Reviving The Commercial Real Estate Market

The 2010 Milken Institute Global Conference had a panel discussion on the current state of the commercial real estate market yesterday. The discussion featured Harvey Green, President and CEO, Marcus & Millichap Real Estate Investment Services; Richard LeFrak, Chairman, President and CEO, LeFrak Organization; Peter Lowy, Group Managing Director, Westfield Group; Barry Sternlicht, Chairman and CEO; Starwood Capital Group, and D. Michael Van Konynenburg, President, Eastdil Secured. Moderator was Lewis Feldman, Partner/Los Angeles Office Chair, Goodwin Procter LLP. You can watch the entire discussion here.

I Use CoStar, All The Time

Sorry, John, I must disagree with you on this. CoStar has its shortcomings, and yes, it's expensive, but compared to some of the alternatives, CoStar is one of the best resources for commercial real estate.

Maybe CoStar is just not a good tool for brokers? I'm not a broker. I don't know. To be honest, I had no idea CoStar actually provided listing services. CoStar probably provides many products and services, but I know of it mostly as a great source for market data and its comprehensive comps database. Most institutional investors and lenders use CoStar. I guess cost is less of an issue for them as long as the data is reliable and can be delivered on time. Given that CoStar is based in DC, its coverage of the DC Metro area is especially comprehensive. CoStar also owns PPR, which offers research and advisory services for 170 global markets.

All real estate is local. CoStar probably just doesn't have a big presence on the left coast. I'm always amazed at how difference brokerage firms can produce completely different market reports for the same market/submarket. Sometimes an independent source is good, and sometimes you just have to make some phone calls, and do your own research.

Learn The Development Game From Megamall And The Wire

I know development is pretty much dead right now, but for those who want to get in the business and learn the development game, maybe you should watch the documentary Megamall and the TV show The Wire.

Megamall documents the 13-year development process of the massive 2.2 million square feet Palisades Center Mall and its impact on the suburban community of West Nyack, New York, 18 miles north of Manhattan. The documentary is very much anti-suburban sprawl and portrays the Syracuse, NY based mall developer The Pyramid Companies as the villain. But regardless of your politics, the film provides rare archival footage of town hall meetings and interviews with residents, activists, environmental advocates and developers over the 13-year period. You can truly witness the entire development process of a major retail project.

The Wire is my all-time favorite TV show and I wish more people watched the show. One of the main characters, drug dealer Stringer Bell, decides to try his hands on the development game. Below is a nice mashup someone posted on Youtube. In the clip Stringer Bell learns how cost overrun is the nature of the development business and wonders how anybody makes money in this game.

Greenspan: Commercial Real Estate Bubble Has Already Popped

Alan Greenspan was interviewed by Jack Tapper on "This Week". He commented briefly on commercial real estate. The relevant comments start at the 2:28 minute mark


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Weekend Roundup

RREEF: 2010 U.S. Real Estate Investment Outlook and Market Perspective ("IREI")

Legacy CMBS Troubles Keep Piling Up ("GlobeSt.com")

RBS to Sell Commercial Mortgage Debt, Ending Drought ("Bloomberg")

Standard & Poor’s, Moody’s Win Dismissal of Mortgage Bond Suit ("Bloomberg")

Investors Win on REIT Path ("WSJ")

FDIC is the Top Choice for Loan Portfolios ("GlobeSt.com")

CRE Firms Lay Out Modes for Operating in a Post-Recessionary Environment ("CoStar")

Who Are the Top Brands in Commercial Real Estate? ("Retail Traffic")

Medical Office Investors Mobilize as Health Reform Becomes Law ("NREI")

Multifamily, Yesterday and Today ("The Commerecial Observer")

Apartment REITs Scout for Deals on Busted Condos ("Developments")

Grubb & Ellis Founder Says REITs Signal Recovery in Commercial Property

Steven Roth on CRE: The eye of the storm has clearly passed

Vornado Realty's chairman Steven Roth shares his observations on distressed sellers/distressed buyers and the state of commercial real estate in his annual letter to shareholders:

• Today, lenders are not selling at panic distressed prices. This is very different than the 1990s - who can forget the RTC, etc.
• Sellers, and sellers who were lenders (and not natural holders) will flood to market as prices rise. Assets will soon trade a plenty (just look at the volumes flooding into special servicing) but in controlled processes at clearing, but not distressed prices.(6)

The Great Recession and the debacle in residential real estate notwithstanding, commercial real estate is nowhere near as distressed today as in the 1990s. Then, commercial real estate from coast-to-coast was grossly over built; year after year see-through office buildings stayed see-through. That is not the case today – over leveraged yes, over built no.

And, on GGP sale:

Look at General Growth - all the money was made buying securities in the panic. Whoever the final acquirer turns out to be, they will be paying a fair, not distressed price.

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