This week’s perspective is provided by Mike Sullivan:
While it may be difficult to top my partner Tom Powers’ “Giddy up” at the end of last week’s post, I will do my best to entertain as well as enlighten. And who knows, I may even weave in a reference to that university in South Bend.
I had lunch yesterday with a locally-based investor (he owed me lunch for making the mistake of betting his Kentucky Wildcats over my Irish in basketball earlier this season). I was intrigued to hear about his company’s acquisition activity over the past few years. They have maintained a brisk pace in buying both notes and REO properties throughout the country, which supports what Tom wrote last week. Specifically, many investors have been willing to pursue properties other than core assets in Tier 1 markets. And while the risk might be greater, the reward is also greater. And in the case of this particular investor, the reward for his many equity partners has been outstanding for over two years running in the form of consistent preferred return dividend payments.
What was also interesting to hear is that this particular investor is willing to consider property types previously not on their radar. This seems to be more prevalent. A local Industrial owner/developer recently acquired an office building. A large multi-family investor also acquired an office building. The investor with whom I had lunch is a retail owner/developer but is exploring other property types as well. When asked why the pursuit of other asset types, these investors and many others like them have responded by saying that if yields are attractive and the fundamentals are in place, then an opportunity makes sense no matter the property type. Not exactly a revelation but it is interesting to see investors get out of their comfort zone to pursue solid returns.
So here’s what I learned on Valentine’s Day – take some risk, explore all opportunities, and find a lunch “date” who will buy if you can’t be with your spouse or significant other.
ARTICLES OF INTEREST________________________
Preqin Investor Outlook: Real Estate 2013
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CRE Sales Surge In 2012 As Pricing Recovery Spreads To More Markets Sales of U.S. commercial real estate reached nearly $64 billion in 2012, jumping 22% from the previous year to the highest annual total since 2004, according to the latest findings from the CoStar Commercial Repeat Sale Indices (CCRSI). Read more…
Retail Sales Growth Slows as Higher Taxes Kick In
(Reuters) – Retail sales barely rose in January as tax increases and higher gasoline prices restrained spending, setting up the economy for only modest growth in the first quarter.
The Commerce Department said on Wednesday retail sales edged up 0.1 percent after a 0.5 percent rise in December. Read more…
Economic Forecast: More Jobs, Faster Growth
The first half of 2013 is expected to be sluggish as government spending cuts dampen growth and a payroll tax increase crimps consumer spending. Read more…