A Confederacy of Dunces? I Think Not

It is not difficult to find bad news over which to angst. For example, the latest data from the Federal Reserve’s Beige Book, an informal survey of business sentiment, showed an alarming drop in activity in the Mid-Atlantic. Namely Philadelphia and Richmond both reported weaker overall economic activity. As for bank lending and commercial real estate - well, need I even elaborate? They have been, and still remain, lackluster sectors at best.

This is hardly news to the commercial real estate industry, which must hobble on until the economy improves and consumer confidence, and thus spending, picks up. Deals get done, but only the best, or the ones that have the most compelling story to tell. An example of the former is  the class A, fully-occupied office in Rosslyn, Va., - one of the Washington, DC-area’s lowest-vacancy submarkets - that just traded to TIAA-CREF. It was, as I wrote, a no-brainer of a deal.

Deals with the most compelling stories to tell, that second category I mentioned, typically fall along similar lines -- but not always.

You'll read on GlobeSt about the Chateau Bourbon Hotel, a New Orleans hotel that saved itself at the last minute through a recapitalization from a non-traded REIT. New Orleans is not my beat at GlobeSt.com; that belongs to my colleague Amy Wolff Sorter, but it is my hometown and much of my family still lives there. Also, the Chateau Bourbon Hotel was where the original D.H. Holmes department store was located, a store that figured prominently in the Pulitzer-prize winning novel “A Confederacy of Dunces,” one of my favorite books.

HRI Properties had a Sept. 1 deadline to pay off $16 million in debt.  At the last minute it was able to sell a majority stake to Carey Watermark Investors, which is affiliated with W.P. Carey & Co.

Bookophile that I am, I don’t entertain for a second the notion that Carey Watermark swooped in to save a building made famous by John Kennedy Toole's most original protagonist ever, Ignatius J. Reilly.

But New Orleans does present a compelling story for investors, some five years after Katrina and this particular hotel is well situated to service the city’s ever-present tourists.

It’s the kind of “compelling story” that was dead in the water two years ago and only beginning to emerge before the economy began to noticeably slow this Spring. Second tier cities were finding it easier to access the credit markets, but supposedly that is all over now.

Only it’s not. The recovery is still lurching forward and investors are inching their way across the risk spectrum, not for any grandiose reasons or visions of the industry but simply because there are few other categories that offer any decent kind of yield. So even if business sentiment is gloomy, job growth is nil and a double dip looms, deals still get done.