>>>>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