 Younan |
Executive opinions from Younan Properties Inc., Behringer Harvard Funds and Cobalt Capital Partners, most likely reflecting peers in their income group, run counter to soothsayers' claims that hard times will befall CRE next year. The common belief is opportunity is knocking for the deep-pocketed crowd because the credit crunch has eliminated high-leveraged buyers from the bidding ranks due to lenders' tightening underwriting practices.
"We will benefit from it. The smaller players will not be able to compete and buy buildings," says Zaya S. Younan, chairman and CEO of Los Angeles-based Younan Properties Inc. "That's the one change I see in 2008." In anticipation, Younan is planning to deploy $3 billion on acquisitions next year in Chicago, Dallas and Houston. This year, he's spent $1.5 billion for 19 office buildings, totaling 4.4 million sf in the three cities.
 Friedland |
And Behringer Harvard, which recently acquired Toronto-based IPC US REIT for $1.4 billion, is going into 2008 ready to spend more. "We believe we'll be able to be very selective at what we go after," says James Fant, senior vice president of real estate for the Dallas-based investment group, "and be able to buy at better returns than what we've seen in the past 12 to 24 months. I think we're going to be buying properties at higher cap rates."
 Fant |
The aftermath of the credit crisis has had a positive impact for the power players. "What we're left with are well-capitalized, institutional, low-leveraged investors," Fant says, adding any subprime fallout still to come "can produce opportunities for folks like ourselves."
Younan, an economist by trade, tells GlobeSt.com that he's getting more and more inquiries from institutional investors wanting to partner up now that the regional and local partners are out of the picture. "We will look at the possibility of a JV with an institutional partner," he says, "but we do not need them for our projected growth in 2008."
None of the three pros are siding with Doomsday economists who are calling for recession. "We are flirting more with the possibility of inflation than we're flirting with the possibility of a recession," Younan stresses. "And office buildings are more impacted by the possibility of a recession than the probability of inflation."
Friedland says the only "negative" that he can see for his preferred product type, industrial, is a "drastic reduction decline in demand." But, he doesn't see that as too likely of an event at this stage of the game.
Mark D. Miller, president of NAI Robert Lynn in Dallas, predicts there will be changes in the leasing arena, but the slowdown in the initial months should ease by midyear. "I think the second half of '08 could lean toward a tenants' market, depending on leasing in the first half," he says. "There will always be opportunities, but we may have to work a little harder. It's going to be fun to see what happens."
In powering up for 2008, Fant has some advice. "Watch the economy carefully and be prepared to respond accordingly," he says. "People have been able to make money in all cycles. You just have to position yourself property and make good decisions."
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