http:www.reit.com Despite mounting concern in the capital markets over looming commercial real estate debt maturities, David LaRue, president and CEO of Forest City Enterprises Inc. (NYSE: FCE.A) says owners shouldn’t fear that they won’t be able to find financing for quality assets.
In a video interview with REIT.com at REITWorld 2011: NAREIT’s Annual Convention for All Things REIT in Dallas at the Hilton Anatole hotel, LaRue discussed his company’s strategy in the capital markets. He noted that significant amounts of commercial real estate debt are coming due beginning in 2012 and growing through 2016. The maturities coincide with commercial mortgage-backed securities pools that were formed during “the heavy finance area that has led to some of the problems we have now,” in LaRue’s words.
“Those investment opportunities are going to be looked at closely by everybody in the industry,” LaRue said.
However, quality assets should find plenty of financing options, in his opinion. Forest City has refinanced approximately $1 billion in assets in each of the last three years, LaRue said.
“The way we’re thinking about it, if you have a good asset, there’s going to be capital available to refinance that as that debt does mature,” LaRue said. “If you have an asset that probably shouldn’t have been built in the first place or financed in the first place, I think those are going to be the ones put in a position where they’re being auctioned for below face value of the mortgage or taken back by the lender and disposed of some other way.”
Looking ahead to 2012, LaRue said it is shaping up as a strong year for the residential sector of the commercial real estate market. That has been a major driving force in Forest City’s strategy, according to LaRue.
“I think if you look across the industry, where the demand clearly exists is in that product type,” he said. “So apartment buildings, which are a major part of our own portfolio, is where we’re focusing a lot of our attention there in terms of new development dollars, as well as scanning the horizon for acquisition opportunities.”
In the retail sector, he said, owners might look to refurbish existing assets, rather than pursue new opportunities or build.
“The opportunities may not be outside of your own investment portfolio, but it could be improving your existing portfolio to keep it relevant to changes in customer preference and changing demographics in a given marketplace,” LaRue said.
By Matt Bechard
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