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HFF Research Update for April 19, 2016: A Tubercular Cough

Tuesday, April 19, 2016

Weekly insights on current research in the commercial real estate industry from HFF Managing Director of Research Jimmy Hinton. View Daily Rates on the HFF website or access the HFF Daily Rates App in iTunes.

Greetings from the nation’s capital! Leaving Houston on Monday was a test of patience and will, but United Airlines delivered. After more than 800 flights were cancelled at IAH, one flight left for D.C., and I was on it. So it is with an extra measure of enthusiasm that I write today’s historical context.

On this day in 1775, a small militia of less than 100 American colonists gathered in a tavern in Lexington, Massachusetts. With British soldiers marching their way, the militia gathered in the town square to “observe and protect” but hardly to meddle otherwise. On approach, the British commander John Pitcaim ordered the militia of “damned rebels” to disperse. Led by and under the orders of Captain John Parker, the militiamen stood their ground, at least initially.

daily rates april 19 2016

John Parker had served in the French and Indian War years before and his men respected him steadfastly for his leadership. Unfortunately Parker was suffering from tuberculosis, the main symptom being a nasty cough. Wishing to avoid the type of escalation with which British soldiers were increasingly associated, Parker voiced commands to his militia to disband. Most think that Parker’s raspy voice led to his commands not being heard by the majority of his men. A shot was fired, a skirmish ensued. Many died on both sides.

The American Revolutionary War was underway, 241 years ago today.

To be sitting in our nation’s capital, which wouldn’t move to the banks of the Potomac River until some 15years later, on this day feels very fitting. Moreover, Parker’s lack of clarity is a reminder (albeit perhaps a melodramatic one) that we should be clear when messaging the state of the market as we see it.

So it is with explicit lucidity that I wish to state that I believe the market is heading our way in a fashion we’ve not been able to enjoy for nearly nine months. The tenets of this position include dramatic improvement in corporate bond yields (helping pressure on cap rates), corporate bond spreads (helping pressure on debt spreads) and continued employment expansion (helping NOI expansion). But investor sentiment still needs to evidence itself in underwriting and admittedly we’re not there yet.

Stock investors are a little different though as the DJI surpassed and closed above 18,000 on Monday for the first time since July 2015.

If it is starting to feel like “summatime” then let’s enjoy it before it really gets here. A volatile election period approaches in July and 2016 allocations for debt and equity are still being competitively priced.

About Jimmy Hinton

HFF Jimmy HintonMr. Hinton serves as Managing Director of HFF, responsible for the firm’s national research efforts. Mr. Hinton works with the executive management team to assist in investor relations and to inform both HFF staff and firm clients with in-depth analysis of economic, property and capital market trends. He is also responsible for providing extensive market reports, client presentations and deal-specific analysis for debt placement and investment sales assignments. Mr. Hinton’s responsibilities include substantial interaction with pension funds, life insurance companies, regional and CMBS lenders, REITs, foreign investors and private equity funds.

During his tenure at HFF, Mr. Hinton has supported the execution of more than 150 commercial real estate transactions totaling more than $4.5 billion in 20 states. Mr. Hinton has experience in fixed- and adjustable-rate debt, mezzanine debt, construction loans and joint venture executions on behalf of clients engaged in the acquisition, development and recapitalization of property types including multi-housing, industrial, office, retail, medical office and storage properties.

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