It is really difficult to offer any conclusions – and I know you’re going to ask where cap rates are and where they’re going since transaction volumes have been basically anaemic since the fall of 2007, especially for larger quality products – there simply are few comparables. We do know the following though: excessively priced debt is not available above a loan-to-cost of 60% unless it’s made available by the seller or can be assumed. And we know that the pre-mid-2007 sales were fuelled by low cost debt at high loan amounts.Chairman Mortimer B. Zuckerman also responded to questions about his reported GM Building bid:
Underwriting strong rental rate growth over the next few years is going to be a stretch and it’s hard to imagine that buyers are going to use residual cap rates of 5% or less as was customary in 2006 and 2007. Unless sellers’ expectations change or they are left with no choice but to sell into the market, we think it’s going to take some time to see meaningful volumes of sales which will allow for a market check on private valuations.
I am not embarrassed to say, as I am someone who spends some amount of time in the media, that that story was totally without merit, totally without factual basis, never one which was checked out in any way, and an embarrassment to the press, but not an embarrassment to us since it was totally false.You can read the entire transcript here.