On the Road-Not in the Air

A lot of us are in airplanes on a regular basis. I don’t know about you but I’ve been particularly disturbed about the news that has come out about both the Colgan Air flight that crashed near Buffalo and the Air France jumbo jet that disappeared this week. If I take what I’ve read at simply face value, the Buffalo crash was a combination of total and complete pilot incompetence and an airline who had been permitted to violate myriad rules about training and pilot behavior. While the Air France situation is brand new, the warning from AirBus yesterday was very politically unacceptable. To send out a warning, obviously prompted by their lawyers, to all owners of that model about things they should be aware of that could cause the plane to evaporate during a storm seems to point the finger right at them. If they knew about these malfunctions that indicate the planes speed why wasn’t more of a big deal made out of it before this plane evaporated into thin air? Given the amount of scrutiny and compliance that is being looked at and thrust upon the financial services industry, which, when you get down to it is dealing with people’s money and not life and death (except for those to whom money=life) wouldn’t you think there’d be a lot more of this anticipatory oversight going on in an industry where a blatant mistake causes actual death? It worries me and for now, I’m happy not to be getting on any long haul flights for a while.

One of the few email columns that I subscribe to is called “All About Presentation.” As someone who as acted as sort of a presentation counsultant himself, I like this column, probably because it mirrors a lot of the advice that I not only have given others but that I strive to remember for myself. Here is one from this week:

“So when it comes to crafting presentations or communication pieces for an external audience, consider hiring a writer or editor -- if for no other reason than to have an outside set of ears and eyes experience the communication piece. You won't believe the alphabet soup I've often encountered in external marketing presentations. It often slips by, unnoticed to ears that have grown tone-deaf to the buzz of interdepartmental acronyms. For a fun little exercise, open up any one of your recent corporate or organizational PowerPoint presentations. Do an acronym count -- it's quite likely that you'll find at least one. And before you think, "Yeah, but everyone knows THAT acronym..." please think about how little work it might take to change it. You can make yourself more clear by actually speaking the words -- instead of chanting the letters that represent the words. This one simple act may keep your suspects -- er, prospects -- from running away!”

And while I’m on the subject of things that I subscribe to (not that anyone asked me) there’s a good daily news blast that comes out from REP in The Netherlands. You can sign up for it on their website (http://www.europe-re.com).

PEI (Private Equity International) who among other things publish Private Equity Real Estate magazine and sponsor excellent conferences were kind enough to send me a complimentary copy of their 2009 LP Survey the results of which came from their robust database of LP’s called PERE Connect. Some bullet points I pulled out for you:

• 65% said that their approach to real estate investing will remain relatively unchanged. (GOOD NEWS)

• 26% said they are likely to increase their participation in commingled limited partnerships while only 6% said their increase will be in separate accounts.

• Over the next 3-4 years the most attractive real estate investments will be in:
1. North America
2. UK/Europe
3. Asia, ex Japan

• With regard to fund investing, which term will be the most difficult to negotiate?
o Distribution Waterfall/Clawbacks
o GP commitment to the fund

• Overall, how have GP’s communicated with you during the economic crisis?
o Good enough
o Average
o (Poorly and Very Well were both considerably lower on the spectrum)

• What would your one biggest criticism of GP’s be in the wake of the crisis?
o Paid too much for properties
o Used too much leverage

• I am considering pursuing a secondary transaction to get liquidity for one of my real estate partnership interests:
o No: 84%

• I am considering buying a real estate partnership interest on the secondaries market?
o No: 68%

Surveys are good things. But one has to remember that they are don’t at a point in time and may become dated quickly. For example, there are many who believe the secondary market will become more and more vibrant as time goes on. Given the speed with which the world and our industry is changing it may be interesting for someone to start using a “Survey Monkey” type thing to get ‘real-time’ replies to a small group of question as LP’s (and GP’s) deal with continually evolving issues.

