Staying Connected, Troubled Assets

Photo: Somewhere in Las Vegas recently. Thanks BF.

Last summer, I decided to experiment with Linkedin.com. Prior to that I had signed up and accepted invitations from people I knew but I never really spent the time figuring out how to use it or what good it really was. So I invited a number of people that I knew to sign up as well but still didn’t spend much time using the service, just watching it being used around my connections. Last week, after having to literally battle with Linkedin to cancel my account, I dropped out and disconnected. Something I read encouraged me to rethink whether I wanted to share my network with others and I decided that I had not needed before, nor do I need now, any third party social network to help me stay in touch with the people I know and that know me. (However, I am staying with Facebook as it's fun!).

The more things change….I was reading a NY Times article this past Monday on how those who were closely connected to the RTC (Resolution Trust Corporation) are now resurfacing to either take advantage of themselves or help their clients access opportunities today. I also was close to the RTC process and as things have deteriorated in the U.S. have thought about whether this is the time for me to leverage what and who I know. I’ve chosen not to and after reading this article I feel even better with my decision. Why? First of all, while things may look similar to 1990-1995, they aren’t. That time was unique, just like this time is and there’s no guarantee that past performance or actions are any indicator of future results. I believe that those who will be able to benefit from buying distressed assets today are those with very deep pockets and very patient money and those two characteristics are not always seen at the same movie. If we look at history as a model we have to be careful that we take all factors into consideration and not blindly dive into pools where the water is deeper than we first thought.

Having said that, I offer this excerpt from the premier issue of RCA’s Troubled Asset Radar:
“ The inventory already tops $106b and is growing rapidly. Truly distressed situations, where the mortgage is in default, the owner is bankrupt or the property has already been foreclosed, total approximately $25.7b, encompassing well over 1,000 significant assets. Of this total, approximately 200 properties valued at $4.5b have reverted back to the lender to become Real Estate Owned (REO). Thus, the majority of the distressed assets have only recently fallen into default and a foreclosure process commenced. The analysis also ignores approximately $11b of distressed situations that have emerged and already been resolved over the past year. The volume of properties that are potentially troubled is even more significant totaling $80.9b in volume and 3,736 individual properties. Potentially Troubled assets are largely those with an upcoming mortgage maturity in 2009 or those where the owner is in some financial duress, often caused by maturing loans. In these situations, the properties involved may be free of problems or issues. However, certain property issues, such as a major tenant bankruptcy or a development that has stalled or failed to live up to expectations, will qualify it to fall into the Potentially Troubled category. Distressed Assets.”

I clearly think they’re right (and the data is what supports any editorial commentary). And, there will be another generation of Barry Sternlichts, Russ Appels, Joe Roberts, Lou Ranieris and others who have made good money by buying troubled assets. But, we’re all in for some tough sledding and I wonder whether the marquee names that we already know or new ones will step up to the counter and place their orders. It's going to be an interesting year.

First time for everything: At Midway (Chicago) airport I experienced this (but took the description from a website): “New signs, color coded like those at ski resorts that warn of the difficulty level of slopes, will direct passengers to one of three lines – a green circle for beginners, a blue square for intermediate travelers and a black diamond for advanced passengers. Travelers will pick the line that fits their experience level, or security workers will direct them to the appropriate one. The goal is to reduce tension and frustration at security checkpoints and speed up the process for at least the experienced travelers who know to whip off their shoes and remove laptops from carrying cases without being told.” Recently, when I went through, the ‘experienced’ line was very light (I guess it was too intimidating for most holiday travelers ☺). But…..excuse me….what a great idea!

An article in the New York Times on Tony Bennett last week included this; “poise in the wind of uncertainty is a very old idea in American pop.” I liked the phrase and thought it had much broader relevance than just the world of American pop (that’s not ‘soda’ they’re referring to!). Poise is a characteristic I’ve always looked up to and with things being so uncertain it’s going to be an even more admirable quality to maintain.

