRD NATIONAL /
Apr.April 07, 2020 04:00 PM
As the coronavirus crisis sends property values tumbling, funds focused on opportunistic and distressed-asset investments sense a greater opportunity than that seen during the 2008 financial crisis. (Credit: iStock)

As the coronavirus crisis sends property values tumbling, funds focused on opportunistic and distressed-asset investments sense a greater opportunity than that seen during the 2008 financial crisis. (Credit: iStock)

As the coronavirus crisis sends property values tumbling, real estate investors sense an even greater buying opportunity than the 2008 financial crisis.

Hotels, retail properties and mortgage-backed securities in particular present ripe targets for distressed-asset investors, the Wall Street Journal reported. As of December, private real-estate funds focusing on opportunistic and distressed-asset investments held $142 billion in dry powder, according to Preqin.

“There are people that do have dry powder, like us, and that will recognize this as one of the greatest buying opportunities of the century,” Daniel Lebensohn of investment firm BH3 told the Journal. BH3 launched a $100 million distressed-debt fund in late 2018.

Investors poised to take advantage of declining prices include firms like Blackstone Group, Brookfield Asset Management and Starwood Capital Group, which have raised billions of dollars from institutions like pensions and sovereign-wealth funds.

There are risks to investing in distressed assets. It will be difficult to realize profits if prices remain low for a long time, and investors also risk buying before the market has fully bottomed out. Investors also say that their actions will help the market bounce back in the long run.

While few distressed assets have hit the market so far, many investors expect a greater opportunity than that seen during the last financial crisis, when prices fell by 35 prices between August 2008 and June 2010 according to Real Capital Analytics.

“Our thoughts and prayers are with all of our fellow Americans and nobody wants to capitalize on anybody’s misfortune,” said Meridian Capital Group’s David Schechtman. “But I will tell you, real-estate investors — when you take the emotion out of it — many of them have been waiting for this for a decade.” [WSJ] — Kevin Sun


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