Global Real Estate Opportunities for Insurers

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Stewart: Hey, welcome back to the Home of the World's Smartest Money. My name's Stewart Foley, and I'll be your host, and I'm really glad that you're here with us today. Commercial real estate has been one of the most interesting and certainly one of the most debated asset classes of the last several years. High interest rates have reset valuations. I don't think any industry has been, or any sector has been, hit harder by COVID. Financing costs have changed, and some of the sectors have faced significant challenges and others have continued to perform. And interestingly, the opportunity set looks very different depending upon where in the world you're investing, whether you're providing debt or equity capital, and perhaps more importantly, which individual assets you are deciding to own. This makes a particularly interesting moment for insurance investors because the question isn't simply, is commercial real estate attractive?

It's more about where is it attractive, what part of the capital structure, and are there some dislocations that are creating opportunities for me as I look out at the world? So I'm joined today by Greg Eudicone, head of global real estate client portfolio management at Barings. Greg, welcome to the show. We're thrilled to have you.

Greg: Thanks for having me. Appreciate it. That was a great intro, by the way. You kind of covered it, man.

Stewart: Man, listen, it's very kind. So if you don't know Greg, he's worked across Barings’ global real estate platform, debt and equity, oversees development and management of strategic client relationships. You've been at this for a minute and you know this stuff well, and we're thrilled to have you. And I want to get into it, but I also want to know where'd you grow up and is there a fun fact that your colleagues would be surprised to learn?

Greg: I grew up in Hartford, Connecticut.

Stewart: I used to live in West Hartford.

Greg: I got a brother there. I grew up in Simsbury. My fun fact is I broke both of my arms at the same time on Halloween when I was five years old, but my claim to fame is I still went trick or treating. So that's one of the more interesting things about me. I was jacked up.

Greg: Yeah, exactly. Resilience. It prepared me for what I do, which is navigating real estate markets and international investors and debt versus equity. So I guess it prepared me well, but yeah. So we're from the same area, so that's fun.

Stewart: It's interesting. When people talk about real estate, it's sometimes discussed as a monolithic block. But when you look across Barings’ global platform today, can you talk a little bit about, if we can just crank the lens out, how do the opportunities differ by geography, sector and so forth?

Greg: Yeah. I think one of the major themes we now explore versus previous cycles, if you will, where there were times globally you could say, "I'm just going to go buy industrial." And generally, you were going to be pretty good from, I don't know, the dot-com boom on. And that could be in the U.S., it can be Europe, it can be in Asia. Again, I'm painting with a broad brush somewhat on purpose here, but the theme we speak with global investors now is that is no longer the case. Generally, we believe we are in a stock picker’s market, if you will. So no longer can you just go buy the market index of industrial and hope to do well. And so I think it's adding a layer of complexity to our discussions, but I also think it adds an interesting layer of opportunity for the investment set, if you will.

And so it's far more nuanced. So you can never say no to office anymore. A couple years ago, post-COVID, people were like, "I'm never going to do office again." And I would imagine most managers would say, "Well, maybe now." And so I think it's a really interesting story, and you can never zoom out too much because you might miss interesting opportunities. It's about being back to the fundamentals, understanding your location, understanding your drivers, understanding your replacement costs, thinking about rates, which you so astutely pointed out. I think this dynamism of the conversation right now is pretty unique.

Stewart: It's interesting that when you, there's an old joke in fixed income that goes, "There's no such thing as bad bonds, just bad prices."

Greg: Correct.

Stewart: It's like there's no such thing as bad real estate, just bad prices.

Greg: Correct.

Stewart: And so we've spent a lot of time hearing broad narratives about the major food groups, office, multifamily, industrial, healthcare and other segments, but that can hide dispersion. So when you look out there, where are you seeing strong fundamentals? And is there any place that you're cautious?

Greg: So I think the variance in asset classes is some of the widest it's been over the past 20, 25 years if you look at the NCREIF NPI, and that is something that Barings, with its research colleagues, spends a good amount of time focusing on. So really, you have your good assets and your bad assets. And the cleanest example right now is office. You can look at New York City, and I'm sitting at 43rd and Madison. It is arguably one of the best office markets in the world with very tight vacancies. And so the opportunity lens of office right here in my little section is incredibly different than you go down the 4-5 train to Wall Street and it's a completely different story. When you think about previous market cycles, I think you'd be hard pressed to find a node like New York City where you have a top 10 office market probably in the world and a bottom 10 market in the world all within a mile apart.

