Wednesday, December 31, 2008

Year-End: 2008

Paul Summer of J.P. Morgan Asset Management Global Real Assets is one of the most creative guys I know. The holiday card, which Paul created for their group this season is something special. It’s digital, short and, well,let me share the text with you. Picture a leather-bound book……

Cover: 2008-2009: Turning the Page by Hedda Nuff and Gladys Over
Page One: It was the best of times, it was the worst of times.
Page Two: OK, so it wasn’t the best of times…But as we turn the page on a dickens of a year, let's get down on our knees and give thanks we're still on our feet.
Page Three: Every end brings forth a new beginning. Wishing you a healthy, happy
and prosperous new year. May your troubles only last as long as your resolutions

Well said Paul, well said.

I woke up this morning and felt the need to write to you as we start a new year. I thought about how my 2008 went and what is going on in our industry right now with people losing their jobs, whole business units being cut and more people fearful that they may be fired early in the new year. And I went to Wikipedia, a resource that I rarely rely on and found typed in the word ‘friend’ to their search engine.

“Friendship is a term used to denote co-operative and supportive behavior between two or more people. In this sense, the term connotes a relationship, which involves mutual knowledge, esteem, and affection and respect along with a degree of rendering service to friends in times of need or crisis. Friends will welcome each other's company and exhibit loyalty towards each other, often to the point of altruism. They will also engage in mutually helping behavior, such as exchange of advice and the sharing of hardship. A friend is someone who may often demonstrate reciprocating and reflective behaviors. Yet for many, friendship is nothing more than the trust that someone or something will not harm them.

Value that is found in friendships is often the result of a friend demonstrating the following on a consistent basis:

* the tendency to desire what is best for the other,
* sympathy and empathy,
* honesty, perhaps in situations where it may be difficult for others to speak the truth, especially in terms of pointing out the perceived faults of one's counterpart
* mutual understanding."

I’ve always been good at helping others and up until recent years it has been difficult for me to let others help me. But I’ve learned over the past few years in particular that it’s okay to accept help as the balance of giving and receiving is the healthiest approach to life. After all these years in the real estate industry I’ve developed a pretty good ‘sixth sense’ about people and my instinct is pretty darn good. I am grateful for having so many ‘friends’ but also ‘connected acquaintances’ in my life. In 2007-2008 I’ve learned who my true friends are and to them I am forever grateful. I’ve also learned that when you have an instinctive sense that you can’t trust someone, don’t ever doubt it because sooner or later they will prove to be who you think they are.

Anyway, what I’m trying to say is this: a lot of our industry friends and acquaintances are and will be going through difficult times. I would guess that all of us have gone through career challenges at one time or another in our own lives. And while we may not have an answer or be able to pick up a phone and find someone a suitable position, what we can do is spend some time talking with people, listening to what they’re thinking about and, well, being a friend. In 1995, as I was working my way out of a job doing workouts for a large commercial bank in New Jersey, someone in that bank, who I didn’t know very well, turned me on to the phrase ‘transferable skills.’ Given what is going on right now I think that we need to help coach our industry colleagues to think about how to transfer their skills and look in directions where there may be opportunities that they might not have thought of. We can all be coaches, nay, friends to each other and it pretty much starts with just being willing to take some time to meet with someone. It’s a small world and getting smaller. Not only will you feel good about trying to help someone, they will not forget you.

My band, “Everyone” used to have the song “Carry On” (Crosby, Stills & Nash, written by Stephen Stills) on our setlist every night we played. It was a song that was written about a broken relationship but I thought of it just his morning and while I recommend listening to the whole song (I’m going to do it as well) I offer this simple phrase:

Rejoice, rejoice, we have no choice but
To carry on

Let’s let 2008 be a reminder of what’s really important in life and as we ‘carry on’ never forget that we’re fortunate to have each other.

Happy New Year!

Friday, December 26, 2008

From The Great White North

Photo: The mostly frozen Rivière des Prairies, Quebec from my home office.

When I flew Southwest Airlines to Chicago last week and looked out the window in the gray of the early winter morning I could clearly see the snow grid of middle America frozen in place and all I could think of was how it reminded me of how our industry, nay, the worlds’ financial and business and consumer landscape is frozen, virtually shut down in a strange sort of hibernation. The big question: Will Spring bring a thaw? I hope so.

From a NYTimes editorial on 12/24:
“The world may never again be able to gaze at its photo with awestruck wonder. But two startlingly fresh images of our planet come to mind. The first is the virtual globe that appears when you open Google Earth. The planet as information tool, waiting to fly you anywhere you choose. The other is a haunting image from the movie "Wall-E" of a brown husk left lifeless by consumption. The real Earth seen from the Moon is surely as lovely as ever, even with thinner ice caps, smaller forests, fewer gorillas and tigers and a few billion more people. We are still brothers and sisters in the eternal cold, but increasingly connected by invisible threads, able to see — and hear and understand — one another as never before. That, at least, is reason for optimism.”

From Tom Asacker: Nine Predictions for 2009 (BTW, I learned some time ago that nine is the maximum number of things you should put on a list; seems like this fellow read the same thing! And, yes, I skipped some ☺):

#2: Many things will change, but many people will not.
Most of us will be doing, thinking and feeling more or less the same things this time next year as we are now. If you don’t want that sameness, grab yourself by the collar and yank yourself off that comfortable, well-worn path and onto the one less travelled by you. Let go of your past and grab on to your future. Because while you’re waiting for that grand insight to point you in the right direction, the beauty if life is flying right on by. (SF

#3: Most people will sit quietly in their seats and watch life unfold around them.
Grab the wheel and get moving. Let the pull of what excites you and what you care most deeply about be your guide.

#5: Many “friends” will be lost and many new ones made.
Many of the people who have “friended” you through social networking did so for a reason; their reason. And once that reason goes away, so will they. Don’t sweat it. Keep connecting. Keep reaching out and sharing with people with similar interests and beliefs. But also spend more slow and deep time with your family and your true friends; those who accept and care about the real you, not the social status you. “In prosperity, our friends know us; in adversity, we know our friends.” –John Churton Collins.

#6: The passionate will not only survive, they will thrive.
The future belongs to those unwilling to accept the stifling status quo; to those who stay puzzled, excited , frustrated and surprised.

#7: Success will go to those with the best questions, not those with the cleverest answers.
Successful people know that they’ll never know enough, especially about what really matters. So, they pay attention. They catch on and refocus rapidly. They never stop trying and learning. They’re driven by the questions, by their desire to understand and to change things. “All you need in this life is ignorance and confidence, and then success is sure.” –Mark Twain

#8: Execution is the new strategy.
E.L. Doctorow wrote, “Planning to write is not writing.” Sure, vision and planning are important. But with the accelerating pace of change in today’s world, the important insights are more likely to come through doing and editing, than through speculating and strategizing.

#9: Making a difference will trump making a buck.
Walt Disney’s mantra was, “I don’t make movies to make money. I make money to make movies. “ What about you? Why do you make money? Think really had and long about that simple question. If you’ve been putting off being passionate about your work in order to make a lot of money, now may be the time for you to make a change. Why? Because the business of making money simply to make more money is quickly coming to an end. The future is not in making a buck, it’s in making a difference. “We make a living by what we get, but we make a life by what we give.” –Winston Churchill

And, please, as things get more and more hectic and frantic, don’t forget the famous Princess Louise Principal: When you’re off you’re off! If you work at it you can do it. You can turn your work phone and BlackBerry off when you’re off. Just give yourself and those around you a break!

I discovered an interesting blog last week.
http://pensionpulse.blogspot.com and will be meeting with the author next Tuesday in Montreal.

2008 has been a challenging year in one way shape or form for almost all of us. I’ve had my own personal adventure this year which has, as many things in life, resulted in me being in a better place (not just physical). I have met some terrific people for the first time and visited places I had never been before. I have also really learned who my true friends are and I cherish their friendship. For me, growing as a person, exploring new things, living with my eyes and heart open and being grateful for so many little things is the essence of my life. Having your support in the launch of this blog means a great deal to me. 2009 will bring us challenges, some leftover, others pushing us to be more creative, more enthusiastic and more disciplined. But throughout it all, I have learned that it is the small things that matter and that in this time of stress, reaching out to help someone makes a difference.

