Posts tagged Assets
They report that rates compressed among retail, office and industrial as the focus on core assets in primary market combined with a limited supply was the main driver. Investors did not, as insiders expected, “seek opportunistic yields in secondary markets and private credits.” [download report]
By Roger Denny, NAI Knoxville
Recently in an interview, Robert White CEO of Real Capital Analytics stated investors are looking for higher yield on their investments. Presently money market funds and stock market returns are low, and since real estate offers a “hard asset” as a hedge against inflation investors are looking at core properties as a solution and low risk.
Core properties are defined as stabilized (high occupancy) Class A properties located in top tier markets with high intrinsic value. According to White investors see these assets as low risk and are paying top dollar for them with cap rates in the range of 5 1/2. Historic low interest rates on Treasuries allow investors to still have positive leverage says White. In 2010 75% of the deals tracked by Real Market Analytics were Core properties.
Here is the good news. White feels that investors have a threshold of pain for those prime assets and will look for the same type of assets in the smaller markets as prices push upward in the top tier markets. For right now those cap rates and investor demands are being seen mostly in the office sector but low cap rates are nudging investors toward high quality larger retail centers with a grocery or big box anchors trading in the mid 6 caps.
Mr. White also stated that “the loosening of the credit crunch and the revival of the CMBS market should also support investment in smaller cities.”
If you reside in an organization such as a company, government or religious organization, what assets should you consider strategic? There does not necessarily have to be a set of strategic assets, but if an asset is strategic it must be key to the business. Examples would be a church for a religious organization, perhaps R&D facilities for a pharmaceutical company, truck terminals for a freight firm and restaurants for a chain of food providers. Key assets tend to be utilized for a term that is long. Therefore ownership is preferred to leasing. Non strategic assets are therefore all other classes of real estate and should thus be leased. [more]
Competition Fierce for Choice Assets But Deals Aren’t As Prolific in the First Half of Year as Some Analysts Expected [see CoStar's article].