Monday, February 01, 2010

Smart Money And All That
I have seen a number of investment opportunities over the past year attempting to raise capital to acquire distressed real estate and real estate debt through the independent broker / dealer market place.  Some of these deals have had attractive business models and may have a chance of making money for investors.  Unfortunately, these deals have not caught on with independent broker /dealers and have struggled to raise capital.  This contrasts with private equity that raised over $40 billion in 2009 for opportunistic real estate investing, which I noted here.   In talking to executives at independent broker / dealers, I am told that their brokers want to sell income, not value or opportunity.  This is unfortunate, as real estate programs with legacy properties - i.e. pre-2008 acquisitions - that are paying more in distributions than their properites are earning are attracting capital from broker / dealers.  To restate, any income is better than opportunity, even if the income is mostly false.  I wouldn't be shocked to learn that some income-oriented investment sponsors eventually talk to the private equity money for help.

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