As published from Urban Land Institute, Tales From the Front Line | May 18, 2020, Stephen Quazzo shares his commentary

Not since my high school days as a former newspaper sports editor have I had an opportunity to pen a column. Back then my monthly column was entitled “On the Green” a sophomoric pun on our school color/nickname and a youthful optimism concerning my golf game.

And it’s that optimism that I want to tap into here. I’m old enough to have lived through – and remember vividly – all the major business calamities our country has faced over the last half century:

Year / Crisis / US Economy

1969 – Political assassinations, Kent State, civil unrest, Vietnam War (Recovered)

1974 – OPEC gas shortages (Recovered)

1982 – Runaway inflation, 20% interest rates (Recovered)

1990 – S&L, real estate crisis (Recovered)

2001 – Tech bubble bust and 9/11 terror attack (Recovered)

2008 – Great financial crisis (Recovered)

2020 – Global pandemic (???)

As an investor, I understand that past results do not guarantee future performance – but it’s still the best indicator we have. It is also well understood that commercial real estate is tied to our economic growth and, with 30 million unemployed Americans, things do look bleak for our industry at the moment. Yet I remain an optimist. Our federal government has provided a significant economic stimulus, our financial institutions are strong, our biomedical industry is closing in on a cure, and the American entrepreneurial spirit has not been extinguished.

With mass disruption comes rapid change – and pricing real estate values at the moment is extremely difficult. But history has shown that the first three years immediately following a crisis have been the best time to invest in property. Underwriting durable income streams, devising the right capital structure and protecting the downside will be critical to making sound real estate investments during the coming 12-18 months and weathering this storm. Our economic recovery is likely to be gradual (a “swoosh” and not a “V”) and it will differ by geography and product types, but long term I believe in the US economy.

In John Belushi’s stirring, rallying cry “Animal House” speech he opened with “Was it over when the Germans bombed Pearl Harbor?…”. While Belushi may have had his facts a bit off, directionally he was spot on. The US economy will recover and so will real estate values. Hang in there.

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