Oh, one more thing the PERE Connect survey asked (I’ve chosen to list the reasons rather than the firm names):
• What do you admire about one particular GP group?
o Good communication
o Extensive underwriting and strategic thinking
o Doing the right things
o The people and their experience
o Low management fees and sustained high performance
o Generating competitive returns with low leverage
o Disciplined consistent approach to real estate investing
o Straightforward
o Straightforward

So, with this I believe I have shared with you the things that many LP’s find most important to them and as the competition for fewer institutional dollars heats up it seems easy to make sure that your firm things you are employing these characteristics (unless you are already…but the proof is always in the eye of the beholder isn’t it?).

There was an interesting piece in the NY Times this week. Allison Arieff, who writes the 'By Design' column for the New York Times was brought to the recent ICSC convention as a juror for the organization’s inaugural Future Image Architecture Competition, which asked entrants to imagine the shopping mall of the future. “My expectations for the entries were high — and probably too preconceived. This seems like a watershed moment for malls, much as it does for housing. Surely, I thought, the entries will reflect the extent to which business as usual — i.e., massive anchor retail tenants surrounded by thousands (even millions) of square feet of specialized yet mass retail, in settings only accessible by car — cannot possibly continue. Despite near-non-existent consumer spending, the declining popularity of shopping as America’s favorite pastime and the chilling effect foreclosed homes in housing developments are surely having on nearby malls, most entries in the ICSC competition responded less to the future of the shopping mall than to the glory days to which we’ve recently bid adieu. I was struck by how little attention entrants paid to things like sustainable architecture, alternative transit or changing consumer attitudes about consumption. Architectural visions tended toward iconic futurist forms — domes or similarly curvy buildings that felt right in line with World’s Fairs past. Distressing to think that in 2059, we’ll finally get to live as the Jetsons did back in 1962.”

It’s poignant to see how many groups are holding ‘Career Counseling’ programs. Yes, there are some techniques for finding a job. Goodness knows in my life I’ve employed them. But no matter what what you do or how diligent you do it it’s very, very difficult to find a job when there aren’t any. One of the things that I learned along the way, and this may be one of the most important things anyone looking for a job can do right now, is to assess your ‘transferable skills.’ Break down who you are by skills rather than by accomplishments or job titles. I guarantee you that by doing that your world of possible paths to your next job will be dramatically increased and it may lead you to another industry completely.

Last item. Former Wall Street donut darling Krispy Kreme has announced that they will be opening a new type of store going forward which will be a "smaller, more compact retail concept.” I am assuming that these smaller stores will be selling smaller donuts. This sounds like a good idea to me given the number of really overweight people there are in the U.S. today ( I can stand to lose about 20 pounds myself). But ain’t it amazing at how good old Dunkin’ Donuts is increasing their market share? Do you think it’s only because their cheaper than Starbucks? I think there’s a lot more to it than that.




These are my views and not that of my employer.

On the Road-Upper West Side

I got an email from my alma mater, Fairleigh Dickinson University mentioning that the 2009 graduation took place a couple of weeks ago (and also asking me for money). It made me think back to my college graduation. Sadly, I didn’t take the education part of college seriously enough but was involved in a bunch of extra-curricular activities: school newspaper, baseball and basketball teams, playing in a band. Our graduation was held outside on the campus. The music was provided by the first steel drum band I’d ever heard and kept looking to see where the organ was until I realized that it was all coming from the drums. So we are sitting in our respective colleges (mine was the school of business). At that time I had very long hair and a full beard. I’ve always worn sport jackets with jeans and that was my outfit that day (under the cap and gown). I’m sitting amongst a group of clean-cut business majors, not one of whom I knew. As the processional came down the aisle (I was sitting three seats in) the school president, J. Osborne Fuller, who was leading it, saw me and said “Congratulations Steve.” Well, you should have seen and felt the stares and looks of amazement that came from those guys around me. “How does this hippie know Dr. Fuller?” Well, I guess even back then I was involved in human relations, communications (and to some degree public relations). With all the scrutiny today public relations (and in some cases damage/crisis control) is becoming more of a valued art than ever. And all of us who are in client relations need to be on top of things and on our toes continually. But the communications challenge isn’t just with our clients or third-parties. It’s a huge part of working in a company environment. Big or small, intra-company communication is also an art which some have mastered and some have not. I put myself in the second category although I am trying. And, it requires me adapting to others and not feeling that the way I communicate (very openly) is the way others are going to do it. In fact, I have found over the years that some colleagues feel threatened by my openness, honesty and desire to be helpful. But when communication becomes a political tool it is not only dangerous but also creates negative energy and wastes time. There’s a lot of talk about ‘open lines of communication’ but there’s not as much action as there are words. And, when someone who promotes themselves and even trains others on the art of communicating can’t do it themselves, well, you’ve got a real problem; one that sets the tone in an organization and can be its undoing. But communication and trust go hand in hand and if we don’t start trusting each other to speak without forked-tongue or out of both sides of our mouths and just to do the right thing and do what we say we're going to do it’ll be even more difficult to make it through these challenging times.


