A — August 31 - September 13, 2012 — Mid Atlantic Real Estate Journal
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Aldo Design Group......................................................... 10A Alfred Auctions. ............................................................... 7A ALT Realty..................................................................... 18B Auction Directory............................................................. 7A B.R. Kreider & Son, Inc................................................. 21B Bill Board Directory. ................................................. IBC-A BL Companies....................................................... 10A, 32B Bohler Engineering........................................................ 14B Borrus Associates........................................................... 25B Brahney.............................................................................12 Business Card Directory. .............................................. 31A Capitol Aerials............................................................... 19A CBC Bennett Williams.................................................... 3B Chartwell Group............................................................. 7A Clarion Partners..........................................................BC-A Cooper Roofing............................................................... 11A CREATE ........................................................................ 17B Crystal............................................................................ 20A Cushman & Wakefield..................................................... 5A D.F. Pray. ................................................................... IBC-B Earth Engineering Incorporated..................................... 8B Entech. ........................................................................... 16A Fameco Real Estate....................................................... 10B FOWLER........................................................................ 25A Franchise World............................................................. 21B GA Keen Realty Advisors................................................ 3A Gerard Construction Corp........................................16-17B Gilbeaux Associates, PC................................................ 19A Haftek CWS................................................................... 14A Hutchinson Mechanical Svcs........................................ 22A Hylant Environmental Risk Management................... 32B IREM.............................................................................. 27A Katz Properties................................................................ 7B Kay Realty Services LLC. ............................................. 32B KW Commercial- The James Balliet Comm’l. Grp........ 2B Landcore Engineering Consultants, P.C.. ...................... 4B Lippincott Jacobs........................................................... 12B LMS Commercial Real Estate....................................... 19B M. Miller & Son. .............................................................. 3A Marcus & Millichap Taylor Zang.................................... 4B McMahon Transportation Engineers & Planners.......... 6B Meyer Consulting Engineers Corporation.................... 16B NAI Keystone Commercial & Industrial, LLC............. 27B NAI Summit..................................................................... 3A NJ Paving....................................................................... 15A NJ SmartStart Buildings.............................................. 18A NorthMarq Capital.......................................................... 4A Omdex Incorporated Consulting Engineers................. 16B Penncap Properties......................................................BC-B Poskanzer Skott Architects........................................... 13A RCX. ............................................................................... 21A RD Management LLC. .............................................22-23B Real Connect.................................................................... 9B ROCK Commercial Real Estate...................................... 6B SHAH Electric & Builder.............................................. 12A Silbert Realty................................................................. 13B Target Building Construction....................................... 11B Thesing Companies. ...................................................... 27B TRG. ................................................................................. 9B Vanasse Hangen Brustlin, Inc...................................... 32B Vantage Landscaping............................................10A, 14A Whitestone Associates, Inc............................................ 14B WP Realty. ....................................................................... 5B MAREJ A dvertisers D irectory To advertise, call 1-800-584-1062
Mid Atlantic R eal E state J ournal Publisher ............................................................................Linda Christman Co-Publisher .........................................................................Joe Christman Section Publisher ..............................................................Michael Campisi Section Publisher ................................................................Elaine Fanning Senior Editor/Graphic Artist ................................................ Karen Vachon Production Assistant ......................................................... Rachel Rugman Office Manager ....................................................................Joanne Gavaza Editorial Consultant .............................................................. Ben Summers Contributing Columnist .......................................................... Eugene Diaz Mid Atlantic R eal E state J ournal ~ Published Semi-Monthly P.O. Box 26 Accord, MA 02018 (Mail) 312 Market Street, Rockland, MA 02370 (Overnight) Periodicals postage paid at Rockland, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal, P.O. Box 26, Accord, MA 02018 USPS #22-358 | Vol. 24 Issue 16 Subscription rates: $99 - one year, $198 - two years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Toll-Free: (800) 584-1062 | MA: (781) 871-5298 | Fax: (781) 871-5299 www.marejournal.com The views expressed by contributing columnists are not necessarily representative of the Mid Atlantic Real Estate Journal
