GlobeSt.com: What types of deals are getting made this year so far?

Welsh: There is a very deep pool of capital for all product types, multifamily, industrial, office, but substantial liquidity only in what I call ‘core space,’ which is the top quality asset – or at the other extreme, in opportunistic investment.

GlobeSt.com: So investors want solid-gold deals or else risky ones?

Welsh: It seems counter-intuitive, or as I heard someone say the other day, ‘counter-factual.’ But that is the bifurcation of the market today.

GlobeSt.com: Is ‘opportunistic’ investment the same as ‘value-added’ investment, in which buyers upgrade properties to get a better return?

Welsh: I think there is a difference, although it is difficult for me to be specific. I think ‘opportunistic’ is all the way at the opposite end of the spectrum from ‘core.’ You take on a lot of risk, whether buying debt, or vacant office space at a very low price point, or whatever it is. People are playing to double or triple their investments. It could be fast when you buy debt, and get control of the capital stack. Or it could be that the pay-off comes two or three years down the line.

GlobeSt.com: Any recent deals you can point to as opportunistic?

Welsh: Last year Mountain Development Corp. bought 56 Livingston in Roseland, a 400,000-square-foot building that had belonged to Merke. They bought it for, effectively, the low $40s per square foot and look to execute on the investment within 18-24 months. They put $50 million into updates and new systems.

GlobeSt.com: Everyone knows that multifamily is the investment darling at this point, but what can you say about the appetite for industrial?

Welsh: New Jersey industrial is a fantastic market, one of the two or three major markets in the country. Here again, there a significant differential between the primary markets and core properties – the Meadowlands, Exit 12 and 13 off the New Jersey Turnpike, Newark and other port markets – and everything else. Core properties are trading with something like a 6% cap’ rate. The top of the top – ‘core-plus’ – it’s about a 7.5% cap’ rate.

GlobeSt.com: Office?

Welsh: There is just not much liquidity in the middle of the spectrum of property types, especially with office property. With industrial, people are willing to buy lesser quality, so long as they get a higher premium. Office is more tied to job growth and it is hard to point to job growth. Properties with hub access to transit – Jersey City and Hoboken, Newark, and Metropark in Iselin – are more attractive to investors.