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We're already in a mini bubble. That's what Massey Knakal's Bob Knakal told us yesterday at NYC Network Group's investment sales market panel. Some asset sale prices are a little higher than they should be, he says.
Massey Knakal's Bob Knakal, NYC Network Group director Anthony Kazazis and AREA Property Partners' Richard Mack
Bob, here with NYC Network Group director Anthony Kazazis and AREA Property Partners' Richard Mack, notes that there's a lot of paper going to market since special servicers don't want to go through the foreclosure process. More distress is coming. Discretionary sellers are putting product on the market to avoid the capital gains tax increase. And funds want to sell at the current carried interest rate. Expect more deleveraging, he adds-we've already absolved $15B of the $30B to $40B in losses expected before the cycle is over. Greenberg Traurig's Robert Ivanhoe, not pictured, says that some sellers will have no motivation to sell unless forced by lenders, and we'll see more zombie ownership in the market.
Stonehenge Partners' Joel Seiden and Real Estate Weekly's Dan Geiger
Until we address valuation, it's going to be a slow, painful recovery, Richard says. On the investment side, he notes that AREA's investors want it to put capital to work, but as a fiduciary it's being careful. Stonehenge Partners's Joel Seiden (with moderator Dan Geiger ofReal Estate Weekly), says he's seeing more opportunities coming across his desk, but you have to analyze properties past the cap rate-what can you do to touch up an asset and add value? REITs have recovered tremendously and tables have turned, Robert adds-they can raise money quite efficiently now, and are no longer at the huge disadvantage they faced in '06 and '07.