Friday, September 19, 2008

terms & conditions

i read this afternoon that henry paulson is talking about creating another RTC (Resolution Trust Corporation) type entity. I was a consultant to the RTC and started and ran what was called a SAMDA (Standard Asset Management & Disposition) office. while i was happy to be involved, as a taxpayer, it was an insult. that agency made things up as they went along and the absolute waste of money was incredible; that coupled with the fire sale mentality of trying to solve the problems quickly...well, i know that there were some who benefited but again the U.S. taxpayer footed the bill for the problems created by, at that time, poor underwriting and too aggressive lending. i for one am getting tired of the government bailing out business failures in the name of the 'greater good.' if you and i owned a business and we lost money, well, we'd just have to go out of business, it seems pretty simple to me. and maybe, that is what is going on. but there must be a better way.

i don't know about you but i feel that the U.S. government is using my tax dollars in ways that i don't approve of. they're desperate actions designed to 'save the U.S. economy from complete disaster." but the U.S. economy is a free market system where anyone can 'make it' (especially in NY) and it think that too much interference is not a good thing. from those people that i've talked with, it's likely that this week, while a triple play is not the end of the 'marquee' news in the financial community because we still don't know all the bad things that are behind closed doors and secret balance sheets. to have your job pulled out from under you without any real warning is not a pleasant experience, especially if you've been doing a good job over as much as 10 years or more. seeing people stream out of their offices carrying no more than a single box or a backpack which represents their personal effects was a sad but vivid reminder that nothing really is as it seems and that we need to always prepare ourselves for the unexpected. it's why building your own network, your own community is just as important (maybe more so) during 'normal' times so that if something should happen you're not starting from scratch. that, plus the good feeling one gets from helping others. that is what linkedin and other communities are all about to me, helping each other, but maybe i'm naive. anyway, sometimes being naive is a blessing.

Henry Z. Steinway, the last Steinway to run the piano-making company his family started in 1853, died Thursday at his home in Manhattan. he was 93. i've never owned a Steinway (the baby grand that I bought in 1987 and is now living with my son in Chicago is a Tokai). i always wanted to have a Steinway. i remember first playing one and feeling the heavy action. but the one Steinway experience I'll never forget was walking into Steinway Hall on 57th Street in New York and a very kind salesperson took me downstairs to the place where they keep the big boys, the pianos that visiting concert players can choose from for their gig. there they were, just all together in one big room, some with covers on them and some just naked. the salesperson directed me to a few, saying "Try this one, so and so uses this whenever he performs in New York." but the one that really shook me up was the piano that Arthur Rubenstein used. it was a Hamburg Model D. i asked, "Are your sure it's okay?" and he just smiled. I opened up the cover, sat down and hit a full C chord with octave bass. i almost jumped off the bench. it was such a powerful sound and feel. I played just that one chord and close the cover and got up and just walked away feeling that this was a spiritual moment. Steinway is one of those 'category killer' brand names that have lasted over time. it was a family business, run with quality control and integrity: Henry started in the factory, building pianos, just like the other members of the Steinway family. on our industry, starting in the 'factory', on a building site and learning the real estate business, brick or beam by beam is the old-fashioned way. but there's no substitute for knowing the essence of what makes the 'real' real estate business tick. i think it must hold true for almost any industry.

the news that the engineer of the train involved in the Los Angeles area train wreck that killed at least 25 people was texting and missed signals is horrible. it's unconscionable and it's unacceptable (and very sad). of course, now the authorities have enacted immediate rules prohibiting such things. but the damage, oh such waste of lives, is done. but several years ago, a good industry friend of mine, died in a car accident when it's reported that he was using his blackberry while driving. please, people: there is nothing that important that cannot wait until you're in a safe place and just like the advice I gave to my sons about not riding with someone who has been drinking, I'd make the same recommendation about someone who sends or checks emails while they're driving. more and more places seem to be enacting legislation forbidding use of mobile phones while driving unless they're 'hands-free' but, as we all know (and can see) there are a lot of people who don't believe rules are made for them. it's one thing that they are willing to put their own life at risk (and those of their passengers) but they're also putting our lives at risk. defensive driving has never been more important.

Private Equity International is hosting is annual Emerging Managers Forum in London
on November 4-5. Feedback from their events has always been very positive


i must admit that i have never read the 'terms and conditions' that i agree to when i'm doing certain things on the web. do you know anyone who has? i'm sure they contain language that you agree to have them or others that they sell or trade their lists with barrage you with stuff, solicitations or whatnot. i had somewhat of a similar experience this past summer. after many years of happy motoring with T-Mobile i got a new phone/blackberry with AT&T. i started getting unsolicited phone calls soliciting me for something; i started getting phone calls from Aunt Minerva trying to find someone (i could never understand what she said in her messages) who evidently recently had had the same mobile phone number as me. i called AT&T and complained. they said they were sorry (why can't people just do the right thing instead of falling back on apologizing) and click some button so people who were calling Minerva (including some lawyers) would not bother me anymore. as far as the solicitation calls: they said i had not asked to have the "No Call" capability turned on. btw, when i bought the phone, no one even mentioned this. so after asking them how could they operate like this i just said, 'turn it on." so that didn't work and i had to call them back again and the next person i spoke with said that it had not been turned on. so much for customer service. but what i'm really talking about here is disclosure and transparency in marketing. there are firms that operate in a sneaky type way. let's say you buy something from them or sign up for an online publication. they add you to their solicitation lists and you start getting regular emails, sometimes as many as two per week offering you another one of their products or services. clearly lists are big business as they always have been and junk mail, whether it's paper in your mailbox or what amounts to spam in your inbox are just, to me, unacceptable ways of doing business. do companies that barrage you with emails think that you'll hold them in higher esteem? i just don't get it.

