Publications

- April 1, 2019: Vol. 31, Number 4

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Is debt the new equity? The search for staying power in the market

by Ethan Penner

I recently read a piece that reviewed an institutional real estate conference and the temperament there. In reflecting upon the 2006–2007 period, when debt capital was overabundantly available — mostly as a result of the extraordinary leveraging of the financial system (remember structured investment vehicles?) — the author reminisced on what must have been a common refrain at that time (I was living in Hawaii, so never heard it myself): Debt was the new equity. The author hinted times today were mildly reminiscent of that past bubble, and real estate borrowers may once again be availing themselves of abundant debt in place of equity, thus placing themselves in a far more precarious position if things don’t go as planned — say, a recession hits, or pro forma budgets are not achieved.

Do you feel lucky, punk?

I began to meditate on the phrase itself, “debt is the new equity,” and wonder if maybe both concepts — debt and equity — are po

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