My best to you for a happy and healthy 2009!


Where I'll be:

Dec. 26-Jan. 2, 2009: Montreal.
Jan. 13-14: Cleveland, OH
Jan. 16-18: Ormond Beach, FL for the first 'annual' Felix Family Birthday Celebration
Feb. 17: Atlanta, GA
Feb. 18: Raleigh, NC
Feb. 19-, 2009: Chapel Hill, NC to attend the Kennan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.
Mar. 10-13: Cannes to attend MIPIM, host the second annual MIPIM Summit TV show and attend INREV's Annual General Meeting.
Mar.24: New York to moderate a panel at the IGlobal Forum Real Estate Private Equity Summit
Mar. 25-26: Washington DC to attend PREA's Spring Conference
April 1: Champaign-Urbana, IL to attend a very special music recital
Apr. 24: New York, Madison Square Garden to watch Syracuse beat St. Johns (College Basketball).



These are my personal views and not that of my employer.











Friday, December 19, 2008

"Made-Off", Frozen Chicago, Optimism


<<<<<Chicago-Frozen Lake Michigan from my hotel room.
>>>>>>>>>>>>>>>Brian Felix/Joel Cummins Annual Holiday Keyboard Fundraiser for Keys 4 Kids in Chicago last night. Annual sing along song was The Beatles-A Day in the Life.

Well, what a week. So this dude ‘made-off’ with a lot of people’s money and here I thought Ponzi was just a sauce you dipped dumplings in! In this era of finger pointing rather than accepting responsibility for our own actions, investors with Mr. Maydoff were operating in the trance that was part of the euphoric period of the ‘wall of capital’ days. Well, the dyke in the wall of capital broke and no one’s finger is big enough to stop the rush of filthy water, carrying hopes and dreams down the sewer. And while “Caveat Emptor” is not intended to scold those who got caught in this scheme, it is and even better rule for us to remember going forward. No, we can’t change deeds that have been done or words that we’ve said but we can change the way we approach things, our attitude if you will and thus the future and boy, is there going to be change. What I don’t understand is how could someone knowingly screw foundations, many foundations, out of money that was donated to those organizations out of the goodness of the hearts of others to help people in need? And, the Cheney-like smirk that Madoff seemingly proudly wears in recent photos of make me feel like throwing much more than some shoes at him. What a scumbag! If this guy doesn't really pay for what he's done, we've got more of a problem here in the U.S. than I ever thought. But we also need to restrain from lynching or public flagellation and respect 'due process.' As a friend of mine in Chicago said to me yesterday, “All we can hope is that this is the end of things because the accumulation of all the ‘bad press’ about the financial world and the 'guilt by association' real estate is suffering can really damage the short term future of our industry.” I echo that hope but I’m just not sure that we’re finished as in I don’t think the bottom is yet in sight and as we know we'll only know when we hit the bottom after it's happened. This is like a bad movie but, it’s not, it’s real.

Desperate to read something at breakfast this morning I thumbed through USA Today and found a short Op-Ed piece by founder, Al Neuharth (age 84). Allow me to share some excerpts with you:

• In a recession you can not only survive but thrive by practicing these two things:
o Realism
o Optimism
• The reality today is to tighten you belt as much as necessary.
• Optimism means you must understand that if you handle this problem properly, you can ride high on the wave of recovery and prosperity that follows every recession….
o That means investing now in everything worthwhile you can afford.
o It means spending only what is necessary on necessities and funneling what you can into the future. The sooner the better.
• We launched USA TODAY during the 16-month recession of 1981-82. Because it was a popular new product, it rode the recovery.
• If you invest in the future in time of recession, the best of times are ahead of you.

Having been a real estate contrarian for much of my life, I tend to agree with Al in a number of ways. But I guess, the idea of ‘riding high on the wave of recovery and prosperity’ sounds a little too much like what we’re suffering now from over-doing it. Anyway, I leave it to you to chose your poison as we all attempt to navigate a wide and deep global unraveling. And, there are enough “What was he thinking?” type of news pieces to actually bring a smile (or a shaking of the head) to our day. I’ve always said, “Real life is much more entertaining than any TV show or movie.” Governor of Illinois. Auto execs private jet. Auto bailout…just announced by the U.S. President (where’s mine?) Wearing boots just in case you need something to throw ad someone.

There has been a lot of talk this week about the new Troubled Asset Radar report launched by RCA (Real Capital Analytics) this week and available to subscribers only. To my knowledge this is the only such aggregation of timely information on the state of and the potential opportunities in commercial real estate.

Restaurant of the week: Lazzaras Pizza, 221 W. 38th Street, New York (http://lazzaraspizza.com). I have eaten a lot of pizza and I have to say that this is one of the top three pizzas I have ever tasted. No slices, just pies. Go with someone who loves to eat!

Where I'll be:

Dec. 20-Jan. 2, 2009: Montreal working from home in between the holidays.
Jan. 13-14: Cleveland, OH
Feb. 19-20, 2009: Chapel Hill, NC to attend the Kenan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.
Mar. 10-13: Cannes to attend MIPIM, host the second annual MIPIM Summit TV show and attend INREV's Annual General Meeting.
Mar.24: New York to moderate a panel at the IGlobal Forum Real Estate Private Equity Summit
Mar. 25-26: Washington DC to attend PREA's Spring Conference

These are my personal views and not that of my employer.


Saturday, December 13, 2008

Reuters Real Estate, RCA and Christmas in New York and London


<<<<Fifth Avenue & 57th Street, New York last night.


>>>>Gracechurch, London, Wednesday night.


Last night I attended the Christmas party thrown by Real Capital Analytics at one of New York’s hottest places, Strata. Both in London and New York I was talking to people about the American habit of saying “Happy Holidays” vs. “Merry Christmas.” Maybe it’s one time that Americans tread lightly and don’t want to risk offending anyone who either doesn’t celebrate Christmas at all or may celebrate Chanukah, Kwanzaa or something else. Anyway, I have felt for a long time that while Christmas has religious significance for some, in many ways it has transcended religion and is just a special time of year when we celebrate the good things with our families, friends and colleagues. Anyway, I have a scoop for you:this week RCA will be releasing a powerful new feature to their subscription service focused on global distressed opportunities. I’ll be able to say more next week once it’s public.

While in London I moderated a panel at the Second Annual Reuters Real Estate Property Outlook-2009. Last year, Reuters charged a registration fee for the event. This year they found that tough sledding. But we should salute Reutersrealestate.com for producing the event as originally planned but without charging delegates any fee. It remained an invitation only event and although there were only 250 seats, 600 people wanted to attend. In this, Reuters Real Estate has shown that they are a dedicated servant to an industry which has fallen from lofty heights in a rather short time and Robert Ciemniak and his colleagues are to be congratulated for a first class and timely event. Here are some of my takeaways:

1. No one is really sure of anything.
2. “We don’t have to worry about data when we’re talking about the future.” Head of Research and Strategy for household name investment manager.
3. “The key to the future is our frame of mind.”
4. “Forecasting: the number, any number, is wrong.”
5. “We knew there was risk in the market but we chose to ignore it.”

And here are the results of a few of the audience response questions:

1. Total return expectation Eurozone-2009:
a. -10% or worse: 56%
b. -10% to 0: 37%
c. 0-10%: 5%
d. 10% or better: 2%

2. Total return expectation-Developed Asia-2009
a. -10% or worse: 48%
b. -10% to 0: 35%
c. 0-10%: 15%
d. 10% or better: 3%

3. Total return expectation-Developing Asia-2009
a. -10% or worse: 41%
b. -10% to 0: 30%
c. 0-10%: 24%
d. 10% or better: 5%

4. Which sector will provide the best returns in UK-2009
a. Office: 13%
b. Retail 23%
c. Ind/Whse 34%
d. Residential 18%
e. Hotels 12%

5. What will be a better investment in 2009?
a. Stocks/Equities 39%
b. Bonds 35%
c. Real Estate 12%
d. Other 14%

6. How long before things get better?
a. 1-3 months 1%
b. 3-6 months 7%
c. 1 year 25%
d. More than 1 year 67%

7. Expected total returns UK-2009:
a. -10% or worse: 51%
b. -10% to 0: 36%
c. 0-10%: 11%
d. 10% or better: 2%

8. Expected total returns US-2009:
a. -10% or worse: 57%
b. -10% to 0: 32%
c. 0-10%: 10%
d. 10% or better: 1%

9. How confident are you in the views you just expressed (in the voting)?
a. Very 17%
b. Just my best guess 44%
c. Not sure, loads of uncertainty 28%
d. Frankly, no idea 12%

What a difference a year makes. The further we get into this thing the longer it’s taking for us to hit bottom (although there’s an old blues song that has the line, “been down so long it looks like up to me”) and the more strain there’s going to be, everywhere in the food chain. I’ve been finding that there is money still flowing into real estate but more into distressed opportunities and secondaries than traditional property deals. But, we won’t know when where the bottom is until we pass it, right?