So the variance in office is something that I think is quite pronounced, and I think that's a good example, but it's not just office though. I mean, you can think about multifamily, and generally we are most supportive of the macro trends, which is living and industrial.

I think everyone agrees there's a sort of a dearth of housing across the globe, and so the living trends, which can be for-sale residential, obviously you got to be watching about legislation there, multifamily, all the living sectors I think are supported by macro trends, which we like. And then obviously industrial, although there's tariff noise, we're still buying more online and we still need to move goods. Those are the big ones, but there are dispersions within those asset classes. There's pockets of oversupply in certain markets in the Southeast and the Southwest and in the U.S. for multifamily, for instance. So you need to be mindful of that. In industrial, the golden child of industrial is the Inland Empire, and then the Inland Empire hit some rough patches. So dispersion, I think, is again getting us into a stock picker’s market, but outside of the main food groups, or maybe I can touch quickly on retail. Retail wasn't really developed after the boom in 2008.

And so a scarcity effect has set in. So people think retail is really, really interesting. I think 10 years ago, you would agree that no one would say, "I'm never touching retail again after the boom of e-commerce." So what's interesting about real estate is the cyclical nature of it and the supply-demand. The big trend we are seeing right now is how do you stand up the four major food groups with alternatives? I think the managers that will win the next few cycles are able to source alternative assets for their clients, and that's credit and equity. As we think about sectors, there's manufactured housing, back to the affordability index of housing and the lack thereof. Manufactured housing is really interesting. Student housing, those are areas where we think in the living sector that I think are interesting. Other alternatives are supported by the aging populace in the U.S., so that's medical outpatient, people going for more day-in procedures when they come out, senior living, which was sort of magnified in the COVID era, how that was going, how people are going to age, and there's cold storage.

There's these alternative sectors that allow you to diversify within industrial or within living that I think is making the conversation really interesting these days.

Stewart: Yeah, it's interesting because when markets are screaming full steam ahead, it's hard to separate good from bad asset managers, right?

Greg: Correct.

Stewart: But when there's dispersion, there tends to be no substitute for rolling up sleeves, and that's where an active manager can really outperform. Part of what I think is misunderstood by having, I've been on both sides of the fence as a CIO and as a PM, I think that it's difficult to communicate effectively how deep the resources are and how much analysis goes into this to allow you to outperform in the dispersion that you're talking about. So can you talk a little bit about how the sausage is made to some extent?

Greg: Yeah. Look, on both the debt and equity side of the house, we have strong asset managers that really cover the asset from acquisition to disposition. I think of it as a people relationship. Obviously, on the debt side, you have a borrower, and an asset manager there is forming a relationship with your borrower to achieve some outcome. There's some business plan, but almost immediately something is going to go off track. Generally, borrowers, if I think about the debt side, they usually just need more time. It's that communication process where you have an active asset manager that's pairing with a borrower, that's understanding critically what do you need to achieve your business plan? Now, if you're doing a core mortgage in Chicago at 55% LTV, you're just collecting rents and there's not so much to do. But as soon as you step into, which many insurers are, transitional real estate where you are effectuating some business plan, that could be a lease up, that could be a change of use, that could be whatever, immediately you're going to get off plan.

So timing, communication is incredibly important. On the equity side, you are creating something at the property. You could be developing something, you could be changing use, so it's not too dissimilar. I think we have the ability to do both at Barings. Our colleagues that we partnered with recently at Artemis Real Estate Partners, they run a cradle-to-grave approach, so their acquisitions professionals stay with the deal all the way until disposition. We think that is that specialized asset management approach, if you will, is really, really strong because the acquisitions professional knows everything about it, but we actually now supplement that with Barings’ asset management professionals from the equity side that can really pair with our Artemis colleagues to get really deep into the property. And they're, dare I say, specialists in industrial or multifamily. Generally, we think markets are too dynamic just to sit back and clip coupons.

If you're thoughtful about the asset, you understand your local market conditions, I think you can uncover opportunities to create new returns without taking undue risks. So it's really about being close to the asset, close to the market and doing good by you and being your fiduciary and creating new returns and new possible returns for your investors.

