The Real Deal

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Editor's note

While I've been the editor of The Real Deal from the time it started more than six years ago, this is my first editor's note, and I'd like to introduce myself.

I have usually worked behind the scenes, at first writing stories, and then editing and assigning them as the magazine grew.

But now, thanks to our crackerjack staff of deputy editors, I've found the time to write this note, and I imagine you'll be hearing more from me in the coming months.

And for those of you who miss our publisher Amir Korangy's name on this page, you can still catch his views as a market commentator by tuning into news outlets like MSNBC, CNBC and CBS, and by reading the New York Times, the New York Post, the New York Observer, the Los Angeles Times and Bloomberg News. He has been quite busy recently helping readers and audiences make sense of the turbulent real estate market.

One thing that has been on TRD's radar lately is more reports filtering in of business practices that went awry during the boom, and that came back to bite us, leaving us in the predicament we are in now.

I just read Paul Muolo and Mathew Padilla's excellent book about the mortgage meltdown, "Chain of Blame."

Together, with Richard Bitner's "Confessions of a Subprime Lender," the book does the best job I've seen of getting into the nitty-gritty of what was happening in parts of the mortgage industry during the boom. For example, it includes a mortgage executive with a penchant for throwing knives around the office.

"Chain of Blame" describes how the pressure from Wall Street and mortgage originators to continue making money hand over fist during that period was so strong that arguments as to why borrowers could be classified as kosher and not a credit risk were comical:

• On one of the loans an underwriter reviewed, instead of a professional appraisal, there was a statement from the borrower saying what he thought the property was worth.

• One underwriter was told by his superior that a loan should be approved because the house had "curb appeal," which the underwriter found amusing because, after all, it's the borrower that pays the mortgage, not the house.

• Yet another underwriter was asked to leave his job after raising a stink about a lender who encouraged asset-poor borrowers to take out cash advances on their credit cards and use them as money for their down payments.

And so on.

It was these kinds of insane practices that led to a real estate bubble that was popped.

Lies and half-truths always take a while to unwind once they are exposed, whether they are the shady practices of a mortgage executive or the massive fraud of Bernard Madoff. And now, we are in the middle of the great unwinding.

If there had been more transparency in the real estate sector, and these practices had been detected earlier, the crisis we are in today might not be so dire. Transparency is something that has generally been lacking in real estate, and The Real Deal's mission, now as always, is to bring greater transparency to New York real estate, and to show how business is done and what really goes on. Transparent markets are efficient markets.

Currently, since the bubble has deflated for a while, falling prices have meant great deals for a few investors. Reporter Sarah Ryley highlights who the winners and losers are as part of an insightful package about the best and worst deals in New York real estate since the credit crunch, beginning on page 55.

For instance, Young Woo's recent purchase of AIG's 70 Pine Street and 72 Wall Street for $140 million seems a masterstroke. The deal set a new basement benchmark of $100 per square foot for a Manhattan office building, and it's hard to see how Woo won't make money on this investment. George Comfort & Sons' purchase of Worldwide Plaza for roughly $600 million — which works out to a very low $365 a square foot — is another "best" deal on our list.

In another big feature in this issue starting on page 35, Candace Taylor takes a look at the recent uptick in activity in the residential market in a series of stories, separating what is fleeting from any truly changed market fundamentals that would indicate a recovery. It's the kind of reporting that is central to what we do: trying to separate true economic growth from speculation, fact from fiction, and reality from hype.

Enjoy the issue and enjoy the rest of your summer.