That's what this picture tells!
The issue on Hoboken's real estate market now becomes one of arrogance and bankruptcy or self-sustainability through capital preservation.
Either way, the natural forces now correcting themselves will not allow any opportunity for compromise or recovery - just as it should be.
We will move prices back towards "trend." How quickly that will happen will depend a great deal on who the smart exits are and who the bankrupt ostriches will be.
I've said it here before. This is a correction that has no comparison. It was apparent in the behavior of the land developers, through to the weak resellers. And while I can confidently leave Maxwell Place on the "dead in the water" list, there are some serious repercussions on this town as a whole.
One such issue is a very large private company by the name of Applied Companies, whose large and deep pockets have problems of their own. How that filters down is probably not far away.
It is a forecast that I don't wish to post here - and that should say enough. The property markets in this town have been fueled by a greed greater than Donald Trump, by a majority of amateurs who believe there is no downside over time.
They picked the wrong cycle to repeat history!
1 comment:
A financial backer/investor in Applied Companies is slowly slipping. Fortress Investment Group (FIG) went public when RE private equity was in vogue. The W Hotel and Residences in Hoboken are of course part of Applied's sprawl at the height of vanity. The following from Paul Kedrosky at http://seekingalpha.com/article/101196-brinksmanship-at-fortress-investment-group?source=email#comment-288828:
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Brinksmanship at Fortress Investment Group
by: Paul Kedrosky October 22, 2008
Riveting brinksmanship going on at 11th hour as Fortress Investment Group (FIG) works frantically to refinance $1.7-billion in Intrawest debt, which expires tomorrow. Recall that Intrawest, the owner of the Whistler ski resort -- which will host the 2010 Winter Olympics -- was purchased by Fortress in a private equity market-top transaction back in 2006.
From what I'm hearing, there is at least one hold-out among the syndicate holding Intrawest notes. They need to agree unanimously to any debt restructuring, and that is awfully tough right now. Said debt is trading at 70 cents on the dollar, implying a 9% yield, way up from the original 6.4% at issue. That, of course, creates a nasty box for the company and its investors, especially given Intrawest's massive exposure to busted consumers and broken resort real estate markets.
While it's not likely we will see a bankruptcy filing here, it is possible we will see some sort of prepackaged bankruptcy-lite deal. The next 24 hours will tell. And, more broadly, this is a drama we will see play out over and over again among private equity deals funded in the 2005/06 timeframe as their mistimed short-term debt comes due.
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