I grabbed this off a website of Erika Anderson who is an author of Growing Great Employees and Being Strategic:

Here's some stuff that people are doing that seems smart and useful:

• using their best minds to explore alternative revenue streams and approaches to distribution and marketing,
• focusing on serving customers better than ever (and in ways their competition isn't),
• communicating consistently and honestly with their employees about what's happening and what the company is doing about it,
• setting clearer performance standards and figuring out how to hold people accountable to them,
• letting go of marginal performers,
• hiring newly available 'rock stars' to fill key open positions,
• agreeing on those efforts most essential to growth and directing resources toward them,
• using any available resources to take advantage of market opportunities created by others' failures (as long as those market opportunities lie squarely in their core competencies).

Book of the week: The Genius Machine: The Eleven Steps That Turn Raw Ideas into Brilliance by Gerald Sindell . I have not read it yet (just ordered it) but I know Jerry and he’s a "brilliant" guy so I’m sure this is a great read.

Photo: Mural at I.V. Lab Studios, Chicago



Upcoming travel (dates not certain except for Whippany next week):

Atlanta
Austin
Boston
Chicago
Cleveland
San Francisco
Whippany, NJ

Something got me thinking about all the different ways people are connecting, or trying to connect, today. I remember one of my best friends’ brother in law opened a nightclub called “The Phone Booth” in Manhattan. The gimmick: many small round tables in a trendily decorated (i.e. black) room each with a telephone. If you saw someone at another table, you just dialed them up. The club lasted for a few years but I thought it was a great idea. Another great social networking idea, which no one has launched, is, picture this: you’re driving in your car and you see someone in another car that you’d like to talk to. Wouldn’t it be great if there was some way to share cell phone numbers while driving on the Adirondack Northway? Well, maybe not as we’re all getting more and more protective of our privacy and sadly there are just too many lunatics out there. But social networking also applies to business and I’m finding more and more people less and less good at networking. Networking is an art. And that runs directly to something that I read in a book on networking many years ago: not everyone is a networker and if you are then you should gravitate towards people who are. One tip: if you attend a conference or any type of event where you gather even a few business cards, drop each person an email, within 24-hours of the exchange of business cards. All it has to say is: “Nice meeting you at such and such event. Look forward to staying in touch.” Although with some folks you meet there will be a desire on, hopefully, both your parts to do more than exchange pleasantries in an email, as there may be some real potential business that can be explored. Anyway, now that the whole world is a “Phone Booth” the only thing that is missing is how to find out the phone number of the person standing right next to you. Although, I guess you could ask. Hey, whatever happened to ‘beaming’ contact info from one device to another?

We’re seeing more and more of government injecting itself into the business world. Some of it appears to be for the greater good. But this thing about politicians trying to find opportunities to build their own reputation is really something that needs it’s own watchdog looking over the shoulder of the politician claiming to be a watchdog. This is happening right now in the placement agent business and it’s not fair to indict a whole industry because of a few bad apples. And, today, with everyone in the investment world nervous about everything, this is not good. Institutional investors in particular are so wary of doing business that many have closed up shop temporarily until things get sorted out and it’s safe to go back into the water. But, because there are still leaders (vs. followers) who actually think for themselves there will continue to be capital flowing into the alternative investment industry and while it may be less it will be going to those firms who not only have communicated openly but who are doing the right thing, right now, during a time when no one wants to be surprised…about anything-except perhaps for a birthday cake.

