What To Do When Interest Rates Are Extremely Low?
Mixed economic indicators and volatile markets lead many to tread lightly in making investment decisions. These conditions also create great opportunities for skilled, niche investors like Alliance.
The headline indicator recently has been interest rates, and those are now at historic lows. Low rates mean borrowers can borrow more cheaply, which tends to raise asset prices and create a sellers’ market.
But the pandemic has also caused financial hardship for many sectors, hurting tenant’s core businesses and putting downward pricing pressure on some real estate.
These two conflicting mega-trends have led to a double-whammy for some investors but looks to be a double-winner for Alliance.
Why does Alliance stand to benefit on both sides?
From a seller’s perspective, we have a strong portfolio of properties with tenants in sectors (primarily medical) that continue to perform well. The anticipated returns from these investments look even better than usual compared with alternative investments in other kinds of assets. That along with low interest rates are some of the main reasons that our portfolio remains very well positioned.
From a buyer’s perspective, we’re ready to pounce on buying specific opportunities too. The current economic downturn is creating many new sellers. Some businesses want to fortify their cash positions. Others are looking to simplify their finances by divesting from their real estate.
At Alliance, we specialize in niche properties spread across the country. We are constantly scanning for deals that fit our investment criteria, and we’re ready to step in wherever we find highly motivated sellers. The current downturn is affecting different regions at different times and levels of severity, and our presence across geographic markets is a big advantage.
Our niche is also turning out to be one of the most resilient to the pandemic. Many of our tenants, such as kidney dialysis centers and private medical practices, are hurting less than other sectors and have stronger balance sheets.
Still, business is down in most sectors, and many firms, even strong ones, are under pressure. We can help relieve temporary financial stress by buying their facilities and keeping them in place under a long term lease. This kind of opportunistic buying can help firms cash out their equity value and create a great win-win situation.
The combination of our deep expertise in our market niche along with incredibly low interest rates is creating some really compelling opportunities. Some sectors are getting crushed, but Alliance stands to weather this storm and emerge even stronger than before.
