The Official Blog of Matthew L. Adler

The Official Blog of Matthew L. Adler

Posts Tagged ‘cash flow’

Reasons for Optimism

Thursday, April 15th, 2010

I am back from my writing sabbatical. It is amazing when you get out of the pattern of regularly updating a blog how quickly months go by. Now that is has been three months since my last post, a fair question is, “What has changed?” From my perspective not a whole lot! Employment is creeping up and healthcare reform has passed but things don’t feel significantly different. I still believe the worst of the economic downturn is behind us, but the recovery will remain slow. Despite slow growth, I am seeing some signs of life in the commercial real estate market.

Our big news in the company is we are under contract with the first acquisition of 2010. I cannot say much about it other than it falls squarely within our mantra of working with not a distressed property, but rather a motivated seller. We plan to close some time this quarter.

The acquisition market has increased; we are seeing more deals then last year but also more competition. On multi-family and most institutional quality assets, cap-rates have reportedly compressed 100-150 basis points. I am not sure if that is a sign of the recovery but it certainly is a sign that there is more competition on the buy side and money is coming off the sidelines. I believe the combination of an improved lending environment and a renewed sense of optimism has fueled increased buyer demand. To date this has not been met with a significant increase in supply by sellers. Consequently, the demand to buy is resulting in price increase.

Even with the inefficiencies in the market, Adler Group is optimistic that we will be active buyers for the remainder of 2010. And, as mentioned in previous blogs, our sector has far less competition than institutional and multi-family assets. To succeed in our product type one must be a strong operator. Just like the asset we currently have under contract, we believe we can buy performing assets with cash flow and an attractive risk adjusted return. Stay tuned for more good news on the investment front.