Investors Line Up for Cash for 2005

(Crittenden Real Estate Buyers)

November 29, 2004 - Fund vehicles driven by institutional investors notice an increase of willing riders. High net worth individuals and institutional money field more interest from fixtures on the national investment scene indicating a bellwether of sorts. Merchant banker The Prescott Group. along with Starwood Capital Group and Victory Real Estate Investments (VREI), gear up for 2005 with investors set to ply value-added, core-plus and other opportunistic investments nationwide. These three investors are amassing more than $2B in capital for purchases dunng the next 12 to 36 months.

Prescott Capital Management, a division of the 17 year old New York group. gets a shot in the arm with a capital infusion from the Gordon P. Getty Family Trusts and has $400M during 2005 for apartment, retail, hotel, offIce and industrial nationwide. Starwood Capital's Global Opportunity Fund VII will target $lB of equity with a first closing expected in December and subsequent closings until the fund has a final commitment anticipated to close by June 2005. VREI, in venture partnership with Rothschild Realty, has more than $200M of equity or $400M to $500M of debt and equity for purchases during the next 36 months.

Prescott Capital Management Looks for JV Partners

Expect Prescott Capital Management to pick up joint venture partners along the way for value-added and core-plus apartments, select retail and hotel deals. Portfolios are the focus for Daniel J. Steinberg, managing director, who's evaluating three portfolio deals collectively valued at $250M to $350M. Escrow is expected to close by March 2005 if the apartment, retail and office/industrial portfolios scattered throughout the U.S., including the Southeast, pass muster. Prescott Capital looks for cash-an-cash returns from 6% to 8% based on a four- to seven-year hold; targeted total returns to investors range from the.low- to mid-teens.

Starwood Global Opportunity Fund has an expected seven- to eight-year life. The investor will focus on hotels, along with urban apartment complexes and senior-livinglindependent-living properties nationwide.

Institutional quality assets are sought by Prescott Capital Management and competitors, including Starwood Capital and VREI, are also on the hunt for value added and core plus assets for high net worth investors. Getty's family trusts also have elected to invest in select portfolio purchases in addition to its cash infusion into The Prescott Group.

Prescott's requirements run the gamut from garden-style, townhouse and high-rise apartments typically valued from $lOM to $15M per property to a $10M to $40M range for community and grocery-anchored retail to full-service and resort hotels with average, per-asset tags of $15M to $20M. Industrial and suburban to downtown office are also considered, ranging from $10M to $40M per property, depending upon type. Values are hovering in the $100M per portfolio range, although the company will consider deals from $75M to $400M. The company doesn't plan to acquire primary market assets to the exclusion of all else. Instead, Prescott aims for both primary and secondary market properties and will consider portfolios with smaller properties in tertiary markets, provided with a solid exit strategy determined in part by supply/demand and job growth figures. The investor also acquires assets for separate account clients.