I was cleaning out some old business card binders this week, from 2000 and saw a number of them were commercial real estate and other tangentially related technology companies. i know some are still operating but haven't taken the time to check them out. thought those of you who were in the business then would enjoy a little stroll down tech-boom lane:

1. propidex.com
2. jobsite.com
3. darwin.net
4. teligent.com
5. workspeed.com
6. avidexchange.com
7. managestar.com
8. electricstreets.com
9. enn.net (elevator news network)
10. virtualpremise.com
11. ebuyxpress.com
12. realwired.com
13. captiger.com
14. zethus.com
15. netfish.com
16. offices2share.com
17. capitalengine.com
18. rescapgroup.com
19. monsterdaata.com
20. servicechannel.com
21. workspeed.com
22. dreamlogik.com
23. corrigo.com
24. auctionwatch.com
25. ibuilding.com
26. therealm.com
27. cypresscommunications.com
28. nextlink.com

i remember in those days i heard a friend, chris hartung, say at a conference, "there goes another company that claims they can boil the ocean." i don't know if chris originated that saying but i've always attributed it to him. chris and others, as well as myself with creol.com were passionate about how technology could and would make us more efficient and change the CRE landscape. clearly, most of us were ahead of the curve or as they say, on the bleeding edge. but as i run into those who experienced that period of time, trying to gain traction, users and subscribers if believe we all feel better for having tried it. now, both those survivors and those new companies who are taking advantage of both the adoption of applications and the younger generations in our industry, are contributing greatly to more transparency, more efficiency, more connectivity and more news, just the way it was supposed to be.

some notes forwarded to me by Norm Kranzdorf from the ICSC Capital Markets Seminar in New York last week that was attended by 400 people:

-MetLife is still doing whole loans in the 50-60% LTC – Loan To Actual Cost – not to value.

-Most speakers did not see a turn around until the 2nd or 3dr Quarter of 2009 and into the 4th.

-Bank of Ireland was the only one admitting to making large construction loans with lots of conditions such as to a well-know developer with a substantial balance sheet.

-Mezz loans are being priced as if they were equity with a due date. Pro-formas are being used with a very conservative exit cap rate.

-Most participants are focused on primary markets only and many are sticking to the northeast from Boston to DC and Texas and the northwest.

-All pro-formas are using lower rents than todays and lowering renewal rates under the option rents.

-Many buyers are concentrating on buying B notes as they can get a higher return than on a new hard asset deal. It is paper vs. hard assets. Returns range from 285 bps above treasuries to 1200 above depending on risk tolerance. Sellers are allowing long due diligence when you look at these.

-Many people are talking to the “special servicers” for deals.

-There are some bargains if you can get to the “kick out bucket” of the issuers that had to hold them when they did a CMBS.

-One JV participant said that his latest apartment JV was for $36.5 MM which required him to invest 30% of the equity using 70% debt. Pari-passu on the 30% on the pref but profits over that started at 90/10.

-Ground up deals are the hardest to get done because the construction loans are hard to find and all have very difficult terms and guarantees. Permanent loans now have more carve outs with some personal guarantees required depending on the developer. Potential construction lenders should be consulted before getting involved in to-be-built projects.


Where will I be?

Sept. 22-30: New York

Oct. 1-3: Chicago for PREA’s 18th Annual Plan Sponsor Real Estate Conference


(t) Oct. 6-8: Munich for Expo Real

Nov. 12-13: New York to moderate a panel on
"Asset Transformation Case Studies) at the fourth annual PERE Forum (Private Equity Real Estate).

Feb. 19-20, 2009: Chapel Hill, NC to attend the Kenan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.

1 comment:

JCG said...

As you can imagine I agree with your post. Who knew when we met with Scott that we were starting a "once in a lifetime financial crisis":-) Seriously, I certainly did not anticipate such changes in the FIRE industries when I founded CREOPoint.com five months ago with friends from Citibank, Morgan Stanley and E&Y.

During these uncommon times, people need uncommon solutions. The time has come to network and help each other faster better. Just in case as you warn...

Many of our friends on CREOPoint.com are concerned about what this mess could mean to them and to their clients. Our response has been to create a “global financial crisis group” on CREOPoint. Hope we can all reinvent ourselves and the industry on http://creopoint.com/group/globalfinancialcrisis. Also hope to see the “industry shrink” and his friends there. Best, JC Goldenstein

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