Key Takeaways
- • Bridgepoint Group, a London-based manager with $125 billion in assets, sees growing opportunity in overlooked real estate segments as higher interest rates deter other investors, according to company executives.
- • This summer Bridgepoint announced its acquisition of Kayne Anderson Real Estate, a real-estate investment firm with over $22 billion in assets, which CEO Raoul Hughes called giving the firm a "category-killing" real-estate offering and a bigger U.S. foothold.
- • Kayne Anderson CEO Al Rabil expects higher rates to produce a shake-out in the industry, with disciplined investors finding outsized opportunities in the fallout.
- • Rabil highlighted medical office space, small-bay industrial, and distressed multifamily debt as priority sectors, while warning that multifamily loans originated in 2021-2022 are coming due.
- • Hughes said higher rates are unlikely to materially impair returns in Bridgepoint's private credit and private equity portfolios.
Summary
While higher interest rates are pulling many investors away from real estate, Bridgepoint Group sees growing opportunity in overlooked parts of the property market, according to company executives interviewed by CNBC's Inside Alts newsletter. The London-based firm, with $125 billion in assets, has broadened from core private equity and private credit into infrastructure, secondaries and real estate. This summer it announced the acquisition of Kayne Anderson Real Estate, a real-estate investment firm with over $22 billion in assets.
Bridgepoint CEO Raoul Hughes said the deal gave the firm a "category-killing" real-estate offering and a larger foothold in the United States. He described the group's products as the go-to options within their niches, focused on value-added investing, and said the real-estate capability was the piece Bridgepoint previously lacked.
The article notes that funds which invested heavily in commercial and residential real estate in 2021, when rates were near zero, now face higher borrowing costs, compressed valuations, slower transaction volumes and rising defaults. Al Rabil, CEO and co-founder of Kayne Anderson Real Estate, said the rate environment will drive a shake-out in the industry, creating opportunities for disciplined investors with sector expertise. He argued that the environment, with higher interest rates and cap rates and lower asset valuations, produces "very outsized" opportunities for a long-duration investment business.
Rabil identified three attractive sectors. Medical office space, which he said has not been below 90% occupancy in over 20 years, is focused on higher-margin oncology, neurology, cardiology and diagnostics subsectors, supported by demand from an aging population. Small-bay industrial space used by small businesses and e-commerce retailers is also a target. In residential, he said multifamily debt taken on in 2021 and 2022, often financed off a 10-year Treasury near 1%, is coming due, creating opportunities in structurally broken capital structures.
Hughes said higher rates are unlikely to materially affect Bridgepoint's private credit and private equity portfolios, which it says focus on high-growth, high-margin businesses that are more resilient to rate swings. He added that rates appear to be stabilizing and that the firm does not believe the environment materially damages its ability to drive equity returns.
Bridgepoint CEO Raoul Hughes said the deal gave the firm a "category-killing" real-estate offering and a larger foothold in the United States. He described the group's products as the go-to options within their niches, focused on value-added investing, and said the real-estate capability was the piece Bridgepoint previously lacked.
The article notes that funds which invested heavily in commercial and residential real estate in 2021, when rates were near zero, now face higher borrowing costs, compressed valuations, slower transaction volumes and rising defaults. Al Rabil, CEO and co-founder of Kayne Anderson Real Estate, said the rate environment will drive a shake-out in the industry, creating opportunities for disciplined investors with sector expertise. He argued that the environment, with higher interest rates and cap rates and lower asset valuations, produces "very outsized" opportunities for a long-duration investment business.
Rabil identified three attractive sectors. Medical office space, which he said has not been below 90% occupancy in over 20 years, is focused on higher-margin oncology, neurology, cardiology and diagnostics subsectors, supported by demand from an aging population. Small-bay industrial space used by small businesses and e-commerce retailers is also a target. In residential, he said multifamily debt taken on in 2021 and 2022, often financed off a 10-year Treasury near 1%, is coming due, creating opportunities in structurally broken capital structures.
Hughes said higher rates are unlikely to materially affect Bridgepoint's private credit and private equity portfolios, which it says focus on high-growth, high-margin businesses that are more resilient to rate swings. He added that rates appear to be stabilizing and that the firm does not believe the environment materially damages its ability to drive equity returns.
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