Successful real estate investors have long followed the adage: if there is blood on the street, buy real estate.
Historically, this approach has paid off and it explains the mentality behind a new venture from Hines, a real estate giant with more than $93 billion in assets under management. Hines recently announced a new platform called Hines Private Wealth Solutions that aims to capitalize on the recent troubles in the real estate industry.
Hines management has been keeping a close eye on the real estate industry for decades and they believe that the current market provides the perfect opportunity for investors to purchase distressed assets and sell them for a profit in the future. When you consider that nearly $4 trillion in commercial real estate loans will mature between now and 2027, it’s easy to understand the logic behind Hines Private Wealth Solutions.
The developers behind many of these projects took out loans under the assumption that they would be able to refinance at pre-COVID interest rates. Considering that current interest rates are about double what they were before COVID-19, this assumption looks more like a losing bet every day. It also means that there will be many bankruptcies that a well-positioned fund can capture for pennies on the dollar.
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That’s where Hines Private Wealth Solutions wants to come into the picture. The company has already signed with investor Paul Ferraro, former head of the Carlyle Private Wealth Group, and raised $10 billion for the new project. It will offer its clients a range of investment options, including:
In addition to this offering, Hines will also provide its investors with personalized advice on how to best manage their real estate assets. It targets investors who want to move away from the traditional 60/40 investment model by funneling more money into real estate and away from other alternative investments. Hines is banking on the idea that high interest rates and high inflation will continue for a while.
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When that happens, it becomes more important for investors to hold inflation-proof assets. That’s a big part of why Hines is betting that real estate is near the bottom after years of declining profits due to high interest rates and big losses in the commercial sector. Hines’ conclusion that now is the time to buy real estate is based on long-term corporate research showing that real estate typically declines in value after a growth period of 15 to 17 years.
The research shows that the decline normally lasts about two years, which is about the same length of time that the real estate market suffers from high prices and high interest rates. Theoretically, now is the perfect time to make aggressive moves in the real estate market, and the Hines Private Wealth Fund is designed to allow investors to take advantage of current market conditions.
Despite the major problems facing today’s real estate industry, it’s not hard to see the logic in Hines’ approach.
“This is a great year, it’s a great moment. This real estate correction actually started more than two years ago, right when the Fed started raising rates,” David Steinbach, Hines’ global chief investment officer, told Fortune magazine. “So we’re two years into a cycle, which means we’re almost at the end.”
If Hines is right, real estate investors will have plenty of good buys with high upside potential to choose from over the next 12 to 24 months. The good news is that even if you’re not wealthy enough to buy into the Hines Private Wealth Solution, there are still plenty of opportunities for you to adopt their investment philosophy and look for an undervalued, distressed asset to invest in. create. Keep your eyes open and be prepared.
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This article from a $93 billion real estate giant is betting the market is about to bottom originally appeared on Benzinga.com
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