Business Specialties
Investment
Aug 03, 2009
By: Tonie Auer, Contributing Correspondent
Foreign real estate investors project their investments for the rest of 2009 will substantially out-strip investments completed year-to-date, while equity investors expect they will place seven times more than their current year-to-date investments, according to the results of a recent survey released by the Association of Foreign Investors in Real Estate.
Most of the investors who pulled out for any significant amount of time are now seeing lower prices, lower cap rates and the ability to get in and get the return they want to achieve, he said.
“In particular, a lot of those investors are motivated by current returns of 7 to 9 percent,” he said. “When cap rates were low, it was hard to do that. The preference seems to be in office, but we also see investors looking at hard at hotel deals in certain areas.”
On June 9, CPN reported that Youngwoo & Associates, a New York-based investment and development firm along with South Korean-based Kumho Investment Bank, entered into an agreement to acquire the AIG building - 70 Pine Street - and an adjacent office building -72 Wall Street - totaling 1.4 million rentable square feet in the heart of Manhattan's Financial District.
Additionally, there is evidence that banks are beginning to regain some semblance of stability is showing up in earnings reports and also in the pricing for inter-bank credit transactions, the report stated. LIBOR, which reflects the borrowing cost for banks lending to each other, has continued to drop, hitting 0.28 percent at the end of last week. In addition, currency swap rates improved significantly as banks become more comfortable with the counter-party risk of those transactions.
“LIBOR is a pretty good proxy for the level of confidence banks have in each other,” Doug Hercher, managing director for Cushman & Wakefield Sonnenblick-Goldman told CPN. “The fact that it has gone down significantly is a sign that banks are more comfortable in taking a credit risk among themselves. It is a good thing for liquidity and the banking system and ultimately a good thing for investors because it means borrowing costs are potentially lower.”
The Cushman & Wakefield report also stated that super-senior CMBS spreads continue to trend inward, tightening 20-30bps over the last week.
“We are seeing glimmers of a recovery for the securitization market,” the report stated. “Credit Suisse recently completed a $900 million private-placement of mortgage backed securities and Developer’s Diversified announced its intention to complete a low-leverage, $600 million TALF deal this summer. Pricing on that deal will provide some much needed visibility as to the state of the securitization market.”
The CMBS market is essentially closed right now and has been for 12 months and has been very quiet for a good 18 months,” Moyer said. “It is important to the real estate market to see a return to a functioning securitization market. Two years ago it was the biggest provider of liquidity to the real estate market.”
“I don’t think that we are going back to the securitization market like we saw in 2005, 2006 or 2007,” Moyer said. “It is important to see liquidity in that market. There are couple of indicators regarding whether that market is starting to get its feet under it. CMBS spreads and the fact that they’re tightening and going down is a good sign for the real estate market generally. We are starting to see these transactions take place, which is very positive.”
There are more lenders coming into the market and more equity investors looking at deals, Hercher said.
“It would be a vast mischaracterization that there has been a big change in the way the market looks,” he added. “There is more capital today than two months ago. That is just good news. The LIBOR and securitization is good news. It is easy in commercial real estate to be doom and gloom because a lot of indicators are down.”
By: Tonie Auer, Contributing Correspondent
Foreign real estate investors project their investments for the rest of 2009 will substantially out-strip investments completed year-to-date, while equity investors expect they will place seven times more than their current year-to-date investments, according to the results of a recent survey released by the Association of Foreign Investors in Real Estate.
“Overall, three quarters of the survey respondents had not yet invested in 2009; however, more than two-thirds of them plan to invest some debt or equity in U.S. real estate before the end of the year,” stated a recent report from Cushman & Wakefield Sonnenblick-Goldman, L.L.C.
“A big part of it is just pent up demand,” Christopher Moyer, an analyst with Cushman & Wakefield Sonnenblick-Goldman, told CPN. “Many investors pulled out of the market 12 months ago. Most are looking at global investment and continue to view the investment in the U.S. and U.K. as two of the strongest markets for them to be investing in. You’ve got political stability, a large economy, and the ability to get in and out of transactions fairly reliably even in a down market.”Most of the investors who pulled out for any significant amount of time are now seeing lower prices, lower cap rates and the ability to get in and get the return they want to achieve, he said.
“In particular, a lot of those investors are motivated by current returns of 7 to 9 percent,” he said. “When cap rates were low, it was hard to do that. The preference seems to be in office, but we also see investors looking at hard at hotel deals in certain areas.”
On June 9, CPN reported that Youngwoo & Associates, a New York-based investment and development firm along with South Korean-based Kumho Investment Bank, entered into an agreement to acquire the AIG building - 70 Pine Street - and an adjacent office building -72 Wall Street - totaling 1.4 million rentable square feet in the heart of Manhattan's Financial District.
Additionally, there is evidence that banks are beginning to regain some semblance of stability is showing up in earnings reports and also in the pricing for inter-bank credit transactions, the report stated. LIBOR, which reflects the borrowing cost for banks lending to each other, has continued to drop, hitting 0.28 percent at the end of last week. In addition, currency swap rates improved significantly as banks become more comfortable with the counter-party risk of those transactions.
“LIBOR is a pretty good proxy for the level of confidence banks have in each other,” Doug Hercher, managing director for Cushman & Wakefield Sonnenblick-Goldman told CPN. “The fact that it has gone down significantly is a sign that banks are more comfortable in taking a credit risk among themselves. It is a good thing for liquidity and the banking system and ultimately a good thing for investors because it means borrowing costs are potentially lower.”
The Cushman & Wakefield report also stated that super-senior CMBS spreads continue to trend inward, tightening 20-30bps over the last week.
“We are seeing glimmers of a recovery for the securitization market,” the report stated. “Credit Suisse recently completed a $900 million private-placement of mortgage backed securities and Developer’s Diversified announced its intention to complete a low-leverage, $600 million TALF deal this summer. Pricing on that deal will provide some much needed visibility as to the state of the securitization market.”
The CMBS market is essentially closed right now and has been for 12 months and has been very quiet for a good 18 months,” Moyer said. “It is important to the real estate market to see a return to a functioning securitization market. Two years ago it was the biggest provider of liquidity to the real estate market.”
“I don’t think that we are going back to the securitization market like we saw in 2005, 2006 or 2007,” Moyer said. “It is important to see liquidity in that market. There are couple of indicators regarding whether that market is starting to get its feet under it. CMBS spreads and the fact that they’re tightening and going down is a good sign for the real estate market generally. We are starting to see these transactions take place, which is very positive.”
There are more lenders coming into the market and more equity investors looking at deals, Hercher said.
“It would be a vast mischaracterization that there has been a big change in the way the market looks,” he added. “There is more capital today than two months ago. That is just good news. The LIBOR and securitization is good news. It is easy in commercial real estate to be doom and gloom because a lot of indicators are down.”
Recent Investment Headlines
Aug 10, 2009
Aug 07, 2009
Aug 07, 2009
Aug 07, 2009
Aug 07, 2009
Subscribe to this blog's feed
