Oklahoma’s stable economy — and “good times” vibe — work in its favor in attracting commercial real estate investors, but the market still lacks institutional capital and diversification of industries, according to one Chicago investor. The energy sector remains Oklahoma’s “one-trick pony” and it’s difficult for investors to liquidate properties they’ve held fewer than, say, seven years, he said.
The remarks came from Jeff Manno, senior vice president of transactions with Inland American Real Estate Trust, who keynoted the Commercial Real Estate Council’s 17th annual forecast conference Thursday at the Petroleum Club in Oklahoma City.
One of six real estate investment trusts of the private Inland American Fund, Manno’s trust holds 10 commercial properties in the state, with most of them in the Oklahoma City area. Among the trust’s local holdings are Tulsa Hills Shopping Center; Penn Park; Rockwell Plaza; Memorial Square Retail Center; Silver Springs Pointe; a Dollar General; University Town Center; Kirkland’s; The Shops at Moore; and Bryant Square in Edmond, which is under contract.
His company plans to make capital investments in Rockwell Plaza and Bryant Square, said Manno, who puts Oklahoma City’s embedded yield premium at 100 basis points below Houston.
In its early years, Inland American held 40,000 apartment buildings in Chicago and Florida, but today, he said, it has a three-pronged, inflation-protected focus: on hotels; the company acquired $800 million in assets last year, and in student housing and multi-tenant retail, in which it acquired $250 million each in assets in 2013, he said.
Manno said Inland is interested in selectively expanding its retail interests here, since the state is “a natural geographic extension of its significant investments in Oklahoma.” Investors are interested in densely-populated, higher-income neighborhoods and commercial retail properties that drive traffic, such as those by Target, CVS or Walgreens stores, Manno said.
He said investors also have looked at student housing investments near Oklahoma State University and the University of Oklahoma. But the pricing on those was too aggressive, he said. Moreover, they weren’t walking distance from the campuses, he said, and lacked the latest student housing amenities, including golf, tanning beds and spinning studios overlooking resort-style swimming pools.
“The silver lining nationwide,” Manno said, “is that, over the next 12 months to 24 months, there will be a limited amount of a new supply of commercial properties. Job growth seems to be gaining traction, and debt still is available in the capital markets.”
“Meanwhile, the U.S. remains the safest place to invest,” he said.