News
TIME PLEASE?
May 19, 2010
| Sox/Yankees games last so long that markets can shift between innings one and nine. So we paid close attention yesterday over breakfast at the Langham, when RELA moderator James Partridge of Eastern Bank asked developers and investors "Is it time to acquire or develop, buy distressed notes or properties?" |
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| The panelists: Normandy Real Estate Partners' Justin Krebs, New England Development's Dawn Neher, Intercontinental Real Estate's Paul Nasser, and Berkeley Investments' Young Park. Justin says the hot investment opportunity is to buy discounted debt and then the property at foreclosure. He knows, since Normandy followed that scenario with the Hancock Tower. (Last week they snagged tenant Bain Capital with a 15-year lease for 208k SF with an option to expand.) But Justin cautioned that most distressed assets suffer from challenging locations. |
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| On the Bain deal, Justin says Normandy met with them last June, and they connected. Bain was impressed with how Normandy acquired the Hancock and with the $25M it's putting into improvements. Dawn says retail-focused NED is both buying and building. On Tuesday, it closed on Westgate Mall in Brockton, purchasing it in foreclosure from a special servicer. In June, NED will start construction on a new 500k SF center in Northborough, with New England?s first Wegman?s as anchor. The mall is already 80% pre-leased. Later this year, it'll break ground in Chestnut Hill on a mixed-use complex. To lenders, Dawn says it may be harder to finance distressed, or value-add assets, but ?they'll have the opportunities.? |
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| Paul, whose firm has $2.5B under management, says in '09 it bought two Midwest multifamily properties at 7.5% and 6.5% cap rates compared with 15 buys a year pre-recession. On Monday, Intercontinental closed on its first acquisition of 2010, a four-building portfolio of student housing near UC Santa Barbara with 50% leverage and a 5.27% interest rate. He says distressed assets are a tough buy because they're tricky to underwrite with certainty. Young Park says the market is highly stratified between stabilized and value-add properties. He hopes to close soon on a construction loan to build a 96-unit apartment building in Waltham, a tight market near Brandeis. Now he sees lots of ?opportunities and traps.? |
