Wednesday, July 22, 2020

Interview with Mike Clarke - A friend who has made a difference in the global commercial real estate industry

Mike is a Senior Advisor to Accord Group Holdings, a Capital Advisory and Principal Investment firm.

Mike Clarke also runs his own consulting company, Mike Clarke Consulting Limited, advising property related businesses and fund managers on their business strategy, capital raising options, product architecture and product development. He also acts as a Non-Executive Director and Independent expert in litigation.

From March 2014 to December 2018, Mike was the Head of Investor Services EMEA for CBRE Global Investors where he was responsible for investor relations, equity raising, targeting of new investors and the delivery of creative investment solutions to clients in the EMEA region. Mike was a member of the Global Leadership Team, EMEA Executive Committee and EMEA Operations Committee.

Mike joined the global real estate industry in 1987 and has extensive experience both as an investor in and manager of real estate vehicles. Before joining CBRE Global Investors he was Senior Managing Director and Head of European Real Estate for Mesirow Financial. At Mesirow he was co-portfolio manager of a global fund of funds program with specific responsibility for sourcing, undertaking due diligence, executing and managing value add and opportunistic strategies in Asia and Europe.  Prior to this, he spent 18 years at Schroders where he grew assets under management from £160 million to over £8 billion through the development of a multi-product real estate strategy.

Mike is an active industry participant. He is a member of the INREV Management Board and is a regular speaker and trainer at INREV and other industry events. He is an external examiner at Oxford Brookes University for their Masters in Real Estate Investment Finance.

Q. How did you get your start in the commercial real estate industry?

Growing up in Norwich, approximately 100 miles North East of London in the UK, the only opportunity for work experience whilst at school, other than strawberry picking, was at the insurance company, Norwich Union (Now Aviva). I was lucky to be offered a summer in their estates department when I was 16 and realised what an exciting sector real estate was. I took the opportunity to meet members of the team who had entered the profession from different routes and decided that I would try and secure a place at University to study Estate Management which was a fast track to becoming a chartered surveyor.

I graduated from Oxford Polytechnic (now Oxford Brookes University) in 1987 with a BSc in Estate Management and secured my first role as a graduate broker with a small firm who had recently opened a London office.  Early on, I realised that we were not a natural fit so quickly moved to Liverpool Victoria Insurance as a Valuation Surveyor. Many of my friends were working in the large broker firms and dealing with Grade A developments. Meanwhile I was getting my hands dirty managing a mix of crappy residential and commercial assets in suburban London. It was a wonderful way to learn the complete food chain of real estate and the art of negotiation!

In 1989 my former valuation lecturer at University called me and persuaded me to join Hillier Parker May & Rowden (now CBRE) to do portfolio valuations. Due to the recession that hit a year later, I was able to concentrate on valuations for insolvency advice which gave me wonderful insight into how investment decisions can go so horribly wrong. These years were perfect training in risk management.

Q. What advice would you give to someone who has been in the industry for a short time or a student looking to get her or his start?

Focus on gaining in depth experience rather than working for purely a big - name employer. Those big-name employers will eventually find you if you have the right experience and attitude. From my experience, the larger firms do not give the best experience as recent graduates are such a small fish in a large pond. The smaller boutiques can give a lot more responsibility and face time with inspirational clients at an earlier stage once you gain the trust of your boss.

Look to the future of the industry rather than the past. I recall one mentee of mine from Oxford Brookes saying that his ambition was to work in Hong Kong like his Uncle had many years before as the lifestyle was awesome. I had to point out that a third of his classmates were now from Asia and they had language skills, culture and networks in Asia on their side. This was not the case when his Uncle had trained as a surveyor 30 years earlier. Going forward, I am convinced that global occupier services will be one of the best training grounds of any firm. Historically, this has been the graveyard slot for graduates. However, data and understanding how occupiers use real estate, is going to be so valuable.

While the current pandemic continues, internships and graduate jobs will be harder to come by. I am encouraging all my mentees to not get disheartened but to focus on how they can use their holidays to obtain relevant skills which will enable them to stand out from the crowd. A big frustration of mine is that real estate graduates often lack the basic skills needed in today’s financial environment. In particular, advanced financial modelling skills.  It is not surprising that many of the global firms recruit people from non-real estate courses to ensure they have the most financially literate personnel. This is so easy to fix given the plethora of training courses available and would show employers that the candidate has ambition and determination to succeed.

