Toxic Assets May Get a Value Soon: Richard Lefrak
The toxic assets dilemma may be solved in the next few weeks, when results from an auction in securities backed by residential mortgages are made public by the Federal Deposit Insurance Corporation (FDIC), commercial real estate investor Richard Lefrak told CNBC Tuesday.
"We did bid on a package of FDIC assets about two weeks ago and we expect to see what the results of that auction were. This was one of the first ones," Lefrak, president of LeFrak Organization, said in a live interview.
"When we get an indication of value that would be an indication of how much these assets are worth," he added, but refused to disclose how much he, together with asset manager Wilbur Ross, had bid.
The auction took place within the government's Public-Private Investment Program, and the package of mortgages was $1.3 billion, he said.
"I don't have the facts completely but I believe they had a significant amount of bidders," he said. "If the auction goes well it's an indication of positive news for the economy… or at least an indication of positive news for the banks that have these assets on their books."
"At the end of the day, it's a great opportunity and the actual interest, vigorous interest in this package, shows you that people are chasing yield right now," Lefrak said.
The commercial real estate sector was heavily dependent on healthy employment, so its recovery is going to take a while, according to Lefrak.
"When they're cutting jobs, they don't need office space. When the retail business is sagging, they don't need shopping space," he said.
And because commercial property investors are sophisticated investors who "ought to have known what they were doing," they don't get the same degree of sympathy from the government, he said.
"They made an effort now with the TALF… but in the end it's going to be about jobs. If we have a vigorous recovery in jobs, the real estate sector will follow," said Lefrak.
"But if the robustness of the stock market is directly related to robustness of profits which is directly related to… corporations getting lean and mean by getting rid of people, real estate will still suffer."