It’s perfectly clear, based on an industry webinar this week, that institutional real estate investors not only want they expect their managers to communicate more frequently and totally openly. And why shouldn’t they? But it seems like some are not. One firm this week had an investor call where the head of client relations didn’t even make an appearance. What message does that send? And, investors won’t get fooled again. Sure these times are trying with valuations falling like the mob hit victim who was fitted for cement overshoes and thrown into the East River. But it’s not like it’s really anyone’s fault. It’s pandemic of the whole industry around the world. So what can managers do? They can take appropriate action, assign their most experienced people to specific problem situations (or hire outside expertise) and communicate, communicate, communicate. And, as much as there are things being said about how we may be past the worst, I don’t really thing so but I do feel that there are strategies that are timely and opportunistic and that investors are looking for those firms who not only have done the right thing but know the right thing to do.

Photo top right: Chalkboard from one of Tom's class. He was famous for them (and for stealing chalk from neighboring classrooms).
Photo top left: Recently discovered photo of my friend Tom David (center) the bass player from the band "Everyone" who passed away in late 2008. His students remember him this way (how will people remember us?):

"Mr. Davis always took time for others. This is his legacy."
"He always had a smile on his face and something pleasant to say."
"His life was worthiest of all because he was able to show you your worth."
"For someone over 40, he's cute as ever! Ask to see the pics of him in his band when 20ish!"
" I have never met another professor who was so passionate and wise about what he was teaching."
"An inspired and inspiring man. Zany, insightful, intelligent, interesting and benevolent. One of the best. (The classes weren't bad, either.)"
"He loves to jump down the rabbit holes. he doesn't ever make a student feel like their views are insignificant, he considers all points."
"He's probably the nicest person you could possibly meet."



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

On the Road-North Palm Beach, FL

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.


Photos:
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.

A Bunch of Stuff

Freddie Hubbard:  Last Monday night I attended a Memorial Concert for jazz trumpet legend Freddie Hubbard.  I don’t know much about jazz but I did know his name and it was held at Cathedral Church St. John the Divine (home of one of my favorite pipe organs).  It was a moving event which featured performances by many jazz greats (or so my family jazz consultant tells me).  But what came out of it is my introduction to the Jazz Foundation of America.  It helps jazz and blues musicians through difficult financial times.  Even Freddie Hubbard needed their help during one health challenged period in his life.  The number of working musicians (those able to earn a living just from music and music related activity (i.e. teaching/lessons) are few and going forward, given all the alternative music sources that are cutting into live performance venues, there will be fewer.  I donated $25.  I’ve also donated $25 to a few other causes recently.  I’m mentioning the amount because if enough people donated $25 to something it would make a difference. Each $25 does.  So if you’re a music lover please consider this. 

Ann Oliveri, Consultant:  In a recent blog made these comments which I find very convincing and I wanted to share them with  you:  "So here's the thing.  Control is an illusion.  Get over it!  Everyone attached to your mission needs to make 10,000 decisions every day, confronting challenges unimagined by you this morning.  Do you really think there is any competitive advantage in commanding an army of corporate droids, clones with one way of thinking and acting and looking?   Isn't it more feasible to have hundreds of different life forms, points of view and intelligences looking at the same problem or managing the same dilemma??  Problem definition is the challenge and focused creativity is the response.  You need to engage your team, your evangelists, your members in real-time inquiries to grow confidence and skills, to test assumptions and challenge conventional wisdom.  You need a shared set of principles to guide action.  You need clarity around your shared values and agreement around your goals. Sure, you need efficient processes, but more than that you need transparency.  The decisions you make are not as important as HOW YOU MAKE THE DECISIONS.The black box is empty, and we know it.  Keep your eyes on the prize.  HOW you mobilize others to achieve your mission IS your BRAND of experiencing the world.  Who are you taking along for the ride?"

Presentation Suggestions:  Use of Cartoons 
1.  The cartoon must be in context. It can't just be this funny, unrelated thing that you throw in there. It actually has to have something to do with the topic at hand. The best cartoons connect your audience to your content...emotionally and positively.

2.  The cartoon must be independent of explanation. Good presenters don't read slides to their audiences: and they certainly don't read cartoons to them! If your audience didn't connect with your cartoon, don't even try to explain it to them. If you have to explain why something is funny: it is not funny. Move on.

