Recessionary Tremors: Gabriel Silverstein

Everyone knows that the real estate bubble has burst. What's still unclear is how low property values will go. "Everyone says, 'I don't want to catch a falling knife,' " says Gabriel Silverstein, president of Angelic Real Estate, a commercial property investment brokerage in Chicago. "There are massive amounts of money on the sidelines. Everyone's waiting for really horrible stuff to happen so they can buy buildings for 20 cents on the dollar." In other words, no one is buying a $10 million office building today that'll be worth $2 million tomorrow.

Silverstein, who has been in real estate for 14 years, says the current economic crisis has forced him to shift tactics to generate the same volume of deals. For example, he sells more properties in the $5 million to $10 million range to make up for the $50 million buildings that are harder to unload now. Silverstein also focuses on projects that already have financing, since cash-strapped banks are wary to back most real estate transactions these days, let alone one worth $50 million. He also has to look longer and harder to find worthy opportunities and can't take as big a risk as he once did with prospective buyers. Before the downturn he sifted through 15 prospectuses to find one building that would sell. Now? At least two dozen.

But Silverstein thinks these are temporary measures, since the fundamentals of the real estate industry are still strong. He notes that Chicago's vacancy rate for retail space in October was 6.6%, just above the 6.5% vacancy rate in September. And in contrast to conventional wisdom, he dismisses economists who warn of tough times to come. "That's like yelling 'Fire!' in a theater," he says. Where others see trouble, he sees bargains. "Change is opportunity. This is one big Wild West of opportunity now."

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