Everyone knows women love shoes and just can’t own enough of them. And nobody loves their stilettos like Dallas real estate women. Our guys have their Italian loafer favorites, too.
In my business, I spend every day trying to negotiate a win-win scenario, and to do so, I’m often standing in someone else’s shoes. As I’m looking down today at my personal faves, some 3-inch red pumps, I’m reminded of a recent conversation with a Dallas developer and lender. The vastly different point of views voiced by the developer and the lender made it clear they saw today’s Dallas real estate market quite differently.
It reminded me that “standing in another person’s shoes” in today’s world, and especially when there are differences of opinion, is the new normal. Our economy has become so predictable that key data, experience, and risk assessment is imperative when assessing the real estate and capital markets.
Standing in the lender’s shoes, I can understand why he’s concerned about the amount of new development, the proliferation of announced multifamily deals, and too many lenders chasing the same deal.
Earlier this year, I attended the annual Commercial Real Estate Finance Council conference in Miami and a panel of speakers representing lending and servicing platforms globally discussed our national markets. Although Dallas has fared far better than other U.S. markets, we have to remember the recession impacted us all. Some of the comments shared from the conference were reminiscent of times past:
“Capital markets have recovered much faster than property markets.” “Liquidity is everywhere.” “Why are there 10-year non-recourse loans?”
“Leverage is back.” “Distressed, mezzanine and portfolio deals all offer opportunities that, combined with leverage, continue to support prices.” “Credit enhancement is kicking in where underwriting is falling down.”
“The banking market that competes on a recourse basis is going to grow tremendously for commercial real estate.”
“The CMBS market produced more than $70 billion in 2013 and is most likely expected to exceed $100 billion in 2014, due to non-recourse, attractive rates, and low leverage.”
“The Fed’s monetary policy is still artificially inflating asset prices. Until the economy improves enough to line up with those prices, concerns will linger.”
In Dallas, I’m not sure we share a high level of anxiety; however, keeping an eye on the national pulse is imperative. Appreciating the lender’s vantage point of having banked Dallas real estate through several painful cycles, I can understand why he is still alarmed.
Jumping into the developer’s shoes, I hear his grateful expressions of our living in the midst of the strongest economy in the United States. These shoes are a more comfortable fit, if I’m honest. After all, we hear daily news reports confirming Dallas is the land of milk and money. I understand the developer’s upbeat perspective and desire to capitalize on this window of opportunity.
The Dallas economy is booming. Uptown and downtown are drawing companies and their young workers back to the center city. Business is strong and companies are growing. Who wouldn’t want to wear these shoes?!
As I’m helping shape plans for both my clients’ businesses and my own, I’m going to try my best to “walk a mile” in a variety of shoes. There’s a lot to be learned and gained from a balanced view of the real estate future, even if rosy-colored slippers are more fun to wear.
