Hillock Land Company Managing Partner Danny Kradjian was quoted in the CoStar News Article titled “TOO MUCH, TOO FAST? Investment Markets Eyeing Free-Flowing Capital With Some Concern.”
In the article, Kradjian addressed the impact of aggressive institutional capital on small-scale developers and operators.
With significant institutional capital flowing into markets, sellers are witnessing a boom in the development pipeline. With increasing volume and a sharp growth in prices, sellers are reevaluating the market potential for existing assets based on their development potential. With so much capital chasing yields (especially in primary markets), investors and developers are often willing to pay increased prices in the present, as they are betting on positive returns from cap-rate compression and a growth in rents/prices over the holding period.
Kradjian says, “High (price) expectations among sellers is present in all assets of all sizes. Often, these assets are not attractive to institutional players, as they do not have the densities or size required to allocate existing capital in a fund, or meet targeted returns in the future. Thus, these assets are normally pursued by small-scale operators.”
“With sellers placing a premium on their assets due to the overall level of activity in the market, local operators are being priced out.”
Read the entire article HERE.