3.  The cartoon must pack ONE hard visual punch. One-panel cartoons tend to work better in business presentations than multiple-panel cartoons. As a presenter, you don't want to be speaking while your audience is reading. Either they'll ignore you while they're reading (bad) or get annoyed at you for yapping while they are reading (worse). 

Pitfall: certain audience members will always read faster than others. The speed-readers will laugh first, which annoys or insults the slower readers. The slow readers will then pretend that they read the joke, but to protect their egos, they won't laugh.

Write Your Own Obituary:  In the landmark book “Type A Behavior and Your Heart”, it’s recommended that one write their own obituary as a way of gaining some perspective on themselves.  This particularly relates to the idea that ‘things worth being’ are more important than ‘things worth having.’  It’s an exercise to get us to look objectively at our lives and when we’re written it decide if that is how we want to be remembered or if, perhaps, something is wrong.  Of course, in many cases, it depends who writes our obituary.  Some people who know us a certain way from a certain perspective would write, “A kind and generous person.” Where someone who had a different relationship might say instead, “That S.O.B. was just out for himself.”  It’s really all a matter of whether we’re consistent in who we are or are a Jekyll & Hyde character whether we want to be or not. But in doing some independent research, I’ve learned that this is more common than one might think-the way we are with business colleagues, in business situations, may not be exactly like we are at home.  Why is this?  Well, some of the answers I’ve gotten during my research include “ work is easier than home”; “home is more complex”; “the dynamics of a marriage (and adding in the child factor) are not easy”; “I actually feel more pressure at home than on the job”.  Whatever it is, and especially at a time like this in the world when the way things were for many years have been turned upside down and many of us are feeling financial pressure that we had not, psychologists and counselors say it’s normal for that pressure to manifest itself in changes in behavior brought on by stress.  The $64 question is: “How do we manage stress?”  Well, some do it better than others and sometimes circumstances make it even harder to recognize that one needs to address their behavior towards loved ones.  But one self-help exercise I’ve learned that’s helped me from time to time is to look at myself in the mirror after getting up.  Notwithstanding that my hair looks very funny I think about this:  “Do I like how I behaved yesterday?” and “Do I like who I am?”  These are important questions to ask ourselves every day as one day turns into the next and time simply speeds by like a Japanese bullet train.  Sometimes I don’t like the answers to those difficult early morning questions and even though I try to remember something I read a while back, I don’t always catch myself and that is:  “Would I rather be right or happy?”  And I think so many situations in life can be put into perspective by measuring what we say or what we do by that.

Taking things for granted.  We all do it.  Mostly it’s in the place that we live, wherever that might be, we overlook something beautiful or special or just something.  It’s sort of like becoming a tourist in your own town or city.  Granted, some cities have more to see than others but I think it’s a matter of degree.  How many times have you had someone who’s just visiting tell you about something you had either never seen, gone to visit or meant to but hadn’t gotten to it yet?  Maybe it’s time to take a look around, open your eyes and appreciate what you have close at hand remembering that it may be something very small like a child bending down to talk to a squirrel, or a kite flying overhead or a model sailboat being steered around a man-made pond by a pre-teen who spent hours putting it together before risking the ‘high seas.’  But it can be as simple as truly smelling the flowers, appreciating that spring has come again to give us a new start like the polar bear who pokes it’s head out of the icy tundra after months of hibernation and looks around to see if anything has changed.  It’s the simple things in life that can bring us the most joy; we just have to remember not to take things for granted.

On the road:  A number of you have asked me why I’m  not posting my travel schedule.  The fact is that I’m going to be doing some heavy duty traveling soon but it will be the kind that is not planned in advance (you and I both know what that's like) although I will be attending the Homer Hoyt Institute event in North Palm Beach, FL this coming Thur and Fri.

P.S.  Is there anything in the real estate world really worth talking about these days?

Photo Top Left:  Athens: Retail on the wall

Photo Top Right:  Shower/Toilet in my hotel in Athens...yes, the shower is 'that' small!

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

Pandemic of Fear

First things first. Today, May 1, is my father’s 92nd birthday. So, happy birthday Dad-you’re just hitting your prime!

