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With the credit markets tightening, the real estate sector has definitely cooled off. Deal valuations for real estate assets have declined, and big deals in the real estate sector have not happened since Blackstone Group LP's purchase of Equity Office Properties in early 2007. So, what does the future of M&A have in store for the real estate industry? Lisa Eyles Beeson, head of real estate mergers and acquisitions at Lehman Brothers Inc.; Marc Faecher, senior vice president at TRC Cos.; Seth Weintrob, a managing director at Morgan Stanley Real Estate; and Roger Marinzoli, vice president of mergers and acquisitions at Wyndham Worldwide Corp.; discussed these issues and more at The Deal's M&A Outlook 2008 at the Ritz-Carlton in New York City Wednesday morning.
Slowdown of financing to hurt real estate deals in near term The slowdown of financing in the real estate market as in the private equity industry will be the cause of a slowdown in real estate deals in the near term, according to the panel members. Weintrob sees the bottom of the M&A real estate market to be either in the first or second quarter of 2008. He sees 80% of these deals to be driven by private buyers, and private equity firms. Beeson is also very conservative about possible M&A real estate deals. She feels "a stabilization of pricing will have to come before more real estate transactions." Lodging and hospitality maybe area for deals One sector within real estate that the panel feels may have potential for deals is the lodging and hospitality industry. However, one concern that was raised with the the panel is that there are many different players who have acquired assets in the lodging and hospitality sector that do not have expertise in the operations of these properties. Blackstone Group is one company that was cited as having made large lodging purchases but will most likely monetize its investments properly by outsourcing with experts in the field. Potential exit strategies in real estate markets So what's the exit strategy for REITs and private holders of real estate assets? Wyndham's Marinozoli said, first off, the holding period of real estate assets will be longer. The exit strategy for those companies holding real estate assets will see three things happening, according to Marinzoli:
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I would have supported up to a 50 cent per gallon increase in gasoline taxes! We need better roads, a bus system, and even rail. (I expect two people to dislike the last: my best friend and Rob Dawg.) Then again, I have relatives who design rail projects and if they could be installed from precast (in a factory) concrete assemblies, it actually makes economic sense. ;) Assuming you also build bus terminals to anchor major destinations (e.g., LAX, union station, Burbank airport, etc.)High Real Estate