Morgan Stanley Joins the List of Companies on Hunt for Bargains
They find the opportunity for good deals ‘amongst the best we’ve ever seen.”
Many big CRE players have been eyeing opportunities, as the economy slows and more properties come to maturity without a good option for refinancing.
Morgan Stanley has joined them.
“We find this opportunity honestly among the best we’ve ever seen,” said Lauren Hochfelder, Morgan Stanley Real Estate Investing Co-CEO, in an interview with Bloomberg TV. “We’re seeing deep distress in the toughest real estate assets, but really what’s more interesting is dislocation across the board. So, to see how different real estate assets are going to behave, you really have to start with what real estate is, which is a function of how people use space.”
“We want to be behind those long-term megatrends that are shifting behavior,” Hochfelder continued. That includes industrial, given the shift toward e-commerce that creates a need for more warehouses. “Assets over the [10-year] period we’ve been investing have doubled and tripled in value on an unlevered basis.”
Two other trends driving demand are a “supply chain overhaul, which we’re seeing on a global basis,” and pressures around deglobalization and geopolitics. Population aging is creating demand for senior housing and medical office.
The firm has been most active in the U.S. and Japan, with the former tending to correct first and adjust to new conditions the most quickly, she said in a separate interview with Bloomberg. “We’re not waiting for the all-clear sign to dip in,” Hochfelder said. “The wall of maturities is finally upon us.”
Japan offers good financing and migration to city centers. In addition, many companies are dropping their real estate investments to focus on their core businesses. As motivated sellers, they attract investors looking for sound assets.
“The easiest way to make money in real assets, especially in real estate, is to buy great assets with bad capital structures,” Brookfield Asset Management CEO Bruce Flatt said at a Goldman Sachs Group-hosted investor conference. “There will be a number of those situations. They’re not coming in one day, or there’s not going to be just an event. But they’re just going to be coming in the next 24 to 36 months, and hopefully we can capture some of those.”
At the same conference, Blackstone President John Gray disclosed that his company had completed a half dozen deals, about $7 billion of value, with banks.