Guy Langford, accounting principal at Deloitte & Touche LLP, is a member of the firm’s Mergers & Acquisitions Transaction Services team and is both Deloitte’s national M&A real estate leader and head of its Northeast real estate practice. Based in New York, Mr. Langford works with financial sponsors, corporate buyers and other clients on complex real estate transactions. Mr. Langford spoke to The Commercial Observer last week about his role at Deloitte and the current state of the market.
The Commercial Observer: Could you give us an overview of your role and what you do at Deloitte?
Mr. Langford: I am an M&A partner by background, and I spend all my time focused on the real estate and lodging sectors. So anything that’s ‘bricks and sticks’ and land, I get looped into to help my clients—more on the buy side, but also on the sell side as well. It ranges from individual assets to pools of assets to companies that hold assets. It runs the gamut from private equity sponsors, sovereign wealth funds and REITs. I spend a lot of time working with market participants, more on a transactional basis.
With REITs, are you seeing anything in particular that’s changing?
REITs are clearly the belle of the ball right now. They’re getting a lot of attention. It’s easier for primary and secondary raises to occur. I think we have seen some examples of this already, where we see opco and propco structures being created so the propcos can get access to public markets. So, an entity with an operating component which has an underlying real estate operation is giving thought to the attributes of the underlying real estate, whether they can put that in a separate vehicle that is a REIT, then take the REIT public. There’s definitely a demand for REIT securities right now.
The glass is half full on commercial real estate. There is an overall feeling or tone of optimism, maybe with some caution around it. There are definitely positive signs within the lending markets. If you have decent-quality assets in good geographies where you have cash flowing, it’s easy to get lending. We are starting to see some signs where the [commercial mortgage-backed securities] are starting to show some life. It will be interesting to see how many bigger issuances we have in 2013, but my guess is they’ll start off small and we’ll start seeing more toward the end of the year.
Can you discuss your opinion on the New York market, where it stands and where you see it going over the next 12 months?
I’m more macro in my lens rather than into a particular market, but there are some instances where quality properties are demonstrating cap rates that were pretty close to their highs in 2007. It seems to me that there are a number of new products coming online, such as hotels, which I don’t think is going to cause any significant dilution of other assets which are in place.
I actually think New York—with the existence of such offshore interest, and I think a longer-term bullish view on this marketplace—I think you’re going to see plenty of capital flows here, but I think there’s going to be an interesting dynamic where cap rates get to historic lows and people start saying, ‘Well, you know, are we still that bullish on New York?’ And I think the answer is probably yes.