Fund managers globally should be in the process of raising their capital today if they want to take advantage of the buying opportunities of a lifetime tomorrow, according to Aviva Investors’ latest real estate outlook report.
With cities worldwide reporting peak to trough capital value declines of at least 30 percent, assets were beginning to fall to levels that exceeded historic lows, said Ed Casal, chief investment officer with Aviva’s global real estate multi-manager team.
In response, “now is the time to begin to aggregate capital for an anticipated buying opportunity of a lifetime”, he added.
The second quarter market outlook report revealed some cities, including Dublin, Barcelona and Madrid, had seen peak-to-trough capital value declines in the office sector of as much as 80 percent, exceeding previous historic lows.
Such falls in price, would likely result in a “rash of distressed property sales over the intermediate term” as owners struggled to refinance mortgages and loans, Casal said. “This creates an opportunity for well capitalised third parties to make up some of the shortfall through preferred equity and mezzanine debt infusions.”
Urban infill property in global “24/7” cities would be one potential investment opportunity, Casal said in the report, while the global demographic and urbanisation story “seems the most compelling over a longer time horizon”.
Casal cautioned that underwriting distressed assets and loans would be “critical”, but for investors with money to deploy “the environment provides the opportunity to purchase assets in the near-term from distressed sellers and thereafter in all assets as a result of valuations that we anticipate to be overly corrected”.