Yesterday at the Bisnow Private Equity Summit
It's all about growth, not all about yield. That's the strategy some private equity managers like Meridian Group's Gary Block (left), are employing, as we heard at our Bisnow Private Equity Summit yesterday at the Mayflower. Gary (with his former Carlyle Group colleague Michael Jacoby, now with Broad Street Ventures) says that NOI growth is his firm's big metric instead: "We can't control cap rates or interest rates, but we can control NOI growth," through renovations, lease-up, and management.
ASB Real Estate Investments CEO Robert Bellinger knows about that: He says in just about 12 months, ASB doubled NOI and saw 30% market rent growth in one of his firm's NYC investments, 72 Green St in SoHo. Robert says ASB got there by buying out certain tenants and bringing in hot retailers like Patagonia and Joseph. (After you buy your camping gear, you can pick up a silk polka dot scarf to scare away bears and women.)
For now, the financing options available for private equity firms is "phenomenal," according to NorthStar Realty Finance's Sujan Patel (right). Since rates are holding steady and buyers are eager to close quickly, Sujan says his firm is closing large finance deals in "well under three to four weeks." Walker & Dunlop's Tyler Blue says debt markets are so strong that buyers can leverage deals up to 90%, "if that's what they're looking for." But Tyler says it's important for lenders and borrowers to stay controlled, since mistakes can be made on deals when they're made too fast.
But back to growth: ALTO Real Estate Funds CIO Peter Auerbach says next to location, location, location, it's all about people, people, people. Properties in markets with huge job growth prospects are hot commodities, and Peter sees Texas, Tennessee, and the Carolinas, to name a few, as smart spots. We'll have more coverage from the Private Equity Summit tomorrow.