John Bralower won’t say that the credit crisis was a non-issue for the Manhattan-based Carlton Advisory Group. Indeed they felt the bite as well. But despite the rocky seas, the investment banking firm managed to score some big hits: Equity deals–well sure–but more impressive, CMBS deals–both creating a volume of more than $4 billion at the end of August. That included such highpoints as the $587 million in acquisition capital they provided for the Lipstick Building and $350 million of senior and mezz money for the construction of the Trump SoHo. In an exclusive interview, fresh from an exploratory mission to Dubai, India, Bralower–president of Carlton Hospitality and managing director of the Advisory Group (and a panelist on Real Estate Media’s recent RealShare New York conference)–spoke about the crisis, the deals and the prospects in Dubai. Credit crisis? Let’s start with the hotel sector. An incredible year. What’s the dynamic?

Bralower: The hotel business as a business is performing very well right now. Occupancy and rates are very high. Couple that with the fact that there was a long period of time when people were underweighted in hotels. That was partly because performance wasn’t as good then, and because there’s always been a group who have the knee-jerk reaction that real estate guys shouldn’t do hotels. And while there’s a degree of truth in that, there are also people who have come to recognize that there’s great money to be made in the hotel business.

Also, we’re coming off of a period of very little hotel development–particularly in places like Manhattan. If everything that’s projected to get built in Manhattan gets built, we’ll still have a very robust market. You’ve played a role in filling that pipeline. The Trump SoHo comes to mind.

Bralower: That’s an interesting illustration of Manhattan versus the world. Financing a condo/hotel project is not something one gets too excited about. But it’s in Manhattan where there’s not a lot of them, and the proof is in the eating: The demand for units has been very high and they’ve been selling above our projected numbers. When that gets built, it’s 400 keys. Are we under-inventoried on a global basis?

Bralower: I’m sure there are markets where they don’t need any more hotels, but certainly in the major markets and the resort market, there’s still a lot of room. The sector certainly has had its spate of major M&As. But people are saying that it’s privatization’s swan song. Do you buy it?

Bralower: If you look where we are at this point in time, it looks like it’s going to slow down, but we’re in a very unusual set of financial circumstances and I wouldn’t make any predictions. Things can shift dramatically, so I’m just not in the prediction business. Fair enough, but at some point . . .

Bralower: Well there are fewer deals to get done and a lot of the good deals have gotten done. But having said that, people always manage to pull a surprise out of their hats. Do you expect Blackstone will sell off Hilton assets as it did EOP’s?

Bralower: I’d be surprised if they don’t sell off some of the assets. There are great properties in there, all over the world. Let’s switch to the capital markets generally. You’ve hit some milestones this year. Impressive, considering . . . .

Bralower: We were having a very good year and we had great momentum. We have a good team of people and market recognition, and the more big deals you do the more you get. So why is your CMBS better than everyone else’s?

Bralower: A lot of the deals we closed were in the pipeline already. Needless to say, our overall volume is still robust, but it won’t be as CMBS-driven as it was. The crisis made execution more complex in that for deals that would have been done in one execution–for 90% or 92% leverage–we now have to layer in mezz. For us, as for anyone, the capital stack is more difficult to put together. Also it’s pushed some of the deals off to the side where they’re not going to get done, deals with more marginal borrowers. Upside?

Bralower: There are more occasions to bring equity into the deal, which frankly has been good for us because that’s one of our specialties. Even before the debt crisis, we were more focused on equity. Back into prediction mode. Sorry. How long will it last?

Bralower: There are people who think things are getting better and there are those who think that the psychological effect of bad news is enough to slow things down a bit. I tend to be an optimist, so I’m assuming things are going to get better. There’s obviously a more negative overall sense right now. But I think it’s an overreaction. What was your toughest deal this year?

Bralower: They’re all tough. Ask what my easiest deal was. It’s the nature of the business. Even when the markets are “easier,” you’re still pushing just as hard because you’re trying to get the best deal. So no one deal stands out as more difficult than the others. What’s happening in Dubai?

Bralower: The size of the projects there are mind-blowing. If I were an architect I would live in Dubai right now. There’s a lot of capital in Dubai, but a lot of that capital wants to be here and diversify. We have an office in Tel Aviv. But we definitely want to have someone on the ground there.

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