Private Equity Real Estate Summit

Yesterday (May 23, 2013), Cygnus Group (Cygnus), Trinity Capital Advisors (TCA) and 25 Capital Partners (25 Capital) hosted an event for approximately fifty local real estate investors including family offices, institutional, and high net worth investors located in the Charlotte, NC area. The event was titled, "Private Equity Real Estate Summit, Investing in Today’s Real Estate: Residential to Commercial, Paper to Hard Assets." It included 30 minutes of introductory presentations by each firm (Justin Starnes of Cygnus, Shaun Ahmad of 25 Capital and Sean McKinley of TCA) and an hour long roundtable discussion around key real estate issues, opportunities and risks. The three participating panelists included Frank McCollum (Cygnus), Walker Collier (TCA), and Shaun Ahmad (25 Capital). The discussion was moderated by Dr. Cheryl Richards, CEO and Regional Dean of Northeastern University - Charlotte. The roundtable panelists discussed a variety of topics including:

1. What is your opinion on the trajectory of real estate fundamentals in your respective markets?
2. What do you see as your top one or two opportunities for investment in your respective markets?
3. As an asset manager, what key lesson have you learned from the last five years - bubble period leading up to 2007, followed by the credit crisis/recession?
4. As an investor, what do you see as the two most important risks to consider over the next 12 months?
5. What is your outlook on interest rate risk and inflation and how does that affect your market?
6. What's been most surprising to you in 2013 in your particular markets?
7. What keeps you up at night?
8. What are the key headwinds in commercial and residential real estate?

How does the current government regulatory environment affect your businesses?
Key themes included: Opportunities still exist, but require deep due diligence and a platform to execute from, risks are economic downturn, rates and regulatory/governmental uncertainty, opportunities in credit MBS, cash-like MBS, Residential Interest Only strips (IOs), hard assets such as suburban office, raw land for residential development and distressed single family residential mortgages sold by governmental agencies. One recurring point was that government intervention has created enormous opportunities, but has also created new risks.

Feedback from the event has been positive and we expect to host similar events in the future. If you would like to participate in future events or if you would like a copy of the presentations from each group, please email us at info@thecygnusgroup.com.

CRE Fundamentals

Wells posted their CRE Chartbook a few weeks ago (you can request it, and other reports via wellsfargo.com/economics), which contains an amalgamation of a number of useful charts and data from various sources. They also have some summary commentary on each sector. I pulled out a few interesting charts below:

CMBS is a dwindling piece of the pie, losing 1.7% net issuance during the 3rd Quarter 2012, although GSE deals gained ground.

There are still some problems to get worked out... This chart shows the status of all CRE loans, not just CMBS.

Delinquencies have improved dramatically. (Also all CRE)

Retail prices seem lofty, perhaps JCP should re-evaluate a REIT conversion.