We Won't Be Fooled Again...Or Will We?

[CREOPoint Managing Editor]

We Won't Be Fooled Again...Or Will We?
Monday, June 29, 2009
David Stejkowski
The Dirt Lawyer's Blog

I think Jonathan Miller at Trend Czar may have largely hit the nail on the head with this post last week, captioned "Don't be fooled." The gist, in my opinion? The financial system has stabilized for now but it is in recovery mode yet. Some provocative points he makes are:

1. Banks are building huge reserves with government encouragement while not lending much, hoping the economy will turn enough so it can write down some of its bad loans to reasonable levels. Then lending can get back to reasonable levels.

2. The people closest to the toxic asset problem don't want us to know how bad things really are.

3. Government is skirting around the issue of why it is not forcing more lending, all the while printing more money.

I don't want to get overly gloomy either (2017?), but I have had some of these questions in my mind for a while now too, and I also got a new thought or two from this post.

Posted by David Stejkowski


Thinking small ball...

In baseball some managers play small ball: a game strategy emphasizing single run production through bunts, hit-and-runs and base stealing. You see that more in the NL, where there is no DH. (And yes, I hate the DH rule.)

The same is true in commercial real estate. While the big deals you read about in the papers are at a near-standstill, the smaller deals -- bloop singles, reaching on an error, etc. -- are getting done. There's money for those small deals out there, and that's all because of less risk. That and the fact that you do not have to depend on CMBS to do a deal.

These deals aren't sexy, nor are the returns so great sometimes, but the deals are at least there. Face it, if you cannot do a Wal-Mart bond lease deal, a GSA building or medical offices, you may as well hang it up. I like seeing clients go after singles and doubles and then swing for the fences once in a while too.

Full disclosure: I have a vested financial interest in saying something like this because these types of smaller deals are in my wheelhouse, so I stand to make money from those deals. I am not equipped (or even interested, for that matter, other than as a spectator) in the mega-deals we saw a few years ago. But it also happens to be my humble opinion.

All that said, we need to start seeing activity on the larger deals and construction to effectuate a CRE recovery. Banks are afraid, and perhaps this is why. But, much as I enjoy small ball personally, the market also has to swing for the fences in order to thrive.

Posted by David Stejkowski

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