The panel not only focused on the effects, risks and opportunities on global real estate markets from the credit crunch, but also explored future investment implications. Along with Butchenhart, the Tuesday afternoon panel session attracted panelists including: John Pelusi, executive managing director of Holliday Fenoglio Fowler; Daniel Walsh, executive vice president and managing director of KeyBank Real Estate Capital; W. Paul Farmer, executive director and CEO of the American Planning Association; and Simon Ziff, president of Ackman-Ziff.
Ziff told the audience that from the front lines, it has been a pretty stressful time. One of the most important things to consider, he says, is deal selection. "We are seeing deals not make it to the finish line because there is a disconnect of expectations," he says. "The art of selecting transactions is critically important. You need to figure out where to spend your time."
Ziff continued to note that large deals now days need many sources and are much harder to get. From the financing end, Ziff says that for the first time—because financing isn't readily available—he is happier to see deals in the $30-million to $50-million range rather than the $200-million to $300-million area. "It is difficult to do large deals no matter how good a project looks or how good developer is…it is just hard."
Pelusi, who said that although most people think we might be in the seventh, eighth inning, we are not when you look at charts. "Graphically, you can see that there are still a lot of losses that still need to be recognized by the global market." Pelisi did note, however, that anything that has solid cash flows is still able to get done. "Capital flows have slowed, but if you look at past experience, we have been through it before, and we are going to pull through...it's just a question of when."
Butchenhart agreed with Pelisi that "it is more of a fourth inning," and said that things should pick up within the next six to nine months unless the economy deteriorates. He noted that when comparing today to the early 1990s, when the multifamily market experienced overbuilding, foreclosures and restructuring, things are better today because of strong fundamentals. "Owners are better capitalized today than in the 90s," he said.
Walsh, who spoke on capital availability, said that "although everyone looks at the historical past to try to predict the future, new events keep happening." He pointed to the Federal Housing Finance Agency's takeover of Fannie Mae and Freddie Mac earlier this week as a key example.
Walsh continues that we are getting back to basics. "We are making sure real estate works on a basic level. We need to make sure the structures put in place are used wisely going forward." He agrees with Butchenhart that "we can get back to recovery quickly once things get going," but he, along with all of the other panelists, said the main question, is when it will happen.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
