building our industry, our profession, our future whither the capital markets? up, down & all...
TRANSCRIPT
Building Our Industry, Our Profession, Our Future
Whither the Capital Markets?
Up, Down & All Around
Where Commercial Real Estate Comes Together
Over several years debt issuance rose . . .
. . . & spreads narrowed
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US CMBS Issuance
Spreads
Q1 / 02 Q1 / 03 Q1 / 04 Q1 / 05 Q1 / 06 Q1 / 07
Volumes Peak
Record Low Spreads
Where Commercial Real Estate Comes Together
REITs were on tear . . .
. . . and able to do accretive acquisitions
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FTSE Global RE Index
S&P/TSX Cappped REIT Index
33.7% total return
S&P/TSX REIT Index Peaks Feb ’07 - 22.7%
12 mo. return
Where Commercial Real Estate Comes Together
Capital drove investment sales up . . .
. . . and cap rates down
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1H2002
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Sale
s V
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ate
%
US Canada US Cap Rate Canada Cap Rate
Where Commercial Real Estate Comes Together
Mega institutions & private equity joined the party . . .
. . . and did some mega deals!
EQUITY OFFICE PROPERTIES
580 Office Properties Location: Across U.S.Size: 108.6 Million SFPrice: US$39 BillionPurchaser: Blackstone & Others
DUNDEE REITMixed-Use PortfolioLocation: Eastern CanadaSize: 16.5 Million SFPrice: C$2.3 BillionPurchaser: GE Capital Realty
Where Commercial Real Estate Comes Together
In commercial real estate cracks first appeared . . .
. . .in the REIT markets, which turned negative
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FTSE Global RE Index
S&P/TSX Cappped REIT Index
S&P/TSX Capped REIT Index - (24.2%)
12 mo. return
Feb ’07 Peak
Where Commercial Real Estate Comes Together
Debt markets threw in the towel . . .
. . .with record low volume & high spreads
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$ B
illio
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'AA
A' S
wa
p S
pre
ad
s (
ba
sis
po
ints
)
US CMBS Issuance
Spreads
Q2 / 07 Q3 / 07 Q4 / 07 Q1 / 08
Volumes Plummet!
Record High Spreads
Where Commercial Real Estate Comes Together
While the Fed & BoC issue liquidity . . .
. . . to “prime the pump” or start more fires?
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Federal Funds RateBoC Target Rate
4.0% US CPI – Negative Real Interest Rates
Where Commercial Real Estate Comes Together
In a changing market how do you . . .• Access equity capital?
• Determine your cost-of-capital?
• Generate the best risk-adjusted returns?
. . . not just survive, but thrive?!