Diminished CRE Values Plaguing Fund Shops
Wall Street Journal reports: In a recent Wall Street Journal article, columnist Eliot Brown profiled the $609 million Sterling American Property V fund – controlled by Fred Wilpon and Saul Katz, who together also own the New York Mets – to exemplify the current status of such real estate investment vehicles after the market’s precipitous drop in value over the past few years. According to the article, funds such as the Sterling American Property V fund have “…seen values decline significantly and troubled properties accumulate.”
This has slashed investments made into these funds by entities such as pension funds and wealthy private investors at the peak of the market. As commercial property pricing values have been slow to rise outside of trophy properties in major markets, investors into real estate funds have avoided selling their stakes, “holing that values will increase enough to wipe out some of all of the possible losses they are facing.”
Remarking on commercial property pricing trends and cited in the Journal’s article, Real Capital Analytics’ Dan Fasulo stated that, “Where we've seen values recover recently has been the primary markets, and certainly many of those secondary cities they invested in have not seen that type of recovery.” Unfortunately for investors of funds such as Sterling’s V fund, a drive to diversify during the market’s rise last decade meant purchasing partial or full stakes in whole buildings located in “…midsize cities and suburbs…markets that have generally been slow to see values rebound.”
Though a Sterling spokeswoman told the Journal that its V fund has sufficient funds to cover losses due to troubled loans on its balance sheet, that does not mitigate losses experienced by individual investors.
View the full article on Wall Street Journal: Diminished CRE Values Plaguing Fund Shops
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Posted by: Nina Turner