Tuesday, February 9, 2010

How low could you go?

Any positive news is, of course, good for us in the real estate business.  So when the great Jeff Vinzani posted a couple of optimistic stories on Twitter I was happy to see them!  41% of private equity investors plan to boost their investments, but 29% plan to decrease exposure.  And JLL is reporting that lenders are looking to rebuild their loan portfolios. This bodes well, of course, for people looking to buy on the cheap or hopefully refinance if they can find the equity to kick into the deal.

What I found most encouraging -- and I am also hearing this anecdotally -- is that lenders are willing to increase their exposure on single-asset deals, to wit: "Fifty-six percent of respondents said they will lend $50 million or more for the purchase of a single property. Last year, most respondents were only willing to lend up to $25 million for one property."  You are going to need that kind of risk taking to make the market work.  You can sum this up in one word: greed. And I mean that in a Gordon Gekko sense, by the way. If lenders see opportunity at the right interest rates and the right LTVs, then of course they will start doing the deals -- lower risk, lower exposure, reasonable chance of a good ROI.

Of course, the cynic in me says, "Obviously investors and lenders are going to increase real estate exposure." How could you go any lower?  (Suddenly I can't help but think of Chubby Checker singing the Limbo Rock.) But at this point the fact that more people want to get back into the game is fine with me.  I'm ready to start doing some deals again.


Doug Lytle said...

Here here! When a deal makes good sense, it doesn't matter what everyone else is doing.

Good greed, reasoned greed, and a willingness to acquire good assets is the way out of this quagmire. Finally, there seems to be a will to move forward; and, as the saying goes, where there's a will, there's a way.

C.K. said...

My best educated guess is we can expect to see more activity this year than we did in 2009. The key will be to watch how the loan mod., workouts, refi's and foreclosures transpire over the next 12 to 16 months, as I suspect we will see continued turbulence with CRE loan portfolios for the immediate future.