Former Florida Governor Jeb Bush said that the absence of an entity like the Resolution Trust Corp. is hindering a recovery in U.S. real estate markets.
The RTC was a market-based solution created in 1990 to get bad assets off the balance sheets of banks during the last major U.S. real estate downturn. Bush noted that in Florida in particular bad real estate loans are resolved through the courts, not the markets or arbitration. As a result, there is a huge backlog of foreclosure cases straining the Florida court system.
Bush was one of many speakers at the first annual Innovative Real Estate Strategies conference in Palm Beach Gardens, Fla. The conference, sponsored by Financial Advisor and Private Wealth magazines as well as Robert A. Stanger & Co. LLC, drew about 250 advisors and real estate professionals.
Conference panelists did note that global capital flows are creating opportunities in commercial properties, coupled with major dislocations arising from the aftershocks of the real estate bubble around the world.
In recent months, capital from wealthy Middle Eastern investors has started to look for new properties in London and elsewhere, as these individuals seek to diversify out of that increasingly unstable region.
Glenn Mueller, professor at the Franklin l. Burns School of Real Estate & Construction Management at the University of Denver, told attendees that now is an excellent time to consider investing in commercial real estate. He also urged advisors to counsel clients not to view their homes as investments. Individuals should think 'of their home as a use asset like a car," Mueller said.
According to Marc Halle, senior portfolio manager and global head of Prudential Real Estate Investors, China and certain other emerging markets have recovered completely and look poised to grow. "China is a very good allocator of capital," Halle told attendees. "The U.S. market will pick up in two or three years."
In core U.S. markets where institutional investors were withdrawing nearly $1 billion in capital a quarter six months ago, they are now investing about $1 billion a quarter to position themselves for an upturn, Halle said.
The absence of virtually any new construction over the last three years and the lack of much future building over the next few years should give commercial real estate owners lots of pricing power and ability to raise rents in many markets, according to Mark Earley, president of Hines Real Estate Investments. In some markets like New York, Washington, D.C., Chicago and especially San Francisco, Earley is not seeing a lot of depressed prices, and in some cases, prices have returned to or exceeded pre-crisis levels.
The widespread popular perception that real estate will never recover amused Brian Conlon, president of Inland Capital [correct title to come]. In the late 1980s, people said there was so much excess supply of real estate in Dallas it would never be absorbed in our lifetimes. In actuality, it took less than a decade.