Weekly News & Capital Markets Perspective

November 17, 2011

This week’s perspective is provide by Tom Powers:

We are starting to see the fallout of the quadruple quagmire of the credit rating downgrade, debt ceiling debacle, European debt issues and our slow moving economy, all of which have been festering since mid-summer.  So what is the fallout from an investment real estate standpoint?  A number of major industrial portfolios have been pulled from the market because of disappointing pricing due to a rise in cap rates for all but the absolute best properties in a few core markets. There is also hesitancy on the part of many investors to move forward on acquisitions due to all the uncertainty.  Yes, some notable transactions have recently been announced, but there have been more disappointments than successes in the last 4-6 weeks.

Even with the incredible financing terms that are currently available, investors remain very cautious and underwriting is becoming very conservative for both the debt and equity sides of the ledger.  With the political standstill in Washington the fear is that not a lot is going to get done in 2012 until after the elections. Hopefully that is not the case but the tea leaves do not look all that favorable right now.  There is hope that both the leveraged and unleveraged yields achievable in real estate will prove to be very attractive when compared to alternative investments and that anxious capital will decide that it cannot wait until after next November to be put to work, and we will see a refocus on investment in real estate assets come January.

A joyful Thanksgiving to all.




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