The replacement of Pandit at Citi is a very good thing for CRE. His appointment 5 years ago never made any sense to me. He was a moderately successful hedge fund operator with absolutely no experience at running any part of a large commercial bank, and no experience running a large, complex, worldwide organization. He took over from a lawyer who also had no operational experience who had no idea how to run the bank, and he had taken over form a deal junkie who had built an very disparate and complex conglomerate of financial services companies. Rubin, it turns out seems to enjoy the perks of his title but did little to rationalize the operation of the bank into a strong commercial bank. Bringing Pandit in to deal with this mess in the midst of the crash of the capital markets seemed at the time to be a terrible decision by the board, which has been proven to be the case.
Giant American commercial banks are extremely complex organizations, but they are a bank, not a hedge fund and not something just any smart guy can run. Commercial banking is at its core, the allocation of capital to a vast array of borrowers and being the custodian of depositors funds for safe keeping. Large banks like Citi are critical to the smooth functioning of commercial transactions throughout the world, and they are critical to the smooth functioning of the real estate market, both residential and commercial. Without well run large commercial banks there is no smooth functioning of the residential mortgage market, and so there could not be a way to finance the development of housing. Likewise, there cannot be construction lending available for large projects without the sound banking system and the strong functioning of the large banks.
The new Citi board seems to far better understand their real obligations, not only to shareholders, but to the financial system and the capital markets at large. They clearly understood that Pandit was doing a poor job of carrying out the role of CEO of such a large institution and they set out to rectify the past error of his hiring five years before.
It will take awhile for the new CEO to fix many of the big issues that currently exist at Citi, but he seems to be the right guy at the right time. All of this is boding well for CRE as a strong institutional lender that is able to serve its role to fund large and small real estate projects throughout the country, will add a substantial capital source to our needs to grow both housing and commercial real estate. As the economy eventually improves over the next several years, it will be very beneficial to have another strong and well run source of capital for the industry.
For those of you who think Libya is just another political issue, or just a screw up about security at a consulate, think again. It affects your business. First, the foreign policy of the administration to lead from behind in the war, and then to abandon the rebuilding of the new government and the army, sent a huge message to the terrorists that it was open season to rebuild in north Africa and set themselves a base from which to train and launch new terror attacks in Europe and potentially the US. It is very clear now that the real issue was a very badly crafted foreign policy that is based on the president thinking, naively, that playing nice in the sand box gets rewarded with nice play by the really bad guys like Iran. In that part of the world, only being very tough and willing to act aggressively to assure leadership, and retaliation is respected. The current foreign policy of the US affects you very directly because it has created a new base for terror, a resurgence of the terror groups after they had been badly damaged over the prior years, and it means the world is a far riskier place than it should have been. Add to that, the attempted cover up by the administration of how and why the ambassador got murdered, and you realize that they learned nothing from Watergate, and we all know how that turned out. Libya should be a major wake up call for everyone that the world is far more dangerous today then the administration wants you to believe, and that danger will not go away soon. This will affect world events over the next few years, and that impacts capital markets, defense budgets, the deficit, and the high risk of another terror attack in the homeland. We walked away in Afghanistan after the Soviets were defeated, and they ignored the lesson by walking away in Libya. Foreign policy really matters to your business and the capital markets, so pay attention to Libya and how badly this administration screwed up and then covered up. The Mideast is where it will all happen in the next year, and the picture is very bad right now because the US is running away instead of out front.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
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.
