Tapping the Securities Markets for Commercial Real Estate
I am a commercial developer in WA state, looking for capital to buy distressed properties. Two years ago I started a private equity fund, with favorable terms and a first security position for investors, but my timing was off; no money was being issued. I started a second fund last year and got it in front of all the large pension fund investment managers, but discovered that my history isn't recent enough. Most of my redevelopment activity was in the '90's, with nothing more recent. So I was denied (without prejudice).
I believe that this is a good time to buy industrial and office, and inflation is right around the corner with this unpayable national debt. (I see no choice but for the govt to monetize the debt) And I have a regular deal flow of medium and large commercial properties to be had at decent to excellent prices. But I need money.
Does anyone have experience floating a public offering? I've looked at starting a REIT, but it requires a minimum of 100 investors. Anyway, I see absolutely no benefit of a REIT over a simple LLC. I've thought about buying a public shell company and merging into it to gain the capital markets, but likely very difficult to do a Raise with only the -prospect- of owned assets. I've thought about doing a bond issue, paying high yields; I know these are very popular these days with money markets and banks paying practically zero.
I just -know- there have to be shortcuts; it's how the current big boys got where they are... I've seen it.
So how does a brother tap the massive securities market, who has an MBA in Land Use Economics, perfect credit, and deep background in development but little recent history?
Good topic Quantum. Unsure this is the venue for it.
Most of what goes on here relates to the following: - Super important Wardrobe inquiries: do I wear suspenders and/or old-man loafers to the office? - "My new start-up hedge fund is up 923844% and FYI I am a total player and get hit on by mad dymes." - HS students mapping out 15-year education/career plans, frantically polling which Ivy is the best to become the yuppiest yuppies. - How to leverage PWM internships into BB IB analyst roles. - Validation of existence: #10-ranked MBA vs. #12-ranked MBA vs. #11-ranked MBA????
Cheers mate.
-Durban
Probably is a good time to buy industrial property- specifically manufacturing. Honestly, this is a case where you almost want to go to a REIT, that say focuses on the East Coast and pitch your background and market knowledge of the Pacific Northwest to them. Get them to set up a subsidiary on the West Coast that you help run, and you've effectively got your own business.
The West coast is going to be pretty strategically positioned when the Chinese consumer kicks into high gear. Maybe offer a few property ideas to them for free- show them some compelling opportunities they can't get on the East Coast- and see if they bite.
Short of that, it's hard to make money if you don't have money. There are $2 million publicly traded companies out there. If you can pick up some income-generating real-estate assets using your own money, that would be enough to probably move to a reverse-takeover.
Long-term, you do want the hassle-free tax benefits of a REIT. Handling a K-1 is a royal pain for investors.
LOL Durban, pretty wry there. I'm hoping that there are some here with experience in the field who can advise, or at least ask around and point me in a direction. Seems like this is the very nature of IB.
Illini actually I'm targeting multifamily, industrial, and office, in that order. Excellent suggestion to work on REITs for a west coast sub. I made a fortune in the '90's buying and redeveloping apartment complexes, but the thieving stock market took it all away in the Tech Crash. No more stocks for me, thank you.
I got my start as a commercial RE broker and participated in the massive property rush after the oil and real estate crash of the ate '80's. No such luck now. I have been working for years to secure distressed commercial properties, but they just have not materialized. Virtually no properties up for foreclosure, and it is driving me to distraction. How is it that all these see-through buildings in the Seattle financial district are not being foreclosed?!
We currently have only one non-residential property over $5m in foreclosure, and the bank has made clear it is spoken for. I came close to buying a $10M class A industrial building six months ago for $7.5M, but somebody offered $9M and got it! I can't make mortgage payments on $9M with that rent. Recently I was tracking an office building that has been vacant since completion two years ago; $48M in debt and it's worth about $22M, but it SOLD before foreclosure! WTH? How is that possible? No bank will/can discount one property or note $26M, I don't care who they are. The developer had his note co-signed by a local wealthy couple, and the only answer I can come up with is they paid off the note.
Some say the Japanese model, as well as recent history, shows us that once the economic and fiscal stimulus is removed in June, in an environment like we have where real economic and job growth has not resumed, asset class prices will once again tumble. The Fed will be reluctant to restart quantitative easing (QE3), but eventually will, which will result in more asset bubbles and inflation.This implies that there will be a "double dip" wherein asset prices will tumble. I can only hope. We need to cleanse the market of all these underwater loans which I have no idea how they are staying afloat.
It should be clear that I am a distressed asset investor, and have been for 30 years. I've been knocked down by the stock market, but have the experience to make some real money if I can get the financing, and if we start foreclosing already.
"likely very difficult to do a Raise with only the -prospect- of owned assets."
I agree. I'm pretty young so take this with a grain of salt but I just wouldn't bank on this happening. There are definitely some big guys doing this or trying to do this in the public markets (recently), but these are people with a sterling reputation whose names are recognizable on a national or international scale.
Why not try to get a fund to back you/partner with you on a particular deal?
OK, assuming no one here can advise further, are you all based in NYC? Is that the obligatory base for IB? Can't there be IB in SF or Seattle? Why would there be this limitation?
How would I look for investment bankers, or more specifically real estate investment bankers, in Seattle?
How would I find in Seattle a hedge fund or a boutique shop?
Is everyone here based in NYC?
Veniam soluta eum repellendus ad ratione sequi. Tempora enim debitis consectetur labore.
Iusto mollitia placeat quis eaque. Fugit soluta adipisci quo accusantium maiores. Saepe sint dolor et id quia. Nostrum dolor temporibus deserunt ut.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...