During the nine years I was living in Napa, California, Copia opened to much fanfare. Copia was billed as “the center for food, wine and the arts” and was initially financed by a large infusion from the late vintner, Robert Mondavi. Having seen many businesses come and go in my years in the real estate and especially shopping center industry I bravely but confidently predicted that Copia would not last long. Opening in November 2001, Copia mysteriously closed its doors a few weeks ago. I bring this up because in my opinion Copia’s model from the get-go was totally flawed, it’s marketing campaign geared to the few, not the many and it’s value proposition to a town that was struggling with it’s own identity and success somewhat cloudy. But it’s like that in any business: if you launch a product or service that is for mass-consumption it will look and feel one way; if it’s for the hoity-toity, then it will have a different appeal. But Marketing 101, which I believe was developed by civilizations long ago, says: Know Your Customer. It’s not any different in the real estate fund management business, which creates real estate investment products for institutional investors. Especially in times like these, any new product must pass the test of being one that investors actually have an interest in. Hello! With companies facing both certain and uncertain challenges for the first time and with our society facing it’s own set of issues for the first time in my generation it’s more important than ever to stay close to your customer, understand what they’re going through and act accordingly. Put yourself in their shoes and appreciate that right now, it may be a smarter marketing strategy to not market at all but to become a resource (which we should always be to our customers anyway) to help them navigate their choppy seas. Long term it will pay off and right now, long-term is how we need to look at our turnaround. But only if we want to be realistic.

Periodically I’ve been writing short feature pieces for Private Equity Real Estate’s website (http://www.privateequityrealestate.com). You need to sign up to get past the headlines but it’s free. If you are not registered there I highly recommend it as it is one of the premier publications in the private equity/institutional real estate domain. I had dinner in London with the two managing partners of PEI (who also have publications on private equity in general), David Hawkins and Richard O’Donohue. And as our relationship grows I have found they and their teams of journalists, researchers and conference people simply top notch and a pleasure to work with. They also have a subscription service called PERE Connect that is a robust database of valuable information on LP’s. You can get a free trial access to this service through their website.


Restaurant of the week: Gaucho, 1 Bell Inn Yard, London EC3V 0BL
1 Bell Inn Yard, London EC3V 0BL; T 020 7626 5180; Authentic food and wine from Argentina in a very fun environment-great music and service (and a lot of smiles even amongst the line cooks). The beef is out of this world. (http://www.gauchorestaurants.co.uk/restaurants/restaurant.php?id=city) Note: they have multiple locations in London.


Where I'll be:

Dec. 15-17: New York
Dec. 18 & 19: Chicago for meetings and on the 18th at 8pm to attend the
Third Annual Holiday Keyboard Concert to Benefit Keys-4-Kids. Schuba's (3159 N. Southport) and features Joel Cummins of Umphreys McGee, Brian Felix of OM Trio and special guests. It’s only $18 and I already know a few real estate folks who I'll be sharing some holiday cheer with. (773.525.2508). Hope to see you there.
Dec. 20-Jan. 2, 2009: Montreal working from home in between the holidays.
Feb. 19-20, 2009: Chapel Hill, NC to attend the Kenan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.
Mar. 10-13: Cannes to attend MIPIM, host the second annual MIPIM Summit TV show and attend INREV's Annual General Meeting.
Mar. 25-26: Washington DC to attend PREA's Spring Conference


Thursday, December 4, 2008

Christmas in New York

<<<Rockefeller Center Christmas Tree lighting with thanks to Rock Center owners Tishman Speyer.

>>>>The tree in the lobby of our building, The Chrysler Building. It's beginning to look a lot like Christmas....

A long time industry friend and recruiter John Peters, attended IMN's 8th Annual Borrower's & Investors Forum on Real Estate Mezzanine Loans and Preferred Equity Financing this week in NY. Knowing how diligent John is, I asked if he would share his personal notes from the conference. So, I pass long some of his key take-aways:

1. In general, doom and gloom was the theme with no let up in sight.
2. The denial phase is in full bloom as very few wanted to give much if any consideration to the fundamentals and the implications if they weaken dramatically.
3. Some of the multi-cycle veterans believe that few recognize how bad it can and probably will get as cash flows deteriorate and push pricing down further. Many back into value from yield targets versus cash flow analysis.
4. "The only glimmer of hope: There's so much pent up demand that when the bottom's found, we'll be rolling in two weeks."
5. Unintended consequence of the TARP (Troubled Asset Recovery Program) program is the slowing of transactions that would have continued to address pricing realities.
6. “I don't understand short term borrowing for long term investing.” (Experienced developer/investor)
7. Disclaimer within a written MAI appraisal: We have done the best we can to find comparables but considering the current market realities, do not count on our opinion.
8. Will lenders extend maturities? A rolling loan gathers no loss.
9. No matter where you are in the capital stack take a long hard look at the collateral.
10. Asking for the outlandish might just be successful.
11. There is a LOT of fear out there.

Be a Correspondent: if you attend a conference and want to share your takeaways with the folks who read this column please send them along. It only needs to be five bullet points and I will share them either with attribution or anonymously as you wish. Thanks.

PERE Awards. Which people, firms, funds and deals stood out in 2008? Cast your nominations now in the only industry awards that are voted on entirely by the participants in the private equity real estate market.

On those days that I take the train from my place in Long Beach, NY into my office in 'the city' I see a lot of backyards, some may call these alleys but whatever the label it's the rear of a house or business. My route includes water views, backs of industrial (the mfg type) buildings, single family homes and apartment projects, a university with great athletic fields, a lot of rooftops of very old and run down businesses that I'm sure the EPA (environmental protection agency) has no idea exist. My point? No matter what a house or business looks like from the front the back or backyard may be tellingly different. For now fugeddaboutbasements! It's the same with all businesses, backyards, backrooms, bullpens, what have you. When you decide to do business with a firm it's based primarily on the 'front of the house' (dare i use the "F" words...facade?) but it's important, maybe now and going forward more than ever, to look beyond the marquee and get to know and become comfortable and feel confident with those behind the scenes who like nurses (sometimes more than doctors) are oft times more directly responsible for your health/survival or that of the properties you've invested in. Institutional real estate investors simply do not get involved with slumlords although I have known a couple and in the early 90's handled the workout of a legendary one, Morty Ginsburg, but that's a whole other story. All I'm saying is as you take a break from allocating money to or investing in real estate waiting for this year to end and the new one to begin also take the time to get to know those you entrust your money to better than ever. How investors behave in difficult times says a lot about how they'll handle themselves in the next cycle.

Sorry but I couldn’t pass this up. Reading a quote from a REIT CEO recently: “Investor relationships are the key to getting through the recession. You need equity to get through this period.” Hello! I guess investor relationships became key as things got bad. Not quite Mr. CEO. It’s a full time commitment to stay close to your investors, to keep them informed and to give them the continued comfort that you know what you’re doing. All the time.


Best new strategy name: Rescue Equity!


On the Road with Steve:

Dec. 6: Cathedral of St. John Divine to hear their newly refurbished organ. Click here to see their real estate initiative .
Dec. 8-11: London and to moderate a panel at the Reuters Real Estate Global Property Outlook 2009 on the 9th (Invitation only).
Dec. 12: Real Capital Analytics (RCA) holiday party.
Dec. 15-17: New York
Dec. 18 & 19: Chicago for meetings and on the 18th to attend the Third Annnual Charity Christmas Concert of Joel Cummins (Umphrey's McGee) and Brian Felix(Om Trio) starting at 7pm at Schubas.
Dec. 20-Jan. 2, 2009: Montreal working from home in between the holidays.
Feb. 19-20, 2009: Chapel Hill, NC to attend the Kenan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.
Mar. 10-13: Cannes to attend MIPIM, host the second annual MIPIM Summit TV show and attend INREV's Annual General Meeting.
Mar. 25-26: Washington DC to attend the PREA Spring Conference




These are my personal views and not that of my employer.


