Monday, December 17, 2007

So what is it? Crisis? Opportunity? Both? Neither?

My bet is on opportunity. Some stories here piqued my interest.

The first, from Crain's, discusses both a record year in dollar volume in Chicago and what some are calling a challenge worse than that of 1998, when I was just a novice in the business. The pundits say that even insurance companies and banks are getting skittish and that LTVs for deals are in the 65% rate compared to what was going on a year ago. I have seen some skittishness, including from banks, but I am not (yet) seeing 65% LTVs required, though I'll bet that might be the case on a riskier deal. If so then the mezz lenders will be having a field day, be it in straight deals or equity kickers. Is it deeper or bigger? Beats me. I'm actually a just little busier than I want to be right now (which I guess is good this time of year).

IPE Real Estate writes about opportunity, and that big players are poised to buy globally in 2008, and have the cash on hand to do it. One example about people I know is Waterton Associates LLC. Waterton as always been able to capitalize on distress (see here for a great example -- the recent sale of property it bought out of a foreclosure a few years ago) and they have announced Fund X with CalSTRS, its usual partner, coming back to the table for more. They are, by the way, assuming 65-70% leverage, so those numbers in Crain's are probably sound. Good for you, Pete and David.