As if we haven't been harping enough on the idea of getting into real estate investing during this global pandemic, a NY Times report proved that even investment firms are looking to buy distressed real estate and pained a very rosy outlook for investors armed with access to capital.
Investment Firms Aggressively Analyze Real Estate Deals
The article focused on the commercial markets, which have been hit hardest due to the many businesses being impacted the most by the COVID-19 pandemic. With rock bottom prices available for properties of all price points, investors are starting to dive into the opportunities that exist.
Prior to the closing of businesses in the USA, long before the stay at home order became the norm in society, real estate funds were waiting for an opportune time for the market to turn into a buyers market. Some firms have been said to have had cash ready for months, while others have raised billions of dollars in the last month.
The report mentioned a jaw dropping figure of approximately $300 billion of equity that's ready to be invested among Blackstone Group, Kayne Anderson Capital Advisors, and Starwood Capital Group, among others. This information was furnished by the founder of Hodes Weill & Associates, Douglas M. Weill, of New York. To put this incredible amount of dry powder into perspective, property sales in 2019 in commercial real estate were said to be $570.6 billion,. This number comes to us via Real Capital Analytics, who tracks deals from $2.5 million and higher.
The last time we saw this much anticipated fund action was 2008, when many funds emerged and attempted to do the same thing, prior to the government started intervening and loan modifications became a reality for many borrowers. This time around, we've seen the forbearance of loans become a major topic for many people, and recently we reported the last number was said to be 4 million Americans not paying their loans.
The retail and hospitality sector was hit the hardest by the pandemic, and those could be the first types of deals that are invested in. According to it's latest financial update, Macerich, based in Santa Monica, California, a shopping center operator, collected only 26% of it's April rent.
Hotel occupancy rates are much lower, and while airlines continue to bring passengers to destinations, it's with far fewer flights and the middle seat removed from coach fare tickets. Landlords, tenants, and let's face it, society as a whole, never anticipated this pandemic.
Green Street Advisors, another California company based in Newport Beach, is into the space of research and advisory. They reported that real estate values in the commercial sector dropped an average of 10% in the last three months due to the pandemic.
Some commercial real estate owners who aren't heavy in cash to ride out a downturn like this are anticipating selling. These are the types of deals that will be attractive to money on the sidelines from the aforementioned funds.
I’ve seen more deals in the past week that were worth looking at than I did in the entire prior year.
-Sanford D. Sigal, President & CEO of NewMark Merrill
There many not be a better time in life to get into the business of real estate investing. Join our mentor program and let us help you navigate these waters.