Stewart: Yeah, and one of the things I wanted to spend some time on and just reading my notes is on healthcare. So demographics are one of those investment themes that sometimes move really slowly, and that tends to underestimate sometimes how powerful they are. Barings has meaningful experience in this area. You mentioned Artemis, I'd love to know more about that, but what do you find compelling? I mean, I feel like I know some of the answer to this. My mom is 89 and we've been deep in the healthcare world for a minute, and all of my friends are dealing with some issue related to their parents, and folks are living longer because they took folks' advice about diet and exercise and folks are living longer. I feel like I know the answer to some extent, but what do you find compelling about healthcare real estate and how does the opportunity differ from some of the more traditional CRE sectors?

Greg: Yeah, what I find interesting about the healthcare real estate play is it's personal. To your point, absolutely everyone has a story related to a parent. I mean, my father's in the hospital right now. He's going to be okay, but he's going to have to go to a rehabilitation center after an emergency surgery. So from just a loved one's perspective, you want the best facilities to take care of your parents, your brother, your sister, your uncle, so whoever it is. Then when you think about the demographics and that silver tsunami coming through, so the need is glaring. What we were so attracted by in the Artemis opportunity was their expertise, their operational expertise. I do think there are some moats around this industry where it is personal. You are putting your mom in a 55-and-up living facility, but it has a continuum of care through her needs, for instance.

You want to make sure you have the best people operating that facility that brings in the best care technicians and what have you. The macro and the micro, I think, come together really, really well. The areas that we like the most are medical outpatient where you're going in for that procedure, which continues, they pop up more and more as you age, getting people healthy again. And so those rehab centers and those medical outpatient centers we think are a really compelling opportunity. They're usually nearby hospitals, so you have that node that's really interesting, and then senior living. Now, COVID I think was an interesting test of that sector when some state-run facilities may not have been doing. But we do all private pay at Barings and Artemis. And again, the aging populace and so the defensive nature of the asset class we think is one of the most unique opportunities for this cycle and going forward.

So one of the things that really attracted us to the Artemis opportunity was their expertise in healthcare, and they have just a very, very strong team.

Stewart: Yeah, I only got a little self-conscious when you mentioned the silver tsunami.

Greg: There you go. Keep going with that beard. I love it.

Stewart: I'm winning the gray hair race handily here. So let's talk about timing. For the last several years, and look, let's not get lost in this. There's career risk in the CIO office, and so they've been cautious in this asset class, and it's understandable because they've got board members and investment committee members who read headlines, and oftentimes that's when there's opportunity, but nobody stands up. I've been in this business a long time, and I have never, ever heard anybody say, "It is an obvious screaming buy right now. Everybody should get in." It doesn't happen. There's uncertainty in the market. There's always uncertainty. We get paid to accept that uncertainty, and we get paid, you get paid, to take a lot of expertise and discern where opportunities exist in a given market where you've spent a lot, a lot of your life studying.

Greg: I think you make a really good point that, at times, real estate people might lose focus of, and I love real estate people. I am one of them, but how many acquisitions professionals do you know? They're like, "I love this deal. This is the deal. This is a great opportunity. It's 25% discount for replacement costs or whatever. We're buying it off market." But then you talk to an insurance CIO or a pension plan CIO, it's like, "I've been burned by New York City office or San Francisco life science," whatever it could be. I spent my career in real estate, but I do believe that's a unique aspect to real estate, that someone's lost money on real estate. So you are very right. But with these headlines, we think there is a strong opportunity set. And that isn't to say that there isn't a really great opportunity set in infrastructure debt or equity or private credit or portfolio finance or ABF. And so we can get all into the credit opportunity where I think is vast, wide, deep, capital efficient for insurers. But there are these general opportunity sets that I think are interesting because when you go back to fundamentals, you have bank retrenchment, you have banks that play a major role in our industry, they are stepping back. That creates opportunities for lenders or that creates opportunities where somebody can't refinance a multifamily asset and allows an equity buyer to come in at an interesting opportunity.

