Scott Cote

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DENVER—Like many in the commercial real estate industry, ScottCote, executive vice president and co-head of Real Assets at AegonReal Assets US is fairly confident that a recession, or at least adownturn, is coming—the only question is when. It could be anywherein the next 19 to 24 months, or perhaps sooner as geopolitical riskcreates more downside.

In response, the company evaluated its private strategies andlanded on multifamily—workforce housing in particular—as resilientto a downside scenario in the economy, Cote told the audience atthe recent 23rd Annual Transwestern Real Estate Forum InstitutionalInsurance Investors Symposium.

Workforce housing, of course, has been attracting its fair shareof investment in recent years for various reasons: demand for theproduct type is strong as the affordable housing crisis worsens,buying opportunities are greater and strong financial support canbe had from the GSEs. Perhaps the most significant reason is thatworkforce housing assets, especially those in secondary markets,are outperforming more traditional multifamily product. Bycontrast, liquidity for institutional-quality assets in urbanmarkets is lower, JLL noted in a recent report. And indeed, Aegon'sCote noted that the company is staying away from new constructionluxury because that property market is weaker right now and doesn'thave the demand drivers seen in the middle market.

How Aegon is Approaching the Market

Instead, the company is partnering with local developers,usually though a JV equity structure, Cote said at the event.