Wednesday, March 19, 2008

In this market. money talks and you know what walks....

Up until this credit crunch hit there were a lot of highly-levered deals going on out there, some better than others. Harry Macklowe can tell you all about them. And sellers were willing to tolerate them because the returns were so high.

Now, of course, the cash buyers have the upper hand. Here's a great example. Unexciting office building, almost 30 years old, but in a great mid-Loop location (heard that before?) and with 94% occupancy, sells for $152/sf. Try to build that now. Even with any refurbishing you'll never get close to replacement value. And why did the deal happen? Cash, cash, cash.

Of course, most of us do not have pension funds or private equity at our fingertips. (Although you'd be surprised...sometimes it is a matter of introduction or connections and a good dirt person can be the local partner in a JV...seen that too many times to deny.) But it is a poignant reminder that money does indeed talk, especially when the lenders are speaking softly or even mute.

2 comments:

COIMBRA CORRUPTION said...
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Terry said...

I can't agree more. I just closed on a great piece of commercial property at a fantastic price. Why? The first two contracts fell through because the buyers couldn't close their financing. The seller was sick of waiting through the due diligence periods only to have the deals fall through. Money talks.....

 
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