Friday, November 28, 2008

Craziness and Gratefulness


“The bottom line here is that there’s going to be a lot of money going back and forth.” I heard this on the streets of New York on Wednesday and figured I’d share it with you as it seems to be the definitive statement on what will be happening in the world over the next 12-18 months. What the guy who said it meant or what he does I have no idea but it sounded as good as anything I’ve heard lately.

The annual Top 14 Restaurant and Hotel Food Trends from international restaurant consultants, Joseph Baum & Michael Whiteman Co. has been delivered. Here are a couple of their views. I’d be happy to send you the full pdf. Just email me (steve@simplicate.com) and put “Food” in the subject box.

• Dust off those meatloaf recipes. Tough times are here.
• The bistros are coming, the bistros are coming.
• It’s comfort food time again.

I’ve been reading about the real estate service companies who are creating groups focused on distress. As someone who spent a fair amount of time turning around distressed assets, working out distressed loans and selling blended distressed portfolios (the blended part were the good assets), working out problems is not a skill that automatically appears when you change the title on your business card or create a new business unit. It’s a relatively small community of us that have real workout experience. One of my peers in that area is Ted Leary of Crosswater Realty Advisors. Don’t get me wrong, there are others. But you need experience to handle problem assets and loans and experience has to come from somewhere; it’s just that a lot of experience this time will be gained on the lenders or distressed owner’s dime.

Does this ever happen to you? You’re somewhere and you see somebody that reminds you of somebody else you know that you’ve either been thinking of calling or weren’t but now there is? It’s happened to me a number of times but several times in short order recently. Fascinating how the mind works, isn’t it?

Leadership Lessons: Here are some of the ‘headlines’ from a book called “I Wanna Tell You A Story” written by a UK friend of mine , Trevor Gay:

1. Never, ever assume.
2. Be humble, you are still learning: you can learn from anyone. You are a role model-think about how you want to be remembered.
3. “Make it up as you go along” works as a strategy sometimes. Policies help and act as a guide but sometimes you just have to get on and ‘do it.’
4. Actually you don’t know all the answers-you can always learn; beware especially of those old well-established systems that everyone is comfortable with-don’t protect them blindly.
5. The best way to gain power is to let go of power. Your front line staff knows all the answers. You cannot possibly know the dynamics and relationships as well as your staff. Learn to let go.
6. Know what it is that you do…. and more importantly, know how you can prove it.
7. You are as powerful or as weak as you believe you are. Strive for change and improvements…No one should be punished for trying too hard.
8. “Walking the talk’ means getting your hands dirty. You never lose the responsibility of making sure the job gets done. Your credibility is linked to how dirty you are prepared to see your hands become.
9. Never underestimate how powerful you are perceived to be as a manager. You hold the key to the joy or grief of many people and you probably do not realize it. Respect that power and use it to make the job of your staff easier.
10. Cherish the basics. When you begin your leadership journey as a junior member of staff, cherish the experience you gain in doing the basics well. Your ‘old’ bosses may appear pedantic-but you will remember that detail when you are a leader and just how important detail can be.
11. Take responsibility personally as a leader. Small thing to you may be a big thing to someone else.
12. You don’t need to shout. People know when they have made a mistake.
13. Rules are made to be stretched….and sometimes broken.
14. Decisiveness is both listening and doing. Decisiveness is about listening respectfully and then setting a clear direction.
15. Make up your own mind. Don’t always believe what you hear about your bosses. Make your mind up based on how they treat you.
16. Always be ready to change your plans. Never make assumptions about other people’s motivation and when you make plans be prepared to change them.

News Item: Edna Parker, a former Indiana schoolteacher who was certified as the world's oldest person, died Wednesday at a nursing home in Shelbyville, Ind. She was 115, a former schoolteacher and ate a lot of meat and starch over the course of her exceptionally long live. Parker especially enjoyed eggs, sausage, bacon and fried chicken. Parker, who credited her longevity to various factors, including education, remained relatively free of health problems in her last years. According to family members, she took few medications and at 113 could still walk. The reason I include this is, and I haven’t shared this with hardly anyone, I plan and believe I will live to 120. Why? Because there is too much to see and experience and I need all those years. It’s also because I really have no interest in dying and feel that with the right attitude I can avoid it for many more years.

Final thought: We need to be kind to each other. In this world of growing craziness and uncertainty we can help things by being more considerate of each other and putting ourselves in the other persons' shoes. Tolerance and patience have never been needed more. And the gratefulness that this week's Thanksgiving in the U.S. has reminded us of (as a number of you have written me about) need to be a part of our daily lives.

Thanks for reading my blog and passing it along.
Many of you know that my life is built on people, on community, on collaboration and on sharing. This platform gives us all a chance to connect and reconnect. I am grateful for and sincerely appreciate your support, suggestions and contributions.

Steve

Photo: Many people say the ‘crane’ is the national bird of the real estate industry. Walking to my office the other day I glanced up to see one of these modular construction cranes above me. Sadly, this is the type of crane that has collapsed a few times in recent past in New York, killing several people. When you look up at it like this, it’s amazing that it can stand at all, don’t you think?

Where I'll be:

Dec. 1-5: New York (Dec. 1 getting together with some of my friends in CRE journalism and P.R. for a holiday drink).
Dec. 6: Cathedral of St. John Divine to hear their newly refurbished organ. Click here to see their real estate initiative .
Dec. 8-12: London and to moderate a panel at the Reuters Real Estate Global Property Outlook 2009 on the 9th (Invitation only).
Dec. 15-19: New York
Dec. 20-Jan. 2, 2009: Montreal working from home in between the holidays.
Feb. 19-20, 2009: Chapel Hill, NC to attend the Kenan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.

Mar. 10-13: Cannes to attend MIPIM, host the second annual MIPIM Summit TV show and attend INREV's Annual General Meeting.
Mar. 25-26: Washington DC to attend PREA's Spring Conference




Note: These are my personal views and not that of my employer.

Saturday, November 15, 2008

Amsterdam/The Hague

I was in Amsterdam this week for the INREV Investor Platform and Committee Meetings (INREV=European Association for Investment in Non-Listed Real Estate Vehicles). There were about 80 or so in attendance, a good percentage European pension funds. It’s possible that I was the only American there. Here are some tidbits:

1. Investors more interested in manager out-performance and corporate governance.
2. Valuation problems raised as a major issue
3. Investors putting more emphasis on longer/more extensive due diligence before committing to a fund.
4. What’s in?(vs. what’s out?)
o Veteran fund managers with more cyclical experience
o Capital raising with loan facility in place
o Preservation of income
o Blind pool funds vs. seeded portfolios
o Private fund managers vs. listed fund managers
5. Themes in the market:
o Problems not limited to higher risk/return funds.
o Local partner model causes worries.
o Investors in charge or investors backing off?
5. “Governance has never been such a hot topic.”
i. When the markets are bad, poor practicing governance will show up (Quote of the week: ‘It’s only when the tide goes out that you’ll see who is not wearing any swimming trunks.’)

(Note: Interesting how much things have changed in a relatively short time isn’t it?)

Being in The Hague again reminded me how much more considerate and polite the people who live in that town are with each other and with visitors (I also saw that retail sales are down considerably there as well). That’s not to say that the tram drivers aren’t a bit gruff but I think that may be part of the profile of mass transit people worldwide. However, it is nice to be in that kind of environment and reminds me of how things can be when people just think of the other person a little bit more rather than just about themselves (p.s. I also paid a surprise visit on my favorite European dog, Joup at the REP offices). I don’t know if this financial meltdown will result in a change in behavior to a ‘kinder and gentler’ America reminiscent of the intense nationalism that was shown in America immediately following September 11 (which lasted about four minutes) but perhaps something good does come out of difficult times. We can hope, can’t we?

(Deleted here was a rant on my former friend from college, political analyst Peggy Noonan).

