Thanks to the gracious invitation of David Funk, Director, Program in Real Estate, Cornell University, last night I attended one of their Real Estate Council events at the, you guessed it, Cornell Club in Manhattan. The first guy I met getting off the elevator was Pike Oliver, Senior Lecturer and person responsible for industry outreach for the Cornell Program in Real Estate. Pike and I had not met before but, as he said, “I feel like I know you as I’ve been reading your column for a number of years.” I recognized his name immediately as he had written me a few times over the years about something I had published. Both he and David are very passionate about the industry and great advocates of their students.
Of the 140 people there my guess is that about half were either current students in the program or alum. The balance comprised a diverse group of New York area commercial real estate professionals. As three of the four panelists work for public companies no media was invited. But I don’t consider myself or OTR media so here are some of the things I heard:
• New York City office rents increased by 5% in the last month.
• “New York is a world-class city in every sense except the age of its office stock.
• New jobs in New York are coming from non-traditional sources (i.e. Li & Fund, a Hong Kong based group managing supply chains for major brands and retailers worldwide who just leased 500,000 square feet in the Empire State Building).
• Bloomberg is the fastest growing company in New York.
• Construction lenders are simply not going to start giving construction loans for spec development.
• The recapitalization of capital stacks of assets is a process that could take as much as seven years to clear.
• People are waiting for a wave of distress but it may not happen.
• Transparency of financial information is more important than ever.
Well, his week I finally figured out what’s up with the commercial/institutional real estate industry: we’re going through a serious identity crisis or perhaps a mid-life crisis (although I’m measuring that by the chronology of my own mid-life). Why do I feel that? Well, in recent weeks, I’ve been listening to people who represent a diverse swath of our industry and, well, it sounds to me like there is a lot of uncertainty.
• The deal marketplace is still in flux regardless of the ‘core’ deals being transacted at dangerously low cap rates and dangerously high prices.
• The flow of capital back into the real estate asset class by pension funds, endowments and foundations is herky-jerky and not anywhere near reliable.
• Some people are talking as if we’re out of the woods. But we’re not.
• Many real estate investment management firms are trying to figure out whether to hire people back or wait a little longer.
• Some of the strategies being offered to institutional investors resemble a ‘let’s throw it against the wall and see what sticks’ philosophy or ‘real estate strategy du jour.’
But beyond specifics, there’s just this feeling I have that the period we’re living through is one of monumental change: AREA selling a 35% interest to the National Australia Bank (which just last year bought global REIT manager Presima from Montreal-based Caisse de Depot); KKR has hired someone to move them into the real estate private equity investment space (given that they’re pretty smart guys, I guess this could be a sign that real estate is ‘back in vogue?’); a company I can’t name is getting ready to launch a seriously sized fund to buy trophy shopping malls in the U.S. And other stuff that just suggests a great uncertainty or perhaps evolution in many ways. I guess time will tell, eh?
Lastly, tomorrow night a friend got me a ticket (well, it’s going to cost me $160 but by today’s concert standards that’s not too bad) to see the Allman Brothers who are celebrating the 40th anniversary of their legendary album, “Live at Fillmore East.” I didn’t get to see that show although I did get to see a good number of shows in that great (and small…2700 seats) venue. As I think about this, here are some of the shows that I saw (I know there are more but I just don’t or can’t remember them right now): Procol Harum, Seals & Croft, Voices of East Harlem, Joe Cocker & The Grease Band, Crosby, Stills, Nash & Young, The Chambers Brothers, Lighthouse, The Grateful Dead, The Band, Jimi Hendrix, Delaney & Bonnie & Friends (with Eric Clapton), King Crimson (original band), Fleetwood Mac (original band), Sweetwater, Cold Blood, Brethren, Richie Havens, Livingston Taylor (James’ brother), Paul Butterfield Blues Band, Traffic, Blue Cheer, Iron Butterfly, Taj Mahal, Spencer Davis Group (w/Steve Winwood), Savoy Brown, Renaissance, Vanilla Fudge, Pacific Gas & Electric, Electric Flag, Quicksilver, Lee Michaels, Sea Train, Country Joe & The Fish, Ten Years After, Cat Mother & The All-Night News Boys, Poco, Mott the Hoople, The Byrds, Raven, Rhinoceros, Illinois Speed Press, Sons of Champlain.
