On Thursday, June 27th, LANDCO sent a small delegation to the National Real Estate Investor’s Commercial Real Estate/High Net Worth Investment Conference in New York City. The key “takeaway” points, from our point of view, were the following:
- Capital for real estate investment is in plentiful supply, both debt and equity, but the debt-load of pre-2008 is not available.
- Cost of funds is modest by comparison to previous times: secured debt is often available at sub-4% rates, and equity is seeking IRR’s into the mid teens.
- Deals are scarce, and investors are most covetous of a sourcing pipeline.
- The most sought-after investments are either distressed
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property and impaired loans, on one hand, or fully leased projects in prime locations, on the other. Tertiary markets are only in the very early stages of reentering the investment landscape.
- Holding periods are relatively short. Even prime investment funds do not typically provide for open-ended holding periods. In all product types and business models, there’s an emphasis on taking profit, rather than holding in the portfolio.
- High net worth investors, meaning family offices and private parties, are seeking real estate investments in order to take advantage of market opportunity (distress), but also
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to bolster cash flows in a low interest environment.
We came away certain that LANDCO is well adapted to fill the niche in distressed property and impaired bank
assets and to serve the institutional investors’ need of a pipeline. We have shaped
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our company for exactly this environment.