Eyeing the Global CRE Market, Macquarie CNL Commences $1.5B First Public Offering

For the last year, a bevy of new investment vehicles have been popping up in hopes of capitalizing on what is now a buyers' market in commercial real estate, and Macquarie CNL Global Income Trust Inc. is among the latest.

April 27, 2010
By Barbra Murray, Contributing Editor

For the last year, a bevy of new investment vehicles have been popping up in hopes of capitalizing on what is now a buyers’ market in commercial real estate, and Macquarie CNL Global Income Trust Inc. is among the latest. The company, which intends to operate as a REIT, just announced a $1.5 billion first public offering of common shares and plans to use the proceeds to acquire real estate assets in the U.S. and abroad.

Macquarie CNL, sponsored by affiliates of Sydney, Australia-based Macquarie Group Ltd. and Orlando-headquartered CNL Financial Group, is offering shares at $10 each and anticipates reaching its goal of raising the billion-and-a-half dollars over the next two to three years. “Real estate is one of the best hedges against inflation, which we see looming in the next three to five years, so we think the investment community will be very interested,” Curtis B. McWilliams, Macquarie CNL president and president and CEO of CNL Real Estate Advisors Co., a subsidiary of CNL Financial Group, told CPE.

Approximately 70 percent of Macquarie CNL’s investment activity will involve real properties in just about every sector, including office, retail, industrial, multifamily, hospitality, healthcare and self-storage. The remaining 30 percent will be spent on real estate-related assets including debt and securities. As for the geographic locations to be targeted, practically every region around the world will be fair game for the REIT. In the United States, transactions involving the acquisition of distressed assets at lower-than-low prices have not been occurring as frequently as investors had hoped, but industry experts expect the opportunities and acquisition activity to increase.

“The deals have been slow to come, but there is capital sitting on the sidelines,” David Rodgers, research analyst with RBC Capital Markets, told CPE. “Some of the money to date has been early and new money being culled today may be early, but our view is they’ll get their chance, but it could be 12 to 24 months before transactions pick up.”

Certainly, Macquarie will take advantage of the increasing pool of highly desirable investment opportunities in the U.S.; however, the majority of the REITs acquisitions–60 percent, to be precise–will involve assets beyond U.S. borders.

“We think the markets on a global basis are ripe to go in and realize significant return for investors,” McWilliams said. “To develop a diversified portfolio of income properties, we need to take a much more global view, which is why we’re partnered with Macquarie. They have great reach in international venues and that will help us evaluate international opportunities.”

Macquarie, a global provider of banking, financial, advisory, investment and funds management services, has operations in North America, Australia, Europe, Asia, South Africa and the U.A.E., and the company has approximately $300 billion in assets under management. “Real estate markets are very cyclical,” he added. “But what happens is different regions in the world are in different places. Some are out of the downturn and into the euphoric stage, like the Hong Kong residential market, and some are still quite depressed like the U.S. office market where there is still more downside than upside, particularly since it is still being hurt by the employment picture.”

No matter the locale or the sector, timing is everything, and Macquarie and CNL believe their new Macquarie CNL investment vehicle has kicked off in just the right climate. “We believe the timing is propitious for REITs looking for high-quality properties with income flow and low risk attributes,” McWilliams said. “I like the quote by Sir John Templeton: ‘Bull-markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.’ Essentially, the best time to invest is in a time of major pessimism and the best time to sell is in a time of major optimism.”

The new Macquarie CNL offering comes just six months after the first public offering of common shares for another endeavor by CNL and Macquarie, CNL Macquarie Global Growth Trust Inc. Its name is the reverse of the newest vehicle, as is its focus–capital appreciation as opposed to current income producing properties. The REIT just broke escrow this week and has admitted initial investors as stockholders.