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Jp Morgan Picking Assets In Europe

JP Morgan Picking Assets in Europe

JP Morgan is planning to make new investments in the European real estate market, increasing their assets by at least 400 percent. Prime properties that are in good condition and have tenants have become and continue to become more expensive. It is for this reason that JP Morgan is going to acquire properties that need re-development, repairs and re-modeling and could benefit from new tenants.

Peter Reilly from JPM said that the company is working on increasing its asset portfolio to almost 4 billion euros by buying resourceful properties. Firms and companies like JP Morgan that deal with property are venturing into a riskier market due to the costly nature of safe investments, which have been at their highest ever since the economic slump of 2007-08.

Purchasing activity driven by changes in the capital market

 

Peter Reilly, JP Morgan's Asset Management Head for Real Estate Europe, said that the firm’s imminent purchases of European property will comprise around 80 percent properties that are opportunistic. This is a big change from the firm’s buying strategy in 2012, when core properties comprised almost 80 percent of the investments made. Explaining this change in buying profile, he said that JPM will change its investment activity according to the developments in the capital market. The firm has in the past bought solid and safe real estate in 2010, after the economic slowdown. Now that the capital market has registered a shift to investment in risky real estate, JPM follows suit.

The real estate market is currently experiencing a rampant increase in risky property investments due to the very costly nature of properties that are deemed ‘safe.’ All major investors and buyers are focusing on taking advantage of opportunities as they come instead of solely focusing on core real estate purchases. There has been an almost 13 percent increase of such investors this year, as compared to the numbers in 2013. Correspondingly, the percentage of safe property buyers has reduced by almost 20 percent this year, currently comprising 35 percent of the total market.

The profitability of riskier real estate investments

 

According to Reilly, JPM Asset Management has investments of almost 3 billion euros in core European properties. The firm has more than 7.5 billion euros invested in property holdings and the plan is to increase this number. With the banks selling off under-performing loans, it has now become easier to invest in real estate. These under-performing loans can earn more than 80 billion dollars by the end of this year, and the money will be used for funding new businesses.

The logic, as explained by Reilly, is to invest in risky properties existing in good market and then converting them into safe core properties, an idea that will prove to be quite profitable in the long run. Big European cities like Hamburg, Paris, Berlin, Munich, and Frankfurt will be the areas that the firm is planning to make real estate investments in.

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