If I am any sort of leading indicator then times are getting a lot better. Just in the last week I have had calls from two serious developers asking for my assistance to raise construction debt for ground-up hotels/retail. Both are in terrific locations, they have excellent sponsorship, the projects make enormous economic sense, and they will have low leverage. Just that these are the sorts of calls I am getting is very indicative of the psychology. Up to now I only got calls asking me to advise on workouts and restructuring and refinancing. I just was able to get a commitment on a $110 million portfolio loan for hotels which included capital to complete the last bit of construction on a hotel in a secondary location.

I was one of those who thought that ground up construction, especially for hotels, would not happen for another two years, but here we are. I think I will be able to arrange the financing for both now. This is not to suggest that everyone can now go find construction loans for their new hotel, retail or office project. That is not going to happen. These are both unique in quality of location and quality of project, and sponsorship.

The enormous shift in thinking to a positive tone in just the past few weeks is astonishing. In the restructurings I am advising on, the attitude of the banks is now shifted noticeably to, let’s find solutions and work to build the client relationship so we can do more business in the future. That is opposed to, pay down your loan and don’t even think of asking for anything new for a long time. In one advisory client situation, we actually have two banks vying to be cooperative on the restructure to be able to keep their client happy so he will bring new deals to them. This is not to suggest they are underwriting poorly or rolling over or being easy. They are not. It is simply the attitude shift to, let’s figure out how we can solve this together so we all go away happy.

If the economic statistics and the equity markets continue to improve, and as the larger banks shift from survival to growth of the book, as they have now, then lending will continue to expand, CMBS will grow and we will see a real stabilization occur and then shift to refinancing and eventually to development. It is actually starting to appear more like a normal recovery as the threat of a double dip, more major bank collapses, and a European disintegration begin to recede. Even the auto companies and AIG are back on track and will repay the government. I guess we can say there is nothing like a major crisis to clean out poor management and over levered companies and banks, and reset the system to a more sustainable course. While we still have a long way to go and there are still many black swans circling like Iran, Lebanon, Tunisia, and terror attacks, there is a much better ability to sustain such events now than there was even a few months ago.

TARP saved us, and Paulson and Bernanke deserve historic credit. Congress did its usual best to try to screw it up, but luckily they passed it. The Israelis launched the first major cyber war attack and set back Iran’s nuclear work, and so far we have been lucky on terror attacks despite Eric Holder still thinking they are just criminal acts and not war. While anything can happen, and it is not yet time to go way out on the risk curve, there is a major shift that the election has set now in place. Getting Nancy out of power may have been the best thing the country has seen in many decades.

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Joel Ross

Joel Ross began his career in Wall St as an investment banker in 1965, handling corporate advisory matters for a variety of clients. During the seventies he was CEO of North American operations for a UK based conglomerate, and sat on the parent company board. In 1981, he began his own firm handling leveraged buyouts, investment banking and real estate financing. In 1984 Ross began providing investment banking services and arranging financing for real estate transactions with his own firm, Ross Properties, Inc. In 1993 Ross and a partner, Lexington Mortgage, created the first Wall St hotel CMBS program in conjunction with Nomura. They went on to develop a similar CMBS program for another major Wall St investment bank and for five leading hotel companies. Lexington, in partnership with Mr. Ross established a hotel mortgage bank table funded by an investment bank, and making all CMBS hotel loans on their behalf. In 1999 he formed Citadel Realty Advisors as a successor to Ross Properties Corp., focusing on real estate investment banking in the US, UK and Paris. He has closed over $3.0 billion of financings for office, hotel, retail, land and multifamily projects. Ross is also a founder of Market Street Investors, a brownfield land development company, and has been involved in the acquisition of notes on defaulted loans and various REO assets in conjunction with several major investors. Ross was an adjunct professor in the graduate program at the NYU Hotel School. He is a member of Urban Land Institute and was a member of the leadership of his ULI council. In 1999, he conceived and co-authored with PricewaterhouseCoopers, the Hotel Mortgage Performance Report, a major study of hotel mortgage default rates.