RealShare Investment and Finance Summit Highlights
Lending Crisis to Worsen
Before It Gets Better
TRADITIONAL CAPITAL FOR REAL ESTATE HAS DRIED UP
in the past year, and although panelists at Incisive Media’s second annual RealShare Investment and Finance Summit were
relatively optimistic, they agreed the current credit void will get
worse before it gets better.
In a year in which investment sales have been relatively stagnant, experts speaking at the event held in Manhattan last month
said that the market will eventually return to normal, it’s just a matter of when. “There will be opportunity eventually, but the crisis is
far from over,” noted Michael Fascitelli, president and trustee of
Vornado Realty Trust, during the Investor Power Panel session.
While there are certainly fewer sales transactions, some of the
experts pointed out that pricing hasn’t come down as much as
expected. “Private equity pricing has been sticky and slow to
react,” remarked Robert Underhill, managing director and head
of the capital transactions group at Shorenstein Properties LLC.
“There seems to be a fair bit of denial,” he added, explaining
that the decline isn’t just the course of a regular real estate cycle,
but more systematic, more global and more synchronized.
The general consensus was that the market will bottom out
around the second quarter of 2009. However, Trevor Michael,
managing director of acquisitions at TIAA-CREF, observed that
when a rebound does occur, the market will come back sharply.
One promising facet of the business is buying debt, according
to participants in the Opportunity Fund Power Panel. Paul Fox,
More than 200 industry professionals turned out for the second annual
RealShare Investment and Finance Summit, held in Manhattan last month.
Participants got the chance to network (bottom left) as well as take
part in such sessions as the Opportunity Fund Power Panel (right) and
“Dislocation Creates Opportunity” (top left).
managing director of Cerberus Real Estate, noted that his firm
sees the best opportunities at the moment in acquiring debt as
opposed to properties.
The reasons for what moderator Jeffrey Lenobel called a
“standoff” between sellers and opportunity fund buyers are all
too familiar. As Linkas put it, real estate finance is coming off a
phase where the perceived risk was quite low and the actual risk
was “terrifying.” However, he said, the current credit environment offers opportunities for funds such as his.
Those opportunities could proliferate over the next several
months in conjunction with an increase in distress situations,
although Lenobel, chair of the real estate department at Schulte
Roth & Zabel, noted that there haven’t been many distressed
assets yet. “Whenever there’s real distress, you know we’ll all be
looking,” Fox said. The trick, he added, is picking the right plays.
One aspect of potential deal making that’s incomplete at the
moment is financing: John Jacobsson, managing partner of
Apollo Real Estate Advisors, said the senior piece of the capital
stack is “not there” and someone needs to start making these
loans again. It isn’t likely to happen right away, though. “Banks
we all know and love are in a capital crisis themselves,” he said,
adding that several overseas banks aren’t capital-constrained but
they don’t know the territory here.
Among domestic banks, Fox said he sees a push to clean up balance sheets by year’s end. “We created these conditions over a long
period,” Davidson added. “We’re not going to cure them in a short
period of time.”—Natalie Dolce and Paul Bubny, GlobeSt.com
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