Category: Finance & Investment

Watch Real Estate for First Signs That Passive Has Grown Too Big

(Bloomberg) –The future of passive investing is facing one of its biggest tests yet. And surprisingly the challenge is coming from a handful of relatively obscure real-estate companies.

Funds that track indexes are coming increasingly close to owning a majority of shares in eight property owners and managers, according to a report from Bloomberg Intelligence. Real estate stands out in a wider market where just 16 percent of stocks are held by passive investors. That makes these companies potential bellwethers for the impact of benchmark tracking as the funds grow.

“For firms with high passive ownership, you have lower reaction to company-specific news,” said Itzhak Ben-David, a finance professor at Ohio State University who’s studied the topic. “When everybody pulls money out of the market or gets into the market, the tide lifts all boats.”

Identifying the potential dangers within passive investing vehicles — particularly exchange-traded funds — has been a Wall Street parlor game for years, not least among displaced stock pickers. Variously described by active managers as being akin to Marxism or financial weapons of mass destruction, indexed funds are poised for another year of inflows as actively managed products hemorrhage cash, data compiled by Bloomberg show.

Tipping Point?

But with the number of U.S. indexes far outstripping stocks, anxiety is mounting over whether passive funds — which buy the stocks in their benchmarks regardless of news, earnings or other fundamentals — artificially inflate share prices, fueling bubbles.

Societe Generale SA last month argued small caps, dividend shares and gold miners were particularly at risk of market selloffs due to their outsized ownership by passive investors. Goldman Sachs Group Inc., meanwhile, suggested in a report last year that stocks with a larger exposure to passive funds could trade more on cross-asset flows and macro views than their own fundamentals.

Tanger Factory Outlet Centers Inc., which owns and operates out-of-town retail parks, could be the first stock to test passive’s tipping point. Indexed funds own 46.9 percent of the real estate investment trust, which has a market capitalization of $2 billion, the data show.

Based in Greensboro, North Carolina, Tanger may seem like a strange yardstick for the future of investing, but its diverse appeal has made it a stock to watch. It’s owned by dividend strategies, funds that buy mid-cap or small-cap companies, and investors in real estate or REITs.

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.

Richard is our resident social media expert. He researches and writes about; the economy, marketing trends and all aspects of real estate investing.

How HNW Investors Should Screen Online CRE Investment Platforms

In recent years, dozens of online platforms have popped up to cater to commercial real estate investors—everyone from everyday investors to high-net-worth (HNW) investors and family offices. Given the plethora of platforms that have emerged and that continue to emerge, any investor, no matter his or her level of sophistication, might be befuddled by which ones to choose.

One of these new platforms is operated by EquityMultiple, a start-up based in New York City. The EquityMultiple platform offers equity and debt deals to accredited commercial real estate investors; it leans toward investments in the multifamily, hotel, industrial, office, manufactured housing and self-storage sectors.

Charles Clinton, a real estate attorney, and Marious Sjulsen, a real estate investment veteran, co-founded EquityMultiple in 2015 with the idea of bringing direct investment in commercial real estate to all investors, not just institutional players. By the end of 2018, the start-up expects to have corralled more than $1 billion in real estate investments since its launch. EquityMultiple, backed by New York City-based capital markets firm Mission Capital and former Wall Street executive Ken Pasternak, boasts that it seals fewer than 10 percent of the deals that it looks at.

Clinton, CEO of EquityMultiple, and Sjulsen, its chief investment officer, talked with NREI about how HNW investors and family offices should approach online real estate investing, which Clinton says is in the “very, very early innings.”

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.

Richard is our resident social media expert. He researches and writes about; the economy, marketing trends and all aspects of real estate investing.

World Trade Center Builder Silverstein Expands Into Real Estate Lending

(Bloomberg)—Silverstein Properties Inc., the developer of prominent New York City buildings such as 3 World Trade Center, launched a real estate lending venture to profit from what it sees as a financing gap left by banks.

