Trump's Victory Isn't Shaking Cautious Investor Market
In the wake of Donald Trump’s election victory, many were concerned about the potential fallout to the investments market. Would the President-elect scare off already skittish and conservative investors?
Not exactly, panelists of Bisnow’s 2016 BOLD East event said. Investors are indeed more cautious than ever, but that means they won’t need to change up their strategies.
Blackstone real estate debt strategies senior managing director Mike Nash (second from right) says not much has changed in the market with the decision. The cycle may be a bit longer, the likely returns may be a big lower than what an Excel spreadsheet predicts and buildings might take longer to lease, but leverage, interest rates and other market factors are so low that most bumps in the road can be easily weathered.
The biggest trends to watch, Mike and Rubenstein Partners founder David Rubenstein (far right) said, would be the potential development boom for pharmaceutical companies if Obamacare’s repealed, the Fed’s December decision, the potential elimination of Dodd-Frank and even a substantial tax reform.
All of these trends, Mike says, could be positive changes for the industry, which is already seen as an attractive environment for investors, and could be more so, as economic volatility hurts other countries more than us.
But it’s simply too early to tell, MetLife Real Estate Investors director Ashleigh Simpson (center, to the left of SL Green's Isaac Zion) says, and, while he’s waiting to see how Trump’s policy changes affect job growth and office demand, he says MetLife's not changing its business strategy of providing debt and financing in Class-B office recapitalizations, upsizing financing and large mortgages. Mike says Blackstone is also not straying from its love for coastal markets, avoidance of regional malls, or investment in food and beverage.
“Nothing changes people’s desire to eat,” he said.
The coastal focus might be the best way to go, David says, since financing is harder to acquire in the heartland. Ashleigh says markets booming with tech like Pittsburgh and NYC are where MetLife is focusing.
Coming from a private equity background, Tony says he’s not afraid to dilute his interest, be incredibly selective with his tenants (tech tenants make up only 8% of ESRT’s portfolio) and strives to keep ESRT’s leverage low.
During its partnership with the Qatari Investment Authority, for example, ESRT sold 9.9% in new shares to increase the cash on its balance sheet. Even the choice of partner is based on this low-leverage mindset, as Tony expressed his reluctance to deal with domestic investors who he finds “too locked-in and accustomed to their structures, advisers and programs."