Market Currents

Smart money is starting to move into commercial real estate, Principal Financial Group (PFG) CEO...

Tuesday, April 27, 2010, 6:32 PM ET
Smart money is starting to move into commercial real estate, Principal Financial Group (PFG) CEO Larry Zimpleman says. "There are a lot of new funds being formed by investors who are looking to invest and buy either loan portfolios or buildings. That's giving you a pretty good signal."

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This news story has 11 comments:

Doc 224899 Comments (909)

OK. Sure. We have a 100% increase in bank failures in 1Q10 over 1Q09, a shrinking private sector, spiraling personal bankruptcies with 70% of them going chapter 7, and the government is going into the bank-wrecking season with the gloves off in their assault on Goldman Sachs. If the "smart money" is moving into commercial real estate, I can only hope and pray that none of my money sprouts a higher IQ overnight while I'm asleep.

27 Apr 2010, 07:17 PM Reply Like

Michael Clark Comments (7805)

Yes, Doc: when people whose business depends on hooking other people's money to finance their life-style -- such as commercial property developers -- begin to tell you it's a good time to buy, run the other direction.

We'll know we may be reaching a bottom when the number of developers committing suicide spikes.

27 Apr 2010, 11:43 PM Reply Like

Anthony Alfidi Comments (592)

I agree w/ Doc above that it's way too early to consider CRE a bargain. Those new funds are chasing a mini-bubble.

27 Apr 2010, 07:46 PM Reply Like

Doc 224899 Comments (909)

Anthony,

Maybe chasing a mini-bubble, or so terribly stuck in their own investing niche that they look at some interim data and interpret it in a way that validates their default mind-set.

Real estate people have their own set of interpretations of market trends, and generate data that validates the conventional wisdom they've peddled for decades. Just sit around a conference with them, and it's pretty obvious that failure to respond to the group's cheerleaders is regarded as treason. At the same time, they are afraid they'll lose more money than they've already lost if they don't chime in with a chorus of "It's getting better", and "the slump is over" in an effort to drum up new business, while trying to convince any recent clients that they made good decisions and shouldn't back out of pending agreements.

Then, there's always the question of back room arm-twisting, and people being compelled to make sunny statements about the CRE market, especially when so many CRE assets are sitting idle in communities that are pivotal in the mid-term elections and the 2012 elections. You can convince a community of people that things are going well, even when they drive past empty properties every day, if you tell them the same lies over and over and punish anyone who disagrees.

29 Apr 2010, 08:11 PM Reply Like

jmcaule Comments (22)

How is this a good signal? Speculation returning to the market to one of the sectors with the worst fundamentals. This is how we got into this mess in the first place.

27 Apr 2010, 07:52 PM Reply Like

Steve in Greensboro Comments (632)

Ha, ha, ha! Thank for the laugh. A local shopping mall in the triad NC area which listed for sale 3-4 years ago for $45m is now listed at $15m. No doubt a bottom is in sight. Or maybe not.

Wow. I suppose this is what makes horse races. Somebody is always willing to bet on the lame goat against Secretariat.

27 Apr 2010, 08:12 PM Reply Like

positivethoughts Comments (1389)

I don't think CRE is going to grow much in the next 5 years. Unemployment is expected to remain high for the forseeable future, taxes will likely be raised and regulation also is on the rise. No economy can rebound much under these conditions. Furthermore, when housing foreclosures pick up and further send real estate values downward, CRE will also be affected by this. You can't have a weak consumer real-estate market and a strong CRE market. They move together. Look at Detroit.

27 Apr 2010, 08:29 PM Reply Like