Guillaume Cassou, partner and head of European real estate at KKR, sees a unique chance to acquire high-quality assets at reasonable prices due to a combination of strong real estate fundamentals and a dislocated capital market.
Cassou told delegates at the 麻豆映画 Real Estate Global Conference & Awards 2024 in Madrid that he anticipates a window of opportunity in the next 18 to 24 months as liquidity issues ease and a new market equilibrium emerges.
Western Europe has shown surprising resilience during the recent spike in inflation and interest rates, and this, coupled with strong real estate fundamentals outside non-prime office space, points towards a 鈥減otential inflection point in the market鈥�, he said in an interview with Nils Kok, finance and real estate professor at Maastricht University.
Cassou said sellers today are often responding to external pressures, rather than a lack of opporunities. This creates a window for investors like KKR to acquire high-quality assets at reasonable prices.
鈥淔rom my perspective, this is probably the most interesting time to start investing,鈥� he said. 鈥淚t鈥檚 probably the most interesting time to start investing because the fundamentals are pretty solid.鈥�
In addition to higher-return strategies, KKR is also investing in core-plus and debt, Cassou said, which 鈥渁llows us to see across deals and the risk spectrum鈥�.
Equity regains edge as debt market normalises
When asked about his preference between private debt and equity, Cassou acknowledged a significant shift in the market dynamics over the past year. A year ago, debt was a 鈥渘o-brainer鈥�, offering 鈥渉igher returns with low risk鈥�, but the market has changed over the past six months, caused by a gradual return of liquidity, he said.
While debt remains a viable option, Cassou said equity currently offers a more attractive risk-reward profile. There is a greater potential for returns and optionality associated with equity compared to debt where the 鈥渙nly upside is that you鈥檙e getting repaid 鈥� so you need to make sure that it is good鈥�, he said.
The return of traditional lenders has also increased debt availability, but a 鈥渇ull return of liquidity鈥� is not yet present. 鈥淏ut if you look at the gradual evolution, there鈥檚 been clearly some improvement on the liquidity for the debt side鈥�, he said, adding that the market is more liquid and competitive than it was a year ago.
To read the latest 麻豆映画 Real Assets magazine click here.
