"We will see a return to fundamentals with strong tenants and strong locations," said Andrew Kroll, a director of the investment banking group at SunTrust Equity Funding. "We should see some improvement."
Robert Micera, SVP and national head of net lease investments at First Industrial Realty Trust, agreed with McDonald and Kroll, noting that "the slower the economy, the more sale-leasebacks pick up, so I think you will see more opportunities going forward." Micera said that cap rates will creep up and those who have resources will get things done. "I don't think we are in a recession," he said. "There is a ton of money sitting on the sidelines and it will be back."
Larissa Belova, a VP at Lexington Realty Trust, said that this has been a liquidity crisis and disagreed with the other panelists regarding next year's forecast, saying that "looking ahead one year from now, I still don't thing we are going to be smiling. I think we will be the same."
When looking at the current market, as it is now, Kroll said that from a debt perspective, he is seeing stress on the CTL market given the credit turmoil. "We are seeing some opportunity, but also see a lot of risk." He did note, however, that "we are better than we were back in December because there is more certainty," adding that he is seeing some movement in the CMBS market.
Micera agreed with Kroll, noting that it is not as bad as December. "We are a lot more selective. We aren't out of the woods yet, but I do see a light at the end of the tunnel." Micera noted that fundamentals are much more important. "We see a change in the capital markets and I think spreads have begun to come in on the CMBS side."
Belova concurred with Micera in that her firm is focusing on fundamentals at the moment and taking its time. She continues that "although we see opportunities out there, lenders are more picky right now, so we are going with the flow and are waiting." Belova explained that the firm is inundated with sale-leaseback activity right now. "Things are also strong in the build-to-suit markets."
Micera also thinks that there will be more sale-leaseback opportunities in terms of supply. "I think you will see more secondary and tertiary supply." He explained that on the demand side, "REITS, pension funds and institutional players are in the game."
Randy Blankstein, president of Boulder Net Lease Funds, said that he sees change happening in the last quarter of the year, but not in the near future. He explains that "key data points investors should look at are the number of properties that have been on the market for three months."
Belova explained that "we are hoping to be buying a lot more this year. Opportunities are certainly picking up in the sale-leaseback arena. In the next few years, we may also see some interesting plays with properties that have been aggressively financed with interest-only debt and that may run into refinancing troubles." She also said that foreign money is still out there on trophy assets. She did agree with Micera that institutional players and pension funds are definitely in the game right now.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
