Source: Real Estate Alert – The Grapevine
December 12, 2001
Institutional investors have slowed their purchases of real estate this year, while privately held firms and individuals have increased their holdings. According to a report from Grubb & Ellis, institutional buyers — including pension funds, insurers and banks — accounted for just 18% of the nationwide market this year, compared to 29% a year ago. Among the reasons for the decline: plunging stock values, which in many cases have caused real estate holdings to exceed target allocations. Private investors, meanwhile, represent 61% of the investor base, compared to 55% a year ago.
T-Rex Capital has delayed the launch of its first commingled opportunity fund. The New York firm, headed by former Starwood Capital executive Thomas Mulroy, had initially planned to raise equity during the fourth quarter, but was forced to reschedule in the wake of the Sept. 11 terrorist attacks. Now the firm intends to take advantage of the weak economy, and the resulting increase in the availability of high yield investment opportunities, by conducting the initial equity closing in mid-January. The $250 million fund will target equity and mezzanine- debt investments, shooting for returns around 20%.
Meanwhile, T-Rex Capital has hired opportunity-fund veteran Kevin Reardon as chief financial officer. He is overseeing the day-to-day operations of the company’s investment-management arm. Before joining T-Rex, Reardon had been a director in the real estate group at UBS PaineWebber. He previously served in similar posts for investment funds sponsored by Lazard Freres Real Estate Investors and NorthStar Capital Partners, both of New York.
An opportunistic investor in Michigan plans to buy as much as $50 million of properties from its home state next year. That would be a significant jump from the $17 million of assets that Paramount Investments has acquired since it was formed about 18 months ago. The Farmington Hills firm is looking for office, retail, industrial and multi-family properties that would provide annual yields as high as 20%, following re-leasing or renovations. The company is currently pursuing its largest purchase to date: a suburban Detroit power center valued at some $22 million. For more information, call vice president David Rubin at 248-538-8600.
Crimson Partners plans to buy out its partners in Campus at Metro Park North, a 190,000-square-foot office property in Rockville, Md. Cassidy & Pinkard had earlier marketed the property for about $30 million, or $158/sf. It’s not known how much Crimson, a Herndon, Va., developer, is willing to pay for the share of the complex that it doesn’t already own.
Intercontinental Real Estate of Boston has almost finished a massive redevelopment project that is serving as one of the key investments of its second opportunity fund. Through the $90 million vehicle, Intercontinental’s development arm last week finished the gutting and expansion of a six-story bakery in Boston. The renovated building — now 12 stories — encompasses 440,000 square feet, including 220,000 sf of office and retail space and 200-plus apartments. The building is scheduled to re-open in about 10 months. The budget for the project, including the purchase of the property, is $90 million, of which 65% was borrowed. The anticipated annual yield of 20% matches Intercontinental’s projections for all of the vehicle’s investments. The firm plans to hold the property until 2005.