Dot-com parallels create real estate opportunities

Rather than review a specific website this month which I have typically done in the past as your tech guru, in this edition I will discuss the eerily similar parallels of the real estate bubble burst and the dot-com blowup of the late '90s. In the peak of the Internet-era there were ridiculous valuations with an endless flow of money getting thrown at websites designed to revolutionize the way we conducted our business. Twenty-something techies were given bags of money which were wasted away on parties, give-aways and conference room ping pong tables at our expense. It was not about creating the greatest platform since sliced bread, it was about bragging about soon to be worthless stock options and paper wealth which ended up tanking the market and our mutual funds along with it. As a close business associate would say to me, "it was just a moment in time when we all lost our sanity." As we dig through the ruins, we assess the damage and figure out what went wrong in this real estate market. Besides the obvious credit meltdown, there was a movement in our industry that stooped us to a new low. What you found were brokers who did not know the difference between a cash-on-cash return and IRR. It became another game of smoke and mirrors just like in the dot-com era. Of little importance were the intelligent brokers who understood the intricacies of deal making. Industry veterans were forced to deal with the newbies, and fly-by-night brokers and developers alike. Handshake deals were a thing of the past. Recent fallout has caused the real estate brokerage community to become fragmented over the past year and has forced brokers to either jump ship or leave the business altogether. Brokers who were looking for that fast buck found that it is not as easy as they thought to make deals in this market. They realize it is best left to the serious professional to clean up the mess in this challenging period and continue to vacate the market. Out of the ashes arise new blood looking to stake their claim in this billion dollar real estate industry. In this relationship-driven business, handshakes are back in vogue as a new generation of leaders takes over, getting back to basics and leading the charge into the next wave of investment activity. Laurence Ross is a managing partner at Onyx Real Estate Advisors, New York, N.Y.