It was a great time to have grown up. Every once in a while, I think about how lucky I've been to have grown up in an era where we had both The Beatles and The Internet.
Restaurant of the week: Spasso, 551 Hudson Street, New York, NY 10014 (212) 858-3838 . This place has been only open a couple of months but has already hit its stride. It’s a place you’ll like the minute you walk in as the staff is friendly (even to those they’ve never met before), the design is cool and the food is really good.
On the road....
Mar. 11-15: New York
Mar. 16-17: Washington, DC for the PREA Spring Conference
Mar. 21-25: Northern California
Mar. 30: New York to attend IMN's inaugural Real Estate Investment & Search Consultants Congress and moderate a panel called “REAL ESTATE ASSET ALLOCATION: WHAT IS YOUR CURRENT VIEW? IS IT TIME TO INCREASE OR DECREASE ALLOCATION? Esteemed panelists: Catherine Polleys, Principal, HEWITT ENNISKNUPP, INC.; Justin C. Mallis, Senior Research Analyst, SEGAL ADVISORS, INC; Martha S. Peyton, Managing Director - Global Real Estate, TIAA - CREF
Apr. 13-15: Venice, Italy to attend the INREV Annual General Meeting
May 12-14: North Palm Beach, FL for the annual meeting of the Homer Hoyt Fellows.
June 9-10: London to moderate a panel at the PERE Forum-Europe.
These are my views and not that of my employer.
Friday, March 11, 2011
Friday, March 4, 2011
NAREIM, Stickball & Willie, Mickey & The Duke
This week I attended my first, but hopefully not my last, NAREIM Senior Executive Meeting. It’s a nice sized group and the interaction and openness of attendees was refreshing. Here, in no particular order, are some things I took away which I hope you will find interesting as well:
I. General comments
a. "Bid/Ask spread is reversed: bid is often greater than seller expects."
b. "Debt/Equity people are taking interest rate risk that they aren’t acknowledging."
c. "Everyone is either in the club format or wants to be in the club format or thinks they want to be in the club format."
d. "The capital markets are ahead of real estate fundamentals."
II. Lessons Learned
a. Fund structure and investor rights issues
b. Replacement of GP
c. Control issues
d. Don’t be greedy
e. Leverage: good in good times; the devil in bad times
f. LP’s having to underwrite fellow LP’s in addition to the GP
g. Dealing with one LP in a fund trying to squeeze an extra pound of flesh out of a manager.
h. Importance of communication both between the LP and the GP and the LP within their own entity
i. Key man provisions
j. Extension of investment period (“GP says ‘look how prudent I was to not invest; I deserve an extension.”)
k. " The U.S. is still the best place to invest over the next five years."
l. Concern about ‘core herd mentality’ today
m. "Hard for us to find places to park long-term real estate equity capital."
i. “The way to get returns is to return something. You get in, you take the risk and you get the hell out.”
i. More capital to be deployed into debt going forward
n. “I’m torn on the club deal concept. Investors are only like-minded for a short period.”
o. “Club transactions make managers into brokers."
p. “This is a people business. It’s relationship driven. I like to invest with managers with whom there has been a ‘sustained confidence’ and who have exhibited the ability to work through challenges”
q. “I want to do as much business with the fewest number of managers possible.”
r. “A lot of good will can be generated by being candid.”
III. Notes from roundtable discussion on ‘Business Management Issues’ (we spent the whole time pretty much talking about compensation issues). There is hiring going on. Analysts, portfolio managers, asset managers, acquisition people. This is a very good sign for the industry. I think many of you can relate to some or all of these comments from around the table:
a. “We’re finding too many people who present themselves as asset management people don’t have real real estate experience
b. “Asset managers have to know how income producing real estate generates revenue.”
c. “Comp is going up; real estate is back in vogue.”
d. “The human component of our business is the most challenging; the real estate doesn’t talk back.”
e. “Succession planning is a big challenge for us.”
f. “The challenge: to be able to identify the right person in terms of experience/chemistry BEFORE you hire them”.
g. “In some cases, people represent themselves to us as a 747 pilot when in reality they’re really a bus driver.”
h. “We’ve learned that our people don’t like being asked to spend time on something that isn’t going to work.”
