3 Strategies for CRE Investors
Many investors are frustrated by today’s frothy pricing of commercial real estate. Non-institutional investors, in particular, are finding themselves outbid on acquisition targets. How should investors plan for a successful 2014?
- Non-institutional buyers can best compete for mid-cap, value-add investments, and are most likely to find those deals outside of primary markets. Asset values are generally high relative to underlying fundamentals due to the ample supply of investment capital in the soft economy, making distressed assets with attractive prices difficult to find.
- Investors should look at what they already own as their best investment opportunity instead of overpaying for new assets. Investing capital to upgrade or reposition current assets can create value and maintains a lower comparative cost basis than developing or acquiring new assets. Investors are advised to evaluate each property in their portfolio and reposition them for a long-term hold.
- Investors should be thinking about debt as an asset in 2014. One has to use leverage advisedly, obviously. But with debt this cheap and strong inflationary pressure looming in the long term, procuring long-term fixed-rate debt is a smart investing strategy.
More in-depth information on these strategies and more can be found in Transwestern's first-quarter edition of "Ask the Expert."
Steven Orchard and Michelle Lee lead Transwestern's structured finance team in the West. The duo is responsible for real estate investment banking and mortgage banking services and arranging debt financing and equity investments. They have completed transactions with an aggregate total of more than $5.7 billion.