It Comes with the Territory

In those days, there was personality in it... There was respect, and comradeship, and gratitude in it. Today, it’s all cut and dried, and there’s no chance for bringing friendship to bear—or personality. You see what I mean? They don’t know me anymore.

–Willy Loman, Death of a Salesman

Values, methods and rules born in a prior era inevitably clash with the demands of the next. Adaptation, as obvious as it is difficult to accomplish, is the key to survival.

This is particularly true of real estate slumps. Fresh from the freewheeling milieu of the 1980s, real estate lenders and borrowers adapted to CMBS 1.0's demands of expanded nonrecourse carveouts, loan and asset disclosures, underwriting standards and rating agency requirements. Today, as lenders tentatively reinstate loan programs, the real estate industry grapples with even more rigorous disclosures and standards, spread volatility, equity gaps and the impact of regulatory reform. (With financial reform bills weighing in at a combined 3,000 pages and the SEC’s request for comments on Reg AB amendments running to over 200 questions, that alone is a lot to grapple with.)

This prolonged downturn has created painful dislocations and concerns about adapting to uncertainty. The lament of the tragic salesman Willy Loman resonates today more than ever. His demise was not tragic in the classic sense of a great figure undone by his greatness or a risk-taker brought down by his risk-taking. We have little empathy anymore for systemic failure or the fall of the powerful. We connect more with people like Willy Loman, just a common man whose personal flaws and flawed interpretation of the American Dream prevented him from adapting to changing times. There’s some of Willy Loman in all of us.

One of Willy’s final laments was that there was no one to talk to. The real estate industry has done a great job of creating forums for members to talk to each other during this downturn. The Line was created to further that discussion. We will continue to provide insights from industry meetings and roundtable discussions and analyze the emerging regulatory changes affecting real estate finance.

Death of a Salesman explains in a requiem for Willy Loman that “for a salesman, there is no rock bottom to the life… A salesman is got to dream, boy. It comes with the territory.” Real estate, through every cycle, is no different.

CMBS 2.0 will inevitably clash with real estate dreams, the pursuit of yield and macro events to come. Real estate market participants are hardwired to be risk-takers and keepers of the mythology of success. In the late 1980s, a Texas developer, his political career cut short by scandal, blamed his real estate setbacks on “the economy, the banks, and oil.” But he was unrepentant, echoing Willy Loman’s requiem: “The people who don’t get criticized are those that remain in the stands. If you get down in the arena and get in the fight, you’re going to get bloody.”

It comes with the territory.

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