The Housing Chronicles Blog: Is private equity the answer to the lending squeeze?

Sunday, November 16, 2008

Is private equity the answer to the lending squeeze?

With banks hoarding cash and other lending sources trying to remain afloat, some experts have suggested that private equity is the next likely source for development projects, as they've been tapped in the past. For now, however, much of that money remains on the sidelines as investors wait for a bottom that so far remains elusive. From a story:

Reports have been surfacing that massive amounts of private equity funds are being pulled together to take advantage of the opportunity that the free fall of home and land values is providing. At the time this article was prepared, sources interviewed indicated that the majority of funds out there are sitting on the sidelines...

When these funds do come around, builders — as much as they want and need the cash to move forward with their developments — will want to be cautious. Private equity investors are not the same animal as the local community bank.

“There are different cultures. Builders are entrepreneurial. Financing people are bottom line. It's not like the good ol' days where things were done on trust...Finance people operate deal-by-deal. It's more black and white. Private equity firms are looking for a return, and there's a gap between what home builders have been used to and what these types of lenders are asking..."

Click here for full story.

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