LeFrak, Rudin expect big commercial real estate opportunities down the line

By Adam Pincus | November 17, 2009 06:20PM

Heads of two of the city’s leading real estate families said although the short-term commercial property landscape remains difficult, opportunities are fast approaching.

Richard LeFrak, chairman and CEO of the LeFrak Organization, told an audience during a Real Estate Board of New York luncheon in Midtown this afternoon that signing a new lease with a tenant was similar to a famously difficult medical procedure.

“It is like having a colonoscopy,” he said. “That is exactly what it is like.”

He was joined on a panel by William Rudin, president of Rudin Management, and Jeffrey DeBoer, president of the national trade association, the Real Estate Roundtable, in a discussion moderated by Steven Liesman, senior economics reporter for CNBC.

Rudin confirmed that striking lease deals was hard work, but there was more activity in the market.

“The good news is we are making [leasing] deals… We are happy we are making deals. We don’t like the rents, don’t like the work contributions,” Rudin said.

But LeFrak said 2010 and 2011 would provide the best buying opportunities in a generation for investors with cash or the ability to borrow.

“I don’t think it is ever going to get better than… the next year and the year after,” he said.

“Because why buy these things when they are all $800, $900, $1,000 a foot and everybody is living in [a] fantasy world, when you will be able to buy them for half off?” he said.

DeBoer cheered the structuring this week of the industry’s first commercial mortgage-backed securitization since the crisis began, for a $400 million loan to Developers Diversified Realty. That deal may be financed using the assistance of the federal term asset-backed securities loan facility program, known as TALF, or it may be financed by private investors, he said.

Simply having the government programs available provides a crutch to the credit markets, and that potential assistance could turn out to be as powerful as actually offering the aid, DeBoer said.

He compared the federal programs such as TALF to a well-executed basketball move. They “may go down as the greatest governmental headfakes ever. Because once they were announced, just having them out there” improved the credit environment, DeBoer said.

But pain remains for property owners, even while the credit crunch appears to be easing.

LeFrak, who recently invested in the purchase of assets from the failed Corus Bank, said there are hundreds of billions of dollars in bad loans on the books of weak regional banks. If many of them were to fail at the same time, it could be a catastrophe.

He said his family expects to finance future building, at least in the near term, without loans.

“We are going to have to finance our construction, probably, with cash. That is the way it is going to be,” LeFrak said.