Patience paves way to recovery.
Last year marked an extreme transitional period in the commercial real estate industry for many owners, developers, managers and investors. The impact of the distressed market left a proliferation of vacant, failed and devalued properties. Those who were overextended battled to re-structure, avoid complete loss of equity and retain a reasonable amount of control in the face of institutions ill-equipped to handle property management. Those with ongoing projects and those leasing office space were embroiled with concession-minded prospective tenants and a dearth of working capitol.
No doubt, this has been a difficult time to weather. In 1993, the pressure to spark a quick recover could spurn our industry to make rash decisions. At Alfred Sanzari Enterprises, we caution against radical re-alignment of company positions or portfolios. Rather, we advocate patience and prudence as principal ideals for the road to recovery. As corporate America continues to restructure so must the real estate industry. Unlike the eighties, deadlines aren't set in stone. As responsible landlords, we must assume that transactions are going to take considerable time and flexible planning. We must work closely with tenants from the beginning and proposals must be able to withstand revamping. We must show restraint.
In December of 1991, for instance, Alfred Sanzari Enterprises was approached by a major off-shore company that was in the process of spinning off one of its lines of consumer foods. They anticipated the need for future headquarters space and targeted one of our properties. Due to antitrust laws and a myriad of federal approvals, the transaction was interminably long. The reviewing, re-reviewing and introspection of corporate independence meant time concessions on our part. However, when the final transaction came to fruition, it was financially beneficial to both parties and fostered a stronger tenant relationship that holds future promise.
Similarly, we must show adaptability to seize the opportunities that a down market presents... At Alfred Sanzari Enterprises, we have chosen to accelerate the pace of revitalizing our existing properties to ensure that they remain attractive to current and prospective tenants. Lobbies and all public areas receive particular attention. High caliber tenants need facilities that function reliably... both mechanically and visually. Ours is a symbiotic business: our job is to protect our tenants interests and in doing so, provide assurances to our own longevity.
In respect to this, Alfred Sanzari Enterprises showed great restraint during the prosperous times by not over-leveraging our assets. We believe that our prudent actions allowed us to weather this costly period. Rather than pyramid our investments during the height of the market, we consolidated and solidified them. Now, during the worst of times we are fortunate enough to re-invest in them and position ourselves for the long-term - a reassuring vote of confidence for tenants.
The cyclical nature of commercial real estate all but guarantees a rebound to stability and growth. Yet just as the investment community helped induce the glut of oversupply with aggressive investments, the regulating authorities are hand-cuffing activity with restrictions and stipulations on the institutions. This has only succeeded in compounding the problem and has caused more losses than necessary. If these lending and regulatory bodies could exercise more restraint in both good and bad times, the whip-saw effect would be eliminated from the equation and normalcy would reign. In the meantime, Washington needs to be creative in implementing incentives to help put the real estate industry back on its feet. If a third wave of casualties occurs due to a prolonged period of disenchantment with destitute markets, they will have been unwarranted casualties of otherwise solid companies.
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|Title Annotation:||Review & Forecast, Section V; economic recovery predicted in real estate industry|
|Author:||van Voorhees, Roger|
|Publication:||Real Estate Weekly|
|Date:||Jan 27, 1993|
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