2013 ULI Trends Day Arizona Recap – Part 9 – Capital Markets Panel

Following the Retail Panel was the Capital Markets Panel. Key characters from this group were: Mike Forsum, Starwood Land Ventures; Ben Greazel, BGC Real Estate Capital Partner; David Sotolov, iStar Financial; moderated by Michael Straneva, Earnest & Young.

This was the final panel to end a marathon of a day! Overall, the panel was optimistic about their prospects of either placing debt or equity into opportunities.

Here are a few of the bullet points:

  • CMBS spreads have tightened and bond buyers are back
  • 45% change in volume between 2011 and 2012. Expect $70B in 2013 (up from 2012)
  • Life Companies – not uncommon to see sub 4% interest rates if an A property and low leverage. Their annual allocations for loans have increased. They have putting in more flexible prepayments. Phoenix is considered a Primary Market for them.
  • CMBS will focus on the cash flow of the property
  • Banks are coming back to the market with nonrecourse debt
  • Bridge Lenders are starting having problems in 2012 because of the competition
  • Starwood – private equity – went in as a principal because of the below replacement costs acquisitions and are now realizing some of the gains.
  • Everything lives in a Fund. The question is, what was the Fund about?
  • Coinvestment occurring but is sponsor dependent
  • Lenders are becoming more aggressive
  • Obstacles today – financing new construction – largest barrier is the geography
  • New project in TX – oil & gas – $270M loan, nonrecourse bank debt in 2012 for office and land
  • Apartments are the easiest to finance and Hospitality is the toughest
  • LNR deal is expected to close in April 2013
  • Phoenix is well received right now for pricing debt as a Primary Market. Even though Phoenix is known for Boom & Bust, it is an important market for the Home Builders.
  • Caution Flag – Inflation – haven’t seen it yet, but they are expecting it.

The panel finished with a few comments about how a year ago, everyone thought the recovery would look like a hockey stick. They still don’t see that for the recovery. They all believe that debt pricing should remain relatively stable over the next couple of years and all believed that the best opportunity is cheap bank and life company debt.

If you are there, what did you takeaway?