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.