Much of today’s stress in commercial real estate is not the result of a sudden dislocation or traditional cyclical downturn, but of prolonged overenthusiasm that allowed pricing assumptions to remain elevated even as underlying operating risks evolved, Case Equity Partners managing partner Shlomo Chopp argues. He contends that yield compression, abundant liquidity and long‑duration financing enabled valuations to persist longer than fundamentals justified, extending the adjustment process rather than preventing it.
Chopp presents his thesis in a paper titled “New Graves to Dance On,” originally published in Real Estate Issues, the journal of the Counselors of Real Estate. The paper is positioned in dialogue with Sam Zell’s influential essays “The Grave Dancer” and “The Return of the Grave Dancer,” which introduced a framework for active investing during periods of real estate distress driven by excess capital, misread demand, and misaligned capital structures.
“Sam Zell wrote about moments when capital structures broke and disciplined investors stepped in to reset them,” said Chopp. “The real estate industry has decades of experience restructuring, refinancing or extending loans in the hope of a better day, and we have been an active participant in achieving this. But pricing ultimately has to reconcile with operating reality or it tends to implode.
“When enthusiasm persists longer than fundamentals justify, the resulting distress reflects mispricing over time, not the absence of opportunity. The standard ways of thinking about and responding to these situations need to evolve for modern markets.”
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