Some real estate stuff from Real Capital Analytics (RCA) April Capital Trends Reports (We’re not out of this thing yet!):
1. Retail: Q1 retail asset sales volume, at $1.9b, was down more than 90% from its market peak two years earlier and was off 74% from the same quarter a year ago.
2. Office: the $3.6b sales volume for office properties through the first quarter fell to just 6% of the $77.5b recorded two years ago at the market peak in Q1’07. Versus a year ago, volume was off 76% and compared to the previous quarter, volume was down 53%. Digging deep to find any positive news, sales did increase slightly in March over February.
3. Industrial: Two statistics illustrate the state of investment sales for the industrial marketplace in q1’09. Closed deal volume fell to its lowest level in at least eight years at $1.3b, and was 9.2% of peak quarterly volume. Adding insult to injury, offered volume, at $8.3b, outpaced closed volume by over 6:1.
4. Apartment: Sales of significant apartment properties fell to a mere $1.8b in q1, a drop of 86% from a year ago. The unimpressive volume last quarter equates to just 6.7% of quarterly volume recorded at the market peak. As shocking as these declines are, more recent comparisons indicate that the market is continuing to slow. q1’09 volume breakdown

I guess these statistics just underscore what it’s like out there. Almost each week we read about new private equity funds that have been pulled due to lack of interest (or other issues) but many people that I speak with say that there is money out there; it’s a matter of finding who’s got it and in some cases working out a draw-down schedule that suits the investor.

Second. I’ve figured out a way to simplicate things….in general. It’s two steps (1) Stop paying any attention to any mainstream media; (2) Just do the right thing.

While I’m sure a few people have the flu (call it whatever you want, it’s still the flu) and if you look at statistics you’ll see that a whole bunch of people die of the flu every year, even in these here United States so I don’t know why it’s necessary to create mass fear and hysteria. But that’s what the media gets paid to do and I for one am really, really tired of it so I’m eliminating news from my life. However, the news about pension funds and placement agent fees has already put a cloud over all asset classes. My guess is that we’ll see some changes in that niche of the business.

The second part of the equation is even easier….to a degree. Just do the right thing. We know what’s right and it’s not only, well, the right thing to do the right thing, but it also (along with #1 suggestion above), decreases our personal stress factor exponentially.

Yesterday, a great burden was lifted from my shoulders. I was in Chicago this week recording the basic tracks for a new CD that I hope to have out by Christmas. On the first CD I sang. But yesterday, after listening to the tracks that I sang on a decision was made: I will stick to song writing and bring in the best possible singer for each song. The songs came out great and it is a real family affair again with my son Kevin writing terrific words and melody for one song in a flash (He doesn’t know that we have another assignment for him) and my son Brian producing, arranging and playing. So, with the relief that I will not have to sing any of my own songs I can concentrate on just writing of them. But, for now the project at hand is this CD, tentatively called “Felix…Finally/Part Deux.”


And finally. This week, while looking for a good deal on a hotel in Chicago I ended up at Hotel Felix Chicago, which is promoted as the most eco-friendly hotel in Chicago. I didn’t really see any concrete evidence of this claim and it is a boutique hotel which means that there were design elements that were both hazardous (I banged my shin numerous times on the frame of the bed which, in a small room, stuck out from the mattress way too far) and annoying (like the sink having been designed by someone who has either really small hands or didn’t expect that people would actually use it). Anyway, it’s not a bad place and I given the rate I got I just had to try it due to the Felix factor. Anyway, this is not a recommendation; just a notation.

Song of the week: Calling All Angels from the soundtrack (at the very end) of the movie Pay It Forward. It’s beautiful.

Photo Top Left (Athens): Front row seats at the Theatre of Dionysos.
Photo Top Right (Athens): My favorite next to homemade apple pie.

