GT's Rabinowitz: Equity is Looking at 'Everything'

NEW YORK CITY-Starwood Capital Group made the news three weeks ago with its $191-million acquisition of a portfolio from CWCapital Asset Management, part of a massive collection of REO assets the special servicer brought to market last fall. A Greenberg Traurig team including Stephen Rabinowitz, co-managing shareholder of the law firm's New York City office, represented Starwood Capital, and although Rabinowitz cannot comment on deal specifics such as pricing, he tells GlobeSt.com that the transaction speaks to the breadth of vision among large-scale investors in 2014.

"There are some big players who are willing to take some big swaths of real estate across all asset classes," says Rabinowitz, who worked on the deal along with Greenberg Traurig colleagues Kristen J. Lonergan, shareholder in the New York office; and Robert Ivanhoe, co-chair of the firm's global real estate practice. "It's a sign of the health of the market. Strong equity players are taking very serious looks at everything, across asset classes and across regions."

Although industry observers may voice the occasional concern about, say, oversupply in luxury condominiums or lodging properties, "we're not seeing any impact on the market" from those concerns, says Rabinowitz. "What we're seeing is just froth, and real activity across every market sector."

In hotels, for example, it's "across every asset class of hotel, from micro-hotel rooms to five-star-plus. In condominiums, there's no secret about what's going on in Manhattan, but we're also seeing activity in outer-borough rentals, and not only in the core neighborhoods." All in all, now is "one of the most active, interesting times I've practiced in," says the veteran of three decades in commercial real estate law.

Such activity, of course, is reminiscent of what we saw in 2006 or 2007. Yet Rabinowitz says that compared to the peak of the last cycle, "there's a bit of a change. On the debt side, we're seeing a more conservative approach to leverage and due diligence than might have been exercised at the height of the market."

That conservatism doesn't apply to the speed at which deals are getting done, though. The conventional wisdom was that after a correction, people might slow down a bit, but it's through a combination of technology and a Wall Street influence on the way people are looking at real estate that things are getting done as quickly, if not even more so," says Rabinowitz. "That's not necessarily a bad thing, as long as you have professionals who are trained to operate under extreme circumstances" and react to client needs on short notice.

Even so, he says, "the speed takes people by surprise sometimes, but it gets things done. Part of it is the sensitivity to rates and part of it is the incredible competition for good assets." Taking down a deal therefore means being able to respond quickly, he adds.

With a fair amount of equity—and, therefore, competition for deals—coming from overseas investors, Rabinowitz says a concern among clients is the potential inhibiting effect of global events on capital flows. "For people in New York, there's always concern whether upheaval in other markets or instability in other economies will affect the flow of capital here," he says.

Those fears may be unfounded. "I'm of the view that what you see is people looking for safe havens for their money, New York and US real estate being one of the safest things you can invest in over the long term," says Rabinowitz. "It may have an effect on some markets, but overall, I see the foreign capital continuing to come looking for safe havens."

Another concern locally, he says, is pricing for residential real estate, with some fearing that "New York could become like London, where there's only high-end real estate," Rabinowitz says. "I don't think that's the case. If you look around New York, you see areas like the Upper East Side and Upper West Side, where prices are getting very high—yet these are neighborhoods where you also have side-street buildings, rent-stabilized tenants and middle-class housing. It makes good headlines when people complain that the Upper East and Upper West Sides are becoming exclusive havens for the super-rich, but I don't see what happened in London happening here."