Behind the Boom and Bust in Real-Estate

This is a case of business people yelling ot the government: "save us from ourselves."

A firm that acted as a middle man in a popular real-estate-investment strategy has closed its doors, leaving investors scrambling to recover millions and pointing to flaws in the largely unregulated industry.

Emphasis added to make a point. Here's another point:

Vesta was founded in 2004 by Chicago businessman John Terzakis and his partner, Robert Estupinian. Prior to starting Vesta, Mr. Terzakis had a history of failed real-estate deals and soured relationships -- information Mr. Terzakis isn't required to disclose to potential clients.

Not required to disclose he had a history? Why? Should not that be considered material?

Californian Christina Pappas was seeking to carry out a 1031 exchange when, on the advice of her escrow company, she handed over $2.5 million to Vesta in April from the sale of a property. She soon found another building to purchase within the IRS-mandated 180-day time frame. But a Vesta representative failed to wire her money to complete the property exchange by the June 16 closing, and still hasn't done so, she says.

The 57-year-old Ms. Pappas filed suit against Vesta last month, but she fears she won't recoup the money, which accounted for much of her retirement savings. "If I would have known any of this, I would have paid my taxes instead" of attempting a 1031 exchange, she says.

If she had known? She handed over 2.5 million, and didn't know? Ouch.

New York's Chrysler Building Bought by Abu Dhabi Fund

Key phrase: Abu Dhabi, Kuwait and other Persian Gulf countries flush with oil revenue have taken advantage of falling prices to invest in real estate and financial companies around the world. Middle Eastern investors have spent $1.8 billion this year on commercial property in the U.S., more than other international buyers, according to Real Capital Analytics Inc., a New York-based property research firm.

Falling prices, flush with cash, makes for good bargains.

Japanese investors spent $78 billion on U.S. properties between the late 1980s and 1995. Many of these transactions, including Mitsubishi Estate's 1989 purchase of Manhattan's Rockefeller Center for $895 million, came just before a U.S. recession sent real estate values plummeting. As a result, the Japanese investors lost an estimated 50 percent to 80 percent of their money during the period.

Could happen again, but somehow it seems to me that the Emirates will do better. Time will tell.