Pension Funds Remain Top Equity Source

In 2012, equity capital pension plans –- direct or through investment advisers –- will represent the largest source of equity capital for commercial real estate, followed by U.S. opportunity funds, publicly traded sources, and sovereign wealth funds, according to Goodwin Procter’s Real Estate Capital Markets Snapshot 2012 survey. Approximately 300 U.S. investment managers and fund sponsors, fund owner/operators, and investment banker, adviser, and placement agents participated in the survey.

When asked about the impact of regulatory and legislative activity, nearly 54 percent of the market leaders surveyed believe that new and proposed legislation, such as Dodd-Frank and carried interest legislation, will not affect capital flow into the real estate markets. However, approximately 37 percent think these initiatives will impact transaction and fund structures in the future.

Despite these concerns, the majority of respondents (46 percent) said that recapitalizing existing investments is their greatest commercial real estate investment opportunity this year. Other respondents have set their sights on property acquisitions from third parties (29 percent) and distressed debt acquisitions (21 percent) in the months ahead.

About 41 percent of survey participants feel that lender and servicer loan modifications that eliminated payoffs prevented the commercial mortgage-backed securities markets from reaching their potential in 2011. While a sizable portion of overall respondents (36 percent) believe the CMBS structure is fundamentally flawed, almost 65 percent of responding lenders believe the CMBS loan and securitization structure is fundamentally flawed.