great market. Chicagoland is still a very solid market with good
growth opportunities. Texas has always been a wonderful market, and if you consider centers in San Antonio or Austin,
there’s enticing yield to be found.
Yields are usually a seven cap in these markets, which is favorable considering the financing terms available. Investors can also
grow rents and retool a center in a market that’s at a crossroads
of growth and income.
RITTER: What investors are entering the market right now?
De LEON: We’ve witnessed a great influx of foreign equity capi-
tal. On the debt side, in 2009, we were an equity investor in a
bridge-debt program intending to take advantage of the capital
markets dislocation. We were originally on track to originate
about $800 million annually and today we’ve basically stopped
originating new loans. From 2009-2012 we were competing
against one or two term sheets, and today we are competing
against seven or eight. With so many new market entrants, mar-
gins have compressed to a level where we can deploy capital
elsewhere for the same risk/return.
PHILLIPS: We’re seeing more foreign capital looking for places
to put money, and I don’t think it’s so much about yield anymore. It’s security. That seems to be a motivation, and we’re
seeing more of the institutional-market capital markets coming
to life and migrating here.
ROSE: In the private-client sector, foreign dominance is clearly from Canada,
but we’re seeing a lot of really good-quality investment, meaning deal size of
$10-million plus, from Argentina and
from the southeastern part of the world.
Clients from Venezuela and Brazil are
investing heavily into Florida. It’s really a
safe-haven play; they’ve got high inflation
in those markets. In New York, it’s from
China and Russia. In California we see a
big push coming in from China.
RITTER: Are you hearing of ground-up development coming back soon?
Is there financing for it?
FRUMKIN: We’re still seeing banks
remain conservative when it comes to new
construction, so my guess is that we’ll sustain the status quo for the time being. The
size of new ground-up projects continues
to be small and we still see the advent of
preferred development programs
between retailers and a select few independent developers.
SEHGAL: Everything is a little bit more
stringent than it was before. That’s OK
because, if you have a viable plan, we still
have seen the financing available for
De LEON: In the Southwest, where we
have strong household formation, we find
the economics of ground-up power-center
development difficult. Based on available
market voids, rent structure, land and
construction costs, it’s tough to arrive at a
healthy development yield. Occupancy
costs for retailers have also reset. We’re
having more luck in infill and specialty
developments and redevelopments.
PHILLIPS: We’re just not seeing the
deals for multi-tenant that have the
returns we can achieve if we buy opportunistically and reposition a center. It’s
14BPL0016. NMLS ID: 399805
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SINGLE TENANT - CLASS A OFFICE
Acquisition, 75% LTV, Non-recourse
SINGLE TENANT - INDUSTRIAL/WAREHOUSE
Acquisition, 71% LTV, Non-recourse
MULTI-TENANT - FLEX SPACE
Cash-out refinance, 70% LTV, Partial recourse
MULTIFAMILY - 40 UNIT CLASS A APARTMENT
Construction take-out, 79% LTC, Non-recourse
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