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Slow-Motion Wreck

The clock started on the current economic debacle in September ’08 during that fateful weekend that Lehman went down. Since that moment, opportunistic distress players began gearing-up and making plans to seize the opportunity of a lifetime. They wanted to capitalize on what was sure to be a wasteland of bad paper and hard assets that would be coughed-up at huge discounts. Well, it hasn’t happened, yet. I recently read a quote by Richard Parkus, head of commercial real estate debt research at Deutsche Bank, who said, “It’s a train wreck in slow motion.” Because it’s in ‘slo-mo,’ people get this sense that it’s really not happening; except that it is happening. There is no doubt that real estate deals that were done in ’05, ’06, and ’07 are going to hit the wall; it’s just a matter of time. My sense is that we are going to see the train wreck speed-up during the second half of this year, and hit the wall sometime in ’11 or ’12. In the meantime, there is still that eerie quiet out there.

Tony LoPinto is a senior client partner and head of Korn//Ferry International’s Real Estate Practice and founder of SelectLeaders. The views expressed in this article are the author’s own.
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