Friday, November 19, 2010

Want to make money? Get out of New York and DC!

This Globest.com piece might be the best I have read in a while.  Why?  Because it makes sense:

“Everybody got so burned by the downturn that they want safety and liquidity,” said Jonathan Gray of Blackstone Real Estate Advisors, during New York University Schack Institute’s 43rd Annual Conference on Capital Markets in Real Estate. Partly because everybody is chasing those same few deals in New York City, Washington, DC and a few other key markets, that means more opportunities in properties that are high-quality yet impaired....
Bingo.  If you want to make good money, get out into the rest of the country where the rest of us are not seeing a recovery as much as others.  And the story is also telling as to the amount lenders are putting out there.  Even though everyone says lenders are lending, transaction volume is still down 50%, 60% and more from a few years ago (not that we should be at those volumes again anyway). And even if you get that deal, the LTVs and rates are not exactly often going to knock you out.  So the deals better be good.

That said, the fire sale of the 90s is not a reality right now, or so says someone who ought to know more than most anyone:
For one thing, while the next few years will see hundreds of billions of dollars in annual commercial mortgage maturities, it’s not at all clear that this will lead to a flood of distressed assets, said panelist Neil Bluhm. “The product is coming out much more slowly and in a rational way” compared to the ‘90s, said Bluhm, managing principal of Walton Street Capital.
For another thing, Bluhm said later in the discussion, it’s not certain whether the capital flow will continue. “Most of the money we were talking about earlier, we raised a few years ago,” he pointed out.
(So yes, money is out there and just sitting on the sideline, just as everyone has said for almost as long as we can remember now.)

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