How tough will it get for the real estate capital markets before it gets better? That was the question top executives tried to answer yesterday afternoon at the Pension Real Estate Association\u2019s spring conference in Boston. As a measure of the intense interest in the issue, the event drew close to 700 real estate finance professionals from around the country\u2014a record turnout for a PREA event, according to the association\u2019s leaders. For the moment, at least, the outlook is not pretty. \u201cI think the capital markets\u2019 pain is going to take longer to heal than people realize,\u201d said Jonathan Gray, senior managing director and co-head of the real estate group for The Blackstone Group L.P. A little more than a year ago, Blackstone engineered the largest-ever private buyout of a public company when it acquired Equity Office Properties. A big part of the problem is the distress on the senior tranches of securitized mortgages; banks are unable to sell several hundred billion dollars\u2019 worth of CMBS paper, Gray noted. As a result of uncertainty in the capital markets, real estate lending has taken a \u201cback to the future\u201d turn. In some ways, the market looks a lot like it did a decade ago, observed Dean Adler, CEO & co-founder of Lubert-Adler Partners L.P. \u201cWe\u2019re back in the real estate business again. The sheriff\u2019s back in town,\u201d Adler said. Once again, capital structures typically consist of at least 30 percent equity. Meanwhile, today\u2019s conditions again favor local operators who understand their markets and are dedicated to adding value to their assets, he argued. One silver lining for commercial real estate in this climate is fundamentals. This contrasts sharply with the slump of the early 1990s. \u201cThere was no pension fund we could convince from 1990 to 1995 to invest in real estate,\u201d recalled J. Bruce Flatt, managing partner for Brookfield Asset Management Inc. He characterized global fundamentals today as \u201cextremely solid,\u201d particularly in the office and retail sectors.Neil Bluhm, principal with Walton Street Capital L.L.C., explained that today\u2019s commercial market in the United States is largely free of the massive vacancy and overbuilding that dogged the market for several years in the 1990s. \u201cI think this is a great time to have capital available, whether it\u2019s in your pocket or (our) pocket,\u201d Bluhm said. Nevertheless, the current situation presents many pitfalls. According to Adler, some developers may want to take what he called the \u201cirresponsible\u201d step of moving forward with chancy projects in this uncertain time. Those sponsors, he explained, may think that they will get a jump on the competition. Adler\u2019s assessment: \u201cThat\u2019s lunacy.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
How tough will it get for the real estate capital markets before it gets better? That was the question top executives tried to answer yesterday afternoon at the Pension Real Estate Association\u2019s spring conference in Boston. As a measure of the intense interest in the issue, the event drew close to 700 real estate finance…<\/p>\n","protected":false},"author":1314,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37301],"tags":[],"class_list":["post-1003780591","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"acf":[],"yoast_head":"\n