Institutional CRE Investing Seen Rising

Institutional investors will increase their commercial real estate investments in the second half of 2003, targeting equity and mezzanine debt, according to Stan Ross, chairman of the board of the University of Southern California Lusk Center for Real Estate in Los Angeles.Mr. Ross said he expects that investment in commercial mortgage-backed securities and other forms of debt financing will also increase this year. "While foreign investment in U.S. properties could decline in the second half, institutional players will step up their investments as they continue to diversify their portfolios and meet allocation guidelines," he said. "Investors are betting that many commercial property markets are nearing the bottom of the cycle and could begin to recover next year." Mr. Ross also says companies are continuing to sell and lease back assets to free up capital tied up in real estate. He said he expects rating agencies to expand their coverage of real estate as technology evolves and more transparent reporting is put into place. This will lead to "pricing of real estate assets and securities that better reflects the underlying risks," he said.