I know the audience of this site tends to be younger, but if you're an older folk or have any stories that would be super interesting.
I was talking to this semi-retired guy who used to do land development, and he was saying how everything used to be analyzed through back of the napkin methods. He would sit down for 2 minutes with a piece of paper and would tell you if he was going to buy the deal or not. What about office culture? Was that any different to what it is now? I've found some old pictures while doing some cleaning at the office i interned at - pictures of everyone on a cruise, in french chalets, etc.
It still is at a high level. Senior execs and investment professionals usually like reading a one page memo and can sniff out if they should pursue the deal or not ("if it pencils").
From what I understand, banks would often lend 100%+ of project costs during a period in the 80's. I know a developer who built this way; he had very little capital of his own. He managed to barely hang on during the downturn that followed. Today he has an empire comprised of a few million square feet, with no debt on about half of those assets. Oh, and almost no partners.
When I asked him for advice on how to get where he is, his response was something along the lines of, "I don't know, because you sure can't do what I did. It's not possible anymore." I suspect that path to success was more common than most old school RE guys want us to believe. Today, real estate is far more institutionalized than it was back then. And as a result, far more sophisticated.
To address your napkin statement, there's an old saying in real estate that goes something like, "if it doesn't make sense on the back of a napkin, then it doesn't make sense." Meaning, no matter how complex your model, an experienced investor/developer can distill it to the back of a napkin. I suspect that someone like CRE can do that by now.
Do you like the institutionalization of real estate? Or would you rather go back to a time where real estate markets were less efficient, but probably more profitable for the smaller guys?
I'll spin the question back to you: Do you want to make more money or less money for doing the exact same thing?
I was told the same thing by a developer in my market who also owns a few million square feet.
Same thing for the pe guys in the ‘80s. Now they still had to operate and execute. But instead of fighting over carry etc they just had the cheap equity compared to the debt. Junk bonds were underpriced for a while.
In the 80's and run up to S&L failures/scandal, DSCR's were break even or 1.1 on MF. There was a huge real estate peak in the late 80's. I did some SFR research for a buddy on median home prices in San Francisco. I was really shocked at the figures. It probably was the same for most asset classes.
The 90's was horrible for all asset classes. Basically real estate price were flat for 8 years, so, with inflation they were declining over that period. There was some crazy SFR lending back then. Credit scores began taking over and so did securitization. 135% LTV 2nd and 3rd TD's. 12-17% interest rates with 10pts up front. This was long before Section 32 came around. Dan Marino did commercials for First Plus Financial. A publicly traded 2nd TD lender. They had an Indy car. It was nuts.
The Money Store, a private mortgage bank sold for a record $1bil to First Union Bank around 98. The had the best commercials. HOF Pitcher Jim Palmer was their guy on commercials...1-800-loan-yes. First Union shut the operation down months later after their stock plummeted from backlash of buying a predatory lender...which they were, lol.
All these companies ultimately failed.
The 90's for resi lending was easily the most aggressive I've ever seen. More so than the 2000's.
Forgot about the Money Store! Those Phil Rizzuto spots seems shady as hell in retrospect
It was affordable
the french chalets you speak of are reminiscent of an era of corporate excess that seems to have been suppressed over the past couple decades, and NOT just at public companies. i seriously think we fuckin missed out on an era of gold-encrusted savagery
it is definitely harder to make money now, returns have compressed etc - HOWEVER, don't feel too bad because my impression is that it has happened in every industry and every asset class. as @Ronclue" mentioned above, markets were less efficient.
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