Q. As you look back on your career is there anything you wish you had done differently? If so, what?

I have been so lucky in being able to travel globally talking about the industry I love and meeting some wonderful and talented people. I have no regrets as such. However, I would try and do two things differently if I was starting all over again.

First, I would try and learn to speak more languages so I could immerse myself in more of the cultures. I am not convinced that my brain works that way, but I would encourage any readers who do have any language skills to maintain them and cultivate them at every opportunity. I am envious of my sister in law who tries to learn some of the language of every country she visits. Approaching 100 at the last count!

Second, I would have looked to work abroad early in my career. Living and working in a foreign country definitely provides a greater depth of understanding of the local market and how it operates. It also provides the opportunity for a broader network of relationships to be developed than when flying in and out on periodic business trips. Once one has family and commitments it definitely becomes a lot harder to take the step so these type opportunities need to be sought out as early as possible.

Q. Who have been the biggest influences on your career? How? Why?

I have been very honoured to have worked with and met some amazing people during the last 33 years. I have learnt so much from so many, for which I will forever be thankful.

The one mentor that I will never forget is Gideon Hudson, a former partner of Allen & Overy in London. Gideon was the lead partner and legal counsel for the Schroders real estate business which I joined in 1992. I was definitely wet behind the ears at this stage and suddenly found myself negotiating development funding agreements, investment acquisitions and joint venture agreements. Gideon sat by me in all key meetings and had a wonderful way of preventing me from agreeing to anything stupid whilst allowing me to appear in total control of the meeting. His guidance in advance of, and presence during, negotiations with some big players in the UK industry built my confidence and I will forever be thankful. Gideon kindly led the prayers at my wedding in 2002 and we still meet for lunch as he enjoys a well-earned retirement.

Whilst not a person, I would say that INREV has been a huge influence in my career. I have been involved with INREV since inception in 2003 and for the last 5 years have had the privilege of being a member of the management board. INREV has brought together some of the best talent in the unlisted real estate industry to improve working practices and improve the professionalism and transparency of the sector. In recent years INREV has spread its wings creating a global alliance with ANREV, NCREIF and PREA.  Throughout, they have created a great sense of community where all the participants have a collegiate approach and know how to have fun

Q. How will the real estate industry evolve post COVID-19, what is the biggest opportunity and the biggest challenge that will come out of it?

The COVID 19 pandemic has allowed the world to press the pause button and assess what we want the future to look like. At the same time, it has had, and will continue to have, a significant impact on the economies of all developed and developing countries which we will take a long time to recover from. I am convinced that we will all recover more quickly if all countries work together rather than individually.

I am hopeful that the inevitable higher unemployment will encourage re-training programmes which will allow us to speed up the transition to a net zero carbon environment.  A huge amount of work has been done by many real estate investors, managers and operators over the last 10 years and I believe we now have the opportunity to turbo boost the initiative. If we rise to this challenge, we will hopefully give our younger generations a future to look forward to.

Whilst global capital markets definitely influence real estate returns, local factors such as supply, demand and regulations have a greater impact. Local economies will react differently to COVID 19 depending on their reliance on public transport, concentration on individual employers or industry sector etc. Given this, I believe it is essential that investors ensure their portfolios are well diversified both domestically as well as internationally.  Those Real Estate Investment Managers who have a diversified product range should also be well placed to navigate the storm providing they provide great client service and reasonable relative investment returns.

One thing I am sure about is that people will want to return to holidays and socialising as soon as possible – I sure will!

Saturday, June 13, 2020

Interview with a friend who has made a difference in the commercial real estate industry: Adrian Harrington

June 13 2020 - New York City
Can you believe it's the middle of June already?  I don't know about you but it seems that the days pass slowly and the week passes quickly.  I'm not sure what that is all about.

This past week New York started opening up again.  Other than walks in the park I'm not going anywhere near commercial streets.  I've heard too many stories of people gathering outside bars and restaurants which are serving take-out cocktails and hanging around in groups drinking and talking - with no masks on.  I know, it's not easy to drink with your mask on but...It just seems like too many people feel the virus is over and gone with.  And it's not just outside the watering's in the park as well.  

