Dallas, USA, Aug. 15, 2020 (GLOBE NEWSWIRE) -- There’s no question the world is struggling under the burden of COVID-19. The ripples sent through markets by the virus and the subsequent lockdown are being felt on every continent and by every investor class.
Case in point: the world’s highest net worth individuals endured significant losses in Q1 2020. In March alone, Jeff Bezos’ wealth dropped by nearly $18B. Elon Musk and Warren Buffet lost about $12B each. And recently named 2nd-richest-man-in-the-world Bernard Arnault has watched his worth topple by $30B over the last two months. Moreover, global market index MSCI is down 10 percent since the outbreak began in January, reversing a longstanding trend “up and to the right.”
Although it’s too soon to gauge the pandemic’s full impact, it’s not too early for sophisticated EB5 investors to begin planning for the upswing that’s likely to follow the current downturn. That means pinpointing which national economies — and which asset classes — are most stable, resilient, and likely to create lasting long-term value.
Dan Healy, Founder and Chief Executive Officer of Civitas Capital Group, believes that commercial real estate (CRE) in the United States meets all three prerequisites. “The U.S. remains the go-to market for investors in a flight to quality,” he explains. “In public markets, we see this with Treasury bills, where massive investor demand has resulted in record-low yields. The same is true in private real estate. Investors who need to allocate capital to real estate typically overweight the U.S. when times are tough.”
Perhaps just as importantly, Healy notes, COVID-19 has not substantially disrupted a trend that has been gaining momentum since the Great Recession of 2007-2009. “Even before COVID-19, there was already roughly a trillion dollars committed to private real estate funds targeting U.S. properties,” Healy says.
How has CRE become such a stronghold for investors seeking risk-adjusted returns in times of economic instability? The first step to answering this question is to revisit recent history.
HOW DID THE RECESSIONS OF THE 2000S AFFECT U.S. REAL ESTATE?
The recession of 2001 is remembered today, if at all, as the bursting of the so-called “dotcom bubble.” However, it was a true — albeit relatively shallow — recession, and its fallout was not limited to the technology sector. Demand for office space experienced an abrupt decline. Net effective rents (NER) didn’t just slump by almost 18 percent. They also stagnated. Office properties did not begin to experience growth until Q2 of 2004, and NER did not return to their pre-recession peak for another 3.5 years.
Cumulative Effects on Rent During and After 2001 Recession
Three and a half years, of course, takes us to 2008 and the bursting of another bubble: housing. The proliferation of subprime mortgages played a major role in precipitating The Great Recession. Research conducted by CoreLogic reveals that, by April 2006, housing markets in “65 percent of the most populated metro areas in the U.S. were listed as overvalued.” The crash that followed resulted in American homeowners collectively losing $16T in net worth. In states such as Arizona, Florida, and Nevada, home prices plummeted by more than 50 percent.
ABOUT CIVITAS CAPITAL GROUP
Civitas Capital Group is an alternative investment manager offering compelling, niche opportunities in U.S. real estate, lodging, and private credit. Civitas exists to create opportunities that enrich our communities, investors, and employees alike. Founded in Dallas, Texas, in 2009, the firm has $1.7 billion in assets under management on behalf of institutional and qualified individual investors from over 40 countries. Driven by relentless creativity, Civitas digs deeper to uncover opportunities that others miss. Media Details: Name: Viresh Ohri Company name: Civitas Capital Company Website: https://www.civitascapital.com/ Company E-mail: viresh.ohri@civitascapital.com