Silverstein Capital Partners will provide loans for the full gamut of projects, from office and industrial to residential and retail, the company said. Silverstein has partnered with a sovereign wealth fund and a pension fund that together will provide most of the capital for the venture, Chief Executive Officer Marty Burger said in an interview, declining to name them.

Burger wouldn’t say how much money the venture has to lend but said the partners have deep pockets and that there is no maximum loan. The minimum loan will be $25 million. The venture, which is prepared to start lending immediately, already has a pipeline of deals, he said, and he expects annual returns of 10 to 15 percent. This is Silverstein’s first foray into lending.

“There were a lot of banks that couldn’t handle the loans,” Burger said. “We’re a developer at heart, and we usually do very large projects, and we found that there was just a gap in the financing markets where there were large loans needed for complicated projects.”

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.

Richard is our resident social media expert. He researches and writes about; the economy, marketing trends and all aspects of real estate investing.

Popular Mortgage-Bond Trade Losing Appeal as Rates Keep Rising

(Bloomberg)—One of the most popular mortgage-bond trades since the financial crisis is going out of fashion as rising rates punish down-on-their-luck borrowers.

So-called “scratch and dent” mortgages — which are tied to borrowers that fell behind or began repaying their debts after a default — accounted for the largest piece of the U.S. residential mortgage-backed securities market without government backing over the last decade.

But rising rates make it harder for homeowners to refinance their mortgages, potentially lengthening how long it will take them to pay off that loan. This means bond buyers could get stuck with these non-performing loan and re-performing loan mortgage securities for more time than they anticipated. And investors are taking a step back, pushing yields higher.

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.

Richard is our resident social media expert. He researches and writes about; the economy, marketing trends and all aspects of real estate investing.

What Institutional Investors Want in this Stage of the CRE Cycle

Whether it’s in a more favored sector like multifamily, a less attractive sector like retail or a somewhat in-between sector like office, the best paths for institutional investors to drive value these days are the ones less traveled.

That’s the assessment of Jacques Gordon, global head of research and strategy at real estate investment management firm LaSalle Investment Management. And other experts in the sector echo those sentiments.

Gordon says purchasing and then improving an undermanaged apartment complex or value-add office building stands to deliver a better payoff, in many cases, than snapping up a stabilized property. He also notes that pursuing retail assets that feature experiential components or that could be remerchandised also provide opportunities to seek value in a sector that’s been largely out of favor among institutional investors in recent years.

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.

Richard is our resident social media expert. He researches and writes about; the economy, marketing trends and all aspects of real estate investing.

Blackstone Seeks $18 Billion for Biggest Real Estate Fund

(Bloomberg)—Blackstone Group LP expects to raise $18 billion for its biggest real estate fund ever.

The firm, already the private equity industry’s largest real estate investor, will have a strategy similar to its last fund, investing in distressed properties globally, according to people with knowledge of the plans. Blackstone’s prior fund gathered $15.8 billion in 2015.

Blackstone is seeking capital at an opportune time. Institutions such as public pension plans and insurance companies are betting big on property assets to protect against inflation and broaden their holdings beyond stocks and bonds. The number of investors allocating $1 billion to the space keeps increasing, according to data provider Preqin.

A representative for Blackstone declined to comment.

In June, New York-based Blackstone raised $7.1 billion for an opportunistic real estate fund focused on Asia, and Carlyle Group LP this month also raised its largest U.S. real estate fund.

Beyond real estate, investors are piling into alternative assets, helping firms raise much larger funds than before. The private equity industry brought in a record $453 billion last year. Blackstone, like its rivals, is taking advantage of that demand. It expects to raise more than $20 billion for its eighth buyout fund, Bloomberg reported in July. Its prior buyout fund was a third invested at the end of June, according to a regulatory filing.

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.

Richard is our resident social media expert. He researches and writes about; the economy, marketing trends and all aspects of real estate investing.

What Every Real Estate Investor Should Know About Cost Segregation

Cost segregation studies, or cost segs, have been a widely used accounting tool by real estate investors as a way to preserve capital and realize significant tax benefits through accelerated depreciation, asset reclassifications and easier write-downs when assets are disposed of. However, with tax reform, many investors are asking whether or not cost segs will continue to benefit them.

