Tough Real Estate Markets Showing Signs of Improvement

A panel of investment bankers was cautiously optimistic about the real estate market as the U.S. economy continues to improve after the Great Recession of 2009.

The speakers were part of “The Capital Conundrum” panel, held during the Capital Marketplace West conference on April 20 at the Skirball Cultural Center in Los Angeles. Speaking on the panel were Greta Guggenheim, president of New York–based Ladder Capital; Jonathan Klein, managing director of Los Angeles–based Fortress Investment Group; Michael Sarkozi, managing director of New York–based JP Morgan Securities Inc.; Lee H. Wagman, vice chairman of Los Angeles–based CityView; and Simon Ziff, president of New York–based AZ-Garnet Loan Sale Advisors. Moderating the discussion was Leslie Lundin, president and managing partner of LBG Realty Advisors, LLC.

Capital Marketplace West was sponsored by the International Council of Shopping Centers, Los Angeles Mortgage Association and Commercial Real Estate Development Association.

Klein, of Fortress Investment Group, said markets that seemed to be in a state of deep-freeze one year ago are thawing out, but he encouraged investors to keep their guard up for a bit more time. “We are pessimistic,” he said.

But for Ziff, of AZ-Garnet, the future looks increasingly bright. “2011 should be a good year,” he said.

For Ladder Capital’s Guggenheim, the forecast was more nuanced. “In terms of the borrowing world, it is divided into the haves and the have-nots,” she said. The economy will continue to be vulnerable until the high unemployment rate goes down, according to Guggenheim. In February, California’s unemployment rate was 12.5 percent, according to the state’s Employment Development Department, and the national unemployment rate was 9.7 percent.

And while some, including CityView’s Wagman, saw opportunities in certain real estate sectors, retail was not among them.

Wagman said his company is recommending investing in multi-family housing. “I’m not bullish on retail,” he said. “There was a lot of overbuilding, and it is hard to repurpose retail buildings.”

He also said investors were seeing a brighter market in many commercial properties. “In some places, deal flow will be better,” Wagman said.—Andrew Asch