What CRE Investors Need to Know for 2014

2014 is already shaping up to be a year where dynamic changes will occur in the commercial real estate investment market. While working on our 2014 Real Estate Report for Kansas City, we gleamed a great deal of insight that professionals could apply to their businesses in 2014. In this post, we will discuss three changes in the landscape that CRE investors will need to know about in 2014:


New Fed Leadership
Investors are bracing themselves for what the changes in leadership at the Federal Reserve will mean. Janet Yellen is now leading the Federal Reserve and there has been a distinct trend that emerges with a new Federal Reserve chair. According to this article, "Newly installed U.S. central bank heads since 1970 see S&P 500 returns that are, on average, negative over the first three years of their tenure."  Markets, then, may trade apprehensively or even negatively in 2014 as investors try to gauge how the new Fed chair will set policy.

Changes to Group Investing 
Changes to securities laws may change your business model in 2014 as the new Jobs Act has dramatically shifted how group investment money is going to be raised. Under Rule 506(c), real estate syndicators can advertise to anyone as long as they only accept accredited investors in their offerings and comply with the rest of the Rule 506(c) provisions. However, the SEC has offered some nonexclusive methods to verify an investor’s accredited status, like:

•  reviewing filed tax forms for the past two years and written assertions from the investor(s) that the income is expected to continue;

•  reviewing brokerage house or bank statement balances or tax assessments and third-party appraisals of real estate holdings and liabilities through an investor’s credit report;

•  obtaining a written confirmation from a securities broker-dealer, registered investment adviser, licensed attorney, or certified public accountant, who asserts having taken reasonable steps to verify an investor’s accredited status within the past three months; and

•  using repeat investors: there is an exemption for investors who have previously invested with an issuer as an accredited investor.

Many of these changes from the Jobs Act are yet to be implemented, but should definitely be on the radar of investors in 2014.

Overseas Investment
In 2014, overseas investors will continue showing interest, however, they are starting to look for cities and things that you may not suspect. In a recent survey taken among the members of the Association of Foreign Investors in Real Estate (AFIRE), respondents ranked New York, San Francisco, Houston and Los Angeles as the top two through five most attractive markets for real estate investment. In this article, a quote from the chief executive of AFIRE said, “Our members’ increasing interest in cities beyond the powerhouses of New York, Washington and San Francisco points to the recognition of additional investment opportunities for foreign investors."

Be sure to get the full outlook on 2014 real estate trends with Block Real Estate Services' 2014 Real Estate Report for Metropolitan Kansas City.

Contributor:

Brian Beggs
Director of Acquisitions
Block Funds
LinkedIn