Social Icons Superfish

4 Quick Questions with David Lazarus

01/29/2014 | By Sarah Borchersen-Keto

Published January/February 2014

David Lazarus, Senior Managing Director, Eastdil Secured Wells Fargo

REIT IPO activity in 2013 almost doubled 2012 levels. What fueled that surge, and do you see it holding on in 2014?

Obviously you had some historically large IPOs in 2013 that influenced the statistics. But I think what you see, more importantly, over a longer period of time is the securitization and institutionalization of real estate ownership. You are seeing more and more ownership in public hands, and I do think that’s a long-term trend that will continue.

I think we’re in a microenvironment, if you will, that will allow more companies to come public in the next year. We’re in a good part of the cycle where fundamentals continue to improve in real estate and in the economy overall. This should provide a backdrop in 2014 that will be conducive to more listed REITs and IPOs

Are there any transactions from 2013 that you think were transformative to the market?

M&A transactions are the most transformative things that happen in our markets. You’ve seen some places, like the net lease sector, where there have been massive consolidation that has certainly been transformative to the sector. Now, you’re going to have a $20 billion enterprise in American Realty Capital (NASDAQ: ARCP), and you still have Realty Income (NYSE: O), W.P. Carey (NYSE: WPC), Spirit Realty (NYSE: SRC) and others that are all quite big, so you’ve seen massive consolidation in that space.

You see a similar pre-consolidation landscape in other sectors, and you wonder if you have the dynamics in those sectors, like the shopping center industry, for example, to create the same consolidation as you see in the net lease sector.

What trends will you be watching in the transactions market?

I think the whole non-traded trend is a very, very interesting aspect of our business that’s emerged. This idea that you have these massive portfolios being owned by individual investors that ultimately will seek liquidity either in the private asset market or the listed market has been a major change. Coming into this year, the amount of equity already invested in these vehicles –something like $80 billion—is just overwhelming and has been growing quickly. These [public, non-listed] REITs have traditionally not been long-term models as investors ultimately look for liquidity leading to listings or other monetizations.

Commercial real estate lending remained strong in 2013. What are you anticipating for 2014?

Wells Fargo has historic levels of deposits, as do many of its competitors, so I think banks are definitely in a posture of wanting to lend.

We are also seeing a tremendous amount of capital from other sources. Whether it is debt funds or CMBS (commercial mortgage-backed securities) shops, there’s a lot of lending capital. The market is evolving, as it normally does—which is to mean providing more aggressive loans, relaxing underwriting standards—and some of that is just that the underlying fundamentals are stronger, and some of it is that people are more willing to take risk, as they should be because the environment is better.

There’s a point at which you’re taking more risk and relaxing underwriting standards not because it makes sense for the environment, but because it makes sense in light of a given lender’s competitive dynamic. That’s when it becomes a little bit dicey.

I don’t think we‘ve reached that point. But I think we need to be careful as we have a very accommodative interest-rate posture and the Federal Reserve doesn’t seem to have the political will to try to restrain some of the exuberance in the financial markets.

 

Column/Department: 
Bio: 

David Lazarus is a senior managing director at Eastdil Secured Wells Fargo, where he heads the real estate investment banking group. He works with public and private real estate companies on all forms of capital raising and strategic activities. Prior to joining Eastdil Secured in 2011, Lazarus co-founded and served as president of EdgeRock Realty Advisors LLC, a boutique real estate investment bank focused on advisory activities.He also spent 13 years as a managing director in the Real Estate Investment Banking Group at Lehman Brothers.

Other Features

Evan Urbania, CEO, ChatterBlast Media
We’re starting to read commentary in the media along the lines of “Twitter is dead” and other dismal prognoses for the various social media platforms...
4 Quick Questions with Andrew Richard
How will current REIT valuations affect their activity in the capital markets? I think that real estate valuations in the U.S. are pricing to...
4 Quick Questions with Rosemarie Thurston
What are your expectations for public, non-listed REITs and their ability to raiseequity in 2014? It will defi nitely be challenging to reach the...
4 Quick Questions with Jeremy Banoff
Using the most recent NAREIT Compensation Survey as a guide, how would you describe the hiring practices of REITs today? It is important to keep in...
4 Quick Questions with Cindy Jacobs
Cindy Jacobs is a senior advisor with the U.S. EPA Energy Star Program. Her more than 20 years of experience at the EPA includes management of the...
4 Quick Questions with Gil Menna
Gil Menna serves as co-chair of Goodwin Procter’s Real Estate, REITs & Real Estate Capital Markets Group. He’s also a member of the board of...
4 Quick Questions with Brian Jones
Brian Jones received a B.A. from Harvard University. He joined Neuberger Berman in 1999 as an associate analyst. In 2003, he became an analyst...
4 Quick Questions with Bill Garber
Bill Garber serves as the liaison to the Appraisal Institute’ Government Relations Committee and the AI Client Advisory Board, as well as the...
4 Quick Questions with Bob O’Brien
Robert O’Brien leads Deloitte’s U.S. Real Estate Practice and has more than 25 years of public accounting and transaction experience in the real...
4 Quick Questions with Roger Platt
Roger Platt has been a guest lecturer at Columbia, Princeton and Georgetown universities as well as a frequent speaker before business, professional...

Pages