Friday, May 15, 2009
This week I was privileged to attend the annual meeting of the Hoyt Fellows. I believe this is the closest that we have to a true industry think-tank and it’s refreshing to be in a room with a bunch of smart and experienced industry academics and practitioners discussing things without egos getting in the way. There are no self-promotional comments or posturing and no marketing. Here are a few takeaways:
Notes & Quotes from the Hoyt Fellows Meeting
• Free & Clear Deal-Level IRR
1Q2007 / Now
Core 6.7% / 8.7%
V/A 8.6% / 12.1%
Oppty 8.7% /13.6%
• TALF-have the funds but don’t have the rules of engagement yet.
• By mid-2009 64-79% of value losses will be past
• Australia is the only place where transactions have increased in 1Q09
• Retail tenants: some seeking rent relief out of need; others just asking for the sake of it
• Nobody trusts anybody anymore
• Separate accounts are more in demand as investors seek more control
• 20% of real estate investment management firms will fail
• There’s been some gamesmanship as investors step into the redemption queues of core open end funds
• Managers are not sensitive to LTV covenants
• Investment managers have to show a legitimate and defensible process in a world where there are no transactions happening
• Most buildings are built better than they are operated or managed.
• Advantages of eco-efficient (aka green) buildings: Awareness is growing but credible evidence lacks.
• Highest % of green office buildings in the U.S.? CA, WA & TX
• A study showed that green buildings achieve:
o 2-3% higher rent
o 6-9% higher effective rent
o 16-17% higher selling price
• The biggest cost in converting a building to ‘green’ is lost rent, not the cost of the conversion.
The other treat from this event was at dinner when I happened to sit a table with Maury Seldin, Chairman of the Homer Hoyt Institute; Hal Smith, Chairman Emeritus of the Hoyt Fellows; and Ron Racster, President of the Homer Hoyt Institute. These guys have known each other for “a few years” and Maury was kind enough to tell me the story of the origins of this one of a kind, post-doc real estate program offered by The Weimer School which is part of the Homer Hoyt Institute.
I got my first glimpse at the new home of the New York Mets, Citi Field (at least this is the temporary corporate name) this past Monday night. We sat in the cheap ($20 seats) but the vantage point was excellent. It’s a nice stadium with an unbelievable number of ways to spend money…from all the food places to one women’s clothing boutique (including Mets logo negligee).
A New York Times Op-Ed piece led me to an article in the June issue of Psychology Today called What Makes Us Happy? It’s based on a Harvard research study of 268 men who entered college in the late 1930’s. This is the first time a journalist has gained access to the findings. It’s a very interesting read which asks the questions, “Is there a formula-some mix of love, work and psychological adaptation-for a good life?”. Here are some things I underlined:
• Normal is that combination of sentiments and physiological factors which in toto is commonly interpreted as successful living.
• The qualities of a superior personality are: stability, intelligence, good judgment, health, high purpose and ideals.
• The most inspiring triumphs were often studies in hardship.
• The central question was not how much or how little trouble these men met, but rather precisely how-and to what effect-they responded to that trouble.
• The study identified seven factors that predict healthy aging, both physically and psychologically: employing mature adaptations, education, stable marriage, not smoking, not abusing alcohol, some exercise and healthy weight.
• It’s social aptitude, not intellectual brilliance or parental social class, that leads to successful aging. Warm connections are necessary.
• The only thing that really matters in your life is your relationships to other people.
• What we do affects how we feel just as much as how we feel affects what we do.
• It is very hard for most of us to tolerate being loved.
• Our most profound yearnings can arise from our most basic fears.
It got me to thinking.
Final item: Transparency is in the headlines again this week, this time regarding the derivatives industry. I don’t get it. Why should transparency (aka honesty in my book) be an issue or even a question? Wouldn’t life be much simpler if we just followed one of The Four Agreements: Be impeccable with your word?
There sure have been a lot of job changes announced recently. In some cases it's understandable as promotes on private equity funds evaporate. In other cases, I guess it's just a case of 'when opportunity knocks you best answer the door.' Congratulations to all my industry friends who have recently started new jobs.
Top Left: The Allman Brothers Band 40th Anniversary show, Beacon Theatre, NY (Thanks Fred)
Top Right: Citi Field (home of the NY Mets baseball team)
These are my personal views and not that of my employer.
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