Interconnected firms likely exposed to both sides of a property transaction
Pensions & Investments reports: In the first half of 2011, overall commercial property transactions were up 100%, according to a recent Deloitte report, "Commercial Real Estate Outlook," citing data from global information provider Real Capital Analytics (RCA). Since then, transactions have slowed slightly, declining about 15% in the third quarter.
Institutional real estate managers accounted for more than one third of property transactions in the first three quarters, according to RCA. Real estate money managers accounted for 36% of total acquisitions and 31% of dispositions in the first nine months of this year (up from 22% of buyers and 16% of sellers in the same period in 2009).
As money managers become more dominant buyers and sellers in today's commercial real estate market, the likelihood that institutional investors could have exposure to both sides of a single transaction is increased, possibly raising the risk in their investors' portfolios. And there is pressure to both buy and sell with capital to invest, funds to liquidate and new capital to raise.
Another way investors might get on both sides of deals is through their investments in REITs. According to the Deloitte report, REITs that raise funds by accessing the public markets have been buying up commercial properties this year. RCA data show REITs bought $17 billion worth of commercial property and sold $9 billion in the first quarter of 2011 alone.
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Posted by: Matthew Stone