Weekly News & Capital Markets Perspective

This week’s perspective is provided by Tom Powers

Tom PowersThe fourth quarter contraction of the economy was unexpected by most but that doesn’t seem to have prevented investors from continuing their appetite for real estate.  Last summer, it seemed the only investment sales that were taking place were for Class A core product.  Anything that was not considered Class A core didn’t seem to have a chance of attracting much capital – from either the equity or debt side.  As we work our way through the winter months of the new year, we are witnessing a new direction.   I am not sure if the owners/lenders/servicers have changed their strategy for dispositions or if investors are finally willing to take risks with non-core properties, but our recent experience suggests that something gives.

In the past 45 days we have been involved in the sale of four CBD office buildings.  Pricing has been very attractive and I think we all agree that the buyers all got very good terms.  Are the sellers happy?   Happy enough that they showed up at the closing table.   The buyers may be getting pricing we have not seen since the RTC days, but considerable risks come with these investments.   What appears to finally be happening is that capital is starting to get off the ‘core-only’ bandwagon, and by all accounts this should lead to some interesting times as we head toward spring and summer.   Make no mistake, Class A core product still commands very aggressive pricing and lots of investor interest, but now a new set of buyers has emerged and the investment markets appear to no longer be a one trick pony.  Giddy up!!!

Tom Powers

ARTICLES OF INTEREST___________________________

U.S. Growth Halted as Federal Spending Fell in 4th Quarter
The federal government helped bring the economic recovery to a virtual halt late last year as cuts in military spending and other factors overwhelmed the Federal Reserve’s expanded campaign to stimulate growth.
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Borrowers Report Stable Conditions Within Capital Markets
Borrowers expect conditions to remain favorable in 2013, according to the results of NREI’s Ninth Annual Borrower Trends survey.  
Overall, 55 percent of respondents expect their total commercial debt to increase in 2012, while only 17 percent expect their debt to decrease.
Read more…

Increasingly Wary 
Monday’s decline in global equities wasn’t exactly a wrenching selloff, except for one thing: it seemed to be completely unexpected. While the S&P only fell 1.2% – reversing almost every penny of that decline Tuesday – European equities was where the pain really was. 
 Read more…

Rising Demand Propels Warehouse Market to Strong 2012 Finish
Monday’s With a burst of positive absorption in the fourth quarter, demand for U.S. warehouse space moved from the recovery to the expansion phase in late 2012 as rising occupancy rates and limited new construction helped push rents a bit higher across a majority of markets.  Read more…

Commercial and Multifamily Mortgage Originations Up 49 Percent in 4Q12
Commercial and multifamily mortgage originations hit their highest levels since 2007 in the fourth quarter 2012, and are expected to increase up to $254 billion in 2013, according to research by the Mortgage Bankers Association released on Monday at its annual CREF/Multifamily Housing Convention & Expo in San DiegoRead More…


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