The Real Deal New York

REBNY panel sees parallels with 1980s S & L failures

November 06, 2008 05:15PM
By Adam Pincus

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The first properties to be sold when troubled banks or real estate companies
put their assets on the block are likely to be cash-generating holdings
such as multi-family housing and industrial sites, according to experts who
spoke at a forum hosted today by the Real Estate Board of New York.

Those who spoke on the panel — which focused on the impact that the weak credit
markets are having on New York City
– predicted that the sale of real estate during the current financial crisis
will be similar to what occurred under the Resolution Trust Corporation (RTC),
which was created to dispose of assets following the 1980s savings and loan
crisis.

“I think we all will go back to
where we started last time,” said Gregory Reimers, executive vice
president of JPMorgan Chase’s real estate banking division. Buyers would look
at cash flow, tenant quality and lease expirations.

“In the RTC days, [buyers] looked at multi-family, looked at underlying
cash. That is where people start to put their toe back in the water … Sectors
like condos and others, which are further detached from cash flow are going to
have a harder time attracting capital,” Reimers said.

Reimers was on the panel with Lee Neibart, a senior partner of Apollo Real
Estate, and Stuart Rothenberg, managing director at Goldman Sachs. The panel,
which was at the Sheraton New York Hotel in Midtown, was moderated by James
Kuhn, president of Newmark Knight Frank.

Neibart said he expected pension funds to raise their caps on real estate as a
reaction to losses from hedge funds and derivatives. Many pension funds, such
as those for New York City
and state employees, are maintained at about 6 percent.

“My hope is our industry will start seeing higher allocations,” he
said. “I would think if that increased to 12, 13, or 14 percent that may
be a great jump start for us.”

Rothenberg said the east side of Downtown would fare worse in both office and
residential markets compared to the west side.

“I think the east side of [Lower] Manhattan is going to be pretty much
dead,” as the city, state and federal governments focus on the west side,
and as Goldman Sachs pulls out of several east side locations for its move to
200 West Street at Vesey Street in Battery Park City. “That is a lot of
space that is not going to get eaten up for a long time,” he said.

“The east side of [Lower] Manhattan
– where you could see conversions to condos, you could see a community being
formed — I think that is the area that is going to suffer in a very tough
way.”

Neibert gave a bleak outlook on retail prospects, saying that tight credit was
inhibiting Manhattan
stores’ financial strength.

“We just don’t have the availability to do any kind of business. People
are holding on and we are all concerned about their ability to expand and
grow,” he said. “Just look at some of the storefronts as you walk
around New York City.
They will hold on through the holidays and then watch what happens afterwards.”

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