Real Insight. Real Estate.

Posts Tagged ‘fund managers’

Caveat Emptor!

As this recent article in the WSJ articulated, the recent run-up in stocks has given some hope to the commercial real estate market. What’s interesting is that many of the enterprises are players who typically enjoy prospering as private shops. Perhaps the warm reception Starwood received earlier this year encouraged them.

Like with the rash of private-shop-turned-public IPO’s announced in early 2007 (Fortress, Sam Zell, BlackRock…etc), I can’t help but feel a little nervous. While Zell actually sold his public company, the point remains the same. I’m not so sure I want to be buying what these guys are selling. Why? Read the rest of this entry »

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Real Questions…

…. and Unintended Consequences

Question 1:

If you are a buyer of real estate (and actually have capital), what sort of IRR are you looking for? 20%? 30%?

Question 2:

If you are an owner of real estate, why on earth would you sell into this market unless you absolutely had to?

These questions succinctly sum up the entire commercial real estate market. Other statements examine facets of the problem, but they all revolve around this problem we’ll call, “The Bid/Offer Spread”.

Every day, the fund managers who still have jobs wake up, read the Wall Street Journal and say to themselves, “If I’m going to buy a property, I deserve a discount.” Any possible ‘green shoots’ notwithstanding, unemployment is high, the economy is in recession, global icons are getting destroyed (or taken over by the government), and the banking system as a whole is only viable because the Feds have stepped in with HUGE assistance programs. You can also throw in the fact that recent liquid market action (rally in gold, commodities and TIPS while the 10yr notes sells off ) is telling us we might even have an inflation problem in the not-so-distant future. Read the rest of this entry »

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