LOS ANGELES—Real estate lending in its many forms is back, and the arena is more competitive than ever, said panelists at yesterday’s RealShare National Investment & Finance conference here. Both domestic and international investors continue to seek a piece of the pie, driving pricing upward and making yields harder to find.
“There’s no lack of interest from overseas in US properties,” said Rodney Richerson, regional president, Western US, for KBS Realty Advisors. “Pricing is being paid. It’s competitive out there, and there’s lots of money chasing deals.”
Stephen Corrigan, managing director of BlackRock, added that his firm—which focuses on the apartment space first, followed by industrial and retail—is looking beyond pure core markets for more yield. Regions like Northeast Texas and Western states other than California are some of the markets his firm is examining.
When acquiring assets, particularly in the healthcare sector, it’s often necessary to buy a portfolio with less-attractive assets with the intention of fixing them up and selling them off in order to get the core assets for the keeping, said Kevin Shields, chairman and CEO of Griffin Capital, which currently has $2 billion of assets. Also, “When positioning a portfolio to sell, you want to convert your balance sheet from mostly secured debt to unsecured debt,” he said, adding, “Revolver debt is so cheap today.”
When moderator Steve Pumper, executive managing director of Transwestern, asked panelists how much debt to have on a property, they answered that it varies on an asset-by-asset basis. “Each acquisition opportunity stands on its own, and it varies across the spectrum,” said Corrigan.
The product types being developed by panelists included multifamily, some industrial and condos, as well as retail, although “apartments aren’t as attractive as they once were,” said Corrigan. “The yield isn’t as high as it once was.”
Panelists predicted interest rates would continue to stay low for at least the next 12-18 months, although the economy is still fragile. “It’s not the direction of the interest rates, but the volatility of those numbers that impact transaction,” said Shields.
When asked to give their theme for 2014, Shields said that cap rates will begin to increase, Richerson said that real estate will continue to improve, with limited construction and pricing hitting new historic peaks, and Corrigan agreed. Concerns included a possible capital pullback, and unrest in Iraq and issues in China creating economic problems here, but panelists agreed that while there is still some runway ahead of us, there’s no real cause for concern.