During the state of the market panel at the recent GlobeSt. net lease national fall event, panelists agreed that we are in a period of price discovery. "We are bullish on retail but we have a pricing disconnect we have to work through," explained panelist Will Pike, vice chairman and managing director of CBRE. "There is a lot of price discovery. I think we are in the second or third inning of that." According to Pike, "we have to see what happens with the Fed during the next meeting." He added that the primary groups are willing to transact in the market if they have a specific reason to sell or if they have debt coming due.
Gino Sabatini, managing director and head of investments at W. P. Carey, agreed, noting that while not currently doing deals, they are not pens down at W.P. Carey. "We are in a period of price discovery and eventually there are going to be people who have to do something and they will move the market."
He explained that sellers still want yesterday's pricing so there is a disconnect. "If you can't borrow below 6% I don't know how you are going to do a 6% cap rate."
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But there are groups out there who still have capital to invest and it depends on what side you are on, said Gordon Whiting, managing director of Angelo Gordon. "If you are a seller, you are likely willing to transact now. If you are a buyer, you are a bit more cautious. Are you buying a leveraged asset? Can you ride out the market? It is a more nuanced marketplace."
If you are a buyer, it also depends on how you look at the investment, he added. "Over the last several years I have been doing this, 40% of people view net lease as a credit investment and 40% view it as a real estate investment and the rest don't really know, or care and just like the return."
One area that Brandon Flickinger, chief investment officer of bridge net lease at Bridge Investment Group, is seeing is in the sale-leaseback space. But still, they are submitting a lot of offers, but very few clearing the market, he said.
Panelist Daniel Taub, SVP and national director of the retail and net lease divisions at Marcus & Millichap, said that there is a big difference between your private client capital and your institutional capital. "There is a nuance to it. We are transacting today with a variety of REITs even in the volatility and rising interest rates," he said.
Same things with some PE firms who are active in the space, Taub continued. "Your private client, I would say, is more affected. It depends on what kind of capital you have… private institutional short term long term is playing into the transactional activity." Taub explained that his company has done more than 2000 transactions with probably 450 lenders. "The terms have obviously changed, but smaller lenders are still there but are getting to the point of capacity. They just don't have the same depth and breadth as the larger banks."
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com, 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.
