| IOREBA'S 18TH ANNUAL DEVELOPER'S NIGHT ADDRESSES KEY ISSUES OF A CHALLENGED MARKET Terming the Two-Year Drought a "Meltdown" and "Unprecedented," a Panel of Real Estate Leaders Looks for Signs of an Upturn |
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TEANECK, N.J., March 25, 2010 – "For this industry and the economy, the past 24 months have been unprecedented," said David Simson of Newmark Knight Frank, moderator of a panel of real estate leaders headlining the Industrial and Office Real Estate Brokers Association's (IOREBA) 18th Annual Developer's Night. "We have seen the biggest meltdown in our lifetime." What do developers need to do to adjust to these challenging times? One key factor is, simply put, money. "Companies need to have enough to take care of what they already own and to take advantage of investment opportunities as they arise," said Tom Walsh, principal of Normandy Real Estate Partners. "The REITs are in a good position because they have been able to raise enough money." There is indeed money "sitting on the sidelines," said Jonathan Schultz, managing principal of Onyx Equities LLC. "But it is trying to figure out what to do. The capital markets are trying to determine where the pricing should be," a factor he attributed to the lack of transactions and the amount of available space. "The greatest challenge is to attract new tenants," confirmed Todd Anderson, portfolio manager for Hampshire Companies. "Leasing is the name of the game, and it is tough work in this market. The biggest factor out there is the empty space." More than ever, the bottom line is what matters most for landlords and tenants alike, ventured Eugene Diaz, principal of Prism Capital Partners LLC. "The biggest issue today is the value of your property, and low debt levels are important in terms of staying ahead of the market." Panelists agreed that attracting new tenants will continue to be difficult. Besides concession packages and reduced rents, "tenants want locked-in value over the next 10 years," said Alex Klatskin, partner, Forsgate Industrial Partners. "They want to make sure the building will be operated properly." "Tenants are increasingly investigating landlords," said Anderson, noting that in the past it was more likely to be the other way around. "They want to make certain that their potential landlord is well-capitalized." Noting that it can be very costly to move, "landlords are trying to make people want to stay," Schultz said. "At the end of the day, landlords need to be flexible." He also raised the issue of the so-called "gap," the difference between what current tenants are paying and what potential tenants are being offered. Simson pointed to an example of a potential tenant being offered a rate 20% less than a 10-year tenant, which did not sit well with the latter. "It is an issue, and landlords and tenants need to have a strong dialogue," he said. In terms of financing, "we are seeing 50-70% loan-to-value," Klatskin noted. "A wall of debt is coming our way, and the more offers you get, the more competitive it will be." Schultz agreed that money is "chasing product, but if there is any 'hair' on your deal, lenders are very conservative. But this will be a great opportunity to invest in New Jersey. It will take time, but there will be great buying opportunities." "We have to grow our way out of this problem," Klatskin concluded. "And after the 'drunken years,' everything is on the table." Scholarship Awards As part of the evening's program at the Marriott at Glenpointe, Charles Logan, President of IOREBA and CEO of The Aztec Corporation, announced the awarding of scholarships to 14 students at Monmouth University's Kislak Real Estate Institute. Each year, IOREBA dedicates the proceeds of the Developer's Night event to the Institute's Real Estate Scholarship Program. "These young people are the future of our industry," Logan said. "Our goal is to prepare the best and brightest by giving them the tools they need to be successful in this and future real estate cycles." With roots dating back to 1927, IOREBA is one of the nation's largest regional commercial real estate groups; the group has grown to more than 300 members that conduct business in New Jersey, New York, Pennsylvania and Connecticut. To assist its members in difficult economic times, IOREBA has cut costs for events and membership to ensure members are able to take full advantage of everything the organization has to offer. For more information, visit www.ioreba.com. << back to news |
