The Ackman-Ziff Real Estate Group has graciously provided us permission to print their fourth quarter 2010 equity survey which follows. Ackman-Ziff is a real estate investment banking firm based in New York.

Investor Appetite & Sentiment

  • Eager to Invest in Quality Opportunities (Distress, Restructure/Recapitalization, Off-Market, Strong Markets)
  • Highly Selective / Flight to Quality (Location, Asset, Sponsorship)
  • Investors are Transacting as Availability of more Viable Opportunities Increasing
  • Seeking Strong Risk-Adjusted Returns
  • Prefer to Get Involved in Restructure/Recapitalizations after Initial Discussion and before Final Deal Negotiated with Lender/Special Servicer
  • Purchase Property at Discount to Intrinsic Value (Low Relative Cost Basis)
  • Willing to Consider Development in Special Situations

Investor Total Return Target

  • Total Return Targets:
    • Value-Add: 15-17% IRR / Equity Multiple Focused
    • Opportunistic: 18%+ IRR / Equity Multiple Focused
    • 10-15% Sponsor Co-Investment Capital Required
    • Investors Begrudgingly Provide Generous Promotes above their Internal IRR Hurdles
    • Cash-on-Cash Yield more Important Component of Total Return

    Investor Underwriting Approach

    • Continued Conservative Approach for Base Case Scenario / Some Investors Attributing Higher Probability to Upside Scenario
    • In-Place Durable Cash Flow is Highly Valued
    • Value Creation through Maximization of NOI versus Reliance on Residual Value
    • Some Value Attributed to Vacancy
    • Capitalization Rates Mean Reverting Upward within the Mid- to Long-Term Horizon

    Equity Capital Availability

    • Trending to Higher Availability of Equity Capital
    • Fund Raising for New Funds Remains Challenging but Superior Advisers Achieving More Success
    • Fund Legacy Issues and LP Liquidity Issues Being Revolved