Duke Snider died this week. He was the center fielder for the Brooklyn, then Los Angeles Dodgers. When I was growing up there were three great centerfielders in New York: Snider, Willie Mays of the New York Giants and Mickey Mantle of the New York Yankees. I was a Mantle fan. Actually, he was my (and millions of other kids) idol. Reading Duke’s obit got me thinking back to those days. When we played stickball and we knew all the players in the major leagues. We’d each pick a team to be and then emulated the batting and pitching characteristics of each player. We’d debate who the best centerfielder was. It was also a much simpler time. It was a great time to grow up. It was safe. All we did was play sports from morning ‘til night; whatever the season, that was the sport we played: baseball, basketball, football, and stickball. And some ‘city sports’ like boxball, stoopball, handball, Chinese handball (why it was called that I’ve never known), ball hockey, punchball and others that I can’t recall at this moment. Of the three, Willie Mays is the last one standing. As I look back on their careers, I will admit, here, for the first time, that I believe Willie was the greatest all around centerfielder of that time and perhaps of all history (I'm sorry I put the hurt on your Willie Mays doll Sande).
Anecdote of the week: Heard from a keynote speaker. “I'm always looking to improve my public speaking skills. I was reading the speaker feedback surveys from a conference. One respondent wrote a comment. "If I had one hour to live, I'd want to spend it listening to your presentation." Very touching. Then I read on: “Because sitting through your presentation is like an eternity!”
On the road....
Mar. 7-15: New York
Mar. 16-17: Washington, DC for the PREA Spring Conference
Mar. 21-25: Northern California
Mar. 30: New York to attend IMN's inaugural Real Estate Investment & Search Consultants Congress and moderate a panel called “REAL ESTATE ASSET ALLOCATION: WHAT IS YOUR CURRENT VIEW? IS IT TIME TO INCREASE OR DECREASE ALLOCATION? Esteemed panelists: Catherine Polleys, Principal, HEWITT ENNISKNUPP, INC.; Sean P. Ruhmann, Senior Consultant, Private Markets, NEPC, LLC; Justin C. Mallis, Senior Research Analyst, SEGAL ADVISORS, INC; Martha S. Peyton, Managing Director - Global Real Estate, TIAA - CREF
Apr. 13-15: Venice, Italy to attend the INREV Annual General Meeting
May 12-14: North Palm Beach, FL for the annual meeting of the Homer Hoyt Fellows.
June 9-10: London to moderate a panel at the PERE Forum-Europe.
These are my views and not that of my employer.
I. General comments
a. "Bid/Ask spread is reversed: bid is often greater than seller expects."
b. "Debt/Equity people are taking interest rate risk that they aren’t acknowledging."
c. "Everyone is either in the club format or wants to be in the club format or thinks they want to be in the club format."
d. "The capital markets are ahead of real estate fundamentals."
II. Lessons Learned
a. Fund structure and investor rights issues
b. Replacement of GP
c. Control issues
d. Don’t be greedy
e. Leverage: good in good times; the devil in bad times
f. LP’s having to underwrite fellow LP’s in addition to the GP
g. Dealing with one LP in a fund trying to squeeze an extra pound of flesh out of a manager.
h. Importance of communication both between the LP and the GP and the LP within their own entity
i. Key man provisions
j. Extension of investment period (“GP says ‘look how prudent I was to not invest; I deserve an extension.”)
k. " The U.S. is still the best place to invest over the next five years."
l. Concern about ‘core herd mentality’ today
m. "Hard for us to find places to park long-term real estate equity capital."
i. “The way to get returns is to return something. You get in, you take the risk and you get the hell out.”
i. More capital to be deployed into debt going forward
n. “I’m torn on the club deal concept. Investors are only like-minded for a short period.”
o. “Club transactions make managers into brokers."
p. “This is a people business. It’s relationship driven. I like to invest with managers with whom there has been a ‘sustained confidence’ and who have exhibited the ability to work through challenges”
q. “I want to do as much business with the fewest number of managers possible.”
r. “A lot of good will can be generated by being candid.”
