The Dirt Lawyer's Blog Archive

The one thing we know is this: markets hate uncertainty.  And after reading this CoStar piece about Dodd-Frank I can see why there is a lot of angst and uneasiness among some investors in the commercial real estate market.  It is going to take time -- and a lot of manpower and legal analysis -- to sort through yet another behemoth set of laws, rules and regulations.  While I am not a deal guy, here's what I am thinking, and I encourage you to critique me or even tell me I am dead wrong. Pricing and cap rates will have to be lower than they were to sustain any good returns on deals.  If the days of what I liked to call "cowboy lending" are over, that is fine.  I was never a big fan of it anyway as a lawyer.  But we need to adjust to the fact that with lower LTVs on loans and stricter underwriting (including the requirement that lenders keep at least 5% of all their loans on the books as so-called "skin in the game") and more documentation (yay, lawyers!), this w

According to this nicely-done New York Times post, not in real estate: Private equity real estate fund-raising fell in the second quarter to its lowest level since 2004, suggesting that a recovery has yet to take root in the investment property market. For years you kept hearing about everyone having "dry powder" but not using it.  Is that like the Mutual Assured Destruction theory of the Cold War?  I think the story correctly states that many lenders are wary to lend money to PE-backed concerns.  But it could also be --as the piece correctly mentioned -- that these entities raised a lot of money in past years, are looking for the right deals carefully and slowly; so looking for more cash right now when you are not deploying what you have is not necessarily a good thing. The deals I know about are often all-cash ones, perhaps or perhaps not levered after closing.  That just makes a take-down of the dirt so much easier when you can do that. The piece also talks about an exp

Why are so many brokers and lawyers mortal enemies?  I cannot being to tell you the stories I've heard about broker x and lawyer y fighting with one another to the detriment of a deal.  I think there are two main reasons for this: (1) lack of communication and (2) interference. I had a great conversation with broker and fellow blogger Duke Long yesterday that made me want to write about this. In many deals if not most, brokers are at the table before the lawyers, negotiating the business terms and working the deal.  That said, smarter client in my humble opinion get legal counsel involved earlier, such as at the LOI stage.  They often take ownership of the deal, guiding it through for the client and to collect that commission.  Sometimes we lawyers laugh at the brokers, thinking that they do nothing to earn their money -- which, by the way is way too much anyway since it is so much more than the legal fees.  That happens sometimes, but not as often as lawyers think in my opinion.