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Nikkei Veritas speaks to one of the “winning” investors, the CEO of Blumberg Capital Partners
“It’s still early to be buying American commercial real estate.” In an interview with Veritas, Philip Blumberg, CEO of Blumberg Capital Partners, expressed his view that the U.S. commercial real estate market still has a way to go before bottoming out.
– It seems you earned 17.6% in profits last year.
“Our past three years of devoting ourselves to sales, without buying, bore fruit. We built up cash savings and released ourselves from the need to rely on debt. We made sure that buildings we own or manage are fully set up, with gyms and cafeterias, which kept rents from going down.”
“I’ve been predicting the confidence collapse for more than two years. With so much risk investment, which relied on cheap leverage, prices went up to an unrealistic level.”
– In the American market, prices continue to fall.
“There’s still room for them to go down further. It would be premature to start buying yet. I want to wait another year then reassess the situation. That’s because for the next several years, huge commercial real estate loans will be up for refinancing.”
– Do you have any plans to increase the scale of your business?
“We plan to set up a fund for foreign investors, aiming for this summer. We’ve already received advance reserves of $1 billion - $1.5 billion from institutional investors in Europe, the Middle East, and Asia. The new fund’s policy is to offer a wide range of diversified investment, from commercial real estate inside and outside the U.S. to commercial real estate loans, CMBS, REIT, etc. In Japan we’re looking to work with a large bank.”
– Financial institutions have been receiving financing from the U.S. government to back CMBS.
“Governmental interference in the market is unreliable. The loans which are supposed to back CMBS are not working yet, for the most part. Watching the movements within the new administration, it seems they’re lacking in experience with private enterprise. There are times when what they’re saying, and the government’s goals, change very quickly. It’s hard to take the plans they hammer out at face value.”
Blumberg Capital Partners is a private real estate investment company headquartered in Florida. Since its founding in 1979, it’s been involved in management and sales of office buildings nationwide. The company is known for its conservative investment strategy, “keeping financing on new investment to around 50%” and “avoiding speculative trading.” In 1992 they also set up an assets management business for clients like pension funds. Currently managing two commercial real estate investment funds, from 1992-2008 their average return has been 17.1% (in 2008, the annual return was 17.6%).
Keywords: Asia, CMBS, CRE, debt, economy, Europe, fund, government, investment, Japan, Middle East, Nikkei Veritas, Philip Blumberg, profit, REIT
