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Goldman Sachs exec talks of 'opportunity after storm'.

Buying distressed real estate and securitized investment vehicles were among the "opportunities after the storm" described by Michael D. Fascitelli at a recent meeting of the Young Men's/ Women's Real Estate Association.

Fascitelli, vice president and co-head of Real Estate for Goldman-Sachs & Co., said his company is doing a considerable amount of purchasing from the Resolution Trust Corporation (RTC). With an Alexandria, Virginia company doing the due diligence, asset and property management, the firm has purchased apartment units for about $11,000 to $12,000 each and they expect a sale price of $18,000 to $20,000. They are also buying office "junk", he said, that can be acquired for $5 to $10 a foot and has a market value of $20 to $40 per square foot.

Goldman Sachs, he said, is pursuing these deals with $200 million of its own capital and $1 billion from pension funds.

The RTC sales, Fascitelli said, are even more advantageous for smaller pools of investors and capital as the RTC is offering reduced cash discounts and allow 85 percent financing.

"There's going to be a huge opportunity here in the principalling of those deals," he said.

In the area of securitized investment devices, Fascitelli said there are three new Real Estate Investment Trusts or "REITs" due to come on line. One is to be issued by Goldman Sachs, another by Merrill Lynch, and Morgan's Taubman-REIT.

In 1985, Goldman Sachs released one of the largest REITs - Rockefeller Center Properties. While it came out at $20 per share, it is down to $10 per share today. While the underlying real estate is strong, Fascitelli said, cash flow and cash flow growth are tantamount.

As for tenant rep, Fascitelli said, they are disappointed in the fee pressure. In pitching to search for 250,000 square feet of prime midtown Manhattan recently, he said, Goldman Sachs was undercut by $1 million.

"We are prepared to match fees to a certain point," he said, "and then we will walk away from that business.

"When faced with buying or service, buy."

While Downtown is still suffering, Fascitelli said, he believes the outlook for Midtown is stable.

"We think Midtown is firming," he said. "We are urging tenants to sign leases and go longer."
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Title Annotation:vice president of Goldman Sachs and Co. Michael D. Fascitelli addresses Young Men's/Young Women's Real Estate Association regarding purchase of distressed real property
Author:Fitzgerald, Therese
Publication:Real Estate Weekly
Date:Nov 11, 1992
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