By the end of June, I will no longer occupy an office at Madison Circle, 3191 Coral Way. The first of July, I will set up my new home office at Kings Creek South, near Dadeland. This same contact information will be valid, since I will receive my mail at the office on Coral Way and the telephone, fax and e-mail address will not change.

What will change however, is that I will no longer be an office mate of Tom Dixon (17 years), Andrew Dixon (6 years), Gary Sisler (8 years) and Roger Lopez (3 years). I shall miss the fellowship, camaraderie and synergism of being together on a daily basis.

It is time to reflect past events and remember its lessons, as well as look to the future. To reflect on my lifetime, I was born 18 months before the stock market crash of October 1929, that led to the Great Depression, grew up in the Northeast during this time. My recollection of the Depression years is one of a normal childhood, without financial concerns. My father worked for a large Wall Street commercial bank, collecting a paycheck each week. He even bought a new Pontiac for only $285. I do remember when Pearl Harbor was bombed, (I was playing roller hockey at Victory Field in Queens N.Y.). I spent the war years of WW II attending high school and attended college and law school at the University of Virginia. Then served two years in the US Army in the Far East, in the counter intelligence agency (CIC) during the Korean War. With my new bride Dawn we moved to South Florida in September 1955.

My first encounter with a recession was in 1958-59 while working as a young traveling lawyer for a title company. The recession was caused by the tight money controls imposed on an overheated real estate economy by the Federal Reserve. The next downturn occurred during in 1966, when I was running the asset side of the balance sheet of the first mortgage real estate investment trust (REIT) in the US, First Mortgage Investors. We were making construction and development loans in 18 states. This downturn was moderate to severe, again caused by a restrictive monetary policy by the Federal Reserve to slow down the overbuilding in single family homes. This caused many defaults and foreclosures in the housing industry. Up to this point in the US economic history, inflation was not the factor it became in later downturns.

By the early 1970’s, the economy was booming again, with an over-supply of easy money from commercial banks and REIT’s formed by financial intermediaries with little experience in making construction and development loan to unqualified builder/developers in unfeasible locations. This led to a severe downturn caused by tight money at high costs, inflation and the Watergate scandals of the Nixon administration. Many REITS failed or were absorbed by their parent banks. This led to a period of workouts and restructuring of both construction and development loans.

The 1980’s was a period of recovery and prosperity, led by the Savings and Loan Industry fed by jumbo Certificates of Deposit and excess funds to invest in real estate projects that were not feasible. Also, real estate tax syndications created false values for investment real estate. The excess of this market, plus the Tax Reform Act of 1986, brought the house of cards crashing down in the early 1990’s. This led to government intervention in the market place by the formation of the Resolution Trust Corporation (RTC), as a vehicle to work out these problems. Scandals surfaced and several S&L executives went to jail.

By the late 1990’s and the dawn of the new century, things were booming again. Only this time Wall Street got involved in the real estate finance area with exotic debt and equity vehicles such as Commercial Mortgage Backed Securities (CMBS) and subprime mortgages. They created credit default swaps to securitize and protect themselves from the inevitable defaults. This arrangement not only did not protect the Wall Street house from default, it placed them all in the same boat. When it sprung a leak by default, they all began to sink.

The event that ushered in the Great Recession was the bankruptcy filing of Lehman Brothers in the fall of 2007. Other houses (Morgan Stanley, Goldman Sachs, Morgan Chase, Merrill Lynch and etc, were rescued by mergers engineered by the US Treasury with more solvent commercial banks. The US congress was convinced to provide stimulus monies to rescue the financial houses, General Motors and Chrysler Motors also received “bailout” loans to save those “too big to fail’.

At the present time we are still feeling the pain of financial excesses, fraud and lack of controls and experience in financial/loan management. I once had a Texas banker (who we owed over 6 million dollars) say “remember too much ice cream will make you sick”.

Many pundits and forecasters predict it will be several more years until the housing and commercial markets correct themselves. If that proves true, it will be 2015 or 2018 before a return to “normal” is evident. Next time around let us hope we have more wisdom and experience at the financial controls of our recovery.

Belonging to that elite group of males know as Octogenarians , I celebrate the naming of Jack McKeon (age 80) as the new skipper of the Florida Marlins. He will right the team and may instill the magic of the 2003 team which won the World Series.

Call me, I still function as a commercial real estate broker.

STEVE MAGENHEIMER – (305) 445-0916