Cohen & Steers is readying its funds to capitalize on distress in commercial real estate, but isn’t yet ready to take the plunge.
Price declines in the sector are “about halfway there,” CEO Joe Harvey said in an earnings call reported by Crain’s. Harvey said the firm’s expectation was that prices needed to fall between 25 percent and 30 percent before it would resume investing in distressed properties.
The firm is still raising capital as the market corrects, according to the chief executive.
Investors have pulled more money from Cohen & Steers funds than they’ve invested for six consecutive quarters. During that time, the company’s assets under management have fallen by roughly 20 percent, or $20 billion.
Shares of U.S. real estate investment trusts declined by 8.6 percent in the third quarter, according to Harvey, outpacing the 3.3 percent decline on the broader S&P 500. Cohen & Steers’ flagship fund has gained 2.3 percent on the stock market in the last three years, well behind the gains seen on the S&P 500, according to Morningstar data.
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A recent report prepared by the McKinsey Global Institute estimated that falling demand could wipe out $800 billion in office value across “superstar” cities across the globe. Those cities included New York City, San Francisco and Houston.
Cohen & Steers isn’t the only Wall Street firm gearing up to capitalize on distressed properties.
Goldman Sachs, EQT Exeter and BGO are among those circling distressed commercial properties to acquire them at a discount. The Wall Street Journal reported this summer Cohen & Steers is looking to raise $2.5 billion for a nontraded real estate investment trust.
— Holden Walter-Warner