Median secondary bids continue to decline for interests in commercial real estate partnerships relative to private equity partnerships, according to a report by Nyppex, a global seconda
Median secondary bids continue to decline for interests in commercial real estate partnerships relative to private equity partnerships, according to a report by Nyppex, a global secondary private market advisory, trading and research firm.
The report found that secondary buyers have been acquiring interests in commercial real estate partnerships at prices 20 per cent to 40 per cent below the replacement cost of the underlying properties.
This is a result of secondary buyers requiring 40 per cent to 60 per cent discounts to net asset values which have been written down below replacement costs.
According to the report, secondary buyers of commercial real estate partnership interests are primarily concerned about the refinancing risk for mortgage loans originated during the 2005 to 2008 period.
Other risks include loan size risk, as default rates are expected to rise for loans of USD50m or more; and risks associated with property type, as retail and office properties have suffered in particular under current economic conditions.
The report also provides recommendations for secondary buyers interested in purchasing interests in commercial real estate partnerships, and to current limited partners that seek to evaluate their holdings in such partnerships.