III. Notes from roundtable discussion on ‘Business Management Issues’ (we spent the whole time pretty much talking about compensation issues). There is hiring going on. Analysts, portfolio managers, asset managers, acquisition people. This is a very good sign for the industry. I think many of you can relate to some or all of these comments from around the table:
a. “We’re finding too many people who present themselves as asset management people don’t have real real estate experience
b. “Asset managers have to know how income producing real estate generates revenue.”
c. “Comp is going up; real estate is back in vogue.”
d. “The human component of our business is the most challenging; the real estate doesn’t talk back.”
e. “Succession planning is a big challenge for us.”
f. “The challenge: to be able to identify the right person in terms of experience/chemistry BEFORE you hire them”.
g. “In some cases, people represent themselves to us as a 747 pilot when in reality they’re really a bus driver.”
h. “We’ve learned that our people don’t like being asked to spend time on something that isn’t going to work.”
Duke Snider died this week. He was the center fielder for the Brooklyn, then Los Angeles Dodgers. When I was growing up there were three great centerfielders in New York: Snider, Willie Mays of the New York Giants and Mickey Mantle of the New York Yankees. I was a Mantle fan. Actually, he was my (and millions of other kids) idol. Reading Duke’s obit got me thinking back to those days. When we played stickball and we knew all the players in the major leagues. We’d each pick a team to be and then emulated the batting and pitching characteristics of each player. We’d debate who the best centerfielder was. It was also a much simpler time. It was a great time to grow up. It was safe. All we did was play sports from morning ‘til night; whatever the season, that was the sport we played: baseball, basketball, football, and stickball. And some ‘city sports’ like boxball, stoopball, handball, Chinese handball (why it was called that I’ve never known), ball hockey, punchball and others that I can’t recall at this moment. Of the three, Willie Mays is the last one standing. As I look back on their careers, I will admit, here, for the first time, that I believe Willie was the greatest all around centerfielder of that time and perhaps of all history (I'm sorry I put the hurt on your Willie Mays doll Sande).
Anecdote of the week: Heard from a keynote speaker. “I'm always looking to improve my public speaking skills. I was reading the speaker feedback surveys from a conference. One respondent wrote a comment. "If I had one hour to live, I'd want to spend it listening to your presentation." Very touching. Then I read on: “Because sitting through your presentation is like an eternity!”
On the road....
Mar. 7-15: New York
Mar. 16-17: Washington, DC for the PREA Spring Conference
Mar. 21-25: Northern California
Mar. 30: New York to attend IMN's inaugural Real Estate Investment & Search Consultants Congress and moderate a panel called “REAL ESTATE ASSET ALLOCATION: WHAT IS YOUR CURRENT VIEW? IS IT TIME TO INCREASE OR DECREASE ALLOCATION? Esteemed panelists: Catherine Polleys, Principal, HEWITT ENNISKNUPP, INC.; Sean P. Ruhmann, Senior Consultant, Private Markets, NEPC, LLC; Justin C. Mallis, Senior Research Analyst, SEGAL ADVISORS, INC; Martha S. Peyton, Managing Director - Global Real Estate, TIAA - CREF
Apr. 13-15: Venice, Italy to attend the INREV Annual General Meeting
May 12-14: North Palm Beach, FL for the annual meeting of the Homer Hoyt Fellows.
June 9-10: London to moderate a panel at the PERE Forum-Europe.
These are my views and not that of my employer.
Friday, February 25, 2011
"The credit belongs to the man.....
“ The credit belongs to the man who is actually in the arena-whose face is marred by dust and sweat and blood….who knows the great enthusiasms, the great devotion-and spends himself in a worthy cause…who at best, if he wins, knows the thrills of high achievement-and, if he fails, at least fails while daring greatly-so that his place shall never be with those cold and timid souls who know neither victory or defeat.”
