Volatility in capital markets have made investors hungry for capital preservation and in frenzy for whatever small yields they can get. This push by investors has put sellers in the driver’s seat, and risk premiums are slowly being abandoned. Development land price per buildable foot continues to increase, apartment building capex are being downloaded to buyers without an equivalent adjustment in prices (Prediction for 2011: cap rates will continue to fall). Investors must have the capacity to extract returns out of their real estate because there is no tidal wave of appreciation from the economy or credit on steroids to bail them out. Value add deals are being aggressively searched out by investors and talent is the currency of the day. Quick Case study: Peter Freed and Minto:

  • Purchased site 570-580 Front St W for $42,000,000
  • Saw opportunity with building the right type of retail to attract both home buyers, investors, and high quality tenants (see my previous blog post)
  • Raised significant capital from Private Equity

image source: Andrew Michaels