Mid Atlantic Real Estate Journal
By Eugene Diaz Investment Sales: Recession’s After-effects Are Still In Play
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ncertain capital flow for “in-between” deals, increased foreign in-
vestment money for big city properties, an increase in con- struction money, and signs of hope from the economy – those are some of the current trends in an investment sales market still impacted by the after-ef- fects of an economic recession that “officially” ended nearly four years ago. Those after-effects are play- ing out in an investment sales market that has not completely stabilized. After a surge in sales in 2011, for example, the market slowed a bit in the first quarter of 2012, and not necessarily because there is not a sufficient supply of capi- tal. Rather, there has been a lack of quality supply to fuel transactions. The analogy is that cur- rent supply is “two ends of the barbell,” with nothing in the middle. There is either a strong desire for high-qual- ity core, long-term stabilized assets on one end of the bar- bell, or absolute rock bottom pricing providing the basis for opportunistic, value-add transactions on the other. For now, there is very little capital in the market to appropriately price deals in the middle of the barbell – deals that may be value-add in nature, but involve an investor or opera- tor who has to do something with the asset to generate a significant yield. Put another way, those “in between” transactions current- ly providing little investment impetus are those that cannot guarantee long-term cash flow, or do not guarantee or have a significant opportunistic upside – mid and upper 20 percent returns or higher. For those transactions, investors have not put the risk on trade in terms of having confidence in the economy to carry those investments with any sort of underwrite-able certainty. That said, and despite the ebbs and flows of the market- place, the recent performance of the economy has indeed provided some hope and a sense of positive expectation. There has been moderate job hiring and employment gains,
although that has not neces- sarily shown up in all of the statistics just yet. But we are seeing a clear in- crease in activity, particularly among the small to mid-sized companies. One indication comes from the Bankers As- sociation, which reports that those small to mid-sized com- panies are now beginning to access capital and that lenders are beginning to let capital flow to those non publicly traded enterprises. That is indeed a change, because while many of those companies have continued to have very good balance sheets, it has been the large, multi- national public companies that for the past years have had sole, exclusive access to the capital markets. One example of the increase in activity among banks that lend to those kind of groups is Sun Bank, based in Vine- land, N.J. Sun, which has its Northern New Jersey business office in our company’s office park, has been there for just three years and already has doubled their occupancy on the expectation that their middle market lending business is increasing dramatically. In terms of other current investment market trends, for- eign investor money has been extremely active – but only in the gateway cities. As far as the region’s suburbanmarkets, there is some interest in credit- based, long-term leasebacks – they’ll play in that arena. But in general, the suburban markets are not attracting foreign capital. Over and above the foreign money, the majority of capital currently in the market ap- pears to be the commingled funds and institutional pen- sion fund advisors. They are
generally, of course, the same buyers that have always been here and after experiencing a long hiatus are coming back to market. More funds have been raised, they’ve been sit- ting on cash, the mandates are starting to come in, and they are becoming more active. We are, in fact, receiving calls from them and seeing more interest and competition when a quality transaction becomes available. We are also seeing some construction money returning to the market, especially for multi-family product. As has been reported, there has been a significant increase in multi- family construction projects, driven in part by the REITs, as well as by private institutional capital. The industry just can’t seem to build enough apart- ments to meet the current de- mand in a housing market that has seen a surging in rentals at the expense of home buying. But overall, returning to the earlier analogy, there is still too little available product for investment money to be chas- ing at the ends of the “barbell.” That overall trend, by the way, is impacting pricing positively. When a very attractive, high- quality, stabilized transaction does become available in this market, it will indeed be sold at aggressive pricing. For the rest of the year and into 2013, the investment sales market forecast remains mixed. Trends in the overall economy will set the tone, and if pricing does remain aggres- sive, more opportunities will arise for the flow of money that has been sitting on the sidelines post-recession. Eugene Diaz is principal partner of Prism Capital Partners, LLC in Bloom- field, NJ. n
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