"The best opportunities are trying to buy distressed property," Fox noted. "You could buy the debt, but buying the debt is just a way to get to the asset." The issue, he pressed, was that the old ways of retail were running into problems and there needed to be a new innovation that could change the market positively. Something that would "energize the public to get off their computers and interact, again," Fox explained.
The answer is still lost in the ether, but Fox explained its necessity, nonetheless. "The department stores that our grandparents [went to]," he said "People don't do that anymore."
Prager thinks one of the better investments coming down the road will be secondary markets or secondary directs, funds holding retail property, which may present better deals. "Retail is still very popular [to private equity]," she explained. It's also beneficial to the market that investors are keeping their hands off condo construction and land development, as both are dicey investments and banks are being stingy with their loan allotments.
Prager predicted it will take six months to a year before the prices come down and the banks begin releasing property. The issue, she felt, was the infusion of money into the banks. The problem the infusion created was that some of the lender now have a cushion, so they do not have to foreclose on properties yet--ergo the "blend, extend and pretend" mentality--and until the banks gain liquidity again, no one is going to see a dime.
Fox concurred and predicted fundamentals will continue to drop for the next year, after which we'll see single-family begin to rebound. The government eventually could force the banks to sell so that the liquidity could aid the banks in lending its way out of this crisis, but until that point, the lending will be sparse and our economy will be in a holding pattern. However, he noted, retail is still the "best" sector in many respects, namely that it is simple.
"Bodies and dollars," Fox said. Watching the savings rate will be the best indicator. When that drops, it means people are spending money again. Daniel Alpert, managing director of Westwood Capital provided some bad news in this regard in his section "The Federal Government's Role in Repairing the Capital Markets."
Alpert waxed poetic on the benefits and limitations of the government intervention, on the whole a mixed bag of economy-saving measures laced with clunky, hard-to-remove programs. However, the biggest thing for retail at this moment is the government's push to extend unemployment benefits.
Quoting Keynes, Alpert recited, "In times like this it doesn't matter if you hire labor to dig ditches and fill them back in again."
The point being illustrated by this anecdotal information is that large retailers should be concerned about unemployment benefits reaching their limit. Logically, the unemployed are currently spending their meager checks on goods and services, but when their benefits run out, that money will be diverted to necessities or will disappear from the retail market completely. Alpert warned that if these benefits run out it could harshly affect retails margins, as well as vacancy if on-the-brink companies lose enough business.
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