By Ken Ashley
(ATLANTA) July 23, 2010
A recent post on this blog addressed the fact that corporations have trillions in cash about to be deployed in corporate M&A. After many months of suspended animation, the same investment wave is happening before our very eyes in the world of corporate real estate. National Real Estate Investor reports in this July 16th article that global real estate investing is up by 40 to 50% over 2009 levels.
Aficionados of 1980′s trivia will recall the line, “Blue Horse Shoe Loves Anacot Steel,” which was the code that Gordon Gekko (Michael
Douglas) had Bud Fox (Charlie Sheen) use for insider trading in the film “Wall Street” (1987). This real estate market appears to have a lot of similarities. While of course not literally dealing with insider trading, we are certainly dealing with insider knowledge in this high risk stage. We seem to be at the part of cycle where investing is really picking up, but we still have an avalanche of new money chasing product. But the savvy investors with market knowledge are making smart buys while silly money is bidding up so called “core” assets defined as 90% or great leased and in class “A” condition.
So where are the deals about which young Bud Fox would whisper that oft quoted phrase? Several Atlanta media outlets including the Atlanta Journal Constitution reported today that Campanile, a 20 story iconic office tower built to house the corporate headquarters of BellSouth, appears to be under contract for $78 a foot (the last owner, who lost the building in foreclosure, paid $223 a foot). We have worked on warehouse deals that cost more than that. Yes, the building is 15% occupied. Yes, many dollars will need to be spent in improvements, hold time and other costs. But as they say down South, “goodness gracious!” Campanile is an example of what will be a series of stunning deals nationwide that will be made in the coming months by smart and well capitalized investors.
This will be an interesting real estate market to watch and while we still have plenty of bad loans and high risk deals to work through, investors are not the only ones who can make hay in this market (another Southern phrase for you). When buildings of any asset class trade at 30-40% of normal value, you can almost hear Bud Fox sitting on the shoulder and speaking into the ear of Corporate America. It’s time to gear up with insider knowledge and go get those deals done whether they be a purchase or a lease for corporate use. It simply doesn’t get any better than this. Bud Fox told me so.