VIDEO: How Allianz navigates late-cycle investments

Some investors will hesitate to deploy capital as headwinds in market fundamentals emerge, and that’s where Allianz Real Estate of America spots an opportunity as a long-term investor, according to Gary Phillips, managing director and head of acquisitions at the firm, speaking on the sidelines of the PERE America conference this week. For more on the property types he finds most attractive and the riskiest behaviors he’s currently seeing in private real estate, watch the video.

TRANSCRIPT:

You do have some late-comers, so there’s some vintage risk – particularly in the office sector – where some foreign investors in particular missed out on the ramp up in the early stages cycle and are coming in now into an asset class that may experience some softness in the coming years. And then at the same time, we’re also seeing higher leverage ratios than we’ve seen in recent years. So if you couple those two together, there might be some pain, you know, for those late-cycle investors going forward. It all depends on your objectives, or your investor’s objectives.

We take a very long view and we’re not trying to churn capital and take advantage of a very nuanced opportunity and then exit in two years. So whenever there’s dislocation in the market, we view that as one of the greater opportunities, particularly if it’s long-term core real estate. The West Coast has been a big focus for us, and New York will always be a focus for us and I think that there’s been some investors that have hit the pause button here because of some headwinds in the market fundamentals and we always see that as an opportunity as a long-term investor.

We always try to take a long view. So we avoid buying commodity real estate in any respect. We try to acquire assets​ with best-in-class partners that not only exhibit potential for growth but also exhibit downside protection ­– particularly in the next three to five years – whether that’s an inflation hedge in multifamily or student housing, or an office building with a weighted-average lease term that gets you beyond the next handful of years.