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Core Is the Way to Go

Despite the slow pace of recovery and trend lines suggesting lackluster cyclical growth ahead, cash investors should not get sidetracked—now is the time to buy, lend or do preferred equity deals.

By Jonathan D. Miller | Updated on February 16, 2011

Despite the slow pace of recovery and trend lines suggesting lackluster cyclical growth ahead, cash investors should not get sidetracked—now is the time to buy, lend or do preferred equity deals. Dealmakers may not hit grand slams, but the opportunity is there to stroke plenty of singles or doubles and maybe the occasional home-run (it’s spring training time).

Institutional investors continue to gravitate to the handful of core open-end funds, most of which are delivering low-to-mid teen annualized performance. Core funds probably are the best deal in town—investors immediately access pools of well-leased properties and avoid the wait for advisors to find suitable acquisitions over potentially extended commitment periods, missing out on the ongoing recovery.   These open-end funds were written down and then some in 2008-2009, they tend to be invested in higher quality commercial properties in better markets, and now benefit from value upticks especially in gateway cities. These funds also are a long way from returning to peak values, but could hit low double digit returns again in 2011 before settling for a while in the high single-return range. Sounds like what real estate was always advertized to deliver—fairly dependable, solid, risk-adjusted returns.

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