What you should look for in Commercial Real Estate today!

When the market was hot in a growth area, raw land was the king of the hill. For some investor with deep pockets, land banking of raw land is their current strategy. Others are staying on the side lines, knowing it will be a few years before residential construction starts up again. Some developers and builders are selling off inventory to reduce their expenses.

There were two recent acquisitions that catch my attention.

In the first transaction, luxury destination club Quintess announce a $210 million equity commitment from an unnamed investor to pursue luxury residences and residential development sites around the world. This infusion of capital is the largest of its kind for this Colorado-based company in its 10 year history.

“There are so many distressed properties out there,” remarked the Vice-President of Quintess. “Like every other investor, you don’t want to catch a falling knife, but it’s certainly easier for us to get in on the ground floor of five-star resorts.”

I love the visual. And he’s right. You’ve got to be VERY careful attempting to catch a falling knife, but there are many investors flush with cash just looking to take advantage of this market.

The second huge transaction in this market segment was made by a privately held Dallas investment group who announced the purchase of five resort communities, in three states, for approximately $181 million from Centex Homes. When fully developed the acquired portfolio will be worth about $1 billion. Nice.

These five communities will be re-branded TerraMesa Resorts and are located in The Hollows on Lake Travis and The Waters at Horseshoe Bay Resort, both near Austin; Pointe West in Galveston, Texas; Bear Lake Reserve in North Carolina; and South Peak Resort in New Hampshire.

Other investors are looking for properties that have some current cash flow and the numbers show that after the purchase, there will still be a little cash flow, as the property is rehabbed and management problems are fixed.

Savvy investors I meet, are now looking at hitting a little single here, a little single there, not a home run (big payday).

Not surprisingly, they are looking at cash flow. They are looking to expand their portfolios by including properties that bring in cash.

They don’t have to be in the best shape, but they should be producing some income. They are now looking at office buildings, apartments, self-storage units, and mobile home parks.

So as a scout, I still look at raw land, but I have added looking for office buildings, apartments, self-storage units, and mobile home parks to my searches.

To your scouting success.