Nicholas Schorsch, chairman and CEO of American Realty Capital, spoke with REIT.com at REIT Week 2011: NAREIT’s Investor Forum at the Waldorf Astoria in New York. He said that his company’s “core business is running and operating the REITs that are on our platform.” Schorsch said these REITs have a range in property sector focus from health care, to net lease to retail to New York-centric properties.
When asked about the current state of the real estate capital markets, he noted that there’s been a transformation in the market due to the liquidity crisis and said that change is the “new normal.”
“The capital markets are evolving on a weekly or monthly basis, there seems to be much more flow of product coming on the market as capital seems to come back to the market,” Schorsch said. He noted that this is a significant change from the “old days” of 2005 and 2006.
The fact that the debt markets are much more conservative and underwriting is tighter represents a good change, according to Schorsch.
“It’s a much more stable environment when you’re buying 40 percent leverage than when you’re buying on 85 percent leverage,” he said. Schorsch added that this makes people focus on the underlying assets.
In terms of the best opportunities within the next year, Schorsch said that the company has been enjoying tremendous success in the net-lease space, which includes retail corners, pharmacies, gas stations and banks.
“That’s been an area of our focus for a long time as well as the core distribution facilities,” he said. “We also think there’s a lot of demand in health care because the demographics are so strong.”
Recovering markets like those in New York are also on Schorsch’s radar. “There are opportunities that sit in front of us, occupied buildings that are already built and you can buy many of these different asset classes below replacement costs.”