WSJ article on impending CRE bubble

[Account Closed]

Not really treading any new ground here, but interesting read in the WSJ this morning.  

http://www.wsj.com/articles/surge-in-commercial-re...

We've got a number of clients active in South Florida (Miami) and they (and financing sources there) are very concerned about an impending bubble.  Low interest rates + influx of investment capital from foreign sources have really compressed cap rates.  In the past week, I've had 5-6 commercial banks in South Florida tell me they are out of commercial construction financing entirely right now.

[Brian Burke]

@Jay Hinrichs is right, I did just close on a killer deal.  276 units that will be worth $8 million more than I paid for it when I'm done repositioning it.  But @Wendell De Guzman.

Which brings me to another point.  Buying properties is easy.  Buying the right properties, and/or buying properties right is what is hard. 

Which brings me to a final point.  It's not hard because of the market.  It's just always hard and anybody that is waiting for a better time is missing the point.  If you have a lot of money to invest this point doesn't apply to you.  You can just buy whenever you want.  But for those of us that raise money from investors to fund our acquisitions do not have a better time than right now to buy property.  We also don't have a worse time than right now.

What do I mean? Consider this: In 2010 asset prices in many markets were extremely favorable compared to where they are today. I was buying then and I knew that it was an absolute slam dunk. But...it was nearly impossible to raise money then. Everybody that had money or managed money was still hiding under their desks after the recession, and it was widely believed that real estate was toxic. Thus, you could find deals all day long, but couldn't raise the money to close them (or, at the very least, you could raise it but it was much more difficult and probably took a lot longer). Need to reposition a deal? Good luck finding the financing. Bridge debt was really tough to find unless you wanted to pay very high rates and points. These days, raising money is much easier because investors want to place their capital in real estate. Financing is much easier, CMBS is back, agency debt is more available, and banks are lending. But now it is much harder or takes much longer to find a suitable property that can generate enough return to be attractive to investors that invest in these types of offerings. And if you are wondering why that is, just re-read the last three sentences.