Clearfund: The discussion didn’t veer off into philosophy at all.
I directly challenged your assertions regarding “conservative underwriting” and what appeared to be an over-reliance on cash flow. Another poster also pointed out an issue with the 12% return being touted (which is reasonable).
I offered a CRE real world scenario involving Class A commercial in downtown San Francisco, to which there was no response. The discussion was anything but philosophical, in that it involved an actual scenario postulating a credible “meltdown” scenario. In my opinion, downtown San Francisco offers an excellent environment for discussion, given that nearly 75% of the buildings in downtown, including FiDi, Embarcadero and NoMa have changed hands in the last five to seven years.
If you feel that discussing a real world scenario is too esoteric, or that the downtown San Francisco market is neither emblematic nor symptomatic of the CRE Class A marketplace at large, I’d be happy to talk about Manhattan, Boston or Chicago instead.
I have a lot of former colleagues in CRE, banking/finance, insurance/surety and law and nearly all of them work in major metro areas. Companies like Heller and Thelen offer excellent cautionary lessons and directly challenge the underpinnings of your “conservative investment” offering a premium 12% return and robust cash flow.
