CBRE was/is supposed to be the "asset light" real estate company. All the upside but limited downside...
Well, they just priced sub notes to yield 12% for eight years. All of this (plus some fresh equity the company recently raised from Paulson & Co.) is basically going to be used to term out some existing maturities.
That is expensive capital for simply refi'ing and paying down some of what's already in place.
We at TILB are not sure where "office" cap rates should be, but given the high perceived quality of the CBRE franchise and the nature of its underlying business economics, that same 12% feels like a reasonable starting point.
Of coursen that implies virtually all CRE REITs are zeros...
Happy green shoots to you all!