We are living through heroic times. Because we are optimists we continue to believe that each week we will be told that we’ve hit the bottom thus things will be turning up. But each week the bottom keeps getting deeper and further out. As SNL comedienne Gilda Radner used to say in one of her many characters, “If it’s not one thing, it’s another.” And it has never been truer. Some people feel that bad things come in threes but we’re way past three aren’t we? Industry conferences are being cancelled. Attendance at stalwart shows is down. Travel is being restricted and people are staying closer to home. But just as the advertising industry adage about ‘When you can least afford to advertise is the time you need to most’ goes, so it is in the institutional real estate world where managers, as fiduciaries for pension funds, endowments and foundations need to visit their investors to answer questions, to provide comfort and to tell investors what they’re doing and what they’re planning to do to preserve and protect the assets the fund they’re invested in own. From what I hear, there is still capital being raised as in some ways life goes on; but it’s a changed life as we knew it to be and I don’t think there’s anyone who can say with certainty that they know what tomorrow will bring.

The following are some of my colleague Zack Streit’s notes from Joe LaVorgna’s, Deutsche Bank’s Chief US Economist, address at a New York University’s Capital Conference this week:

1. This recession will likely not be deeper than average recessions but the recovery will be atypically slow, because “it’s hard to start the leverage engine”
2. Housing has already corrected somewhat
3. Home-owner debt has dropped somewhat due to the stimulus earlier this year, but this is expected to spike back up as home prices continue to fall
4. Secretary Paulson is wrong not to buy troubled assets with TARP because:
a. Buying distressed assets increases liquidity
b. The best ways to stimulate the economy are as follows:
i. Giving money to states, to avoid states enacting pro-cyclical legislation like tax raises
ii. Giving money to households, as energy prices, which have pulled back, will no longer impede spending
5. Sequence of recovery
a. The money market for term debt will recover first….
b. ….then high yield debt spreads will tighten, probably in 2Q09….
c. ….tighter credit spreads could result in increased mortgage availability and spur the RMBS market….
d. ….housing will recover as a result of increased mortgage availability….
e. ….then the equity market will recover and likely to be domestic-led.

There was a wonderful sign around the lighted magnifier mirror in my hotel room at the Schiller Hotel in Amsterdam this week: “I have seen a lot of faces and I have never seen a smiling face that was not beautiful.” My brother Jay and I were talking about that, sort of, last weekend-how powerful a smile is to your overall attitude. And it’s something I’ve noticed is missing from all too many people around the world and especially in the U.S. But it was missing even when economies were high-flying. I’m not suggesting a shit-eating grin or a phony toothy smile, but I agree with the message in the mirror wholeheartedly. Try a smile.

Something I learned this week: Believe it or not, you can get a good manicure at the Wal-Mart in Ormond Beach, FL. Not sure how many other stores have this service but I was very pleasantly surprised!

Thanks to those of you who have passed this column along to your friends as I work on rebuilding the community. I’ve been getting notes from new readers as well. It feels great.

Happy Thanksgiving to the Americans who read this column. While things are difficult we still have a lot to be grateful for: remember it’s the small things that really matter.

All the Europeans I talked with this week share the energy and hope for America and the world. “Barry” Obama is a big hit and has already changed the way the U.S. is looked at. We are respected for electing this president and, while everyone realizes that things can’t be turned around overnight, there is belief that it’s a new start. It almost feels good to be an American in Europe again. Now we just need to stand behind him and his new administration. Can we make a difference? Yes we can! GOBAMA!

Restaurant of the week: Little V, Rabbijn Maarssenplein 21, The Hague +31 070 392 1230. Classy Vietnamese Cuisine.

One more restaurant: Casa Caroni, Gebouw 1 Jagerije, The Hague. Authentic Italian in a setting suitable for Billy Joel's "Scenes from an Italian Restaurant." +31 070 346 0370

Family Christmas Gift Suggestion: Hero Dragon- a family game that helps parents and children communicate about difficult subjects using imagination.

Boutique hotel of the week: Palais Hotel, Molenstraat 26, The Hague. +31 070 362 46 21

Where I'll be:

Nov. 24-25: New York
Nov. 26-12/1: Montreal
Dec. 1-5: New York
Dec. 2 (t) Toronto to attend Global Property Market Conference
Dec. 8-12: London and to moderate a panel at the Reuters Real Estate Global Property Outlook 2009 on the 9th (Invitation only).
Dec. 15-19: New York
Dec. 22-Jan. 2, 2009: Montreal
Feb. 19-20, 2009: Chapel Hill, NC to attend the Kenan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.

Thanks for reading my blog.
Many of you know that my life is built on people, on community, on collaboration and on sharing. This platform gives us all a chance to connect and reconnect. I am grateful for your support, suggestions and contributions. I sincerely appreciate it.

Steve

Photo: Fishing Pier, Flagler Beach, FL



Note: These are my personal views and not that of my employer.


Thursday, November 13, 2008

Be The Change

I have a favor to ask you: Each week I learn that many people who formerly read my column, "On the Road with Steve Felix" do not know that I'm writing this blog. If you know other people who you think would like to receive this, please send them this link where they can subscribe. I appreciate it. The more, the merrier.

I attended the PERE Forum in NY on Wednesday and Thursday. There was a very strong turnout and interestingly not of the usual suspects. I don't know about you but when I attend an event, whether I'm moderating a panel or not, I hope only to come away with one good new contact and it may not even be someone who I can directly do business with. Well, when you keep your expectations low, you're quite frequently pleasantly surprised and that was the case this week. I've picked a few of the comments made to include in the column this week but I have some good notes which I'll be happy to send you; just email me and say PERE Notes in the subject box (steve@simplicate.com).

Here we go:

36. There is money getting funded to some things now:
a. Asia
b. Distressed Strategies
i. Debt
ii. Mezz
iii. U.S.
iv. Global
c. There’s a new focus on multi-family

37. It’s surprising how quickly the SWF’s (Sovereign Wealth Funds) have retreated.

34. Investors will ultimately reward hard working fund managers who remained transparent and held their organizations together to complete the task at hand.

31. I’m going back to core-plus: income, stable assets and low leverage. Back to the future!

29. Is there enough capital in the world to address all the secondaries that will trade?

26. For most vintage 05-07 funds LP’s should be happy to get their money back; hitting a pref will be heroic.

24. LP’s are going to start rereading their partnership agreements. The lack of uniformity is likely to give rise to more standardized documents in the future.

20. There’s no need to act quickly-this is a bottom you can afford to miss.

19. Fund managers have to resist the urge to throw good money after bad; injecting equity into deals that you’ll lose anyway is a slippery slope and will be much harder to figure.

14. DSC (Debt Service Coverage) ratios were always meant to be whole numbers greater than 1.0.


PERE used a new technology for audience reponse. The handheld device that everyone got not only allowed you to vote on certain questions posed to the audience but also allowed you to text message questions to a screen in front of the moderator of the panel. As a frequent moderator, this technology is fab. It eliminates the need for people to raise their hands (although some did that as well) and ask a question publicly. The group that provided the service is also the group that invented the technology. If you are going to run a conference and are thinking of something like this i encourage you to contact these guys (who happen to be HQ'd in the UK): iml. It is very, very cool-and effective.

I got a sneak peak of the enhancements to a portfolio managment and analysis software that I've been a fan of for many years. It was very cool. Anyway, it's good to see people in our industry are still pushing the technology envelope; it's always been a given that CRE is the slowest industry to adopt technology and doing things differently but we're getting there: Rissnet, Reuters Real Estate, Situs, CREOpoint, Resolve Technology, Realwired, REBackOffice, Real Capital Markets, RCA and others are all bringing us tools and services to make us more productive, more informed, more efficient and more successful. It seems to me that especially in challenging times like these we should be taking advantage or at least trying new tools. I know budgets are getting tightened but sometimes we can be penny-wise and pound foolish. Check out what these folks are doing, if only so you know.

