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What's a big difference between now and ’08? How about how hard it is to raise money for discretionary spending. AllianceBernstein real estate co-head Brahm Cramer shared that thought 190 attendees atBisnow’s 2nd Annual NY Investment Summit at the NY Bar Association on Thursday.
NY Bar Association on June 28, 2012
For some reason, everyone wants to have control of their money and know how it’s being spent nowadays, our panelists say. We, for instance, would love to know our money is going toward layaway purchases at the Nordstrom coming to Extell’s 225 W 57th rather than toward rent, but it doesn't look like we'll get our wish.
Brahm Cramer at the NY Bar Association on June 28, 2012
Brahm says asset managers, in turn, are no longer content to be silent partners and instead want to have a lot more input into what their operating partners are doing.
Brahm Cramer, Jahn Brodwin, and Simon Ziff at the NY Bar Association on June 28, 2012
Ackman-Ziff prez Simon Ziff (right, with Brahm and FTI Consulting’s Jahn Brodwin) agrees that investors are none too bashful about saying what they want. If you want their money, you can’t pitch a deal based on four-year growth assumptions anymore. You have to have a plan, an angle, for the project, and “you have to prove your thesis,” he says. (If we had a nickel for every professor in college who told us that after we made outlandish claims...)
Michael Scheinberg at the NY Bar Association on June 28, 2012
Pircher Nichols & Meeks’ Michael Scheinberg says there’s a big focus on guarantees. What’s going to happen when an equity partner drops out, for instance? It’s gotta be spelled out in the contract. He says a deal’s sponsor needs to push back a bit if investors are demanding too much control. Simon says he knows sponsors are putting money on the line, but that’s why they’re getting promote fees. Jahn points out that both investors and sponsors lost a lot of equity, but the sponsors were “eating well on fees.”
Michael Scheinberg and Matt Dicker at the NY Bar Association on June 28, 2012
Canyon Capital Realty Advisors and Canyon Johnson Urban Funds’Matt Dicker says both Canyon Capital’s bridge debt and Canyon Johnson’s equity funds are in demand for two- to three-year construction funding to keep projects going when an original party drops out. His firm prefers to put in at least $15M unlevered on a shovel-ready project but is willing to provide bridge money in which it’s senior for nine to 12 months and then drops down the stack—if it means working with preferred sponsors.
Debbie Levinson and Vishal Chawla at the NY Bar Association on June 28, 2012
We also snapped Reznick Group’s Debbie Levinson, who moderated our debt panel (more coverage later this week), and Ernst & Young’s Vishal Chawla. Debbie tells us she’s working with new ventures that want to capitalize on emerging development and acquisition opportunities. (We're developing a beef-flavored power drink for dogs that hasn't garnered much interest...yet.) Vishal says recaps have been good opportunities for disciplined investors and lenders that can handle the volatile capital markets.