(To read more on the debt and equity markets, click here.)
NEW YORK CITY-CB Richard Ellis's Jeffrey Dunne said he's seeing themes crop up again and again. First, the holding period for real estate is getting shorter and shorter each year. "The cycle is much quicker," he said during a capital markets outlook at the Urban Land Institute's first Regional Trends Conference. The event was jointly organized by ULI New York, ULI Northern New Jersey and ULI Westchester/Fairfield.
"Buyers are more selective with their time and willing to pay premium for assets," he added. Another theme is that lenders are playing a more important role in the bidding process. He noted that his "rolodex has changed. There are so many new buyers. The buyer list is so deep." He added that one new class of investor is the TIC environment. "Who knew who TICs were five years ago?"
Similar sentiments were echoed by fellow panel member Robert Verrone of Wachovia Securities. "Debt is everywhere. Lenders are really scraping on every deal and probably lending too much." As an example, he cited the recent $3.2-billion Blackstone/Wynham deal, which had a $2.8-billion debt placement.
"There is so much liquidity," said Michael Fascitelli of Vornado Realty Trust, who also pointed out the rising land costs. "Any deal you didn't buy in the past few years, you now look stupid for not buying it. It's unbelievably a seller's market."
Dunne sees that it's also a good time for buyers. "There are so many more options than there ever has been. There are a number of opportunities when compared with the returns you could get elsewhere. The alternate investments aren't so good."
"This party will end," said Fascitelli. "It's just a matter of when. Marginal product is being overpriced." The beauty of a portfolio is that you can put marginal products in them," retorted Dunne, adding that you still have to offer some "gems."
"People want to get their slice," added Russell Appel of Praedium Group. He explained that what distinguishes his firm is that it looks to optimize the assets it acquires. "We identify something the current owner isn't doing." He said the firm is investing in workforce housing in infill locations and is considering acquiring properties in Central Florida that were underinsured and suffered damage in last year's hurricanes.
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