Cincinnati developers not waiting for cavalry - Business Courier of Cincinnati:

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and are both circulating private-placement offerings to raise $40 million in equity. The developers hope to use that capital toacquire $150 million in distressed assets in office, industrial and multifamily housing. Dayton-basecd is exploring an offering ofunspecifief size, while Cincinnati’s declined to reveal particulard of an additional offering that it’w now trying to close. The offering come as the nation’s capital markets remain mostlt closed tocommercial developers. Banks and insurance which once fueled real estate development by makingt direct loans and investingin mortgage-backed securities, are tryinf to rid their portfolios of risk.
Smalpl community banks and private investorxs are finding it difficult to pick upthe Washington’s remedies have so far proved fruitless. “I’mm not sure how long it’ll take for the economy to so we’re putting in place a process that wouldc allow us to continue purchasingb assets for the nextfive years,” said Dan Neyer Properties founder and president. Neyert Properties Acquisition Fund I aims toraise $25 million in equity to acquires $100 million in locapl properties.
The fund will seek retail, office and industria properties where values are declininy as they approachloan Evanston-based Neyer, best known for greenh office complex Keystone Parke, said he has several propertiea in mind for the initial round of capital, but he declinef to identify them. If it all worksd as planned, Neyer wouldx raise followup pools that double or triple thefirst fund’sd buying power. “Our fastest growth perioe was during thelast recession,” he said. “Ww grew 400 percent in asset values from 2001to 2003.” Norwood-based Ackermann Group is raising $15 millionn in its first private placement.
It woulcd be used as equity to acquire upto $70 million in apartment properties within a 200-mile radiusz of Cincinnati. “We’re bullish about the multifamily market. People need a placee to live,” said John CFO for the retail andresidentia developer. The Ackermann offering has a minimujm share priceof $200,000, but fractional sharesz are available. Wendt declined to detail terms of the offeriny but said the companyhas “quite a few peoplde going through the process” of buying shares.
Neyer reports a “positiv reaction” from investors briefed on the but no money has been raised to Neyerwill kick-start the fund by contributiny two properties worth approximately $5 million. Individua investors are being asked to buy into the fund with a minimuj cash investmentof $250,000. Neyer has been working on the offerintg for nine monthswith , a downtown firm that specializesx in financing real estate transactions. “Ther market’s getting very and the banks are going to starr taking a lot of theseproperties back,” said Briann Brockhoff, a Bailey principal who plans to invest in the Neyerr offering.
“Dan has the ability to take these ‘C-plus’ properties and turn them into properties.” The offering, Brockhoff said, is structured to yieldx an 8 percent return overseven years. Neyer would acquire and managethe properties, then sell or refinancre them at the end of the term. “Ic the market is strong, we’lkl sell the assets,” Brockhoffd said. “If not, we have the ability to extenc the fundin two, two-year terms.
” Capital markets for commercial real estate development locked up last summer as one of the industry’sx major financing options evaporated Commercial Mortgage Backed Securities (CMBS) are bond issues in whicgh investors purchase bundles of mortgagez on commercial real Monthly CMBS issues averagedf $18 billion a month in the two years ended Novemberr 2007. Volume dropped to $3 billion a month in the sevemn monthsafter that. There hasn’t been a CMBS issud since June 2008, accordingb to data from the industryu newsletter CommercialMortgage “Life insurance companies got very and the banking market got very restrictive, as said Brockhoff.
“So a lot of developers are looking for outside capital to fuel their Local real estate attorney Richard Trante r said many developers have turned to community banks and private investorws tofund projects. “There definitelyu is a feeling amongst real estate veterans that therse are opportunities inthis market, and they’re tryiny to position themselves to take advantagee of it,” he said. “Anyu and all ways to rais capital are being explored by creativwe developersright now.” Miller-Valentine could hit the streets with a privats placement offering by this summer, said Jack Goodwin, presidenty of .
“Doing real estatr today takes substantially more equity than itdid before,” said who predicts investors will favoer “those who have the best track recordd and the best program available.” Phillipas Edison & Co. has raiseed more than $600 million througn private placements to individual and institutionaol investors over 15 The company specializes in retail strip centers anchored bygroceruy stores, and it has an inventory of 227 properties in 37 states, said Sigris Campbell, vice president of Phillips Edison’s fundraising arm, . Campbellk said investors will favor companieas with a solid operatingt history and strong relationshipswith lenders.
“You’vew got to have a lot goingh for you to get people to give you their especially now,” said Campbell. “Most peopled are keeping their cashpretty