Buyers were taking into account the worst-case scenarios
in rent, occupancy levels and economic distress. Indeed, in
some cases last year, potential buyers were not discounting
deeply enough to match economic conditions. Sellers, for
their part, had no real pressure to sell and figured they
might as well hold onto their assets until the worse-case scenarios materialize. Garfield can’t pinpoint why a shift has
occurred—only that it has.
“We looked at an asset held by Lehman Brothers shortly
after its bankruptcy and the price guidance was in 80% of par
range. The price talk for that same asset today is closer to 50%
of par,” he points out. “I would say there is anywhere from a
10% to 40% swing in favor of buyers in terms of price expectation from sellers.”
Even land—one of the more difficult asset categories to
a belief that prices are approaching the point where investors
will be ready to step up and buy, CEO Rich Samit says.
Seconding Gibson’s point about liquidity, he says there is a
sufficient amount of equity waiting to fund these transactions.
Specifically, Samit says that Fraser Forbes can place its hands
on some $5 billion to invest in land parcels up and down the
Eastern Seaboard.
Of course such money will be aimed at the strongest borrowers and best prospects. However, after a year of credit entrenchment and economic downturn, borrowers’ finances and project
fundamentals have been seriously weakened. For this group,
without a doubt, financing is unavailable. At the same time, the
industry is bracing for the tidal wave of CMBS debt that will
begin to roll over this year. The CMBS market is obviously not
going to refinance it; it will have to be eked out from existing
sources or go into default.
Still, borrowers—even those
“Find me the best trophy asset in Washington, DC
that previously relied on the
CMBS market—are scrapping
and discount it by 30% to 40% from its
by. Lenders, for instance, are
becoming increasingly amendable to allowing borrowers to
buy back their debt at a discount,
often at large markdowns, Jones
Lang LaSalle managing director Wes Boatwright says. Some
are even willing to waive yield
maintenance for borrowers that can pay off a loan.
Private equity is also available for qualified borrowers—
but at a price, of course, Boatwright continues. The terms
asking rate. I will have you 10 offers backed
by funding within a week.
”
value even in stable times—appears to be heading for some
sort of price equilibrium. Fairfax, VA-based land broker Fraser
Forbes is launching a financing arm this summer, inspired by
Thurs., May 21, 2009 at 12:30 PM (ET)
On the heels of a successful inaugural in-person event last year, RealShare TORONTO returns as a Virtual Conference. This cost-effective alternative to cross-border business travel will gather Canadian real estate executives with substantial U.S. interests, as
well as global players with a substantial stake in Canada, to offer a fresh, North American perspective on the Toronto market.
Make new contacts, get fresh perspectives, share international strategies and hear the latest forecasts for leasing, investment and
development in this vibrant market for commercial real estate.
Conference Topics:
• Strategies for Finding Opportunities and Generating New Business in an Economic Downturn
• Cross Border Structure & Perspectives
• How to Secure Financing for Your Next Deal Within the Locked-Down Capital Markets
• Leasing, Investment & Development Outlook for Toronto Office
• Where is One of North America’s Largest Industrial Markets Headed?
• The Changing Face of Global Trade: What Does it Mean for Toronto?
For more information:
Eric Sonntag • eric.sonntag@incisivemedia.com • (212) 457-9742
For details and to register:
www.realshareconferences.com/toronto