Some of my friends have been making early morning trips to the groceries but I'm still having mine delivered.  For entertainment, I don't keep track of what I order and then, when it arrives, it's a surprise!  Of course, once in a while I find that I've ordered too many 'snacks' but, what the heck?  

More and more talk about what's going to happen in the commercial real estate industry.  Does anyone really know what time it is?  We've had a great ride for a long time.  Wasn't it like, as the end of each year arrived people said, "Well, the downturn is going to hit us next year."  And then, things still got even better. Well, something hit us but it's not a downturn, it's a disaster. And forget about real estate and any other material things.  This past few months has been about so many people dying.  How horrible. How sad.  

None of us can predict the future - which is actually tomorrow.  We only have today to live and appreciate and be grateful for. The real estate industry will sort itself out in some way, shape or form.  There's a lot of what I call 'expert speculation' out there - can those words be used together? - and it'll be interesting to see who ends up being right.   

Be careful out's still not over yet!

This interview series had its roots in my desire to have professionals, from various aspects of the global commercial real estate industry, share their stories.  In my mind, the beneficiaries were to be those folks early in their career or just starting out.  Over the years, while that has been true, it’s been fascinating, and rewarding, hearing from the readers of this column and relating their own stories about how they met.  I always connect those two people together – some hadn’t been in touch for ages.  A number of university professors have encouraged their students to sign up for this column as they feel the stories and advice related by the folks I interview are a truly valuable resource. 

Interview with a friend who has made a difference in the commercial real estate industry:  Adrian Harrington

Adrian Harrington
·      Charter Hall – Head of Capital and Product Development – Sydney, New South Wales, Australia, Australia’s leading integrated real estate investment manager with more than USD$27bn invested across office, convenience retail, logistics and social infrastructure.
·      The National Housing Finance and Investment Corporation – Non-Executive Director, a Federal Government entity dedicated to improving housing outcomes especially affordable housing, through innovative financing initiatives.
·      Australian Housing and Urban Research Institute – Chair, a Federal and State Government funded institute that partners with major universities to undertake housing, homelessness, cities and related urban research.

Q. How did you get your start in the commercial real estate industry?
A. I finished university in 1989 with a degree in economic geography. I spent most of 1990 backpacking through Europe and the US and upon my return started to look for a role as a transport economist. The recession was under way and jobs were scarce. A friend from university (who now happens to be the Prime Minister of Australia) was working at BOMA (now called the Property Council of Australia) and called me to say they were looking to hire an research analyst to work on a property index that was to be modelled off the NCREIF Index. I went for the interview and Peter Verwer, the Head of Research at the time, showed me the NCREIF formula and asked if I understood it. Not having studied real estate finance at university, I somehow convinced him I knew all about investment returns and was employed after one interview. I spent the next 7 years working at the Property Council, the last few years as Head of Research. I left to join a boutique real estate fund manager, Paladin Australia, as Head of Strategy and Research at the start of 1998.

Q. What advice would you give to someone who has been in the industry for a short time or a student looking to get her or his start?
A. There are four pieces of advice I always give young people.

Find a Mentor: Mentors can help with exploring careers, setting goals, developing contacts, and providing guidance. As a young person you don’t have all the answers.

Join Industry Committees: I was lucky to work at Property Council for 7 years and was able to meet a wide range of people through the various committees. Being on the other side of the fence, I could see first-hand the power of networking through committees. It is also a great way to give back to the industry.

Take Risks: When young people ask me about career advice, I always quote from the Robert Frost poem The Road Not Taken “Two roads diverged in a wood, and I took the one less travelled by, and that has made all the difference.” In our industry, people have so many opportunities to move around whether it be being relocated to another city or country or moving from one job to another that requires a different skill set i.e. a valuer to fund manager. So many young people, have a preconceived idea of how their career will progress. Most of the successful people in our industry have reached a fork in the road, and have taken a career risk (gone down the road less travelled) rather taken the easy decision (the road most travelled) and they are enriched by the experience and the opportunities that have come from it. I can attest to that. I could have held out to try and find a transport economist role out of university but when given the choice, I joined the property industry and that decision has made all the difference.

