AMERICAS NEWS: Watching a re-run

Dennis Yeskey has seen real estate downturns before – in fact the current recession is actually his fifth go-around.

Starting with the recession of 1973 and 1974, when his father was a homebuilder in Pittsburgh, Yeskey has also lived and worked through the downturns of 1982 to 1984, the RTC of the early 1990s, and the mini-recession of 2000 and 2001 following the bursting of the dotcom bubble.

I have never seen so many managers waiting to buy assets that are not for sale. Never

 Dennis Yeskey

So when it comes to comparing cycles the senior adviser of Southfield, Michigan-based restructuring firm AlixPartners knows a thing or two. This time round, however, Yeskey warns there are two major differences: the willingness of banks to extend maturing debt for good operators and the volume of capital sitting on the sidelines waiting to pounce.

“In the other downturns there were a lot more foreclosures and a greater loss of equity. This time we haven’t had that as much,” he said. Instead, banks have been willing to work with good operators to restructure deals and debt, keeping borrowers in the game and resulting in fewer pricing discounts.

Yeskey was hired by AlixPartners in July to build the firm’s real estate practice, after a 35-year career building three real estate platforms at Deloitte and Kenneth Leventhal. AlixPartners was recently hired to help restructure Dubai World and appointed last year to help restructure US REIT General Growth Properties before it filed for bankruptcy protection.

For Yeskey, though, the main difference between past cycles and the distress of 2009 is the equity sitting on the wings. “I have never seen so many managers waiting to buy assets that are not for sale. Never,” Yeskey added. “In the 1990s, it took three to five years to get money back into the market. This time it’s already sitting on the sidelines.”

The waiting equity has therefore created a Clint Eastwood-style “Good, Bad and Ugly” scenario, according to the veteran. “The good is all that money,” Yeskey says, “but the bad is the fact there are a lot of assets that need to be fixed and which look likely to be fixed by the banks. The ugly are the bad assets sitting there that someone will have a chance to buy.”