CNL Commercial Real Estate is launching a development and investment arm that plans to invest $300 million in the next 18 months on new acquisitions and development projects. CNL Commercial Real Estate plans for the fund to target the retail, industrial and office sectors across the Southeast and Texas.
Based in Orlando, Fla., CNL Commercial Real Estate is part of CNL, the private global real estate investment management firm. However, the new development fund is not a REIT and is not being sold through CNL Securities. CNL Commercial Real Estate's $300 million in new investment is being made in addition to more than $50 million in real estate projects currently being developed throughout the Southeast and more than $100 million committed to development projects on which the company has yet to break ground.
Moses Salcido, CNL Commercial Real Estate’s new managing director, says he is optimistic that the current business cycle will present continued opportunities in the company’s core markets. “We’re pretty excited about where we are right now in the cycle,” Salcido said in an interview with REIT.com. In fact, CNL Commercial Real Estate is calling the $300 million outlay Fund 1 “because we think there will be a Fund 2, 3 and 4,” he explained. “We firmly believe that this next cycle will have steady growth. It may not have the spikes that we saw in the last cycle, which I think is good, and I think the steady growth means it will have longer legs than what we saw in the past.”
Salcido sees particularly good momentum in South and Central Florida industrial markets, noting that in Orlando “absorption numbers continue to increase quarter to quarter” while vacancies continue to drop “significantly.” Salcido described the area as “probably more of a build market than a buy market.” Class-A assets have “pretty much been picked over,” according to Salcido, which means that now the focus is on producing and delivering more inventory.
As for other industrial markets, Salcido noted that although demand exists in Dallas and Atlanta, they are not showing the same kind of rent growth as in Florida. “I don’t know how much we’ll do industrial-wise in Dallas, but we’ll certainly keep our eye on it,” he said.
Looking at other sectors, Salcido said the office market is a “distant third” compared to retail and industrial in terms of rebounding from the economic slowdown. The challenge in investing in the office sector, according to Salcido, is that “capital is going to scrutinize the opportunities significantly more than at the beginning of the prior cycle, meaning there’s going to have to be some really solid fundamentals.”