Theodore Roosevelt
I can’t remember where or when I found this quote but it’s been at least twenty years as i have it scotch-taped to a business card from a job I had at that time. It’s something I tried to never forget but, you know, things just happen that take us off the path that we dream of following onto a path that we need to follow. But why? What happens along the way? It’s called responsibility or in other words obligation. But that’s just part of it. For many of us, life gets complicated, personally and financially. And, we don’t know how to get out of it, even if we want to. There are all kinds of sayings and clichés and advice about how to live your life-‘don’t forget to stop and smell the roses’, ‘don’t be afraid of failing’, ‘don’t be afraid of succeeding’. They’re all good sayings but, you say, are they realistic in this day and age? Well, my view is that this day and age is all we have and if we don’t grab onto it, at some point in our lives, and ride it for all it’s worth, we run a real risk, the risk of regret, the risk of being close to the natural end and saying, “I wish I had done that or I wish I had gone there or I just wish……”. And, if you and I continue to wait for just the right time to do something we really want to do, or go somewhere we want to go, well, there just may not be a time which is the right time….there may simply not be time.
This coming week I'll be attending my first NAREIM Executive Officers Meeting as a guest of Steve Renna, President of NAREIM. When I took a look at the attendee list the other day I saw that I'll know a number of folks who will be there; some who were my consulting clients when I was at IREI; others who I have just known for years in the industry. One thing that interested me was the list of topics for Group Discussion/Breakout sessions. I think many of these are topics that you can kick around, right in your own office, early on a Friday morning when you bring in bagels and....With all the hustle and bustle of our work weeks, I'm thinking that we need to make sure that we don't overlook how important it is to get together as a team, debate timely topics and share ideas. The beautiful thing is that you don't have to wait for a conference to do it, although the benefit of a conference is that you have voices from different firms contributing. Anyway, here are some of those timely topics:
- How is your firm responding to the 'outlook' for the markets and the industry in 2011?
- How has your firm applied "Lessons Learned."
- Are we experiencing a structural change in the market?
One last item on conferences. A few of you have contacted me about IMN's Consultant Congress to be held in New York on March 30, 2011. I'll be moderating one of the panel sessions and perhaps the calibre of people on that panel will give you an idea of why it may make sense for you to attend the event:
Sean Buhmann, NEPC
Cate Polleys, Hewitt EnnisKnupp
Justin Mallis, Segal Advisors
Martha Peyton, TIAA-CREF
And to throw in just a few of the other firms that will be attending (perhaps you've wanted to meet them but hadn't had a chance):
- Evaluation Associates
- Courtland Partners
- Mercer
- PCA
- Rogers & Casey
- Callan
- Hamilton Lane
Sounds like I'm promoting the event, eh? Well, probably but I salute IMN for creating something new instead of the SOSO and, given the role that consultants play in our community I just wanted to make sure that I put it out there for you to consider.
Ice cream of the week: Jeni's Splendid Ice Cream, Columbus, OH. Simply unbelievable. Her first creation, Queen City Cayenne, brings a fine wine like experience: "Rich chocolate reveals back-of-the-throat spice. Finish is tingly and complex". This, my friends, is serious shit!
Music videos of the week: Three of the great vocal performances of our time:
Photo: Sean Felix, 19 months.
On the road....
Feb. 27-Mar.1: Santa Monica, CA to attend NAREIM's Senior Executive Officer's Meeting (National Association of Real Estate Investment Managers).
Mar. 7-15: New York
Mar. 16-17: Washington, DC for the PREA Spring Conference
Mar. 30: New York to attend IMN's inaugural Real Estate Investment & Search Consultants Congress
Apr. 13-15: Venice to attend the INREV Annual General Meeting
May 12-14: North Palm Beach, FL for the annual meeting of the Homer Hoyt Fellows.
June 9-10: London to moderate a panel at the PERE Forum-Europe.
These are my views and not that of my employer.
Friday, February 18, 2011
Face2Face
I’m sorry. I don’t care how much technology is available to us today whether it’s email, texting, Skype, Video Conferencing, Twitter, Facebook whatever, there is no substitute for meeting people face2face. Don’t you agree? I have believed in this since early on, at some points, paying for trips out of my own pocket to sit across a table from someone involved in a deal I was doing, just to look into their eyes (of course this was before all the technology mentioned above but not before airplanes J). There is so much to be gained by shaking someone’s hand, looking into their eyes, having cocktail or breaking bread with them. I read somewhere that when two people meet, a first impression takes four seconds! I truly believe that. Go and meet people face2face: it’s worth the effort.
