[GAII 2024] “The final stage of global real estate price adjustment… “It’s time to invest”

“Price adjustments in the global real estate market have already occurred to a large extent. “Now is the time to actively invest.”

Christopher Montserisier, head of real estate debt investment at BNP Paribas Asset Management, who recently attended the Global Alternative Investment Conference 2024 (GAII 2024) hosted by Maeil Business Newspaper at the Lotte Hotel in Jung-gu, Seoul, said this during an interview with Maeil Business Newspaper.

Starting in 2022, the global real estate market will falter due to interest rate increases, and asset prices will also fall. However, he explains that now that interest rates have begun to drop, there is an opportunity to invest in real estate assets.

General Manager Montserisier said, “The cap rate (return on real estate investment) has been rising, but it will now show a stable trend,” and “Rents for prime office and logistics center assets are also continuing to rise.”

Since 2020, General Manager Montserissier has been responsible for the real estate debt investment sector within BNP Paribas Asset Management’s Private Debt and Real Assets (PDRA) investment division. BNP Paribas Asset Management is a global asset management company that manages assets worth $650 billion (912 trillion won).

BNP Paribas Asset Management predicts that the cap rate of prime offices will record 5.25% this year and gradually decline, reaching 4.84% in 2028, five years later.

Director Montserisier said that only by selectively investing in high-quality real estate assets will high returns be achieved.

Prime offices, housing, and hotels were selected as promising investment areas, but he said there was a need to carefully review offices or retail facilities located in outlying areas of the city.

He said, “There is a need to vary investment strategies depending on the type of asset,” and “As hotels that were closed due to COVID-19 are resuming operations, we should pay attention to hotel investment.”

In this situation, it is predicted that the real estate loan investment market will also become active.

Montserisier predicts that although banks, which are big players in real estate loan investment, are still carrying out conservative investment execution, private equity funds (PE) and institutional investors are expected to move actively to find new investment opportunities.

General Manager Montserisier said, “An attractive market environment is being created, with the LTV (collateralization ratio) of senior loans lowering from 65% to 55%,” and “Compared to bond yields in the public market, the illiquidity premium is 100%. “There will be about ~150bp (1bp=0.01%).”

He continued, “However, since volatility still remains in the market, it is important to reduce risks and selectively invest in high-quality real estate assets.” He added, “I seek advice from local experts or companies specializing in specific real estate asset types.” “That is also one way,” he said.

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