Arthur Nevid is the chief investment officer for Mountain Real Estate Capital. The firm is busy in the Southeast, buying up distressed portfolios from struggling banks and working with builders to repair and rebuild those communities for increased cash flow. Nevid joined the company in 1997, and before that he held investment positions at Cofinance Group, a French-owned real estate investment firm, and was an investment banker at Merrill Lynch Hubbard, where he specialized in syndicating public real estate partnerships. For this edition of In This Corner, Nevid lays out investment strategies in the possible double-dip. What do you say to the strategy of growing in times of famine and staying conservative in times of feast? Our company has been providing private capital for value-add opportunities to developers and operators since 1993, and our principals have been through a number of cycles both before and since then. When times are robust, our investment pace actually tends to lag the industry as we refuse to relax our underwriting criteria despite the desire to put out capital, and we often cannot compete with the more aggressive and abundant money sources. Instead, we sit around wringing our hands waiting for, as you say, the famine to set in.  In fact, we invested practically nothing between 2006 and 2010.  But now that the famine as arrived, we have begun to eat. That being said, we do project at least a minor double-dip, so we are being careful not to gorge ourselves. Has Mountain Real Estate Capital positioned itself for the opportunities that are sure to come out of it? We believe so. Our fund is fully organized to invest $1bn, and our corporate infrastructure is well positioned to quickly take advantage of opportunities as they arise.  A year ago, we brought in over fifteen professionals previously employed by GMAC-ResCap’s Business Capital Group who had been responsible for the management and disposition of over 32,000 lots, homes and communities valued at over $2bn, and now provide us with the horsepower to underwrite and manage the purchase of large NPL/REO portfolios.  We have also worked hard to create productive working relationships and joint venture structures with national and regional homebuilders who provide us access to great off-market, one-off opportunities nationally. So, what are you looking for in a good investment? Several things: strong liquidity profile, off-market distressed opportunity, good long-term growth, employment and affordability demographics, and limited downside. If developing, the most important thing, by far, is our partner. We have been involved in good real estate with bad partners and bad real estate with good partners, and we’ll take the latter every time. What sort of bear-traps are out there for investors looking to capitalize on distressed assets? I remember in the RTC days how excited I was to recommend to my boss the purchase of a Manhattan office building for just $50 per square-foot (psf), a ridiculously low price based on historic comps. He told me two things: One, if it’s selling for $50 psf, then it is worth at best $50 psf, and, two, if the economy is such that you will not be able to fill up your $50 psf building with tenants, then you are paying too much. The point being that merely paying a fraction of unpaid balance or replacement cost does not a good deal make – you can lose 20 cents on the dollar as quickly as you can lose 80 cents on the dollar if the real estate fails. Determining the right price is a function of smart and experienced underwriting, in good times and bad. You partner with builders on these investment ventures. From where you’re sitting, are builders forced to become more like renovators in a time when housing demand is so low? Not at all. The idea is to team up with the best partner in a submarket, together do smart long-term underwriting, buy right, build affordable quality product and be the market leader. Thus far, our sales of new homes and lots have exceeded our underwriting even during this latest market downturn.