Capital Markets 'Resilient' on Retail Front

MIAMI—The capital markets are morphing but where do we go from here? Where will be we be six months from now? We caught up with Glenn Cohen, CFO of Kimco, to ask him for his perspective through the retail lens.

GlobeSt.com: How have the capital markets changed in the past 12 months and how are they likely to change throughout the course of the year?

Cohen: We have seen a pretty tremendous compression of spreads in the past year. In fact, we've seen close to a 100-basis-point compression in spreads and not much of an increase in overall Treasuries. Borrowing costs have come down and it goes back to the strengthening of many companies' balance sheets and the sheer amount of capital that has come into insurance companies and pension funds.

Additionally, some of the risk and fear that existed in early and mid-2012 have subsided. We've moved beyond the fiscal cliff, and now the latest craze to watch is sequestration.

Overall, I think the government knows that the economic recovery is still fragile and they will not want to disrupt the recovery that is still taking hold. It will be a pretty solid year in terms of being able to access the capital markets at spreads that have come way back in and at rates pretty close to historic lows.

The capital markets will remain resilient through the year and capital will be available on all fronts, whether it is unsecured debt or non-recourse first mortgage debt. The perpetual preferred market remains open, and to the extent that somebody has an accretive deal and wants to issue common equity, I think that market will be there as well.

GlobeSt.com: What are your predictions for where we'll be 12 months from now in the commercial real estate world?

Cohen: On the retail side, as long as interest rates remain low, the capital markets remain resilient and active, and the lack of new development continues, we should see increases in rental rates and in the overall performance of the retail sector. I think we're going to be in a better place 12 months from now than where we are today, and I think some of the other sectors will probably benefit as well. If the housing market really does stabilize and unemployment reduces to more historic levels, there will be a clear pick-up in the economy that bodes well for everyone.