The photo above is from last Friday night in Asbury Park, NJ. My old band-mate "Puggy" DeRosa has been doing a Neil Diamond tribute show in dinner-theatres across NJ. This was my first time seeing the show. He's great. He also did a couple of songs that we used to do as a band. At this show there were a good number of our friends from the old days. This is Tommy Bruno, the drummer from our old band "Everyone" (hey, it was the 60's!) and me joining Puggy for 'Brown Eyed Girl' (la la la la la la). Asbury Park had been a run down city for years and it's finally seeing the light of day. "The Circuit" where people used to cruise and the site of the "Hullabaloo" club which featured guys like Bobby Banidera (now a member of Bon Jovi), Bruce Springsteen and, yes, my first band "The Better Half" playing 55 minutes on and 5 minutes off every hour with a dancing drum beat between songs played is there but different. Tim McCloone's Supper Club (http://www.timmcloonessupperclub.com/aboutus.html) where Puggy performed is a great place to enjoy some top entertainment (Tim himself is an accomplished keyboardist whose seasonal group, Holiday Express does some great charitable work via it's rocking performances.

The photo at the right is the Halloween costume of a good college friend whose name I will not mention for fear for his life. He has been a loyal reader of my stuff since the beginning and most week's he'll write me some wise-ass comment that makes me smile no matter where I am in the world. He and I used to play softball in Bayonne (NJ) Park and I'd eat over at his house on a regular basis. His mom and dad always made me feel part of the family-meaning they busted my chops just like they did with their own sons.

I don't know about you but since the election, notwithstanding that there are still a couple or three elections still up in the air, it feels different in America. I'm not talking about what I hear or see on TV, partially because I hardly watch TV. What I'm talking about is something that resembles a collective sigh, a sense of relief that, even with the serious financial stress we're all experiencing, we are going to get a chance to experience and participate in a dramatic change. We've all had a wake up call, like being doused with ice water while still in sleepy-time dreamland. It's not fun and for the first time in my lifetime, the problems are not limited to one segment of the population; correction, the world. And, as much as we might try, we cannot go back and change anything that's been done; we can only learn from it and do things differently going forward. The future is now; we can seize the moment and "be the change we wish to see in the world."

Where I'll be:

Nov. 14-16: Ormond Beach, FL with my brother Jay to visit our Dad.
Nov. 18-21: The Netherlands
Nov. 19: Amsterdam for INREV's Investor Platform and Committee Meetings.
Nov. 26-12/1: Montreal
Dec. 1-5: New York
Dec. 8-12: London and to moderate a panel at the Reuters Real Estate Global Property Outlook 2009 on the 9th (Invitation only).
Dec. 15-19: New York
Dec. 22-Jan. 2, 2009: Montreal
Feb. 19-20, 2009: Chapel Hill, NC to attend the Kenan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.

Thanks for reading my blog.
Many of you know that my life is built on people, on community, on collaboration and on sharing. This platform gives us all a chance to connect and reconnect. I am grateful for your support, suggestions and contributions. Thanks a lot.

Steve


Note: These are my personal views and not that of my employer.



Saturday, November 1, 2008

GOBAMA

This week's institutional real estate world phrases that are being heard most often are:
1. Valuation
2. Sale of Secondary Interests
3. Potential LP default
4. Denominator
5. Unfunded commitment
6. No new money will be put out until 2010

As far as the overall commercial real estate market, well, I guess for there to be a market there need to be transactions which, for the most part, have taken a sabbatical. But for flavor I'll give you the headlines from the October Capital Trends Monthly from RCA:

1. Industrial Slowdown not as Heavy—Yet. Early October weakness hits
ahead of global trade downturn
2. Retail: No Shopper’s Paradise. Retail investors and consumers alike are guarding
their money, spelling trouble for sellers
3. Office: Amid Banking Fiasco, Office Sales Worst in Years. One pressured seller makes up 30% of Q3 sales
4. Apartments: Is This Door Closing Too? Apartments have lost the least ground
this year, but that could be changing

So, we're really feeling the stress throughout our industry. But, as I've said before, these are also times for opportunity and those that have the capital, the savvy and the nerve are starting to see more and more distressed situations. And, unfortunately, as 2008 creeps to it's end, while there are great hopes for America with our President-elect energizing the population, 2009 is going to be a very, very tough one.

This week's photo is the view from my home office in Montreal, well, actually Ste. Dorothee which is just across the river from the island of Montreal. The leaves have almost all fallen now and the vista is more stark but I find it actually more beautiful than during the summer. There are no jet-ski's whining, no boaters, just the river flowing and some remaining ducks who are challenging the potential sudden slap of real winter. The first Halloween in our new neighborhood was really something. There were so many kids and their parents dressed up and walking the street; you would have thought it was an organized parade. We were going out for dinner but we left a big bowl of candy on a table at the foot of our driveway (marked by two candles) as we didn't want people ringing the doorbell and driving the dogs nuts. But I think, next year, we'll also get into costume and be there to greet the trick or treaters personally. It was reassuring to see the celebrating of Haloween still lives in the families on our block in particular. It's a sign to me that society has not lost it's way completely.

The exciting election of Barack Obama this week was living history. And his speech was both brilliantly written and inspirationally delivered. In watching John McCain speak that night I almost got the feeling that he was relieved that it was over and that he didn't have to take on the challenges facing the next president of the U.S. We have so many problems to tackle and they all demand simultaneous attention, energy and money. It's like a big workout deal, a very big one and I guess, until you get inside and see what's what, you can't wave a magic wand and, voila, everything will be better. But something special is happening in the U.S. Do you know what it is Mr. Jones? It's a movement, it's the taking of ownership of the future by people, no matter from what generation, to change things. Of course, if you ask ten people what they want to change, they may all have different things and that's okay. But Obama, in brining back, for the first time since JFK, the spirit of volunteerism and the belief that, "Yes We Can" he has injected a belief of hope that things can turn around and it's much, much deeper than the financial crisis: it's about the quality of people's lives. And what more can you hand off to the next generation than the opportunity that anyone can achieve anything if they know, "Yes I Can." The world is on our side. The world needs the U.S. to be strong. The world wants to respect the U.S. And we have shown the world that we respect ourselves. Now it's up to us, not to talk about things, but 'be the change we want to see in the world.' We won't get a second chance, this is it and I know that we as a nation and as a global society are up to the challenge as long as we are willing to participate.

"Studs Terkel, Listener to Americans, Dies at 96" was a headline in last weekend's NY Times. I can't imagine that Studs would have liked to be called anything better than 'listener.'"Mr. Terkel succeeded as an interviewer in part because he believed most people had something to say worth hearing." So do I. Rather than 'talking or waiting to talk' how about we start spending some energy on listening. I have worked hard over the past 20 years to get myself to hold my tongue and let others talk. It's a challenge as I have so much to say that's important :-) but I can tell you that I have both gained a lot by keeping quiet at times and also, from what people tell me, developed a reputation for being a good listener. After all, we all like it when someone listens to what we're saying, right?


Where I'll be:

Nov. 10-14: New York where I'll moderate a panel at the PERE Forum (there's a special "FOS" (Friends of Steve) discount available. Please contact me for details (steve@simplicate.com).
Nov. 14-16: Ormond Beach, FL with my brother Jay to visit our Dad.
Nov. 18-21: The Netherlands
Nov. 19: Amsterdam for INREV's Investor Platform and Committee Meetings.
Nov. 26-12/1: Montreal
Dec. 1-5: New York
Dec. 8-12: London and to moderate a panel at the Reuters Real Estate Global Property Outlook 2009 on the 9th (Invitation only).
Dec. 15-19: New York
Dec. 22-Jan. 2, 2009: Montreal
Feb. 19-20, 2009: Chapel Hill, NC to attend the Kenan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.

Thanks for reading my blog.
Many of you know that my life is built on people, on community, on collaboration and on sharing. This platform gives us all a chance to connect and reconnect. I am grateful for your support, suggestions and contributions. Thanks a lot.


Note: These are my personal views and not that of my employer.




Monday, October 27, 2008

Miami Beach

The South Beach section of Miami Beach has gotten a lot of attention as one of the most trendy beach and nitelife places in the world. The wonderful art deco architecture that has been preserved due to the foresight of the local authorities is the backdrop as you walk down Ocean Beach Drive after dark (ok, there are a lot of beautiful people spilling out of the restaurants and bars along this street too; it only adds to the experience). The photo on the left is the hotel next door to mine taken from my room. It's on Collins Ave. that there are so many of the classic hotels which have been preserved and upgraded.

I attended ULI's Fall Conference in Miami Beach this past week. There were 5,000 attendees across the full spectrum of disiplines involving real estate development (although very few investors).

