What Does 2012 Have In Store For Real Estate Investors?
Abstract: “Property consultant Jones Lang LaSalle, predicts a tricky 2012 for real estate investors who get squeezed by debt, they also warn investors to avoid over heated emerging markets, among other things.”
Reportedly debt and equity will be scarce, limiting financing opportunities. Record numbers of real estate debt are due to expire in the US, the UK, France, Germany and Japan resulting in two classes of properties, those still having access to capital and those put in a squeeze by the shortage of debt and equity. The performance of emerging markets in Asia and Latin America and the Eurozone crisis are key issues for investors in 2012.
Asian Investors Betting Big on This U.S.
“Emerging-market real-estate investors from Asia are betting big on Miami Miami Miami since it owns 50% of Norwegian Cruise Lines which operates out of the Port of Miami Miami Hong Kong stock exchange and will distribute 18% of Swire Properties shares to qualifying shareholders on January 18, 2012. This is a developing trend worth watching, though it may be too early to make an investment.
Bob Evans as Cheapest Restaurant Invites LBO Takeover: Real M&A
January 09, 2012, 9:12 PM EST
Bob Evans Farms Inc has been adversely affected by rising pork prices and falling revenue at its Mimi’s Café chain while sales of sausages and side dishes to grocery stores is on the rise. Restaurant sales have dropped for three straight years. I chose this article because Bob Evans has a considerable amount of real estate, land and buildings worth about $1.18 billion. One of the solutions offered and the one that I think is the most viable, would be to close underperforming locations and sell the land and buildings and lease back the locations that will remain open on long term leases. This would provide capital to remodel the profitable locations and eliminate the drain of non-performing restaurants. They are in the food business, not the real estate business.
Private-Equity Firms Forced to Evolve
With debt less available and lower returns on investments, private equity firms are focusing on smaller deals, growing existing businesses and expanding into real estate and other areas instead of piling on debt for mega-deals. The Carlyle Group recently announced it had raised $2.34 Billion for its largest U.S.
What is Mezzanine Financing?
Mezzanine financing offers a way for publicly and privately held companies to attain financing without going public and potentially giving away ownership of their company. It is a blend of traditional debt financing and equity financing that is unsecured and therefore requires no collateral and may not require giving up any interest in the company. The interest rates for mezzanine financing are typically very high. Since there is no collateral, mezzanine financing lenders have the right to convert their stake to an equity position if there is a default on the loan. Mezzanine financing is typically more difficult to receive than a traditional bank loan because of the lack of collateral. A company must show an established track record in its industry, show a profit or a minimum break even and have a strong business plan for future expansion.
Cost of mezzanine financing to halve by end-2012: CBRE
The cost of mezzanine financing in Europe is forecast to decrease to 8% for prime assets by the end of 2012 as a result of increased competition and more risky assets will be financed at a cost of 10% to 12%. The European market is still relatively new to mezzanine funding compared to the U.S.
Commercial Real Estate Trends Remain Same in 2012
Global economic uncertainty, sovereign debt issues and market volatility will continue into 2012 and therefore investors will be looking for safety while seeking to own the high quality assets. The focus will be on “major market 24/7 cities that have global appeal”. REITs specifically will continue the trend of owning core real estate. Due to private capital frustration with low cap rates, more B quality assets in secondary markets will trade from the public into private. Office space and lower quality retail and lodging in secondary markets will continue to be challenged in 2012.
Arnerich Massena Unveils Top Investment Trends and Issues for 2012
Arnerich Massena is a Portland based eccentric investment advisory organization founded in 1991 that serves corporations, institutions, state and local governments, charitable organizations, trusts and estates, corporate pension and profit sharing plans and private clients. Specializing in on-going investment strategies, Massena believes the European debt crisis will continue to dominate capital markets and headlines; The U.S. will refocus on U.S. debt and fiscal issues due to the upcoming presidential election which will create concerns about increasing risk premiums on U.S. debt; Bonds will most likely be used for liquidity and global diversification opportunities; and Investing in emerging markets basic needs like water, agriculture, clean energy, minerals and healthcare will prove profitable due to population growth and the boom in middle class consumers in those area.
