Profits In Struggling Properties

The Wall Street Journal reported today on one firm's strategy in shopping for real estate in the less popular markets.

"While other big real estate investors breakfast together in the same fancy restaurants and then bid against each other for trophy buildings in hot markets, David Lichtenstein is more likely to buy in places like Shawnee, Okla., or Lake Jackson, Tex., where he recently picked up shopping malls.

When he does venture into the major real estate markets, it's into weak areas such as Chicago, where his firm recently bought the Ludwig Mies van der Rohe-designed IBM Tower in Chicago, which is one-third empty.

He describes his strategy of avoiding hot properties thusly: "It's like going to a bar where there are 50 guys and two girls," says Mr. Lichtenstein, the 43-year-old son of Brooklyn educators. "The odds of getting her are pretty slim."

Even sticking to the unsexy parts of the market, Lightstone has been one of the biggest buyers of commercial real estate in the last two years, building up a portfolio of 20,000 apartments and 27 million square feet of office and retail space in 28 states that is worth about $3 billion. That makes Lightstone, which is based in Lakewood, N.J., one of the biggest private owners of real estate in the U.S.

"There's a lot of people who are chuckling and saying 'David doesn't know what he's doing,' " Mr. Lichtenstein says. "You know what? They may be right." But he says the properties, which had been through board battles in the last few years, can be turned around, which is as important a part of his strategy as getting a good price."

This article was published on July 21, 2005 by Ryan Chittum in the WSJ. Click here to access the full article.