The Funds are Circling - Can We Get Deals Done?
The October 30 Puget Sound Business Journal touts, on its front page, the Schuster Group as another fund ready to “pounce on opportunities presented by the Puget Sound area’s growing list of troubled companies.” The first such fund to get the front page treatment was Talon Private Capital, headed up by heavyweights Bill Pollard (formerly of PREP) and James Neal (formerly of Metzler). Also as reported in the PSBJ, Urban Renaissance Group has added a new Chief Investment Officer (John Bliss, another former Metzler exec) to work with institutional investors looking to buy troubled properties in town. They are not alone. Groups like Caerus Realty Capital and the major brokerage firms are circling as well. When will they investing frenzy begin? It may take awhile.
In September of this year, Northwestern Mutual paid $115 million for the Washington Mutual Tower, which cost $350 million when it was completed in 2006. At $132 a square foot, this is a significant discount on the estimated $450 a square foot paid by Beacon Capital for Equity Office Properties’ portfolio in early 2008. At this point there are not a lot of other well-publicized sales, due to a number of factors: credit markets have yet to thaw, investors want to make sure we’ve hit bottom, owners have to determine if they can hang on to the asset given their debt load/vacancy rates. The lack of sales makes setting a price for distressed properties more difficult. If those with the cash and those with the distressed property can agree to terms on a few other buildings, I hope we’ll see begin to see a more steady flow of “done deals.” I have no doubt everyone mentioned above is hustling to make that happen.
