Given how volatile the public capital markets have been recently, some real estate investment executives speaking in New York recently said they have been finding private markets relatively more attractive.
Ethan Penner, president of CBRE Capital Partners, told attendees at an annual New York University real estate capital markets conference that it depends upon one's situation, but from his perspective being private has been preferable recently to being subject to the vagaries of the stock market.
Wendy Silverstein, executive vice president and co-head of acquisitions and capital markets at Vornado Realty Trust, told attendees at the 44th annual conference, “Clearly public companies have the advantage” when it comes to access to capital.
“It's a lot of hard work to raise money in the private markets, she said.
However, the company does have a private equity fund so it has some flexibility when it comes to the two sources of capital, Silverstein added.
Richard Saltzman, president of Colony Capital LLC, noted at the New York University Schack Institute of Real Estate conference that his company “did the opposite” of what Silverstein's company did. (Colony is a private equity firm that has backed a publicly traded real estate investment trust.)
Saltzman said all things being equal he thinks being private is preferable.
Larger, liquid and diversified companies like Vornado might do better with a public market approach, Scott Rechler, chairman and chief executive officer of RXR Realty LLC, acknowledged.
But for other companies, like his own, being privately held has been clearly preferable, he said.
As part of the panel on permanent capital and structured finance, Penner said that supply as far as deal flow remains “sparse” and noted some are still hoping a second Resolution Trust Corp. may yet come.
He noted that many loans recently, indeed a fairly large part of the market, have been granted extensions. This suggests there are issues that have not yet been fully addressed.
The conduit market is not really healthy and there are questions about who is going to meet the demand for small-balance loans, he said.
The volatility in real estate investment trust stocks, similar to the volatility in financial stocks, has made merger and acquisition activity challenging, Silverstein said.
Also low interest rates raise questions about whether there is enough compensation to take on risk.
There appears to be limited opportunity in the single-family sector but it is more than one might have thought.
“People are actually buying houses,” albeit with less leverage, said Cia Buckley, partner and executive vice president at Dune Real Estate Partners, during the panel discussion at the New York conference.
In general the panelists tended to say they were optimistic as far as the long term, but still thought the market had some shorter-term challenges to get through due to continuing uncertainties linked to global economic concerns.