On the Road-Athens

390 institutional investors, investment managers, advisors and “something else” (as some folks responded to the audience-response question) convened in Athens, Greece this week to take part in the annual INREV conference. The very strong agenda was complimented by an attendee list of the key players in the European institutional real estate industry. It was great to see so many of my European industry friends and acquaintances again. Here are some things I heard this week:

1. Investors take little comfort from a fund outperforming a benchmark when they have lost 25% of their wealth.
2. Investors want more control over manager decisions but issues are not just between LPs and GPs but amongst LPs as well.
3. There’s a difference between an investor who can’t pay (committed dollars to a fund) vs. who won’t pay as they no longer agree with or like the manager’s strategy.
4. What about corporate governance & transparency:
a. Investors just want to be consulted on decisions the manager is making
b. If there is not adequate transparency you risk breaking ‘the contract of trust.’
c. ‘Key man’ issues are starting to surface as promotes evaporate and people leave
d. Going forward investors will want to have more to say about fund debt and restructuring decisions
5. LPs will be looking for GPs who ‘have done the right thing’ during this period.
6. There will be less emphasis on transaction fees and more on success in managing the fund overall.
7. Leverage: We always knew the last fool wasn’t us!
8. Mergermania: the belief that those who remain are too big to fail.
9. Today, any investor is willing to have a discussion about selling any building they own.

As usual, INREV outdid itself Thursday night when it held it’s gala dinner at the a Zappeion (photo top right), a beautiful recreation of a classical-style building featuring a large oval open area surrounded by a two-story colonnade. The mood at the conference was clearly not doom and gloom but dealing with the reality of the situation in real estate investment markets. As usual, our industry are the eternal optimists but still no definitive ideas on how long it will take for a ‘recovery’ only that, as we all know, real estate, being a local business, will recover at different times in different parts of the world. Issues discussed at INREV are similar to those discussed at PREA so even though it’s a local business, the institutional real estate world is experiencing global behavioral similarities. Interesting sidenote: This INREV conference was attended by more Americans than ever before….a sign of the times as managers look to build more and stronger relationships with European capital sources.

The couple of days I spent in Athens before INREV started were my first visit here. While I took many photos, there is no way to explain the scale of the Acropolis, Parthenon (photo top left), Ancient Agora and the Temple of Olympian Zeus. The changing of the guard at the Parliament was very interesting tradition to watch and I happened upon the hourly ritual by accident. Arriving unexpectedly on their Easter Sunday/Monday I experienced a traditional lamb dinner. Families gather on Sunday to cook a lamb, yes, whole lamb on a wood fired pit (it wasn't easy to see the eyes of the lamb as it roasted on the pit). Each family member takes a turn at the rotisserie but I’m told that by the time the lamb has cooked for six hours, everyone is so full that they have the lamb as leftovers the next day. The restaurant I chose, albeit one in a tourist area, in addition to excellent food offered two wonderful musicians and an assortment of both locals and visitors. I sat for about two hours and enjoyed one of my favorite pastimes, people watching. Sitting at a table just across the cobblestone path from me was a guy who I’m certain is ‘The Don’ of Athens. I would have loved to take a photo but I’m sure if I did you would not be hearing from me anymore. But he was a classic!

Okay, I never slept in a hostel when I was younger although some of the places I’ve stayed have been somewhat hostile. This week I stayed a small, inexpensive but well-located hotel in Athens on my own dime before moving to the hotel which hosted the INREV conference where the bathroom was as big as my entire hotel room. Even though I made the reservation some time ago just the day before I left I decided to look on the web to see if there was anything I should be prepared for at this hotel. I’ve never contributed to TripAdvisor (wait, I may have done it once about what used to be our favorite restaurant in Napa before our friend left as the chef). But the comments posted about Hotel Adonis were curious, enlightening and got me prepared…for what? It was good that I brought my own soap and shampoo (there was a little bar of soap but not as good as the one I brought taken from a much higher-end hotel on one of my trips. But the description of the shower/toilet arrangement is something that can almost not be described. Suffice it to say that you have to approach your shower with a smile and appreciate that there’s hot water (something I have never forgotten to appreciate since my time in Liberia a few years ago.) The hotel is clean and terrifically located for the sites. The guys who worked there couldn't have been more friendly and helpful. Anyway, it was an interesting exercise, reading people’s comments and in many cases what they expected from this place given the price.

One last thing. Learning just a few Greek words made a huge difference. I've found that is true in every country I've visited (although Dutch is really, really difficult for me). I highly recommend learning "thank you", "hello", "good morning" at a minimum. But virtually everyone spoke English anyway.



If you’d like to reach me the best email address is (steve@simplicate.com).



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