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Funds Are Buying Debt, Not Assets

NEW YORK CITY-Participants in an opportunity fund power panel see a bright future but say the present is a period of inertia.

By Paul Bubny | Updated on September 11, 2008

NEW YORK CITY-The future holds promise, but the present is a period of inertia aside from buying debt. That was the consensus of panelists at Wednesday’s Opportunity Fund Power Panel during the second annual RealShare Investment and Finance Summit here.

“If this isn’t a crash, I don’t know what is, at least in the lending environment,” said panelist John Jacobsson, managing partner of Apollo Real Estate Advisors. Paul Fox, managing director of Cerberus Real Estate, said he foresees more weakness in the commercial sectors in the near term, and noted that his firm sees the best opportunities at the moment in acquiring debt as opposed to properties. Similarly, Christopher Linkas, partner in Fortress Investment Group’s Drawbridge Special Opportunities Fund, observed, “I don’t see opportunity funds buying assets right now.”

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.

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