There is that general notion of real estate still is an inflation hedge when you can reset your daily rate in a hotel or your rent and living. And so that makes good sense. I mean, you've seen the S&P has run up, I don't know, 75% over the last five years. Real estate is broadly repriced 25%. Now, rates are stubbornly high, but what I think is really interesting post-COVID, we have seen, is the conversation around real estate has gotten horizontal where it may not be the best opportunity at a time for real estate equity, but real estate debt is having its moment, which I think will be sustained. And so generally, if I simplify, we think real estate equity is a really interesting opportunity in the value-add and opportunistic space. So higher returning vehicles where you're doing a little bit more business plan, you are putting some leverage on, you're buying at a slightly depressed price, but we think value-add real estate globally, that's U.S., Europe, UK, Australia, Japan, incredibly interesting.

But I think what's happened post-rate rises, post-COVID, is a conversation around real estate credit where you can be at a mitigated piece of the capital stack where you can focus on income preservation, highly capital efficient market. I think that is taking more space in that sub-10% return range. Why would I take first-loss risk on an apartment somewhere when I can be the debt on it at 65% LTV and clip my coupon when all I'm trying to do is achieve an 8%? And so I think the horizontal nature of the opportunity set between debt and equity around relative value, I think that's really interesting and it is consistent with broad conversations we're having with global LPs. It used to be, I'm just a real estate equity person or I'm just a debt person. Now you're bringing it together and having that full-continuum conversation and you're also doing public and private, right?

You're thinking about ways that you can get some public exposure, maybe CMBS, to supplement your allocation. So I think this is a really interesting time in the industry with real estate credit and equity coming together and real assets in general, having more fulsome conversations with insurance and other investors.

Stewart: Yeah, that really is a comprehensive answer there. I mean, it brings it together. You work with a lot of insurance companies. What are they telling you? Or you mentioned some conversations with LPs. Is there any common theme that you hear back? I mean, I'm kind of asking for a backstage pass here to the extent that you can give us one.

Greg: Sure. Look, I think the sophistication of the insurance investor around credit opportunities is notable, and that could be from a parent company balance sheet that is trying to be capital efficient with rated feeders or what have you. It could be reinsurance dollars coming in, which can take a higher return opportunity because they can notch down in terms of credit ratings. I think there's a real sophistication now around multi-strat credit opportunities where you're pairing, again, back to my theme of being horizontal, let's think about a double-B credit. Let's think about that across corporate credit, real estate credit, infrastructure credit, portfolio finance, ABF. And I think that becomes a really interesting conversation, which in my opinion, slightly. There's two conversations going on at the same time there. It's a relative value discussion around a credit rating, but then it becomes quickly an origination discussion. So it's like, well, it's one thing to tell me I can go get all these things for a double-B, but can you go originate it?

That's the important thing. It's one thing to talk about it. It's another thing to go do it. And so having the origination capabilities to bring together the opportunity set I think gets really interesting. And that's where I've seen insurers take a significant step forward in the last five years, that you're having really nuanced in-depth conversations about how they can be capital efficient, how they can diversify across credit, how they can achieve their desired returns, and that changes for all based on duration profile. So we have some insurers that might have a longer duration profile and they want to stay at a seven- to 10-year fixed rate. And so how do we get efficient there? Or you have that shorter-duration, three- to five-year annuity-based profile that you're looking to originate shorter-term assets for. So it's all coming together, but I think the credit story is continuing.

New chapters are being written from it, and it is really, really interesting. And it's having that interesting conversation between the relative value of within credit and then credit versus equity.

Stewart: And so this is the part of the show, Greg, where we ask you to dust off the crystal ball. And if you look out two, three years from now, what do you think it looks like? And this is maybe the only podcast that we've done in the last several that somebody didn't say AI somewhere along the way.

So what do you think? I mean, is AI changing any of your, I know it's not changing your investment thesis or process. I'm confident of that. Are you using AI and what do you think this is all going to look like in a couple of years? And do you think there's anything that might surprise us?

Greg: We're using AI to augment our investment process, and because we do not think it is a replacement for our human staff.

Stewart: For judgment.

Greg: Exactly. We want our employees to be supplemented by AI so they can be spending more time on doing the right analytical work. So no longer do we need our junior staff pulling numbers from a lease abstract and a PDF. That, to me, is where AI can be really, really helpful. That AI is not going to walk the corner streets in Austin, Texas when you're thinking about a new opportunity. It's just not there yet. And so touching, looking, feeling, touching, knowing the crossroads in real estate, I think it's too important right now. Who knows what happens in three, five, seven years, but AI is certainly going to make us more efficient in terms of our analysis. I hope it makes our underwriting faster because we can get supplements. But at the end of the day, our process is not going to change. Where I see the AI impact in near next three years is it's like where are our rates?

