|When you've been in the industry for four decades, you see plenty go right—and plenty go wrong. (And plenty of people who don't appreciate the subtle power of the bowtie.) Time Equities chairman Francis Greenburger joined Real Estate Principals Group for its inaugural breakfast meeting to share his investment experience. âBuy it right,â he said. âIt's the only chance you'll get.â Risk and profits are defined by the price we pay for the property and what happens when we own it. A well-bought property will absorb the inevitable negative events and achieve a profitable result, he says—but if you buy at too high a price, it will be handicapped.
|We snapped Francis with REPG's steering committee: Time Equities'Barry Lieberman, Global Coverage's Donna Spinillo, Schulman Wolfson & Abruzzo's Harry Dublinsky, and Mintz Levin's Jeffrey Moerdler. It's not just about what NOI the property is making today and its worth but questioning how much it will be in the future. An apparent eight cap deal doesn't really make 8%, he points out—the net cash flow may only provide 6.5% after capital expenses. Underwriting issues that must be addressed: net leases, rental assumptions, and real estate taxes.
|Real estate rewards those who look carefully, are skeptical, and are willing to say no repeatedly until forced to say âyesâ to a compelling deal, Francis says. TEI had a chance to bid on Stuy Town/Peter Cooper Village, which he calculated should have a $3.4B purchase price with condo conversion revenues of $4.4B. TEI's offer was rejected and was told the property would be acquired for its rental upside instead (which Francis said made no sense because current rental income would have only provided a sub-3% return on the purchase). We then know the story: Tishman Speyer acquired it for $5.4B, and it's now in the bank's hands.