Travel Overseas: If you get the chance to travel overseas for a conference or even a job, take it, especially when you are young. I was lucky enough to be encouraged when I was at Property Council to travel to the U.S. once a year. It gave me an opportunity to see how the industry worked in another country and meet insightful people like Blake Eagle, Michael Gilberto, Steve Roulac, Mike Young (who I authored a couple of papers with for American Real Estate Society journals), Charlie Wurtzebach and the late, and wonderful, Susan Hudson-Wilson. In 2007 I was transferred to the UK by Mirvac and spent 18 months working there just as the GFC hit. I’ll never forget the first day walking up Regent Street to our office in London’s West End pinching myself – it was an amazing experience to learn the subtilties’ of doing business in a different country and building a network up from scratch.

Q. As you look back on your career is there anything you wish you had done differently? If so, what?
A. I have no regrets with my career. In fact, I am extremely grateful I didn’t purse a role as a transport economist. I was most fortunate to enter a wonderful industry not really knowing much about it. It is a privilege to be the custodian of people’s money and know that not only is our industry creating the built environment that allows people to live, work and play, but we are also contributing to their wealth accumulation through their investment in real estate via their pension fund accounts. As Greg Paramor, my second boss, and mentor once said to me “just remember you have to think that you are managing money for your Grandma no matter how much money they invest with you.  The person with $10,000 is probably going to appreciate more the return you make for them than the big institution that gives you $10 million to invest.”

Q. Who have been the biggest influences on your career? How? Why?
A. There’s no shortage of real estate people that I worked with and who have had an impact on my career. Our industry is full of bright people, and through observation, asking for advice or reading/listening to their views and thoughts, each has contributed in some way to my career development.

But two people stand out because they have not only had a major influence on my career, but also on me as a person. I am proud to say they are still my friends today.

My first boss, Peter Verwer, took a punt on this young person straight out of university who knew nothing about property. It was an exciting time establishing the property index in Australia, especially when the industry was going through a major downturn and some in the industry didn’t want the bad news published. Peter was a hard boss pushing you at every step to do better. But it paid off! He taught me many great things but most of all, he taught me to back myself to rise to a new challenge. He still reminds me that if it wasn’t for him “I’d still be counting buses.”

Greg Paramor, a doyen of the Australian real estate industry, having successfully established four fund management businesses and ran Mirvac, one of the largest REITs in Australia, employed me from the Property Council. I had been offered a job by a major bank to move into their real estate funds team. I went to Greg, as someone who I admired and respected in the industry, to ask whether I should take the job or stay at the Property Council. Greg said “Neither”. He then just stared at me for what seemed an eternity. I was wondering “gee am I not worthy of either”. Finally, he said “I want you to come and work for me”. That was the start of 20 years journey working with him. Greg retired from full-time work in 2018 when we sold Folkestone to Charter Hall, Australia’s largest real estate investment manager but we still have a connection as he has joined the Charter Hall Board and I now head up wholesale institutional capital there. Greg was a wonderful boss. He is a strategic thinker always looking over the horizon at the next opportunity or the next evolution of the industry. Greg taught me many things – how real estate funds management operates, the importance of putting investors first, how to undertake M&A to grow a real estate platform – but most of all he showed me the importance of giving back, not just to the industry but the broader community. As a friend he has always been there for my family and I through the highs and lows.

It’s not often people get to work for someone they can call a friend. I been lucky on two occasions.

Q. How will the real estate industry evolve post COVID-19, what is the biggest opportunity and the biggest challenge that will come out of it.
A. The real estate industry has an amazing ability to adapt to change and I am confident it will rise to the challenge of a post COVID-19 world. I believe the biggest opportunity will be in the logistics space. The transition to on-line retailing was well under way prior to COVID-19 but it has been fast tracked. This in turn will see a continual evolution in supply chains and distribution networks to cater for the growth in on-line retailing. Many investors are underweight industrial/logistics real estate in their portfolios. Capital will pour into the sector with prime industrial being considered a major component of a real estate portfolio. The biggest challenge to come out of it will be that governments will run even larger deficits going forward putting further pressure on their ability to support retirees while interest rates will stay low for even longer reducing the overall return from investments that retirees will rely on to live off. The growing cohort of baby boomers entering retirement and requiring income will see a flood of money coming into real estate in the hunt for yield. The challenge for the real estate industry is how can we successfully deploy this capital to generate sustainable income for investors, especially retirees, without leading to a mispricing risk.

I truly appreciate Adrian taking the time to answer these interview questions.  He and I met via this column many years ago.  When I was in New South Wales, Australia, in 2017, we tried to connect but, alas, he was on the road.  One of these days…

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