Goldman Sachs reported that hedge funds longed U.S. real estate investment equities for the sixth straight week, betting on a rebound in commercial and industrial assets.
New York Community Bancorp (NYCB.N), opens new tab, has set aside large provisions against its CRE loans, bringing CRE exposure back into the spotlight. NYCB shares have down almost 65% this year.
A post-pandemic shift in work and shopping patterns has hit small and mid-sized banks highly exposed to office and retail properties, but a dramatic drop in their valuations has generated possibilities for hedge funds.
In a Friday letter obtained by Reuters on Monday, Goldman Sachs prime brokerage, which serves hedge funds, said real estate was the biggest net acquired equity sector.
These banks are under pressure to sell assets below current appraised valuations to balance their books. "REITs can buy into the market at lower prices," said Bruno Schneller, a managing director at INVICO Asset Management, referring to investors buying offloaded loans from banks with CRE exposure.
Goldman Sachs said that hedge funds bought real estate investment trusts with broad portfolios, office space, and specialized real estate holdings. The bank noted that hedge funds remained shorted retail, health care, and hotel and resort REITs.
It said that long positions compared to sector bets are near a year-high. Schneller said a strong economy would boost real estate due to the stable U.S. jobs market and broader economic outlook.
"The move to go long on real estate is not merely a bet on economic endurance but a calculated engagement with a sector showing signs of a U-shaped recovery," stated.
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