BARRACK LIQUIDATING R.E. ASSETS Monday, October 24, 2005 - FreeMarketNews.com
Does he know something the rest of us don't? According to a Fortune story reported by CNN, Real estate investment guru Tom Barrack is selling off his U.S. real estate holdings, despite the continued rise in the marketplace. He blames the cluttered investor field, which is currently overwhelmed with amateur speculators, and compares it to a polo match.
"I feel totally safe playing polo on a field full of pros," he is quoted as saying. "but when amateurs are all over the field, someone can get killed. They have more guts than brains. They charge after every ball and don't know when to hold back."
He terms the present R.E. field as "too much money chasing too few good deals, with too much debt and too few brains." He fears the amateurs are about to get trampled, and could catch unwary veterans in the backdraft or crossfire. Barrack, the article continues, holds a $245 billion portfolio in "trophy assets," and has been drawing returns of over 20 percent a year since 1990. It notes that his strategy is buying "classy but neglected properties" at the lowest prices, fixing them up and then reselling after a few years "with their pedigrees fully restored."
The article also notes that Barrack sees a "tech bubble mentality" in real-estate that he likens to the dotcom era: too much capital chasing real estate, with everyone bidding on the same properties. "They've driven prices to the point where the yields on high-quality properties are like the returns on bonds, around 5 percent or 6 percent," he is quoted as saying. "That's too low." The only U.S. property he currently deals in: casinos.
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