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Real Estate Investors Are Taking ‘Barbell’ Approach to Crisis

CRE investors are looking for both assets that have been hard-hit by the pandemic, as well as more stable properties.

(Bloomberg)—Investors are increasingly taking a “barbell” approach to a commercial real estate market that’s been roiled by the coronavirus.

They’re looking at distressed assets like malls and hotels hurt by the pandemic, as well as logistics facilities that are in demand as more shopping shifts online, according to Mike Van Konynenburg, president of real estate investment bank Eastdil Secured.

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The changing strategies are playing out against a backdrop of high unemployment in and low interest rates in the U.S. that may persist for a long time, Van Konynenburg said Tuesday in an interview on Bloomberg Television.

That has investors look for properties that have been hit hard by the virus outbreak, but also stable real estate assets that are holding up.

“There are two places to play,” said Van Konynenburg, who has advised Blackstone Group Inc. on real estate deals and began his career at Drexel Burnham Lambert. “One is playing into distressed assets, assets that were over-leveraged, or assets like the commodity office, certain lower-quality malls, and hotels that have been really hit.”

The other option, he said, is to “start buying those better quality logistics and office properties and life-sciences properties that have long-term leases and locking in a secure returning income stream while I have the opportunity to do it at yields that are very high relative to where Treasuries are right now. Really it’s a barbell.”

--With assistance from Ed Hammond.

To contact the reporter on this story: Noah Buhayar in Seattle at [email protected].

To contact the editors responsible for this story: Craig Giammona at [email protected]

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© 2020 Bloomberg L.P.

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