DECONSTRUCTED:The way we were

If Washington needs a piece of advice on how to deal with the crisis engulfing the commercial real estate industry, it’s this: make the banks capitulate.

So say the many anonymous posters to the personal blog of Steve Felix, a marketing pro at Aviva Investors. Felix, who has long kept a blog called On The Road (, invited his contacts to anonymously compare and contrast the previous recession with the current one, as well as comment on the government’s divergent responses. We’ve excerpted some of the best posts below. Some offer remedies, others offer criticism. One offered the profound insight “we are in deep shit now”.


“Today, OMG how slow! Deal by deal, discount by discount. As long as the lenders can argue they are solvent nuttin’ needs to move. But in fact it all needs to move … Stop propping and start popping.”

“Past was FAST! The pace was fantastic! The government facilitated a quick, catastrophic, over-the-top write-down, taking many lenders and owners down and out. It was all about courage. Constituted perhaps the greatest involuntary wealth transfer ever on the planet. Was it fair? No. Was it effective? Very.”

“The rigid debt structure of CMBS is untested and did not exist the last time around – we are all going by Braille on this and who knows where it will take us and the real estate industry.”

“The only way to cleanse and restart was to force the classic investment thesis of capitulation. Markets only heal when the bad assets and many good assets are sold in a fire sale.”

“In short, the economic fundamentals are much weaker this time and will be much slower to recover, and rents will be a long time recovering as a result. We have yet to see the worst of it, generally speaking, and there will be many a false dawn before we see the real McCoy.”

“Then I was a wiz on the HP 12C, now it's an iPhone.”

“Today it is not clear that the opportunities to buy will be anywhere near as attractive or voluminous as they were in the early 1990s … those with dry powder will find far fewer owners and borrowers ready to capitulate at any price and there will be lots of competition.”

“Realisation of problem is happening at warp speed when compared to 1985 to 1991 time frame. [But] then, despite slowness to recognise the scale of the problem there truly was a clearing mechanism. Today the structure of debt and its administration is so complex that despite knowledge the workout will be pre-global warming glacial. This could take a long time, maybe as long as 1985 to 1995.”

“Bottom line? The market cannot clear to a pricing level that accurately represents the risk.”

“My best memories are of buying assets at distressed, market clearing prices, and of course selling at a profit.”

“Remember, it was the crisis that leads to the creation of opportunity funds, REITs as we know them, securitisation, and eventually mezzanine and other debt innovations. Today, real estate is ridiculously mainstream and investors’ willingness to invest anywhere, anyhow, at any level of the capital structure continues to amaze me. I’m no longer naive (or with hair), and remain sceptical that we will learn anything from this crisis.”

“Few innovations will come from it (nothing is forcing the innovation this time), the banks will pretend they don’t have massive losses long enough that things will inevitably improve (and thus justify their inaction), and we will soon return to frenzied bidding wars to buy mediocre assets at 4.5 percent yields (at least in Europe). Unlike the last time, when it took almost eight years for investors to re-dip their toes, I predict the wall of cash returns much sooner than is financially justified, which will of course bailout all the silly projections that underlie these future buys. And on we go.”

“All evidence supports a slow recovery. If the economy is strong enough, pretend and extend will stop. If the economy has a gradual recovery, it won’t for a while. We need a market clearing mechanism to put this problem behind us. But first, we need to be able to afford it. That’s the dilemma.”