What is a Secondary Market?

You know we are in the mature part of the cycle when institutional investors start hashing over just what is a secondary market. What they are really concerned about and trying to rationalize is buying assets in higher risk urban centers with suspect tenant depth and limited exit strategies when times go bad. And oh, by the way, that’s just about everywhere outside the leading 24-hour cities. It’s just a matter of degree of how risky some of these other places are.

Most savvy domestic investors realize that buyers are now significantly overpaying in the handful of primary gateway markets. They have stepped aside and let the foreigners do the deals. It’s a bit like the trophy hunting by Japanese in the late 1980s. Just this time various Chinese, South American, and Middle East investors are doing the hold-no-bars acquiring. What did the Waldorf sell for?  $2 billion.  And the penthouse at One 57, overlooking Central Park and everything else? $100 million plus. The stratospheric pied de terre on the top French Fry building at 432 Park will likely garner at least as much–is anybody going to dare to live in it anyway?