A Search for Attractive Investment Opportunities
At the recent EisnerAmper’s Private Equity Summit in New York, real estate experts weighed in on locating attractive investment opportunities in the U.S. Their comments were sobering.
Equity Group Chairman Sam Zell noted that he didn’t see much opportunity in the capital markets today, according to a Sept. 29 article published by National Real Estate Investors.
“Our whole world was built based on the assumption the pie would grow. Nobody has come up with a solution as to where that growth will come from,” Zell replied when asked about his assumptions for the next decade of real estate investment. Industry pros expressed mixed feelings about the near-term prospects, saying there are sources of investment opportunity in the market, but they are spotty.
As commercial property prices continue to rise and interest rates remain low, private equity players see increased opportunity in transitional mortgage lending for 2017. Bridge lending platforms are seeking deals but competition is forcing them to price at more aggressive rates, currently about 8 percent instead of the traditional 10 to 12 percent. John Lippman, senior director at New York Life Investment Management, said his company has expanded its bridge lending and construction loan targets to procure more investments in the years ahead. At the same time, mezzanine debt investors are more interested in financial investment than strategic investment, panelists said. They anticipate mezzanine-lending activity will increase and provide more opportunity next year, with $140 billion in CMBS loans maturing in 2017. Panelists also remarked that the regulatory environment by the end of the year would not be favorable to balance sheet lenders. As a result, non-regulated entities such as Blackstone will make further inroads as financiers.
Another group making inroads in the U.S. market next year will be foreign investors, according to panelists. The U.S. is experiencing a third wave of Asian investors, with the first and second waves consisting of institutions and ultra-high-net-worth individuals. Panelists also reported a 20 percent increase in U.S.-bound investment from the Middle East year-over-year. They also describe experiencing zero pushback regarding secondary markets since foreign investors seeking income-producing, yield-focused properties are increasingly viewing primary cities as oversaturated.
For the long version of the National Real Estate Investors article click here.