Partner Wayne Heicklen Speaks to Bloomberg News About Wealthy Individuals Investing in Commercial Property
Partner Wayne Heicklen, Co-Chair of Pryor Cashman’s Real Estate Group, was interviewed by Bloomberg News for its March 10, 2011 story, “Wealthy U.S. Individuals Invest in Commercial Property in Quest for Yield.”
The article begins by noting that individual investors provided about a quarter of the financing when Sumeet Parekh bought two retail units in the bottom of a building at 157 Chambers Street in Manhattan's TriBeCa neighborhood. Morgan Stanley (MS) put up a little more than half of the $6 million purchase price and Parekh contributed about $1.25 million. He got the rest from wealthy investors, who contributed increments of $100,000 to $625,000 in hopes of a 10% annual return and a portion of the building’s appreciation.
According to the article, high net-worth individuals invested $2.1 billion in commercial real estate last year, up from $579 million in 2009.
Heicklen, who worked on Parekh’s purchase in TriBeCa, told Bloomberg News that families, when investing in commercial real estate, should compare what they may be charged in “promotes,” which are similar to carried interest fees paid to private equity and hedge funds, to other investments. Investors should also investigate the sponsor and inspect the property. “They were offering great yields yet the tenant wasn’t there for the full time and the location was bad,” he said of one property his clients were evaluating.
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