New PIMCO CRE Fund Targets 'Some of the Most Attractive Opportunities in a Decade'

PIMCO has launched a new flexible real estate fund to address what its managing director and group investment officer Dan Ivascyn said are “some of the most attractive investment opportunities in more than a decade” based on the “extraordinary re-pricing of assets across financial markets this year.”

Speaking on behalf of PIMCO’s investment committee, Ivascyn said that “higher yields and lower valuations in both public and private markets make for an attractive environment for patient investors ready to deploy funds in a flexible vehicle that can allocate investments across commercial real estate.”

The PIMCO Flexible Real Estate Income Fund (REFLX) is the firm’s first real estate-focused interval fund. It will invest in private equity by acquiring stabilized, income-oriented CRE; private real estate loans; public debt such as commercial mortgaged-backed securities, and public equity such as REITs.

PIMCO launched its first interval fund in 2017 and has over $4.5 billion of AUM across five continuously offered interval funds, as of Sept. 30.

‘Prudent Contrarian Decisions’ Could Prove Wise

Scott Singer, principal and co-lead of Tri-State Debt & Equity Finance, tells GlobeSt.com that while the firm is still finding substantial liquidity for its transactions, the volatility of the last several months has caused some dislocation across the capital markets.

“Funds structured with the flexibility for thoughtful managers to make prudent contrarian decisions are likely to find attractive opportunities over the next couple years,” Singer said.

Investors Must Be Patient

Will Young, vice president, EMEA & corporate development, at NavigatorCRE, tells GlobeSt.com that the current market provides unique opportunities as investors “seek to see through the fog” of the current market uncertainty.

“It’s interesting to see them take a broad approach across debt and equity, public and private, but I believe it is the right one, as this market is going to present value in different ways, and it will be important to be flexible in structure and security.

“The final piece of the puzzle will be patient investors who can take a long-term view to look past any further short-term market turbulence.”

The Key is Due Diligence

Paul Fiorilla, director of research at Yardi Matrix, tells GlobeSt.com that today’s market provides solid buying opportunities for investors that perform due diligence.

“Equity yields are up from historic lows, while yields on debt products are up 200 to 300 basis points from the recent past on loans written at lower leverage points,” he said.

“Plus, the mezzanine and preferred equity market has come back after years in which high-yield investments were sparsely available and at prices that did not reflect the risk involved. Even so, investors must be discriminate to ensure that assets are solid enough to stand up to an economic downturn that is likely to occur in late 2023 or early 2024.”