“The story today is about how tax reform might affect the cost segregations industry,” says Kevin Mowatt, Northeast practice leader at the consulting firm RSM’s tangible property services group in New York City. “The best way to look at cost segs is that they are an IRS-recognized tool that helps companies exploit the time value of money or TVM.” The concept of TVM is that money available today is worth more than the same amount down the road. The types of companies most likely to benefit from cost segs are those that have been consistently profitable and are looking to offset their current tax liabilities, according to Mowatt. “If a hotel chain or a retail property owner is consistently running at a net operating loss (NOL), then cost segs probably aren’t for them.”

For example, a rapidly growing data center operator RSM has worked with made almost $200 million in capital expenditures in just a few years. The company was searching for ways to reduce its tax burden. The cost segs study enabled the company to apportion its capital expenditures appropriately between 39-, 15- and 5-year tax lives in order to accelerate depreciation and generate significant tax savings.

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.

Richard is our resident social media expert. He researches and writes about; the economy, marketing trends and all aspects of real estate investing.

Lenders Continue to Fight for Market Share with Multifamily Deals

Multifamily investors are still able to get low interest rates on permanent loans as different lender groups continue to compete for market share.

“The competition between the agencies and life companies is creating bidding wars on the debt side, with increased interest-only and decreased spreads a requisite to win deals,” says Brandon Harrington, managing director with JLL Capital Markets.

Benchmark interest rates like the yield on 10-year Treasury bonds have risen nearly half-a-percentage-point since last year. But the interest rates on permanent loans for multifamily assets have remained relatively stable. To make more loans, lenders are cutting the extra amount that they add to interest rates—the “spread” between their cost of capital and the interest rates they charge borrowers.

“The debt market for multifamily remains very liquid,” says Mitchell W. Kiffe, co-head of national production for the debt & structured finance group at CBRE Capital Markets. “All of the capital sources remain active and are seeking multifamily borrowers.”

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.

Richard is our resident social media expert. He researches and writes about; the economy, marketing trends and all aspects of real estate investing.

Rising Interest Rates: The Calm Before the Storm?

In a predominantly steady economy, real estate players have been gearing up for the next phase in the cycle for a while now. Borrowers and lenders alike are watching closely as the Federal Open Market Committee continues to raise short-term interest rates.

The Fed first hiked up rates in March and then again in June—from 1.75 to 2 percent—and according to Marc Suarez, director with Hunt Real Estate Capital, “There has been talk about the Fed raising rates every three months. The Fed has penciled in two more rate hikes this year—we should expect one more for sure in my opinion.” However, despite rising rates, the yield curve has flattened, Suarez noted.

As cap rates start to move higher as well, in strong markets such as Florida “most of the deals we are seeing are debt service coverage ratio-constrained (DSCR) at the values,” Suarez continued, explaining that Hunt Real Estate Capital has had success with early rate locks and by helping borrowers keep track of stabilization of property financials, as DSCR-constrained proceeds are rate-sensitive. Multifamily borrowers are still focused on value-add deals, showing no signs of slowing down, Suarez pointed out.

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.

Richard is our resident social media expert. He researches and writes about; the economy, marketing trends and all aspects of real estate investing.

Wall Street Resurrects Another Financing Tool Killed by Crisis

(Bloomberg)—Investors are breathing life back into a once-dead financing tool. The market for bundled loans used to fund riskier real-estate projects is on pace for a post-crisis record after all but disappearing during the 2008 crash.

Sales of commercial real estate collateralized loan obligations are expected to double from last year to as high as $20 billion this year, which would be the highest since 2007, according to industry analysts.

The renaissance of the so-called CRE CLOs — which are used to fund properties that don’t qualify for traditional financing, such as suburban office complexes, multi-family housing and malls that are in transition — is being hotly debated. Some investors like the better returns and protection from rising interest rates from the floating-rate securities, while others warn of the higher risk of defaults and looser underwriting standards.

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.

Richard is our resident social media expert. He researches and writes about; the economy, marketing trends and all aspects of real estate investing.

Scroll to top