IMN Conference

By Michael Seton, executive vice president, Carter

NEW YORK – I attended the IMN (Information Management Network) Real Estate Mezzanine Loans and Distressed Debt Conference in New York City earlier this month. IMN provides a resource that arms investors in all fields of finance and commerce with the knowledge they need to survive and succeed in tomorrow’s world of finance and investment. The event was attended by more than 500 real estate professionals, and thought I would share some of my observations.

Seton_Michael_2009_bw  Opportunities still exist in secondary markets to buy office properties at a 10 percent cap rate. Banks directly are the best source of product and will be so for the next 12-24 months. The best positioned for these opportunities are local operators, like Carter, that can justify to the seller why they are the best buyer because they are invested in their own markets. The bigger money will flow to these opportunities, as they will realize they will have to in order to close transactions. With record-low investment totals in 2009, experts agreed that 2010 will see an increase in total investment sales volume.

 

Faced with declining rents and increased occupancy in most markets, there will be opportunity to buy assets well below replacement cost. There will be enough deals for everyone in the next six to 24 months. The time horizon for holding these assets will need to be longer than one would have thought, creating a “new normal.” 


The only way 20 percent+ returns have been achieved is with leverage, and everyone agreed that – save the insurance companies (who will do $25 billion of volume in 2009 vs. $45 billion at the peak –  and they are the only lender in 2009) – there is virtually no debt available.

 

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