As the full spectre of CMBS refinancing looms ever more closely over real estate markets, the need for fresh equity has become increasingly urgent. If only there were large global sources of capital that banks and troubled property owners could turn to. If only there were a group of global investors, with long-term investment horizons, a constant need to deploy capital and a desire to diversify into illiquid asset classes, who could effectively bail out the impending real estate securitised loans crisis.
From the Current Issue
The last two years have been sluggish for capital raising, to say the least. When asked to write this article, I immediately thought back to my first days at Tishman Speyer in January 2006, a very different time.
Much has been written about what is wrong with the property fund model, much less about the important role that it plays. The last two years have stressed a system that was still in its infancy and we must be careful not to throw the baby out with the bathwater, rather to nurture and guide it to maturity.
The US commercial real estate market is in the early stage of a cycle that will be dominated by the restructuring of distressed debt. It remains to be seen how long the cycle will last and how severe the distress will be, but there is no doubt that the market will not regain its balance until the vast majority of distressed debt — completed through scores of individual property recapitalisations — is resolved. This is also true in much of Europe and Japan, and many fear it will also be true in other parts of Asia, but this article discusses only the US market.
The Crown Estate in the United Kingdom is one of the oldest real estate operators, of land and property, in the world. The organisation has the twin objectives of enhancing the value of the estate and the income that it generates, and of passing surplus revenue to the government. The Crown Estate manages a diverse property portfolio that includes office, retail and industrial premises; and also housing, farmland, forests, parkland and more than half the foreshore and almost all the seabed around the United Kingdom.