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PERE Forum Europe 2009: Citi’s Orf predicts triple silver lining

While many investors are 'shell-shocked', Citi Property Investors’ president and CEO Roger Orf believes a trio of future investment opportunities offer up reasons for optimism. He said debt, residential and real estate securities could be 'silver linings'.

The increased availability of cheap commercial real estate debt packages, residential projects being sold at “bargain basement” prices and a bottoming out of real estate securities market are “silver linings” for investors to be cheerful about, delegates at the fifth annual PERE Forum: Europe heard today.

Addressing an audience at the Renaissance Hotel in London, Roger Orf, president and chief executive officer at Citi Property Investors, said while investors were “shell shocked” from the global downturn and liquidity crisis, there would be three distinctive market opportunities going forward.

In the near term, Orf said many debt instruments would be sold by “originators” who were “compelled to reduce their loan balances”. He said that these “are likely to offer equity level returns”.

He added the US residential sector would also offer “extraordinary equity investment opportunities in the coming years.” He said: “The US population is expected to grow by 27 million people in the coming decade. They will require somewhere to live.” He also said demand for “lifestyle” housing would continue to grow from those from the “baby boom” era after the Second World War.

He said: “Huge amounts of residential land and projects will be sold at bargain basement prices in the years ahead.” Orf predicted a similar opportunity could arise in Spain and other European markets.

Orf also said the global real estate securities market was showing early signs of recovery. “In many (geographies) the fall of real estate share prices preceded the credit crunch. The UK, for example, peaked in January 2007, eight months prior to the first tremors of the crunch. Since then shares that traded at significant premiums to net asset value have traded at significant discounts to net asset value. As a result, you can allocate capital more effectively in a public market than in a private market.”

“I would submit that the global real estate securities market would be a leading indicator of recovery and it seems to me, this [recovery] has been happening since March this year.”