Real Assets Investments — Opportunity in Distress
In a dynamic industry like real estate — where market conditions drive change at an extraordinary rate — the need for a relevant real estate education is strong. Here we talk with Matthew L. Cypher, the director of the Steers Center for Global Real Estate, who brings 20 years of real estate experience to Georgetown McDonough School of Business.
You lead the new M.S. in Global Real Assets program for Georgetown McDonough School of Business. Given your extensive and successful history in the industry, can you share how this program can help new and established investors get ahead in the marketplace?
The world of real estate and infrastructure has been turned upside down, starting with Covid-19 and continuing through its aftermath of elevated inflation and rapidly rising interest rates. Combined with ESG priorities and changing focal points, professionals in this field need a different skill set than three years ago.
This is the real estate degree program for the future. We developed our program to include these new perspectives so students can add them to the toolkit they’ll carry into their future as real assets investors.
We are excited about the future of our industry, as we believe there will be a tremendous opportunity given the market distress today.
How has the market changed?
People are interfacing differently with physical space, and it has a direct effect on real assets. The carnage in the office market is only just beginning, and we believe other property types will not be immune from similar distress. Interest rates are much higher than they have been in some time, and the four-decade downward move in rates has reversed. People speak of their hope that we will “get back to normal,” but we believe this is the new normal, and our students need to understand how to invest in this environment.
What are “real” assets?
When we talk about real assets, we talk about the physical structures and raw materials that drive economic growth. Real estate is included within this definition, but so is infrastructure and energy, so highways, data centers, and affordable housing fit there too.
How do professionals in real estate need to think about real assets?
Our view is that real estate investors need to expand their playbook and understand the nuances of investing in infrastructure, which is similar to real estate in terms of cash flow but can differ significantly in a physical sense.
How do ESG issues play into strategy?
While ESG has become a highly politicized issue, investors who can identify what aspects of ESG will drive value will see their investments outperform others. There are components of ESG that can help investors avoid mistakes and provide proof points that can increase investment performance. We look at ESG through a risk management lens, similar to how other areas of risk are contemplated in real assets investing. Institutional investors want to know how you manage ESG-centered risks within your real assets portfolio, and innovators will be the beneficiaries of more capital flows.