Lubert-Adler alum seeks busted-condo deals in Phila, DC

Sounds like a paradox: "Rents in all real estate asset classes are going down" this year - but we'll soon face "a period of significant inflation," predicts Devin Aronstam, a Wharton School real estate-finance MBA who did time as a Wall Street securitization specialist before joining Philadelphia commercial property investor Lubert-Adler Partners LP, which counts Pennsylvania's state pension funds among its major clients, six years ago.

How to profit from a bust-and-reflux cycle? Aronstam's making a big bet on his current thesis: He's left Lubert-Adler to join Neal Rudler's New York-based Vantage Properties as director of its new mid-Atlantic division, focusing on multifamily apartments, and busted condominium projects that may be ripe for conversion to apartments, in the Philadelphia-Washington corridor.

Falling rents means low real estate values. But the inflation that Aronstam figures will follow the government's massive deficit spending will bring rents back up - starting with apartment rents, because landlords set new prices every year and aren't locked into multi-year deals like offices or warehouses. So when the market finally recovers, capital will flow into apartment buildings first "because it is the most transparent assset class."

Why isn't he doing that for Lubert Adler? "I want to be an entrepreneur, I want to take on more risk." Working for Lubert-Adler, he did a few deals with Vantage's Rudler. "We've grown close... He was sharing how his next step was to expand geographically," from Vantage's New York base, "and he said, 'Why don't we do this together'?"

How'd that play with his old boss? "Dean thinks it's a very good investment thesis," Aronstam told me. "I expect he'll be helpful and he may consider investing in these deals if they meet his parameters." No immediate comment at Adler's office.