Eighteen months ago, banks were throwing money around with very little discretion. Now we find that they made a lot of bad loans, took extreme risk and jeopardized the global economy and the well being of hundreds of millions of people.
All this was supported by a simple minded president, corrupt Congress and an over-confident, short sighted investment community maneuvering in and around a sleeping Securities and Exchange Commission.
Having invested in a broad range of real estate assets (as well as stocks), I am feeling the pain like most everyone else. Reduced values, tighter liquidity, and uncertainty rule the market place.
What has me steamed currently is that I think there is more capital in the marketplace than courage! The lack of courage along with a shortage of leadership and wisdom continues to exacerbate a bad situation. I am probably better off than many people having been able to close two loans in the past month. It was not easy. However, after dealing with many financial institutions that are now doing a better job in the review process, I see that they have swung too far to the conservative side.
Consider this: only a short while ago lenders were happy to loan money for construction when the cost of labor, materials and land were high. We were allowed to buy high, and now in some cases forced to sell low -- and the banking industry has been crushed because of it. Now when the prices of everything have collapsed, it is the perfect time to build, but they are afraid to loan any money.
Anyone starting a project today will find that their project costs have come down drastically. As a result, projects started now will come on market in 24 to 30 months in a different economy -- a better economy. Unfortunately, lenders are not allowed to look ahead, or at least have not honed that skill. To some degree, they loaned money when they should not have, and will not when they should.
Here is an interesting bit of trivia. I have a loan commitment letter from Washington Mutual (NYSE: WM) on the same day the bank collapsed into the hands of JPMorgan Chase (NYSE: JPM). The loan closed without any difficulty and they are still lending.
Currently, I am endeavoring to develop apartment buildings in Southern California. Nothing huge, mostly infill type projects. I have zero fear that I will have any trouble renting them since so few were developed in favor of condominiums in the past decade. It will just take more patience educating the banks.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.











Reader Comments (Page 1 of 1)
11-19-2008 @ 3:13PM
BHarrison said...
RE: "Quote from article: "The lack of courage along with a shortage of leadership and wisdom continues to exacerbate a bad situation."
Is this a reference to "investors" or coproate leadership? Wihout haveing gotten full disclosure on the financial status of the FIs and corporations . . . and with the roller coaster rises and falls of the market, esp. as it drops loweer and lower . . . investors are certainly prudent to be wary of the market. Basically, the same CORRUPT CEOs, CFOs, and upper management are running those companies . . . and still receiving their exorbitant salaries, and other compensations. What investor is going to be STUPID enough to invest to subsidize those unwarranted salaries, and bonuses, which have to be "brought down to earth". any investor is a fool to continue to invest in such a market. It's time for cahnge in the salaries and compensations for CEOs and upper management.
11-19-2008 @ 3:33PM
Sheldon L said...
BH, ref...investors sometimes, corporate and institutional all the time.
11-24-2008 @ 3:57PM
Horst G Ludwig said...
Hi Sheldon, although I do like your language you are completly wrong like most of the wheel professionals and consumers. The problem with money is born far in the background of the comedy club called FED, within the creation of money. The moment it is created a debt is created too...... but anyhow, certainly nobody wants to listen to hiperinflation warning leading to kind of depression like never seen before. Ask any halfmade mathematic student. Those games of flimpsy and risky mortgage toilet paper has been invented because the problem did exist already before and its running by now into nothing since no valuable warranties can be achieved. A idiot just called in a another news "safe" warranty the coming boom of government treasury papers which Bush anounces BUT have a close look to the warranty of a bancrupt USA.
I dont believe that there are that much profesional investors around cause all those guys just buy papers from retailers and than you howl in circles. It had to end badly and it will end but very badly cause nowadays it aint that easy to lie to the world, to start a couple of wars and to recover on the back on millions of deaths. We know this is coming too since nobody want to say goodbye to the sistem of poison which would be the most easiest thing to do.
Over here in Europe ppl are migrating into free currencies and solid exchange, trust into polititians and bankers is CERO at this point and should have been that way far before they turned our democracies into sort of Hollywood show.
Now you got a black president coming up since somebody has to offer his neck. Wonderful move from all those sick people in love with power and money, but 98% of the population doesnt understand as usual..... and at this point I really do look forward it colapses all cause without dumpness the true triggers wouldnt have come that far.
Fact is that against each real existing dolar are 8000 non existing dolars which have to be paid by now from that little unique real dolar. Doing the right conclusion here is that difficult that everybody seeks in the sinking ship a glas of water?
Why saving banks when capital is needed at hand of the people to save at least productivity? Because its all a giant setup to gain a little time and distance of whats next.
Right, there is something coming next cause we are in a kind of domino effect and if those moroans dont stop to print money like mad it will acelerate instead of declining.
Next big schock comes out when the last quarter of consumers credit card sistem reports bancrupcy too and by than the true problem just begins but all responsables are home and dry. Thats the game. Thinking but thinking selfish as usual.
If you are really a true investor change all currencies in cans of food cause there you wont loose. Food will be short too.
My best wishes to everybody.
H G Ludwig