I wanted to share some interesting comments by Steven Roth, CEO of Vornado Realty Trust, from a recent CNBC video. Taking a historical perspective of real estate cycles, Mr. Roth described the typical cycle as lasting 18 years peak-to-peak.
To summarize, 1988 was the top of the last cycle while 2006 was the top of this cycle. The way it worked then was, a vicious decline from 1988-1991, in 1991 Kimco went public and in 1993 there was a flood of public offerings. From 1988 to 91-93 that’s 3-5 years, that’s exactly what has happened in this cycle so far, 2006 was the top, we’re now in 2009 and there has been a flood of re-equitizing in the public markets. So we’re exactly on track with the early 90’s cycle.
Basically, the downdraft takes 2-3 years, the public market re-equitizes and the unsecured debt market comes back, then the base building is 3-6 years which is the best time to make acquisitions. We’re currently in the base building phase. I recommend watching the entire video, but the description of the 18 year cycle can be found from (4:13-5:55).
