Loan ranger, Gabriel, at home in investment sales.
Things, in fact, were just about dismal. With the economic recession of 1990-1991 nearing, real estate fundamentals had taken a plunge and the various many financial institutions that had lent to real estate investors found themselves reeling--and even going bankrupt--in the face of an ugly wave of defaulted loans.
The Savings and Loan crisis was born, accompanied by rampant foreclosures and a subsequent fire sale of real estate assets. A simultaneous pullback in available capital for further real estate investment created a state of illiquidity in both the debt and real estate markets that, combined with the mass sell-off, had the effect of causing property pricing to plummet. The bargain basement values of the day proved to be fertile ground for the individuals and firms that had the foresight to see that the tumult in the market would eventually settle and so bought up property, later enjoying a windfall of profits from their timely purchases.
But in the late 80s and early 90s when the crisis was unfolding, banks like the one Gabriel worked for weren't debating real estate's potential as a future goldmine. Rather, their principal concern was how they could negotiate the terms of loans with debtors in a manner that would simply minimize their losses. Gabriel was quickly assigned to work on a team that handled such "workout" negotiations. Slashing the interest rate or converting the loans from amortization to interest-only payments were some of the techniques he employed to try to mend the financing of a deal. And employ them he did.
Confronted with a heap of bad loans that the bank had made, Gabriel got to see the business of real estate at its worst.
"I saw a lot of blood basically," Gabriel said. "A lot of people lost a lot of money."
On one transaction, Gabriel tried to negotiate for the bank on a third mortgage it had given to an investor for an office property in Colorado. An unusually structured deal, the collateral was a loan on a shopping center in Tennessee, an amount far insufficient to cover what the bank had lent. Dealings with the owner of the properties took a turn for the worse when the man began kiting checks to cover his hemorrhaged bank accounts. "You got to see some wild things go on," Gabriel said. "There were some crooks out there, but there were also some people who were just really desperate and were just doing what they thought they had to."
The experience of working to ameliorate broken deals didn't dissuade Gabriel from the real estate industry. Instead, working so intimately on the debt side of the business played right into his interest in finance.
"I got to see how things were structured, and the mistakes people made," Gabriel said.
Having excelled in finance while attending George Washington University, but lacking the pedigree that would gain him entry into Wall Street's elite investment banking firms, Gabriel saw his opportunity to continue in real estate. With leasing brokerage not quite as sophisticated then as it is now, Gabriel said he was drawn to the investment sales side of the business for its interrelation with the capital markets.
"To be able to analyze market conditions and show how trends in rising rents, say, could then be shown to produce higher cash flow in a building that could then be used to justify a higher building price was something that encompassed so many things I was fascinated with," Gabriel said.
Soon after his banking stint, and by the mid 1990s, Gabriel became an investment sales broker at Cushman & Wakefield's New Jersey office. Rising through the years with the hot commercial real estate market, Gabriel now is one of four principals in a 15-member team that this year will handle anywhere between $2.5-$3 billion worth of transactions he says--an impressive increase in volume from the team's early days of $200-$400 million years.
Like Gabriel, there are many in the real estate industry familiar with the micro and macroeconomic trends that can have an effect on the real estate market. Few, however, have honed their knowledge as thoroughly and can speak as accurately and authoritatively on a host of closely watched economic trends on which the fortunes of real estate are dependent.
Ask him and, he can tell you about the level of overseas appetite for US Treasurys, where inflation is going and how it will affect interest rates and the real estate market, and the health of the securitized debt market and how that in turn will influence liquidity in the real estate market.
Staying in the know is not a workless task. Every day, Gabriel says he reads The New York Times, The Wall Street Journal and Forbes for an hour and half to stay up on economic and market trends.
But knowledge has granted him the foresight that another quick downturn in the real estate market won't blindside investors in the foreseeable future--unlike so many who talk of a commercial real estate bubble have been suggesting.
The industry has the busy market for the securitization of real estate debt to thank. Securitization indexes risk so that it isn't saddled on any one entity, Gabriel explained. That means that defaults can be absorbed in more digestible chunks, rather than acting as shocking catalysts for abrupt pullbacks in the amount of capital available to real estate investors. Such capital pullbacks are one of the primary culprits for dampening liquidity in the real estate market, which has the effect of hurting real estate pricing.
"There are still plenty of buyers for these pieces of loans," Gabriel said. "As long as there are end buyers for that securitized real estate debt, we'll continue to have liquidity from a debt perspective and it appears that the current up market will continue."
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|Title Annotation:||PROFILE OF THE WEEK: Gary Gabriel, executive director Cushman & Wakefield|
|Publication:||Real Estate Weekly|
|Date:||Nov 23, 2005|
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