Paul Volcker, former head of the Federal Reserve gave a terrific speech. Here are some takeaways:

1. There’s no doubt we’re in a recession, not just in the U.S.-it’ll be rather long before we get back to robust growth.
2. We have a crisis in our financial system-but, doesn’t ‘system’ imply some order?
3. We’re seeing and going to see government intervention beyond our imagination.
4. I’ve never seen anything or as complex as this situation.
5. We had a fancy financial system with ingenious ways of supporting capital needs with money coming from abroad.
6. Confidence and trust are the key issues
7. Even with all that the government is doing, people are still not confident
8. We’ve produced too few civil engineers and too many financial engineers

From Sam Zell’s ULI keynote about Latin America:
A. Transparency in Mexico for the first time is very important to new investment.
B. There is no greater issue in real estate than the issue of demand and the developed world has little in the way of new demand.
C. The developed world adjusted to the lack of demand by overleveraging.
D. Latin America, relatively speaking, will outperform the developed world.
E. This is the time that tries mens’ souls. This is the time that you find out if you have balls.
F. Brazil and Mexico are the only two places in Latin/South America where scale is achievable. If your goal is to build a world-class business you have to look to scalability.

My favorite ULI panel was the "Forecast Fight" moderated by NCREIF head, Doug Poutasse and including Bret Wilkerson of PPR, Jon Southard of Torto Wheaton, Ken Rosen of Rosen Consulting and Sam Chandan of REIS.
1. It's all about the economy and credit markets; it's not about real estate.
2. Prediction: deep recession lasting 4-6 quarters; key will be the behavior and sentiment of consumers.
3 Cap rates are a bad measure of what is going on.
4. The three things wrong with retail today are: supply, demand and pricing :-)
5. 2008 is the first time in 15 years that the use of retail 'coupons' is up.
6. The shift in the global path of goods is impacting industrial real estate and ports.

Although I feel that we've had enough speakers and panelists talk about what caused the problems this panel did provide forecasts on rent, vacancy and absorption in the four major property types (U.S. only). However, in response to my question, "What is the sentiment of European institutional investors re: the U.S.?" the consensus was that the train had already left the station, values are a mystery and debt is rare and pricey and when you combine that with the fact that the Euro doesn't go as far as it did just a few months ago, there was no real encouragement that European investors would be taking significant positions in the U.S. right now.

Hopefully, going forward, panelists will talk about what they're planning to do, what are their fears, their expectations, etc. It's up to panel moderators and conference organizers to push panelists away from the drivel and into the dynamic kind of talk that they would have with a friend in a one-to-one conversation. After all, the panel to an audience has a one-to-one relationship as well, doesn't it?

My parents were staunch supporters of JFK and so I grew up in that kind of environment. On election night 1960, I stayed up as late as I was allowed but the final results didn't come in until the middle of the night. I woke up to find that a small sign I had made on a shirt cardboard saying, "Kennedy for President" was changed to "Kennedy is President." I was excited and happy. This time around even with what has gone on and what the polls say (who do they ask anyway?) I feel that it won't take until the middle of the night next week for us to learn who the next President of the United States will be. It will be another of those rare, world-changing events that have occured in our lifetimes (The Beatles, Video Games, The Internet, Sushi, Space Travel, Gay Marriages, X-treme Sports, the Phillies winning a World Series, Wireless, Handheld Computers, GPS......) that generations from now people will still be talking about. Every generation lives through these type things but I think we have had our fair share of biggies. On Tuesday night, I will be toasting to a brighter tomorrow for the United States and the world. There is much work to be done and we must start now. And as Johann Wolfgang Von Goethe (1749-1832) stated in one of my favorite quotes, "Whatever you dream you can do, or believe you can, begin it. Boldness has genius, power and magic in it." BTW, this quote is for us as individuals as well as for our world leaders.

Where I'll be:

Nov. 3-7: New York
Nov. 12-13: New York to moderate a panel at the PERE Forum (there's a special "FOS" (Friends of Steve) discount available. Please contact me for details (steve@simplicate.com).
Nov. 14-16: Ormond Beach, FL with my brother Jay to visit our Dad.
Nov. 18-21: The Netherlands
Nov. 19: Amsterdam for INREV's Investor Platform and Committee Meetings.
Nov. 26-12/1: Montreal
Dec. 1-5: New York
Dec. 8-12: London and to moderate a panel at the Reuters Real Estate Global Property Outlook 2009 on the 9th (Invitation only).
Dec. 15-19: New York
Dec. 22-Jan. 2, 2009: Montreal
Feb. 19-20, 2009: Chapel Hill, NC to attend the Kenan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.

Thanks for reading my blog.
Many of you know that my life is built on people, on community, on collaboration and on sharing. This platform gives us all a chance to connect and reconnect. I am grateful for your support, suggestions and contributions. Thanks a lot.


Note: These are my personal views and not that of my employer.

Friday, October 24, 2008

How to feel good


I walked by two banks hosting cocktail receptions this week, trying to give their retail customers some comfort and feeling of safety and probably also to lure new customers (after all hors d'oeuvres and wine are a sure sign of safe conditions regarding your deposits aren’t they? Plus I don’t think they had any raw shrimp, just veggies and dip!). There isn’t anything that I know about what’s going on that you don’t already know; actually I don’t know if any of us really know too much but things seem to be starting to play themselves out. So I’m going to move to another subject.

Last night I attended the annual gala of The MacDella Cooper Foundation (MCF). Those of you who have been following my travels for at least two years remember that I went with MacDella to Liberia for a month in December/January 2006/7 during which time we hosted a Christmas party for 600 needy children. MCF supports needy children. At the event last night, Nathaniel Barnes, Liberia’s Ambassador and Permanent Representative to the U.N. made a poignant remark: “When you have nothing, all you can think about is having something.” Sadly, from what I saw in Monrovia, this holds true for many, many children there. We have grown up to recognize the importance of education but there is no public school system in Liberia. In order to go to private school, it costs approximately $200 per child per year. That’s all. But when unemployment is 85% and the average wage of those employed is $24/month, $200 could just as well be $2 million.

The vast majority of Americans have seen their investments drop at least 20%. No one is happy about that and many people are frightened. There is a fog over our society caused by the shattered underpinnings of the global financial markets. This is heady stuff and it’s taking it’s toll on us as people. But I’ve learned that when you help someone, even in a small way, it makes you feel better, about yourself. So, I have a suggestion about how you can feel better: go to your checkbook and write a check for $200 to The MacDella Cooper Foundation. Mail it to:

MCF US Office
101 West 55 Street
Suite 10F
New York, NY 10019
Phone: 212 204 6574

If you like, you can contact them and arrange to have your donation go to sending a specific child to school and you can identify with that child and get updates on their progress. The $200 that I gave last night is paying for Aloysius Johnson, Age 4, to continue at the Action Faith Institute in Monrovia. The children of Liberia need us to give them some hope. This, my friends, is the ultimate win-win situation. I guarantee you will feel good about doing this and, with all the financial stress that we’re feeling, me included, $200 is one less dinner out or one less latte over two months. MacDella Cooper, called “Liberia’s Angel” is making a difference in the world. You can to. Just do it!

Where I'll be:

Oct. 27-30: Miami Beach for the ULI Fall Meeting.
Oct. 30-Nov.2: Montreal
Nov. 3-7: New York
Nov. 12-13: New York to moderate a panel at the PERE Forum (there's a special "FOS" (Friends of Steve) discount available. Please contact me for details.
Nov. 18-19: Amsterdam for INREV's Investor Platform and Committee Meetings
Dec. 3-5: Sacremento, San Francisco & Los Angeles, CA
Dec. 8-12: London for meetings and especially to moderate a panel at the Reuters Real Estate Global Property Outlook 2009 on the 9th (Invitation only).
Feb. 19-20, 2009: Chapel Hill, NC to attend the Kenan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.

Thanks for reading my blog.
Many of you know that my life is built on people, on community, on collaboration and on sharing. This platform gives us all a chance to connect and reconnect. I am grateful for your support, suggestions and contributions. Thanks a lot.

Photo: NYC, 5pm, Friday, 10/24/08

Monday, October 13, 2008

Please Vote

The U.S. Presidential election on November 4 will be the most significant of my adult life. The world is watching us so hopefully there will be no election shenanigans this time around. I offer this piece from today's NY Times for your consideration First, let's make sure everyone gets out to vote.

