Why is it so hard to get new funding?
Partly because new equity is needed from the owner to provide any loan because the underlying real estate is 30%-50% less valuable than it was at the time of origination. Where is that going to come from? Everybody's tapped out. All the real estate guys have gone from G4's to electric golf carts.
The object of the drill for everyone in commercial real estate--and this is everyone in the world--is just get to the other side of Death Valley. If you can make it to the other side of Death Valley, there's hope. But even when the economy does start to roll out, commercial real estate takes a while behind the tail of that economy to catch up.
Is the CMBS market more complex than the residential mortgage-backed securities market?
Yes. You have a multitude of tenants and you have a multitude of income streams and thousands of varying properties. You have to be a nuclear physicist to understand the architecture of what happens in the event of default on these deals. It's all untested.
Where is the opportunity for smart investors right now?
The new equity in real estate is buying and restructuring debt. The rescue business is the business of the moment.
What's your outlook for the American economy?
When we shift all our energy from all the whining and crying and entitlement of what the past was, we're going to figure it out. American ingenuity and entrepreneurism is the best of brand everywhere in the world. The good news is nobody made a mistake, everybody's net worth got wiped out together on a no-fault basis. We all got marked to market together.
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