Play it as it lies! A fundamental aspect of golf is realizing which club is appropriate for a particular "lie." The past two decades of real estate investing can be summarized by stating different times (lies) required different approaches (clubs).
Transaction activity picked up substantially in 2010 as debt markets opened up and the attractive yield offered by the real estate asset class lured both traditional and nontraditional investors to the market.
Real estate private equity funds have a big issue: They need more capital, and it’s not that easy to get, at least not anymore. A mere three years ago, capital was abundant. Between 1999 and 2008, investors filled real estate funds’ coffers with equity capital totaling some $420 billion, nearly 80 percent of which was raised in the relatively short period between 2005 and 2008. During the same period, debt became overly abundant and very inexpensive, and underwriting standards became very loose. Nearly half of the approximately $1 trillion in commercial mortgage debt that has been originated since 2002 was issued in the two-and-a-half-year period between 2005 and 2007, right at the peak of the market.
Larry Gray, editor of The Institutional Real Estate Letter – North America, recently interviewed Peter Ballon,vice president, head of real estate investments, Americas, who provided an overview of CPPIB’s real estate investment program and some insights into its investment strategies and plans for 2011.
Direct commercial real estate investment strategies run the gamut from the lowest risk core to the medium risk value-added and up to the highest risk opportunistic, but they all shared one characteristic through 2008 and 2009 — substantial value declines. Now though, in effect, the higher the strategy’s risk, the deeper the current discount from peak.
Reading the news these days has all of us feeling a bit whipsawed. Just when it looks like some positive news is floating our way, another wave of bad news breaks over our heads.
The latest waves have been coming from Ireland, as the €85 billion ($111 billion) bailout package was approved recently while most of us were home, catching our breath.
Meanwhile, Icelandic and Portuguese finance ministers continue to claim that the states of their respective state’s finances, while admittedly troubled, are not in any immediate danger of heading into default. Of course, that’s what finance ministers always claim, shortly before the fall.
Skimming the headlines coming from across the pond here in the United States, you’d think that everything here finally is starting to settle out. It isn’t.