With all the financial modeling, engineering and technology, we are the lucky ones: real estate remains still a people business and I am grateful to share that world with those of you who are in it as well. We are a global community. We have responsibility. And we have the opportunity to do things differently this time around. We should be embracing the change (as they say) and perhaps remembering those simpler days when people’s handshakes meant something. But to shake someone’s hand you need to be there in person. And, if you are going to be someplace where you see that I will also be, I’d love to meet you. I have met a number of readers of this column over the years and a few of those connections have resulted in true friendships. I am very lucky. Feel free to reach out. My mobile number is 646.886.9535. I look forward to it.
I hear fewer and fewer people talking about how difficult things are in our industry. Perhaps it’s like, “Well, if we just soldier on and don’t talk about it, things will get better.” We all know about self-fulfilling prophecies, right? But more than just using cosmic energy, things are getting better.
Witness what Matt Slepin of Terra Search Partners, wrote in his newsletter this week: The headline is that the glut of talent is fast coming to an end and a normalized environment will return. Definitely focus on retaining your best talent through bucks, benefits and opportunities. If you are looking to hire, there is still a window to find talent on the street and with bonuses recently paid (and promoted interests still underwater); strong people ready to make their moves out of the firms where they played in the last cycle. For those seeking opportunities, this will be a far superior year (certainly anything is better than the last several). Continue to follow the advice we’ve been suggesting during the downturn for staying in the game, but if you are talented and hungry, things should come together in 2011. Is this a real turn in the fundamentals or just pent up demand driven by abundant capital and human nature? I think probably some of each and we are indeed a bit ahead of ourselves in this swing.
Bob White, Founder and President of Real Capital Analytics (RCA) spoke before the U.S. House of Representatives this week on the state of the commercial real estate industry. While much of his presentation was a primer of sorts, I offer his conclusion to you with Bob’s kind permission (actually he doesn’t know I’m doing this but I think it’s okay J
Recent improvements lead to cautious optimism in the commercial real estate industry but meaningful risks remain. Many of the improvements are very recent and have not been very widespread.
• Space Market Issues:
· Depressed rents and high vacancies, but trends stabilizing
· Largely dependent on economic activity and job growth
• Capital Market Issues:
· Credit conditions and investment trends improving
· Overhang of distress
· Looming maturities
Of course, those of us who operate in this industry each day know this stuff; it’s good to know there are some folks in Washington who want to learn more about it.
In an inflight magazine I found an excerpt from a book called, Good Boss, Bad Boss by Bob Sutton. The excerpt is titled, “Lead the Way: Earn the admiration and respect of your employees with these simple workplace strategies.” It’s good stuff. I’d be happy to send it to you (steve@simplicate.com).
A friend in The Netherlands sent me these Chinese proverbs. I don’t know if they’re truly Chinese Proverbs but I tend to believe people. I had stored them away and found them this morning. I think you’ll like them:
About Money
· 1. With money you can buy a house, but not a home (SF suggestion: listen to Tom Wait’s “The House Where Nobody Lives.”)
· 2. With money you can buy a clock, but not time.
· 3. With money you can buy a bed, but not sleep.
· 4. With money you can buy a book, but not knowledge.
· 5. With money you can see a doctor, but not good health.
· 6. With money you can buy a position, but not respect.
· 7. With money you can buy blood, but not life.
· 8. With money you can buy sex, but not love.
Hotel of the Week: The Suites of 800 Locust, Des Moines, Iowa. Formerly the Des Moines Club. My first stay this week. Very nice. Friendly people and a grand piano in the lobby that they encourage people to play. I don’t have a real piano these days and I played for an hour the other night. For those of you going to Des Moines to visit Principal or Aviva or Allstate or any of the other companies located there, I highly recommend this place.
Apartment search. A friend of mine’s daughter is starting a PhD program at UC Berkeley and is looking for an apartment. If you have one (or know anyone who might have one for rent to a responsible tenant) please let me know and I’ll pass the info along. Also, don’t hesitate to forward this on to someone who may have ideas. Thanks.
