Economic uncertainty is not stopping commercial real estate industry heads from finding deals nationally, top executives at the International Council of Shopping Centers’ and NAIOP’s 2011 Real Estate Capital Marketplace Conference at Chelsea Piers agreed yesterday, GlobeSt.com reported. There are still key development opportunities to be found in hot gateway markets, they said.
Scott Rechler, CEO of RXR Realty, is focusing primarily on Class A assets, he told the audience. RXR recently acquired the Starrett-Lehigh Building at 601 West 26th Street and is in contract to purchase a controlling share of 620 Sixth Avenue.
“What we’ve seen historically, and this goes back through the last 20 years of cycles, is that B quality assets are a value trap,” Rechler said. “People think they are getting good returns and people think they are getting good deals until you get down to the down cycle, where you have to invest almost as much as you spend to buy the building, re-build the building and get the same rent that you got 10 years ago.”
Rechler advised a large degree of caution for these acquisitions.
“These are very volatile times, and firstly, take nothing for granted. It is very difficult to know what is going to happen,” Rechler said.
Alex Klatskin, partner at Forsgate Industrial Partners, of Teterboro, NJ, said his company is being extra careful about the quality of the tenants it accepts.
“Rather than run for the highest rent we could get on the property, we are always focusing on the credit and viability of the customer,” he said. “The only thing you can’t change about a building is where it’s located. One opportunity we have as developers is finding what we consider a B building in an A location.” [GlobeSt]