"Does anybody really know what time it is?" This line from a song by the band 'Chicago' may simply describe what we're all experiencing these days. In conversations this week I have not been surprised that while business to some degree goes on as usual, the transaction business, buying and selling investment grade real estate has slowed to a snail's pace. And, while people who have gone through previous cycles think that the troubled assets (vs. loans) will start surfacing in early 2009, no one seems exactly certain. However, there definitely seems to be a movement towards getting ready for an expected deluge of troubled assets to become available. But, with the U.S. government's plan to prop up the banking system still not executed it seems somewhat uncertain as to how this whole thing will play out. Suffice it to say that there is money ready and smart, experienced opportunistic real estate players out there who can pull the trigger pretty quickly (p.s. this won't be hedge funds will it?)

Another interesting point is the amount of interest in Real Capital Analytics' (RCA) new Global Trends Report (GTR) but it's not surprising that institutional investors in more and more numbers are looking outside the U.S. to deploy their allocations. BTW, RCA is offering a free trial to their GTR on their website http://www.rcanalytics.com.


This is a photo of my friend and former bandmate, Professor Tom Davis. Thank you all who wrote to me with condolences about Tom; I really appreciated it. Tom was a professor of philosophy and religion at SUNY (State University of New York)'s Ulster County Campus (about 90 minutes north of Manhattan). He was loved and respected by his students, many of whom have said that Tom changed their lives. His sudden death has shocked the campus, his family and his friends (one of whom wrote me after Googling and finding this column). The band that Tom and I played in, "Everyone" is working on doing a concert at the school to raise money for the scholarship fund created in Tom's name. It's the least we can do to celebrate Tom's life.

At least two industry conferences have been cancelled between now and the end of the year. Clearly people are cutting back on expenses, travel included. The U.S. is in bad shape in general and something needs to happen to turn the tide. Hopefully, whoever our next President is will inspire the confidence needed for the population in general to keep the system going. But, it's not an easy task, nor a quick fix. And, just as I don't know what my house in Napa, CA is worth, valuations of assets is a roadblock to deals (assuming equity and debt exist, which I continue to believe they do albeit changed due to current underwriting standards). I'm told that the real estate derivatives market in the U.S. has heated up and that one of the major players had their best trading month in September.

So, whose crystal ball can predict where and when we'll hit bottom?

P.S. I've been writing pieces for PERE (Private Equity Real Estate). You can sign-up free for access to their stories on our industry.

P.P.S. If you find this blog worthwhile, please pass along this link where people can sign up to receive it. Thanks.


Where I'll be:

October 23: New York Athletic Club: The MacDella Cooper Foundation Gala to raise money to help needy children in Liberia.
Oct. 27-30: Miami Beach for the ULI Fall Meeting.
Oct. 30-Nov.2: Montreal
Nov. 3-7: New York
Nov. 12-13: New York to moderate a panel at the PERE Forum (there's a special "FOS" (Friends of Steve) discount available. Please contact me for details.
Nov. 18-19: Amsterdam for INREV's Investor Platform and Committee Meetings
Dec. 8-12: London for meetings and especially to moderate a panel at the Reuters Real Estate Global Property Outlook 2009 on the 9th (Invitation only).
Feb. 19-20, 2009: Chapel Hill, NC to attend the Kenan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.

Copyright Steve Felix 2008


Friday, October 10, 2008

show me the money

10 October 2008

“Show me the money” is Cuba Gooding’s mantra in the movie “Jerry McGuire.” But while big numbers are being thrown around by governments worldwide, trying to avoid a total meltdown (is las vegas taking odds on that?) there continues to be real losses accumulating in the real estate industry. So, it seems like now it the time to start pulling the trigger on distressed deals. But then again maybe not. If values continue to fall, then maybe waiting is smarter. That’s why the people making these investment decisions both get paid the big bucks and have sleepless nights. We are clearly in a meltdown and this one has nothing to do with global warming. Unlike the U.S. in the early 1990’s when we were watching to see what bank the RTC took over, today we’re waking up wondering what country is going to take things into their own hands, trying desperately to keep some semblance of confidence in their banking sector. These are and will continue to be trying times but for those who have only seen the real estate boom, it’s both sobering and instructional. For those of us that have been through at least one, and for me and some of my friends at least three real estate cycles, we know about uncertain times. But I don’t think that any of us really knows exactly what to expect today or next Monday. What is looking pretty certain is that cash will continue to be king and there will be buying opportunities where there is seller stress. I use the term stress rather than distress because many of the assets that will be bought (or refinanced privately) will be healthy assets caught in the wringer of the evaporation of the bountiful capital that existed. Maybe this year we in America will have a lot more to be thankful for at Thanksgiving than material things and hopefully one of them will be that America made the right choice to elect a president that can inspire us to a brighter future.


The fall season is beautiful in the northeast this year although a little warmer than ‘normal’ (whatever normal is anymore). my coordinates these days have me living part-time in an apartment in long beach, on the long island shore not far from JFK. Most mornings, I walk down the boardwalk, which even though is a couple of blocks out of the way, and can hear the sound of waves crashing on the shoreline. While sometimes I’m walking in the dark, the smell and sound are still fabulous. On the weekends, I take walks on the beach, looking for that one ultimate seashell to take back with me (haven’t found it yet) and watching the hundreds of surfers who are magnetically pulled to this beach. I’ve never surfed and am not sure I need to (haven’t skydived or downhilled skied either). But I’ve noticed the patience that is necessary in this part of the atlantic ocean as the one good wave may come only once in eight. One of the discoveries I’ve made in the few weeks I’ve been living there is that the beach club, silverpoint, where my family had a small cabana is still there. The gates have been closed but one day I’m going to drive in to see, if possibly, after all these year, anything recognizable remains. I have photos and movies that have been passed down to me showing the adults playing bridge and canasta; of the men playing softball in the sand; of birthday parties (mine is in july) and bbq’s and people looking very happy. My grandfather taught me how to swim there, in the ocean (as a young man he was a lifeguard who once saved someone from drowning) and I also learned to play baseball there from my father and my uncles, all who were fairly good athletes. Things were so much simpler then. My father use to let me and my brother sit on his lap and steer the car as we left the parking lot for home after a long weekend day at the beach. Where I grew up, in forest hills, ny, is also on my list to visit, probably next weekend. I was there about five years ago and the buildings are pretty much the same, I think just the makeup of the people has changed. We can never go back, except to visit, but, sometimes in a quiet time, I think of those days, reminded recently by a facebook website group of my former junior high school where people were testing each others’ memories of teachers. I think about how lucky I was to grow up until age 15 in new york and then move to the suburbs in new jersey which while only 22 miles west of midtown manhattan could have been somewhere in the heartland as it’s become to be referred to. And, as I write this, early on Friday morning, knowing that tonight I will be playing the piano at my former band mate tom davis’ memorial service, I stop, just for a moment, because that’s all it takes, and smile and know that even with what is going on in the global financial world, and no matter how much my investments have dropped in the past months (btw, more than 20%) I have my health; I have a loving wife and children who are happy and healthy and doing things that they love. When things get tough, sometimes we get more sentimental; I used to be that way too. But in the last few years, I have become more and more grateful, every day of the joy of life and my good fortune to have had a chance to do and see so many things and meet so many people and…..well, I could go on and on but one of my friends who reads this column has suggested that I try to keep it shorter (it’s a little shorter paul) and so i’ll end with this:

“Your best shot at happiness, self-worth and personal satisfaction-the things that constitute real success-is not in earning as much as you can but in performing as well as you can something that you consider worthwhile.”
William Raspberry


Where I’ll Be:

Week of October 13: New York
Week of October 20: New York
October 23: New York Athletic Club: The MacDella Cooper Foundation Gala to raise money to help needy children in Liberia
October 27-30: Miami Beach for the ULI Fall Meeting.
Nov. 12-13: New York to moderate a panel at the PERE Forum.
Dec. 8-12: London for meetings and especially to moderate a panel at the Reuters Real Estate Global Property Outlook 2009 on the 9th (Invitation only).
Feb. 19-20, 2009: Chapel Hill, NC to attend the Kenan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.



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