In 1990, the country's savings and loan industry had just collapsed, and the federal government found itself the reluctant owner of thousands of office buildings, apartment complexes, and shopping centers it never wanted.
The Resolution Trust Corporation was formed to sell it all off, whatever the price. Bankers who had financed reckless construction throughout the 1980s were gone.
Insurance companies that once eagerly wrote checks for trophy towers pulled back entirely.
Prices for commercial property fell by roughly 30% in some markets, and by considerably more in others.
Sam Zell walked into that wreckage with cash in hand.
He did not buy everything the RTC was selling. He bought buildings priced below what it would cost to pour the concrete and frame the steel again, buildings with tenants who were paying rent and staying put.
He left the empty towers and the half finished condominium projects for someone else.
Investors who followed his discipline through that period built fortunes that lasted for decades. Investors who bought indiscriminately because “real estate is cheap” often lost everything a second time.
I bring this up because the language coming out of the largest institutional real estate managers this year sounds remarkably familiar.
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Ares, Brookfield, JLL, AEW, Cohen and Steers, and Clarion Partners have all published research this year making some version of the same argument: commercial property has been repriced sharply lower since 2022, the capital that once chased this asset class has largely left the building, and a selective recovery is underway.
None of them are calling for investors to buy everything with a “For Sale” sign on it. All of them are drawing the same distinction Zell drew in 1990, between an asset that is cheap because the market overreacted and an asset that is cheap because it deserves to be.
That distinction is the entire subject of this update.
This is the part that matters.
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