Where I'll be:

Jan. 5-12: New York
Jan. 13-14: Cleveland, OH
Jan. 16-18: Ormond Beach, FL for the first 'annual' Felix Family Birthday Celebration
Jan. 28: Washington, DC
Feb. 17: Atlanta, GA
Feb. 18: Raleigh, NC
Feb. 19: Chapel Hill, NC to attend the Kennan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.
Mar. 10-13: Cannes to attend MIPIM, host the second annual MIPIM Summit TV show and attend INREV's Annual General Meeting.
Mar.24: New York to moderate a panel at the IGlobal Forum Real Estate Private Equity Summit
Mar. 25-26: Washington DC to attend PREA's Spring Conference
April 1: Champaign-Urbana, IL to attend a very special music recital
Apr. 24: New York, Madison Square Garden to watch Syracuse beat St. Johns (College Basketball).



These are my personal views and not that of my employer.

Year-End: 2008

Paul Summer of J.P. Morgan Asset Management Global Real Assets is one of the most creative guys I know. The holiday card, which Paul created for their group this season is something special. It’s digital, short and, well,let me share the text with you. Picture a leather-bound book……

Cover: 2008-2009: Turning the Page by Hedda Nuff and Gladys Over
Page One: It was the best of times, it was the worst of times.
Page Two: OK, so it wasn’t the best of times…But as we turn the page on a dickens of a year, let's get down on our knees and give thanks we're still on our feet.
Page Three: Every end brings forth a new beginning. Wishing you a healthy, happy
and prosperous new year. May your troubles only last as long as your resolutions

Well said Paul, well said.

I woke up this morning and felt the need to write to you as we start a new year. I thought about how my 2008 went and what is going on in our industry right now with people losing their jobs, whole business units being cut and more people fearful that they may be fired early in the new year. And I went to Wikipedia, a resource that I rarely rely on and found typed in the word ‘friend’ to their search engine.

“Friendship is a term used to denote co-operative and supportive behavior between two or more people. In this sense, the term connotes a relationship, which involves mutual knowledge, esteem, and affection and respect along with a degree of rendering service to friends in times of need or crisis. Friends will welcome each other's company and exhibit loyalty towards each other, often to the point of altruism. They will also engage in mutually helping behavior, such as exchange of advice and the sharing of hardship. A friend is someone who may often demonstrate reciprocating and reflective behaviors. Yet for many, friendship is nothing more than the trust that someone or something will not harm them.

Value that is found in friendships is often the result of a friend demonstrating the following on a consistent basis:

* the tendency to desire what is best for the other,
* sympathy and empathy,
* honesty, perhaps in situations where it may be difficult for others to speak the truth, especially in terms of pointing out the perceived faults of one's counterpart
* mutual understanding."

I’ve always been good at helping others and up until recent years it has been difficult for me to let others help me. But I’ve learned over the past few years in particular that it’s okay to accept help as the balance of giving and receiving is the healthiest approach to life. After all these years in the real estate industry I’ve developed a pretty good ‘sixth sense’ about people and my instinct is pretty darn good. I am grateful for having so many ‘friends’ but also ‘connected acquaintances’ in my life. In 2007-2008 I’ve learned who my true friends are and to them I am forever grateful. I’ve also learned that when you have an instinctive sense that you can’t trust someone, don’t ever doubt it because sooner or later they will prove to be who you think they are.

Anyway, what I’m trying to say is this: a lot of our industry friends and acquaintances are and will be going through difficult times. I would guess that all of us have gone through career challenges at one time or another in our own lives. And while we may not have an answer or be able to pick up a phone and find someone a suitable position, what we can do is spend some time talking with people, listening to what they’re thinking about and, well, being a friend. In 1995, as I was working my way out of a job doing workouts for a large commercial bank in New Jersey, someone in that bank, who I didn’t know very well, turned me on to the phrase ‘transferable skills.’ Given what is going on right now I think that we need to help coach our industry colleagues to think about how to transfer their skills and look in directions where there may be opportunities that they might not have thought of. We can all be coaches, nay, friends to each other and it pretty much starts with just being willing to take some time to meet with someone. It’s a small world and getting smaller. Not only will you feel good about trying to help someone, they will not forget you.

My band, “Everyone” used to have the song “Carry On” (Crosby, Stills & Nash, written by Stephen Stills) on our setlist every night we played. It was a song that was written about a broken relationship but I thought of it just his morning and while I recommend listening to the whole song (I’m going to do it as well) I offer this simple phrase:

Rejoice, rejoice, we have no choice but
To carry on

Let’s let 2008 be a reminder of what’s really important in life and as we ‘carry on’ never forget that we’re fortunate to have each other.

Happy New Year!