Photo: From the air, Chicago to New York, early this morning. Absolutely breathtaking.
On the road....
Feb. 18-22: New York
Feb. 24: Columbus, OH
Feb. 27-Mar.1: Santa Monica, CA to attend NAREIM's Senior Executive Officer's Meeting (National Association of Real Estate Investment Managers).
Mar. 16-17: Washington, DC for the PREA Spring Conference
Mar. 30: New York to attend IMN's inaugural Real Estate Investment & Search Consultants Congress
Apr. 13-15: Venice to attend the INREV Annual General Meeting
May 12-14: North Palm Beach, FL for the annual meeting of the Homer Hoyt Fellows.
June 9-10: London to moderate a panel at the PERE Forum-Europe.
These are my views and not that of my employer.
Friday, February 11, 2011
You can say anything to anyone, as long as you say it the right way.
Today was the UNC/Kenan-Flagler Real Estate Challenge day. I was one of the judges. The case was a monster involving the redevelopment/development of The General Artigas Train Station Site in Montevideo, Uruguay. 15 teams from Real Estate MBA programs around the country (this year there was a team from the London School of Economics) participated. The teams have 57 hours to study the case, do the research and prepare a presentation. It's not very long but the results are very impressive. This case did not have a clear-cut answer so there was a lot of room for creativity. All the schools teams are to be complimented. But, as in all competitions, there is a winner. This year it was the group from Haas School at Berkeley. Second place went to the team from the Fuqua School at Duke and the tie for third place went to Marshall USC and Darden UVA. Congratulations to everyone.
I’ve been coming to this event for a number of years now. It’s a great opportunity for me to meet another generation of people who are passionate about the real estate industry. As it’s the only industry I’ve ever worked in (unless you count rock and roll), I love getting to know these students, most of whom have had jobs and decided to go back to get their MBA in real estate. Dave Hartzell, who runs the program is the magnet for attracting students. His enthusiasm is contagious and, once exposed to him, I don’t think there are too many students who can turn down an invitation to be part of his program. Dave’s partner in crime in this whole thing is Susan “The Hurricane” Drake, Associate Director of the Center for Real Estate Development. Susan and I have gotten to know each other over the years and she is one special woman and part of the reason the program has been so successful. If you are interested in the UNC Real Estate program and being invited to the next UNC Real Estate Conference (held the day before the challenge) please send an email to cred@unc.edu.
I’ve been coming to this event for a number of years now. It’s a great opportunity for me to meet another generation of people who are passionate about the real estate industry. As it’s the only industry I’ve ever worked in (unless you count rock and roll), I love getting to know these students, most of whom have had jobs and decided to go back to get their MBA in real estate. Dave Hartzell, who runs the program is the magnet for attracting students. His enthusiasm is contagious and, once exposed to him, I don’t think there are too many students who can turn down an invitation to be part of his program. Dave’s partner in crime in this whole thing is Susan “The Hurricane” Drake, Associate Director of the Center for Real Estate Development. Susan and I have gotten to know each other over the years and she is one special woman and part of the reason the program has been so successful. If you are interested in the UNC Real Estate program and being invited to the next UNC Real Estate Conference (held the day before the challenge) please send an email to cred@unc.edu.
