Private Equity Strategies In Asia Preface What’s To Come For U.S. — Takeaways From Glenn Youngkin, Willy Walker
If positive signs out of the Asian market are any indicator, it could be a bit before U.S. private equity firms return to the business of buying and growing companies.
Traditional private equity deals are largely on hold as investors and companies worldwide wait for the market to settle, said Glenn Youngkin, co-CEO of the Carlyle Group, one of the world’s largest private equity and asset management firms.
Youngkin, a speaker on Walker & Dunlop's weekly webcast led by Chairman and CEO Willy Walker, described how until more traditional transactions come back, a series of other deal types will crop up in the meantime, including private credit, secondary purchases and liquidity support.
Private credit deals are already showing up in Asia, where markets are a few months ahead of the U.S. Stateside deals could follow soon.
“There’s encouraging data out of China right now that would suggest that industry can stand back up reasonably quickly,” Youngkin told the webcast's audience. “Opportunities in Asia are presenting themselves earlier than opportunities here. Remember, while we’re sitting in shelter in place now, China was doing this back in January.”
Carlyle’s busiest arm at the moment is its private credit business, which Youngkin said is always the “tip of the spear” during recoveries. As the economy settles, he expects secondary purchases of other investors’ interests to become more active.
Depending on how long the recovery takes, Youngkin said, companies may look to firms like Carlyle to start offering liquidity, either as a financial stopgap until the market really starts to pick up or as a way to fund new acquisitions.
Once the market is on the upswing again, more traditional private equity deals should make a return.
“We’re starting to see opportunities in Asia in sectors you would expect: innovative healthcare, technology, many parts of the financial services sector,” Youngkin said. “The success of the business models over the next few months will differentiate the true winners coming out of this from the more sluggish companies to recover.”
Here are a few other quick hits from this week’s webcast about the state of commercial real estate:
- CMBS spreads are tightening, prompting suggestions that it will return to being a viable source of financing for commercial real estate. But Walker expects that CMBS players won’t start being willing to lend until market volatility gets under control and they can begin pricing risk effectively.
- Collections in May were strong for Walker & Dunlop’s largest multifamily clients. Among seven multifamily companies representing around 250,000 units nationwide, five said collections for May were pacing ahead of the month of April. One client reported 85% collections by May 4 after seeing 75% collections on April 4.
- Forecasts for student housing could shift wildly in the coming weeks as colleges and universities decide how — and if — students will return to campus this fall. While some owners might be facing down the disappointing prospect of empty buildings, Walker suggested another outcome. If colleges follow Purdue’s proposed plan to turn double dorm rooms into singles and establish quarantine areas in on-campus housing, off-campus housing may see a huge spike in demand.
This feature was produced in collaboration between the Bisnow Branded Content Studio and Walker & Dunlop. Bisnow news staff was not involved in the production of this content.