Commercial Real Estate Finance

Posts Tagged ‘REITs’

Based on the response to our latest poll, it looks like private equity real estate is still a major player in today’s commercial real estate market. Thanks to everyone who clicked!

See our previous polls here.

Not all pension funds are equal. Just consider this list of the Top 10 largest pensions in America: all but two–IBM and General Motors–are public funds. We see a great disparity between the state and federal pensions and the majority of private (single- or combined-employer) pensions. This difference may account for levels of risk, whether we’re talking about an annual loss or all-out failure. However, though private pensions in the U.S. don’t draw from nearly as many salaries as their public counterparts, they do have one advantage over their larger peers: non-capital alternatives.

Take a look at this fascinating New York Times article published last weekend. It explore an unusual method by which cash-strapped companies pay into their employees’ pension funds: substituting capital with large amounts of whatever commodity the company owns, makes, or sells. As a result, some private pensions hold very unusual assets, such as:

• $92 million worth of cheese (40% of a dairy company’s inventory)
•  Two million barrels of whiskey
• Obscure real assets like water rights in a desert, a slaughterhouse, and oil wells
• A brewery, tree farms, golf courses, spas
• and even a lien on an airport terminal

Value is value. Since employees and fund managers are ultimately interested in steady returns, it may not matter how conventional an investment may be. If a well-aged cheese or whiskey fetches a nice profit a year or two from now, that’s what counts. Read the rest of this entry »

As college students approach the end of their school year, let’s take a look at CRE’s role in higher education by exploring student housing.

Here, Jim Smith of Campus Apartments talks to Llenrock Group’s Andrew Benioff. They discuss growing competition and other conditions in this unique sector. (This is Part I of our interview. Check back next week for the conclusion!)

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There are a lot of options when investing in REITs. Here’s what our readers suggest:

See our previous polls here.

CNBC explores the role of REITs in the single-family rental sector, mentioning such housing-focused REITs as Silver Bay Realty Trust (NYSE: SBY) and Altisource Residential:

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Obviously, I should have done this list before Halloween, but better late than never. This is based on CNBC‘s ranking of U.S. cities with decreasing real estate occupancy (and, presumably, declining populations).

Here are the Top 10 Emptiest U.S. Cities in 2012:

10. Toledo, OH: Rental vacancy rate: 11.5%. Homeowner vacancy rate: 3.8%. 

Week in Review for August 11 – 17:

- “Are Clicks Cannibalizing Bricks?” CoStar reports on the strategies traditional retail chains are using to compete with–and adapt to–online retail. In many cases, this includes closing stores and reducing expansion plans. The Gap (NYSE: GPS) and Lowe’s (NYSE: LOW) have chosen this route, closing 200 and 20 locations, respectively. Analysts predict clothing and apparel stores will be especially affected by e-commerce, diminishing this market’s overall real estate demand.

- Lehman Brothers, which took control of Colorado multifamily REIT Archstone after a heated battle with Equity Residential (NYSE: EQR), files to take the REIT public in a $100 million IPO.

- In Central Pennsylvania, Cabot Properties acquires an 862,450-SF industrial property for $44.8 million (about $52/SF). They acquired the former K-Mart Distribution Center in Chambersburg from JP Morgan Chase (NYSE: JPM).

- Michael Fascitelli, president of Vornado Realty Trust (NYSE: VNO), attempts to calm investors worried over the increasingly soft CRE market in Washington, D.C. Because of the government‘s endeavor to sell off unused and underused Federal property–as well as general political uncertainty–the District and Northern Virginia have become more challenging for investors and developers.

- The UK’s Financial Services Authority calls for reform of the Libor, arguing that the “existing structure and governance of Libor is no longer fit for purpose…” They are also examining other financial benchmarks for flaws.   Read the rest of this entry »

Dismayed by low yields and volatility in the equity markets, more and more investors are targeting alternative investments, says Matthew Botein of BlackRock (NYSE: BLK). These alternatives include not only hedge funds, but real estate debt and REITs:
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 We’ve been hearing good things about shopping mall REITs. Are you buying into the hype?

Mensch: Noun, informal. A decent, upright, mature and responsible person.

Schlemiel: Noun, slang. An awkward, clumsy, or unlucky person whose endeavors tend to fail; a loser.

Mensch of the Week:

Craig Israelsen, Professor of Finance at Brigham Young University

As I mentioned in last Friday’s Week in Review, REITs were recently touted in the investment world as, not simply a strong alternative asset but an important core asset class. Thanks to the extra street cred he’s given to REITs and the commercial real estate world, I hereby proclaim BYU’s Craig Israelsen our Mensch of the Week.

To be sure, the viability of the REIT investment strategy is no mystery, whether we’re talking about the commercial real estate community or the broader investment world. Many people already view REITs as a key asset, particularly considering current economic conditions, which benefit precious few sectors other than REITs. Professor Israelsen, however, connects to a different audience than the many CRE professionals and analysts who’ve been espousing REITs for years. Read the rest of this entry »