Alpha Real Capital: COVID-19 crisis will create more investment opportunities in real estate

Alpha Real Capital: COVID-19 crisis will create more investment opportunities in real estate

August 10, 2020

Real Assets Real Estate
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Alpha Real Capital LLP claims that the impact of COVID-19 will create attractive investment opportunities for investors in the European Long income real estate sector. Over the next 6 to 12 months, it expects a significant growth in refinancing and M&A activity where ground rents may offer an attractive financing option. 

Although challenges remain, in a new paper published by Alpha entitled ‘Commercial Ground Rents: Investment opportunity in a time of adversity’, it says there are several supply-specific factors behind this predicted trend:

  • Reduced liquidity: multiple sectors are struggling for short-term liquidity, which can be achieved by releasing capital through ground rents.
  • Increased financing costs: traditional financing costs have increased, so ground rents will become an even more attractive funding alternative for certain acquirers and operators.
  • Banks looking to de-lever: banks are looking to operators to provide new equity into existing positions to reduce leverage. Ground rents represent a low-cost option to provide this equity.
  • Wider opportunity set: the change in circumstances apply to many quality assets with sustainable mature income which previously saw no need for a ground rent. For example, high quality ‘trophy’ assets owned by family offices may need liquidity injections and this could be the first and potentially the only opportunity to access these.
  • Heightened M&A activity: due to the current environment, distressed sale and consolidation M&A activity is expected to increase and require attendant financing options.

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