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EDITOR'S LETTER: Cycles of change

When I first starting covering the real estate market back in late 1995, the Resolution Trust Corporation was winding down, having liquidated a total of roughly $394 billion in assets from 747 savings and loan associations (S&Ls) declared insolvent as a consequence of aggressive lending policies during the 1980s.

Investment opportunities were plentiful, and opportunity funds were popping up everywhere to take advantage of the deluge. I stepped away from the real estate markets in 2000 to cover other industries and take on other roles, but I never forgot the excitement the industry generated.

Therefore, it is funny that, upon my return to real estate journalism, I find the market in a similar but different position. Aggressive lending practices have once again led to a crisis, but this time the bailout did not require the banks to dispose of assets. As a result, opportunities – especially ones with good returns – are scarce, and all the capital that has been raised by fund managers is sitting on the sidelines, waiting to pounce.

To get a bird’s-eye perspective on the situation in the US, I recommend you check out PERE’s US roundtable. The participants talk about why they have turned their attention to the economy when evaluating domestic opportunities.

In addition, they discuss foreign capital’s interest in the US, the current lending environment and what it takes to survive today.

Talk about surviving, we have a pair of related (but different) features on Lehman Brothers. First, Robin Marriott takes you inside Silverpeak Real Estate Partners, the new investment advisor spun out from Lehman. Brett Bossung and Mark Newman discuss the rocky road they had to travel since Lehman’s
collapse and their plans for the future.

Then, in a separate story, I give you a look into the mindset of Bryan Marsal, the man in charge of winding down Lehman’s estate, including its numerous real estate holdings. Much to the consternation of the investment community, a mere $2.2 billion has been sold so far, owning much to the three principles
Marsal devised for managing the portfolio. I tell you what those are, as well as the three strict criteria that need to be met for further investment.

Lastly, Jonathan Brasse brings you a special report on Bank of America Merrill Lynch’s $650 million settlement with the LPs of its Asia real estate fund. The move has caused the entire sector to sit up and take notice, but observers say it would be premature to expect LPs of similar vintage funds to stage comparable mutinies, as the issues raised were shrouded in ‘special circumstances’.

All in all, I’m pretty pleased with the package of news and analysis we are able to bring you this month. It is my sincere wish that you are too.

Enjoy the issue,
Erik Kolb