Where are global borrowings? The deficits, data centers, we haven't touched on data centers. Data centers is a really interesting space. So the insatiable appetite for the hyperscalers to need more power in data centers, that's a place we dabble. We actually place it a little bit more in our infrastructure bucket than real estate bucket. For real estate credit, usually our cost of capital is just too high, so it goes off to banks. We'll look at some construction loans with our infrastructure debt team who's very, very strong in the space. If we are going to dabble in data centers and we do it here and there, it's usually in powered shells for hyperscalers in established markets. That's opportunistic for us and we're happy to make it a short-term hold. Let's develop it. Let's get someone to come in, lease it long-term, and then we'll move on. So I think AI in our industry, how that's bringing the compute power, the electrical power, and what is doing the grids, I think that's a really interesting place to play, and I think that's where we're going to see some significant change on the next couple years.

And then my last answer is, at times, I worry we're becoming numb to the noise, and I worry at times people lose sight on really underwriting the downside, being prepared for draconian situations because we have so many events that come out of nowhere, if you will, that at times I get worried that people don't. They just got to drive right through the volatility. But I do feel at a time the volatility, we might be entering it right now where you see where rates are and they're staying stubbornly high, but we just have been churning through volatility, head down, just look at the S&P and it keeps going up. I don't think that's sustainable, and it's going to come down to really disciplined managers that step back and be like, "Wait a minute, I need to go look at the fundamentals here, and this doesn't make sense." And you're going to have to make some tough calls, and maybe those calls that I see aren't going to be the popular calls because the crowd is doing it, but I think the disciplined managers are going to survive this cycle of volatility when people just drive right through it.

It is happening. You need to be disciplined. You need to think about fundamentals, and I think that's going to separate the winners from the losers of the next couple years.

Stewart: Wow. I mean, just a great podcast. I mean, really, really good. Super informative and really educational. Greg, I really appreciate you being on. I got one fun one for you on the way out the door.

Greg: It better not be about the Hartford Whalers.

Stewart: No, it's not. No. I mean, I lived on Wood Pond in West Hartford. I know you know where that is. I also lived in Simsbury briefly.

Greg: Really?

Stewart: On Schoolhouse Lane. I think it was Schoolhouse Lane in Simsbury. And another friend, I used to work at a firm that was in Farmington, and so a lot of those folks lived up that way, and several still do. So it's a beautiful part of the world. Alright. The last question is, describe your best real or fantasy dinner.

Greg: I have four kids, ages 10 to two, and a wonderful wife. And so I will say, and it's kind of realish, and it doesn't last that long, but we're all eating outside in a summer evening. There's live music. Everyone is sitting. None of our kids are flipping out. They're good kids. We're all having a nice little conversation somewhere near the beach. We just came back from beach vacation. I think we had minutes of that, but not necessarily prolonged, but I have faith that that will become my reality in five to seven years. So I'm close to my dream and I think it's achievable. Dinner at the beach, outside, live music, family. That's all I need.

Stewart: How about that? There you go. Hey, listen, thanks for being on, Greg.

Greg: Yeah, of course.

Stewart: I really appreciate it. I appreciate taking the time. We've been joined by Greg Eudicone, head of Global Real Estate Client Portfolio Management at Barings. Thanks for listening. If you like what we're doing, it helps if you'll rate us and review us wherever you listen to your favorite shows. And if you want to watch us, this is a video podcast, you can catch us on our YouTube channel at InsuranceAUM Community. Thanks for joining us. We'll see you next time on the InsuranceAUM.com podcast.

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Barings

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Barings is a $502 billion* global alternative asset manager that partners with institutional, insurance and wealth clients and supports leading businesses with flexible financing solutions. The firm, a subsidiary of MassMutual with a minority investment from MS&AD, seeks to deliver excess returns by leveraging its global scale and capabilities across credit, real assets, capital solutions and emerging markets.

*As of June 30, 2026
 

Ilena Coyle
Head of North American Insurance and Intermediary  
ilena.coyle@barings.com
973-271-2400

www.barings.com
 
300 South Tryon St, Suite 2500,
Charlotte, NC 28202

 

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