Real Estate Forum

that. I do see the rate of growth slowing
because prices in some markets are getting
pretty high. But I don’t see dramatic con-
traction of the market. Growth is slowing
but not stopping.”
Frye says he tries not to imagine a sce-
nario in which his firm might scale back.
“We’ve never really gotten out over our skis.
For that reason, we probably wouldn’t be
pulling back. If there’s significant pullback
in the global economy, or if the US economy
stumbles or starts to fall a little bit, we may
have to slow down our expectations, but for
the most part I see good, solid growth from
us for the foreseeable future.”

Room for More Growth
The principals do see areas in the economy
where there are growth opportunities.
Cooper, for one, sees a chance to attract
young talent in fields where growth contin-
ues to skyrocket. “The tech, biotech and
entertainment sectors are seeing tremen-
dous growth,” says Cooper. “There’s such a
battle for talent right now, and that’s why you
see this expansion going on here in Southern
California and certainly in Northern
California, the Silicon Valley, San Francisco—
wherever there’s creative space: West L.A.,
Santa Monica, Playa Vista. As long as that
business expands, the fight is going to be for
this young talent coming out of college.”
As for attracting experienced talent,
Cooper says sometimes you have to reach
across the country to find executive talent
for senior and middle management, which
presents opportunities to create environ-
ments that will entice experienced talent.
“That’s why, when I talk about Downtown
L.A. becoming this live/work/play environ-
ment, it’s important because people from
other regions are concerned about our traf-
fic, and they’re not used to commuting,” he
says. “Can you create an environment where
they can walk to work and afford to live?”
The most recent growth opportunities
ARC has seen are from taking products from
non-core, non-traded platforms to the pub-
lic markets, says Schorsch. “Whether through
listing, IPOs or selling assets, a liquidity event
completes the circle. We’re creating a capital
event where the investor can prove perfor-
mance and yield. It’s no different from
what’s occurred in endowments and what’s
occurred in the fund world.”
Schorsch adds that he’s seeing a resur-
gence of demand as more non-traded
REITs look for liquidity. “There is $39 bil-
lion in non-traded REITs looking for liquid-
ity. The non-traded space is growing.” Also,
he says that investors have a lower yield
expectation than they used to. “The mar-
kets are certainly recovering. The average
American doesn’t feel like the market’s
back. They’re still feeling like it’s a chal-
lenged economy.”
While he feels there are barriers to growth
for smaller and mid-sized firms in terms of
raising capital, Frye notes “there’s always an
opportunity for growth. There will always be
some good niche firms within the industry,
but the growth will be dictated more by the
rise and fall in the economy.”
Wittman says Ventas continues to look at
potential opportunities in the healthcare
sector. “It’s a very large market, and very
fragmented,” she points out. “Less than 10%
is owned by public REITs, and there are
underlying factors that allow us to continue
to grow. The industry is consolidating, and
other changes present opportunities. We
think the real estate will continue to flow to
the logical owner, and that will be public
REITs because the cost to own healthcare
real estate is lower than for other sectors.” ◆

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“WEST COAST MONEY” IS A FALLACY!
Quanti;able Data Proves That Investors are Sourced Close To Home

In the world of net lease investments the “California money” pitch is purported as a known fact. The gist of it is simple – California buyers have access to unmatched amounts of capital and due to tax constraints instate, are the most vibrant players in the national net lease market. Therefore, one could deduce that according to this theory, behind most net lease buildings sits a California owner. This is a complete fallacy where the data clearly shows that by far the largest contingency of owners comes from instate investors and that California/West Coast buyers are only a small fraction.

To test this thesis, a sample was taken of all Walgreens and CVS properties in the state of Florida. Both tenants are considered prime net lease investments - the typical target of the “California Buyer” pitch that is made so frequently. The state of Florida is a large market with many attractive, high-income areas coupled with very favorable state tax laws which typically equates to an ideal location for any buyer to invest. Therefore, if the “California money” pitch were valid we would see a dominant percentage of California buyers for Florida pharmacies, one of the prime net leased investments available today. The below data clearly shows that the facts do not support this theory and is, in fact, fundamentally wrong. Cont...