'Jerk' Insurance Soothes Property Sellers Amid Recovery Signs
April 15, 2010
By: Josh Gittelsohn

When private-equity investor Tony Avila negotiated a purchase of empty lots in Las Vegas in March, he persuaded the selling bank to accept 30 cents on the dollar by pledging to share profits from developing the land....

... Sweeteners to protect one side in a transaction from looking like a loser have been used by hedge-fund managers William Ackman and Carl Icahn and the Federal Deposit Insurance Corp. They’re helping seal deals amid signs that the worst real estate crisis in 80 years may be easing, said Woody Heller, an executive managing director at Studley, a New York-based commercial broker. Avila, Trump, Ackman and Icahn call the practice “schmuck insurance,” derived from a vulgar Yiddish word that has come to mean “jerk,” “fool,” or “easy mark.”

“No one worries about schmuck insurance when the market is in decline,” said Heller, who has worked in New York real estate since 1981 and said the expression has been around for decades. “That this is a topic anyone is thinking about or talking about is an affirmation that the market is in recovery.” ...

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