Thursday, December 4, 2008

Christmas in New York

<<<Rockefeller Center Christmas Tree lighting with thanks to Rock Center owners Tishman Speyer.

>>>>The tree in the lobby of our building, The Chrysler Building. It's beginning to look a lot like Christmas....

A long time industry friend and recruiter John Peters, attended IMN's 8th Annual Borrower's & Investors Forum on Real Estate Mezzanine Loans and Preferred Equity Financing this week in NY. Knowing how diligent John is, I asked if he would share his personal notes from the conference. So, I pass long some of his key take-aways:

1. In general, doom and gloom was the theme with no let up in sight.
2. The denial phase is in full bloom as very few wanted to give much if any consideration to the fundamentals and the implications if they weaken dramatically.
3. Some of the multi-cycle veterans believe that few recognize how bad it can and probably will get as cash flows deteriorate and push pricing down further. Many back into value from yield targets versus cash flow analysis.
4. "The only glimmer of hope: There's so much pent up demand that when the bottom's found, we'll be rolling in two weeks."
5. Unintended consequence of the TARP (Troubled Asset Recovery Program) program is the slowing of transactions that would have continued to address pricing realities.
6. “I don't understand short term borrowing for long term investing.” (Experienced developer/investor)
7. Disclaimer within a written MAI appraisal: We have done the best we can to find comparables but considering the current market realities, do not count on our opinion.
8. Will lenders extend maturities? A rolling loan gathers no loss.
9. No matter where you are in the capital stack take a long hard look at the collateral.
10. Asking for the outlandish might just be successful.
11. There is a LOT of fear out there.

Be a Correspondent: if you attend a conference and want to share your takeaways with the folks who read this column please send them along. It only needs to be five bullet points and I will share them either with attribution or anonymously as you wish. Thanks.

PERE Awards. Which people, firms, funds and deals stood out in 2008? Cast your nominations now in the only industry awards that are voted on entirely by the participants in the private equity real estate market.

On those days that I take the train from my place in Long Beach, NY into my office in 'the city' I see a lot of backyards, some may call these alleys but whatever the label it's the rear of a house or business. My route includes water views, backs of industrial (the mfg type) buildings, single family homes and apartment projects, a university with great athletic fields, a lot of rooftops of very old and run down businesses that I'm sure the EPA (environmental protection agency) has no idea exist. My point? No matter what a house or business looks like from the front the back or backyard may be tellingly different. For now fugeddaboutbasements! It's the same with all businesses, backyards, backrooms, bullpens, what have you. When you decide to do business with a firm it's based primarily on the 'front of the house' (dare i use the "F" words...facade?) but it's important, maybe now and going forward more than ever, to look beyond the marquee and get to know and become comfortable and feel confident with those behind the scenes who like nurses (sometimes more than doctors) are oft times more directly responsible for your health/survival or that of the properties you've invested in. Institutional real estate investors simply do not get involved with slumlords although I have known a couple and in the early 90's handled the workout of a legendary one, Morty Ginsburg, but that's a whole other story. All I'm saying is as you take a break from allocating money to or investing in real estate waiting for this year to end and the new one to begin also take the time to get to know those you entrust your money to better than ever. How investors behave in difficult times says a lot about how they'll handle themselves in the next cycle.

Sorry but I couldn’t pass this up. Reading a quote from a REIT CEO recently: “Investor relationships are the key to getting through the recession. You need equity to get through this period.” Hello! I guess investor relationships became key as things got bad. Not quite Mr. CEO. It’s a full time commitment to stay close to your investors, to keep them informed and to give them the continued comfort that you know what you’re doing. All the time.

Best new strategy name: Rescue Equity!

On the Road with Steve:

Dec. 6: Cathedral of St. John Divine to hear their newly refurbished organ. Click here to see their real estate initiative .
Dec. 8-11: London and to moderate a panel at the Reuters Real Estate Global Property Outlook 2009 on the 9th (Invitation only).
Dec. 12: Real Capital Analytics (RCA) holiday party.
Dec. 15-17: New York
Dec. 18 & 19: Chicago for meetings and on the 18th to attend the Third Annnual Charity Christmas Concert of Joel Cummins (Umphrey's McGee) and Brian Felix(Om Trio) starting at 7pm at Schubas.
Dec. 20-Jan. 2, 2009: Montreal working from home in between the holidays.
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.
Mar. 10-13: Cannes to attend MIPIM, host the second annual MIPIM Summit TV show and attend INREV's Annual General Meeting.
Mar. 25-26: Washington DC to attend the PREA Spring Conference

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

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