Tuesday, November 4, 2008

And, just to top things off

Institutional investors are backing off private equity investments:

Large institutional investors that provided much of the capital that put some of America's best-known companies into private hands are starting to cool on the investment strategy, suggesting that the lifeline for private equity is eroding.
PE can bring big returns, but there's a concern about liquidity. I can understand that. But this can also mean, for dirt folks, less capital for investing and lower prices.

But what it can also mean is a HUGE opportunity for the real estate investors who stay the course. If you have the cash on hand or available and prices go down because there is less competition for assets (case in point here - 525 W. Van Buren selling for less than its purchase price per Tom Corfman), then you can truly buy low and wait for the cycle to sell high.


Doug Cornelius said...

David -

The interesting thing we will see over the next few months is forced liquidity events. (like what happened to Macklowe).

There is distinct lack of debt in the market for refinancing. Even though loans are performing, lenders are not renewing loans, on any terms!! I am hearing about lots of capital hoarding by banks.

I am also hearing about borrowers going into default at maturity because there is no debt to replace the maturing debt.

Nobody wants to sell in this market, but some owners may be forced to sell offering some attractive opportunities for buyers with cash available.

Fortunately, the New Company is in a very attractive position given all of these events.

David Stejkowski said...

Doug, I could not agree more!

The lack of liquidity is going to really hurt some folks. But it is going to be a boon to some others who have the cash to capitalize on the lack of liquidity. The even better news is that you have less competition.

I alluded to this in my thoughts on GGP, because I think cash buyers (and I have a couple in mind) could really pick up some bargains.

P.S. Congrats again on the new gig.