Opportunities For Real Estate Investment Today by Tom Barrack of Colony Capital

Tom Barrack over at Colony Capital put up a nice presentation of where he sees the opportunities for real estate investment in the current market. While Colony is geared to serving their large institutional investors, those of us operating on a smaller scale can benefit from Tom’s insights as well.

My Exec Sum of the opportunities he sees that I think will impact smaller investors in North America (and my comments in parentheses):

  • Commercial and residential real estate are great investments today because equities and debt are mispriced and the economy is regaining its feet. (There will be competition however).
  • Distressed debt in the US is diminishing but they are continuing to resolve non-performing assets (which can create deals for long term holders as these turned around assets come back to the market).
  • Single family residential for rent housing is stabilizing and becoming a institutional asset class (which can provide exits for those who have built portfolios of these properties).
  • Mezzanine debt and what he calls ‘stretched senior debt’ is becoming more available for value add & opportunistic deals because institutional investors such as pension funds need the extra yield (it will be easier to finance turnaround commercial properties at higher LTVs).
Investment opportunities for commercial real estate investors in North America
Source: Tom Barrack at Colony Capital

The split between Apartment Investors Creates Opportunity for Good Returns in Value-Add

Good article in Asset Management Quarterly Value Add Has Its Day talking about how investors have split since the Financial Meltdown in 2007 into a risk adverse group favoring mostly Class A apartment building investments in core markets and a more risk tolerant group seeking high returns by purchasing distressed debt.

For Apartment Builidng Investors Value Add Has Its Day

This has created an opportunity to generate good returns with investments in properties that need help of some kind. A few bullet points:

  • “It’s [The polarization] left this big open hole in the middle of the playing field for middle-risk, middle-return strategies, and it’s made the pricing on value add very attractive,”
  • “It should be an extremely desirable place to invest but you haven’t seen a lot of investors go there yet, which is why it’s such an interesting opportunity.”
  • buyers needn’t take on excessively risky scenarios in order to reap a handsome return of Continue reading The split between Apartment Investors Creates Opportunity for Good Returns in Value-Add