"Although few new players pulled the trigger and bought an asset last year, many more were out raising capital or just waiting for the right opportunity," according to the latest issue of RCA's US Capital Trends newsletter. "The growing number of bidders being reported by brokers recently is evidence that many have raised the capital and may now be ready to invest."
Among those newcomers that have been actively buying, high net worth individuals dominate, with some foreign entities, RCA says. Overseas investors made just under $1 billion of US commercial acquisitions in '09, led by Dutch healthcare pension fund PGGM. Compared to previous years, the field of new foreign players was "a smattering," RCA says.
Overall, the number of active players last year looks like a smattering when compared to 2006 or 2007. Just 1,800 entities made significant commercial property acquisitions in '09, compared to 6,500-plus for both '06 and '07, according to RCA. Newcomers last year were also few and far between compared to the market's peak: 26 new players made acquisitions in '09, versus 291 in '06 and 217 in '07.
Along with their reduced numbers, commercial players also demonstrated a smaller appetite last year, generally buying one property apiece worth an average of $27 million. Earlier in the decade, most investors bought between 2.5 and three properties per year, with an average transaction size between $50 million and $80 million.
All that could change this year, RCA says. "Conspicuously absent from the list of active buyers in '09 are the crowds of recently formed distress funds; recent reports place the equity raised in the $75-billion range," according to RCA. While some funds have made investments in distressed debt, few have made a direct property acquisition.
In addition, RCA says, "the market should brace for the largest wave of 'blank check' REITs the industry has ever seen. Some $4 billion worth of prospectuses have been filed by these aspirational investor vehicles in just the last few months; some of these are being led by former REIT CEOs, including ex-Trizec chief Tim Callahan and former Arden Realty head Richard Ziman."
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
