Follow Up – OBP Perspective

November 11, 2010

Last week’s perspective was provided by Tom Powers.   He mentioned his trip to the east coast for the annual investors meeting of a billion dollar  private equity real estate investment fund.  As promised, below is his follow-up to share the views of those at the meeting.

“Interesting meetings last week with investors from one of the larger domestic industrial funds.  Not sure that any conclusions were drawn but a few overriding thoughts from an overall national perspective:

Fundamentals still not good with little improvement – far more available buildings than tenants, resulting in landlords being very aggressive in their attempts to keep and win new tenants

Last week’s elections:  More business friendly atmosphere in Washington should lead to increased confidence from business decision makers.

Qualitative easing should keep interest rates low for the foreseeable future which will allow investors to continue to aggressively price assets.

Investment outlook:  With very low interest rates and below replacement cost pricing derived from in-place NOI based on current market rents, aggressive valuations make a lot of sense – at least on paper.  An improving economy over the next few years resulting in increased occupancy and higher rents should make current bets pay off nicely.  One item that may affect things is, can today’s investors sell the assets into a higher interest rate environment in the future when cap rates may be much higher than we see today.  Positive spread investing is great today but your overall yield is based on getting your equity back.

Just one group of investors’ views, but seemed worth taking note of.”  Tom Powers

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Click below to read Tom’s original perspective from November 4, 2010Tom’s original perspective posted November  4, 2010 below:

The election and the Fed stimulus take center stage this week and we tried to capture some interesting articles regarding both,  and how they relate to our industry. Later this week I will be headed to the east coast for the annual investors meeting of a billion dollar  private equity real estate investment fund.  The room will be filled with individuals representing endowment funds, pension funds, State and University funds and high net worth individuals that have invested in this fund, and also invest in a wide spectrum of other real estate investment vehicles.

I will report back as to their view on how they see the elections and the Fed stimulus affecting the commercial real estate market and their strategies going forward.  With such a wide ranging group of investors, it should lead to some very interesting conversations and offer real time views on the commercial real estate investment industry.  Tom Powers

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