News
YESTERDAY'S PANEL ON DISTRESSED ASSETS
August 14, 2009
| We admit to being nervous hosts, holding a Bisnow Breakfast & Schmooze yesterday in Manhattan. Isn’t everyone away in mid-August? Nope, you guys are workaholics, which is why we have hope! Thanks to all of you who brought us a full house of 250 at the General Society Library and helped eat up all that cream cheese. |
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| World class experts held forth: Schonbraun McCann’s Paul Griesmer, IVI International’s Bob Barone, Arent Fox’s Jackie Weiss, Massey Knakal’s Bob Knakal, and Eastern Consolidated’s David Schechtman. Their consensus: Just because the recession’s over doesn’t mean things are looking up in NYC real estate. There are many distressed assets that have not come to market yet, but likely will by year’s end as owners find refinancing challenging. |
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| Ernst & Young’s Mark Grinis called home equity the "jet fuel" that drove the economy the last few years. Relying instead on just increases in population and productivity, he foresees growth now of 1 to 2% post-recession, rather than the previous 3-4%. |
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| Schonbraun McCann’s Paul Griesmer said significant differences exist between the current market and the last real estate downturn of the early 1990's, when problems were concentrated in banks and consisted of troubled acquisition and development whole loans where development properties weren't leasing up. In the current cycle, he says, troubled loans run throughout the financial system as a result of declining values on fully leased or stabilized properties in much more complex lending structures. In the 1990's, the RTC and OCC led the way in making a market for pricing distressed assets or forcing banks to take write downs that led to sales, whereas we don't have this today, and therefore resolution will be more challenging. |
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| IVI Inernational’s Bob Barone said his concern is that lenders may be doing financial due diligence but not sufficient investigation of the actual “bricks and sticks” condition of what they’re buying. That is, if it’s a numbers game, he says, they may be pleased that they’re getting an asset at, say 30 cents on the dollar, but that may turn out not to be such a bargain if they belatedly discover physical deficiencies like deferred maintenance. |
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| Arent Fox’s Jackie Weiss said lenders are beginning to re-examine the policies of extending maturities in the hope that market values will improve. She expects a slow uptick in default activity over the coming months that will result in greater volume of distressed assets and other property transfer transactions. |
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| Eastern Consolidated’s David Schechtman said the shift in pricing has almost been completely digested; lenders concede we are in a loss mitigation mode. He said brokers help assuage the pain of loss with broad marketing campaigns. |
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| Bob Knakal says that even if banking and insurance money were coming in at full throttle, lack of CMBS funding still leaves a giant hole. |
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| On the schmooze front: Frontview Advisors’ Marc Brooks, Eastern Consolidated’s Dan Glaser, First American Title’s Theresa Garelli, Pioneer Acquisitions’ Jayson Lemberg, and Platinum Maintenance’s Nick Gilbo. |
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| ING Clarion’s Tim Zietara, Massey Knakal’s Nick Petkoff, Rhodes Associates’ Ellen Haber, Requity Real Estate Group’s Bill Krowkoski, Ackman Ziff’s Rich Lechtman (also president of NAIOP NY), and IVI’s Josh Simon. |
