| DOG DAYS: How Will the Great Real Estate Workout Unfold? Arixa Capital proudly sponsor's an annual spirited discussion among five established real estate investors. On February 8th Arixa Capital Advisors hosted the 7th annual Real Estate Round Table at the Ziman Center at the UCLA Anderson School of Management. |  |
| An hour of networking was followed by a lively discussion about the state of the real estate market in Southern California. The panel participants included William Lindsey, Founding Partner, PCCP, Jonathan Roth, Principal, Canyon Capital Realty Advisors, Samuel Freshman, President and Founder, Standard Management Company, Michael Nagin, Senior Vice President, Wells Fargo Bank, Commercial Real Estate, Jan Brzeski, Fund Manager, Arixa Capital Advisors, and the event was moderated by Jesse Sharf, Partner, Gibson, Dunn & Crutcher. The panel was made up of a cross section of real estate industry participants representing a diversity of perspectives. A major theme for everyone however was how risk aversion remains an intractable sentiment that dominates the market. Investors do have different risk tolerances, but in the aggregate they are in the midst of a "flight to quality". Significant competition for institutional quality properties has compressed capitalization rates to the point where valuations are unattractive. Higher capitalization rates can be found in secondary and tertiary markets, but excess capacity and weaker economic growth in those areas warrants caution. Banks are lending to only the most qualified borrowers, overcompensating for past excesses and restricted in their activities by balance sheets laden with non-performing assets. Interest rates for borrowers who do not qualify for bank financing are declining. Competition in the non-traditional lending sector is eroding once double digit yields on low leverage secured loans to the mid-single digits. Mezzanine financing, uncommon only a few years ago, is experiencing a resurgence. In the single family residential space, rehabbers who had been generating high returns fixing and flipping single family residential properties are increasingly holding on to their properties and renting them out. A steady flow of REO sales is pressuring home prices and operators are choosing to collect income as they wait for a housing recovery. With a supply demand imbalance over the next six years of approximately 5 million homes in the United States, a recovery may take some time to materialize. Thank you to everyone who attended. We hope to see you again next year. Thank you to our event sponsors: the UCLA Ziman Center, Globe Street, Gibson, Dunn & Crutcher, Stanford Professionals in Real Estate, UCLA Ziman REAG, the Los Angeles Venture Association, the Dartmouth Club of Los Angeles, and the Anderson Real Estate Association. And special thanks to all of our panelists and the UCLA Anderson School facilities staff. If you are interested in seeing photos of the event, please click here. |
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