LLoyd Jones | The Time Is Now

Brookfield Asset Management has announced that it anticipates raising $150,000,000,000 this year. (Count the zeros!) That’s right. One hundred and fifty BILLION dollars. That’s beyond comprehension. How do you find $150B of deals in a two-to-three-year investment period?

According to the Wall Street Journal, the firm’s CEO recently said,

“[The current market] will lead to the best environment we’ve seen since 2009 to execute on our longstanding investment strategy for real estate.” 

I completely agree. When I look back to 2010 when we were investing exclusively in multifamily value-add, I think we acquired about one deal in every 100 that we underwrote. In hindsight, I was way too conservative. We lost many good deals by not recognizing just how good the opportunity was.  But hindsight is 20/20 – and a good teacher.

Today, the opportunity is senior housing. The rising interest rates are putting stress on good properties. That creates acquisition opportunities. I see a repeat of 2010. Senior housing will lead the way, followed by multifamily and hotels. Most office and retail will have a difficult time. Some projects can be redeveloped, but most will have to be scraped. Of course, there will be smaller niches, like medical office and research labs, but the favored asset class will be senior housing.

Now the question is “Who among the big guys is going to be the first to start the wave?” Most of those we’ve talked to are waiting until they are convinced that we have hit bottom and the recovery has started.

I disagree with that strategy. While there’s a distinct chance prices will still go lower, now is the time to capture great deals. There’s no time to delay. The great deals I’m seeing now will go fast when all that pent-up capital starts flowing. And prices will soar, just as they did with multifamily. So now is the time to act. Of course, that’s easier said than done. Only the institutions have the cash. So, the rest of us have to accept putting in more equity and bearing higher-priced debt to get some of these extraordinary deals. Smaller, private investors can partner with an experienced sponsor who has access to institutional capital.

We don’t have Brookfield’s $150 billion, but we recognize an opportunity. And it is here now.

Chris Finlay
Lloyd Jones LLC
Chairman/CEO

_{Disclaimer: The thoughts offered by the author reflect solely his personal opinions and observations and not necessarily those of Lloyd Jones LLC. They are for entertainment purposes only. Nothing should be construed as investment advice. All investments involve risk.}