Texas billionaire and real estate investor John Goff predicted that a number of appealing properties will hit the market soon as rising interest rates force some investors to sell.
“We’re entering a period here where there are going to be great properties that will hit a debt wall,” Goff said Tuesday on Bloomberg Television’s Wall Street Week with David Westin. “We’ll be able to acquire some very attractive properties at compelling pricing.”
Goff’s remarks echo those of other prominent real estate investors who are eager to cash in on an anticipated wave of defaults and restructurings in commercial real estate. In May, Starwood Capital Group’s Barry Sternlicht said his business is poised to seize on potential distress as higher rates and falling demand squeeze property owners. And Armen Panossian, one of Oaktree Capital Management’s two incoming co-chief executive officers, said in September that he sees an opportunity coming in the office sector although it may not be quite the time to pounce yet.
The massive commercial real estate market is under pressure from high vacancies and a rapid increase in interest rates. That’s fueled distress in the market, particularly for firms that have to refinance. About $1.4 trillion of US commercial property loans are coming due this year and next, according to an estimate earlier this year by the Mortgage Bankers Association. Values for US offices were down 21% in October from a year earlier, according to real estate analytics firm Green Street.
Goff said that while pricing is poised to become more attractive to buyers, he doesn’t expect discounts as deep as what he saw earlier in his career.
“There are definitely discounts available, but it’s not to the extreme that we saw in the nineties,” Goff said.
The 68-year-old investor is chairman of Crescent Real Estate, which has a portfolio of assets including office, multifamily and hospitality properties. On Wednesday, the company is opening up a new development called the Crescent in Fort Worth, Texas, which will feature a hotel, office space, residences and the luxury spa Canyon Ranch.
The company also owns the Crescent in Dallas, an iconic office tower and hotel in the trendy Uptown neighborhood that caters to law firms and asset managers.
Goff also holds interests in oil and gas. He sits on the board of Crescent Energy, a Houston-based firm that acquires, develops and operates oil and natural gas properties. Goff said he thinks the global economy is “woefully” under-invested in oil and gas and described the rush to eliminate hydrocarbons as “misguided.”
“No doubt, there should be a form of transition,” he said. “But to simply set aside oil and gas as, you know, the crux of our economy, the crux of our energy capacity, is extremely naïve, if not, dangerous.”
--With assistance from Julie Fine.