The Dirt Lawyer's Blog Archive

This is something I've read about before, but it bears repeating . The "denominator effect" looms as the next force that could pressure the slumping real-estate market. Falling stock prices are leaving institutional investors overexposed to real estate, which could trigger further declines in property values as some of the market's most-active players move to the sidelines to recalibrate their portfolios. Big pension funds, college endowments and insurance companies typically allocate most of their investment dollars to stocks and bonds and sometimes a smaller amount -- about 6% to 10% for pension funds and as much as 30% for other institutions -- to real estate. In the past decade, as real-estate values rose rapidly, many institutional investors expanded their real-estate holdings and in many cases became fully invested in the sector or close to it, bumping up against their preferred allocations. Now that stock values are beaten down, and because real estate is ty...

I honestly don't know the answer to the question. But the deal is done for the Feds to bail out AIG, just like it did with Bear and Fannie and Freddie but not with Lehman or Merrill. At least the loan , once again made under the "unusual and exigent" clause of Section 13(3) of the Federal Reserve Act, is at 850 bps above LIBOR . Where do you draw the line ? Is Ford or GM a "national treasure," too? (Those are Hank Greenberg's words, not mine.) What about the airlines (again)? Or some other distressed company? The line was drawn in the sand and then changed. Why bail out the bondholders ? Certitude would be nice. But again, even though I am a free-marketer at heart, maybe this one had to happen too. Unlike Fannie and Freddie, I don't know. Some say it had to be done to prevent a collapse, but others say that the Fed should have let the market take its course . Apparently Steven Udvar-Hazy wants to buy back ILFC , the aircraft leasing uni...

Here's a story about pension and endowment and other institutional investors looking toward so-called "next generation" investments. In short, Investors already experienced with the traditional alternatives — private equity, real estate and hedge funds — are now open to newer alternatives such as real assets, infrastructure and 130/30 strategies, said John Garibaldi, managing director, heading the alternative strategies group at JPMorgan Asset Management, New York. Yeah, let's take advantage of market disconnects and make lots of money. Sound like something you've heard before? In short, what goes around comes around. And as catchy as some investments are, don't forget that there's no more dirt being manufactured in the world, unless you count land created by dikes. Now, if you've gotten this far in the post, you'll find that I buried the lede, which is exactly what this story did imo. Get this: Overall, 94% of all investors stated that real e...

It's funny. I always assumed that, by this time in my life I would be involved heavily in the political process. But, other than my non-partisan position as a government official and enjoying reading about and watching the world, I'm not involved. And I expect I'll be staying that way. I had the chance to see the Illinois legislature in (in)action on May 31 (yes, a Saturday -- the last day a budget can be passed without requiring a super-majority and it reminded me of how much politics and how little statesmanship is involved in government these days. Now I read in The Economist that Congress is holding up not just judicial appointments but nominees for the Board of Governors of the Federal Reserve. Why? No one doubts Mr Bush's candidates are qualified. The hold-up is ideological. Democrats want to wait until after November's election so that a new president can, as one senator put it, “remake the Fed” by appointing a clutch of new people at once. That is r...

It is great to be back. I had a wonderful Christmas with my family (including my three remaining grandparents -- it is such a blessing to still have them all at my age). I am expecting a slowish day or two that will allow me to catch up here, catch up with administrative work for my and prepare for 2008 (and some exciting plans for me personally and professionally). As I have said before, some investors are not buying into the prevailing feeling in the market that 2008 is going to be a bad year in the commercial real estate market. And face it: many of the best in the game buy when everyone else is selling and vice versa. We saw this in the last two years. According to the contrarians, "The common belief is opportunity is knocking for the deep-pocketed crowd because the credit crunch has eliminated high-leveraged buyers from the bidding ranks due to lenders' tightening underwriting practices." Most of these people have access to major league capital that will perm...

That's what it looks like, and I think it is nicely done. The investment arm of a Baltimore law firm, according to this report , has bought an industrial site from a pharmaceutical company. I like the way the firm is doing this: as a separate arm in which the partners can presumably invest. By buying their own dirt, they eliminate any ethical considerations that may come in to play if a lawyer wants to go in with a client and take a piece of the action. All they need is business savvy. Some say lawyers are lawyers because they don't know business, but I know some that don't fit that stereotypical mold.

Back to work time. Where does the market go? Beats me; that is why I am the lawyer. But seriously, David Bodamer was once again kind enough to find a well-written post from Net Gain Real Estate about real estate investing in a marker correction, including a good basic three-point summary for analyzing property before getting into serious due diligence: cash flow, tenant quality and net growth. That is a great start for any investor in any property. I also this holiday weekend got around to catching up on the zillion periodicals to which I subscribe and came across a characteristically witty piece in Fortune from Ben Stein. His take? "Stupid" investors who just buy the broad markets make money in the long run, while "smart" investors lose trying by jumping in and out of the market. My favorite line was what I assume is a swipe at Jim Cramer , one of my favorite writers: "[The smart investor] even has bald people on TV telling him he's right to worr...

Did you stumble upon this site because you are a budding investor looking for education and advice about investing? If so, I've been meaning for a few days to link this great post from bawldguytalking.com about this very subject. There are good books out there, but the books, while well-written and well-intentioned, are not only not a substitute for experience but could end up costing you in the end. I love this quote from the post: "The moral of the story? Most folks investing based upon short term observation, or a “really good book they read” are, many times, creating the environment for their own personal train wreck." This also reminds me of the old joke: A tourist stops a New Yorker on the street: "How do you get to Carnegie Hall?" The answer? "Practice, practice, practice!" Believe me, I've read more than a few excellent books on real estate investing and real estate law, But I am a better lawyer and dirt guy than I was ten years ago be...