Property Grunt

Thursday, September 29, 2005

What the Profesionals say

On September 30, 2005 the Grunt attended a breakfast program titled New York Real Estate Markets: A Professional Analysis (or Is There a Bubble in the New York Real Estate Market?) which was sponsored by the Newman real estate institute and the New York Metropolitan Chapter of the Appraisal Institute.

Three speakers were invited and below are their names backgrounds and an analysis of what they said.

Peter F. Korpacz, MAI, Director in the Strategic Real Estate Research Group of PricewaterhouseCoopers LLP (PwC), has over 42 years of experience in the real estate appraisal, counseling, and research fields. Mr. Korpacz is also the Editor in Chief, of Korpacz Real Estate Investor Survey® and Emerging Trends in Real Estate®.

This guy was awesome. He had this funky array of graphs and charts explaining the whole bubble situation. According to his research residential was definitely taking going to take a hit and that high oil prices was playing a role in the demise of the residential market.He also had a joke about the Amish and elevators. No. It was not offensive toAmish people. But it certainly was funny. You had to be there.

Mr. Korpacz stated good indicators of the market were oil prices, GDP and unemployment. Watch those numbers carefully and we'll have a better idea of what is going to happen with the market. I think the coolest part of his job is that he has the opportunity to speak with top real estate investors around the country and get their perspective on the market.

Robert A. Knakal Chairman and Founding Partner, Massey Knakal Realty Services. Mr. Knakal, a graduate of the Wharton School, has been a building sales broker for 21 years and has personally been responsible for the sale of over 1,000 properties having a total consideration in excess of $3 billion. He is a frequent guest lecturer at NYU, Columbia University, and the Real Estate Board of New York.
Another great speaker.

He had this funny joke about cutting himself shaving and making a speech. One thing I remember from his speech was actually something that I heard him tell before at another speaking event. He had a buyer who purchased a $100 million dollars worth of property and had put down $40 million. The cash on cash return was less than 1%. Mr. Knackal realized this was a rather unusual deal and he waited for it close before he asked the buyer why he was going through with this.

The buyer's response was interesting. He realized he would not reap the benefits of this investment neither would his children but his grandchildren would be quite happy to have those buildings. What this story illustrates is that real estate investing is all about the long haul. One has to be willing to detach themselves to the invesment forsee a day when their descendants of their work.

Knackal felt that comps were completely useless since they are usally 8 months old since the processes of purchasing commercial real estate is a lenghthy one.

Knackal made it quite clear that if you were to ask what the value of a building is he would tell you that he has no idea and that is entirely up to the market.

Frank Nothaft, Ph. D. Chief Economist, Vice President, Freddie Mac.
Responsible for primary and secondary mortgage market analysis and research, macroeconomic analysis and forecasting, Mr. Nothaft is also involved in the analysis of affordable lending activities and issues affecting the housing industry.

He was the final speaker but not be choice. He was coming from D.C and was stuck in traffic. His presentation focused on Katrina and oil prices. He stated that because of Katrina, there would a signifigant spike in construction but we also had to watch carefully at oil.

According to Mr. Nothaft we are definitely overdue for a correction because a boom cycle lastas for 7 years and we are on our 13th year of the boom.

One of the funniest parts of the presentation was the end when one of the audience members who was from Duestche Bank complained about the bushes used for decorations obscured some of the visual aids. I wanted to say that it wasn't the bushes but his blinding bright red crushed velvet pants that was distracting us.