Is Everyone Investing in Real Estate?
That's what it seemed like yesterday at our Bisnow Private Equity Summit. So much money chasing yield, there was even a (humorous) transaction on stage.
Fundrise co-founder Ben Miller talked about how easy it is becoming to make even a $100 investment these days via crowdsourcing, stimulating a good-natured contribution from fellow panelist Robert Bellinger, CEO of $5 billion private equity giant ASB Real Estate Investments. While panelists debated the pros and cons of different sources, all agree that low yields in other areas make this is a nice era for real estate in terms of asset allocation.
JBG has had great success in development and acquisition plays, but managing partner Matt Kelly (with Arent Fox's David Martin) says the firm has no plans to get into the debt fund world. Though some of its competitors dabble in the potentially high yields of debt funds, JBG would be "a drop in the bucket," and as debt markets recover, returns may not be as profitable going forward.
EagleBank CEO Ron Paul is seeing a high volume of loans for private real estate owners. And as the top dog at a major regional bank as well as a veteran private real estate investor himself, Ron says he's excited by the promising job growth numbers in the DC region, as Washington relies more and more on the private sector.
Commercial real estate is seeing more capital flowing in than at the market's peak in 2007, says Meridian Group's Gary Block (with Ballard Spahr's Debbie Kils). Nevertheless, fundraising is tougher than ever, he adds: half of the money out there is going to the 10 biggest sponsors, and first-time funds accounted for only about 5% of the market last year.
While Matt says JBG is staying out of the debt game, FCP (and the firm's Esko Korhonen) sees a big opportunity. Esko says getting into structured debt (mezzanine and senior loans, note sales, etc.) gives FCP a chance to get involved with deals it wouldn't otherwise do, and, if any equity is involved, have an opportunity to eventually control a property.
Here's panelist Andrea Drasites of private equity giant Blackstone comparing FitBit bracelets with Foulger-Pratt chief Bryant Foulger.