Jacques Gordon, Global Head of Research & Strategy at LaSalle Investment Management, was one of the presenters yesterday. Until Jacques started busting Hartzell’s chops I didn’t realize that the two of them worked together many years ago and have been good friends ever since. Jacques engaging presentation included some interesting facts and comments:
· Global institutional real estate is a $6 trillion industry
· Percentage of the $6 trillion is attributed to: Americas (36.2%), Europe (34.6%), Asia/Pacific (24.8%), Middle East/North Africa (3.5%)
· Early 2011 Outlook:
o Global economic outlook much improved in last 60 days
o U.S. picking up steam despite long-term concerns about fiscal health
o Deal flow picked up globally in 2H2010; growth will continue in 2011
o Buyer focus on top tier, leased assets, will broaden in 2011
o RCA 4Q2010 transaction volumes were strongest since 2007
· “Capital shouldn’t be thinking about what did happen but rather what should happen and how to price itself"
· 9 out of 10 new mandates he’s seeing, from all types of investors are global
· 13 of the largest 25 real estate companies by market cap are in Asia
· R.E. Transparency Index (most transparent countries 2010):
o Australia
o Canada
o UK
o New Zealand
o Sweden
Some other notes and quotes from the conference from Bob White RCA; Ed Fritsch, Highwood Properties; Wes Fuller, Greystar; Mike Mcdonald, Eastdil Secured; Paul Whyte, Credit Suisse and Chip Rogers, The Real Estate Roundtable:
· The bottom line: for the real estate industry to improve we need jobs
· Biggest apartment rent growth in 2010
o Portland, OR
o San Francisco
o San Antonio
· There are 22 multi-family funds raising capital today vs. 5 in 2009
· There’s a bifurcation in the market. Deals are either trophy or trash
· It’s estimated we’re 35% along working through the distress
· 2010 most active markets for property sales
o NYC Metro
o LA Metro
o DC Metro
o SF Metro
o Chicago
· The Stages of the Real Estate Downcycle:
1. Denial
2. Anger
3. Depression
4. Acceptance
5. Transactions
· Capital will get frustrated at the core and opportunity ends and gravitate to core-plus/value-add.
· The best way to underwrite a deal is to look at the price per pound vs. the replacement cost
· “The reason auctions are popular is that people get excited and start chasing the bid instead of the product.”
I found this interesting and want to share it with you. It’s from an interview with Robin Domeniconi, SVP and Chief Brand Officer for the Elle Group.
You can say anything to anyone, as long as you say it the right way. Maybe you need to preface it with: “I’m just curious, and I want to understand what you’re saying better. Right now, my point of view is quite different. So can you help me understand why you don’t want to do this or why you wanted to do this?”
If you get people talking and challenging each other, you’re going to have the ability to arrive at the right decision so much quicker and so much easier. I just make it so it’s a human environment. I’m not going to motivate by fear, but I am going to motivate by saying, “Let’s win. This is going to be so much fun to figure out. Let’s figure it out together.” I guess my management style is very much about like imagining we’re all children and very vulnerable. Because we are.
We’re all vulnerable and we all are really human. We have all this stuff in side of us that we’ve carried with us. So if you have compassion for that, and you understand that, and you know someone’s smart, then you need to make an effort to understand why they may behave the way they behave. I think everyone should open their closet and show the skeletons.
In October, I wrote to you about my old friend Charlie Oliver’s grandson Logan. Logan has a chromosomal defect known as hypo diploid, which means he has less than the number of chromosomes with full genetic composition that normal humans should have. This complicates his leukemia and worsens his prognosis. Logan’s case is rare. I got the news this week that Logan received his transplant and is "reborn." He's doing well. Logan’s family asked me to extend another big ‘thank you’ to those who generously donated to help them through this difficult (and costly) experience and for those who prayed for Logan.
Congratulations to:
Bob Bartlett who joined Sentinel Real Estate in New York as Managing Director of the Marketing and Client Services Group (better buy some warm clothes Bob!).
Howard West, formerly of Meketa Investment Group who joined The Wilder Companies in Boston.
IT Consulting Firm of the week: Wagner Weber (http://www.wagweb.com). They have been the IT consultants for my company for a number of years. Recently we moved offices and they got us up and running literally overnight. More than that, they are professionals and nice people. The have been providing IT consulting services to the financial services community since 1985.
On the road....
Feb. 12-15: West coast Feb. 16-17: Des Moines, Iowa
Feb. 18-22: New York
Feb. 23-26: West coast
Feb. 27-Mar.1: Santa Monica, CA to attend NAREIM's Senior Executive Officer's Meeting (National Association of Real Estate Investment Managers).
Mar. 16-17: Washington, DC for the PREA Spring Conference
Mar. 30: New York to attend IMN's inaugural Real Estate Investment & Search Consultants Congress
Apr. 13-15: Venice to attend the INREV Annual General Meeting
May 12-14: North Palm Beach, FL for the annual meeting of the Homer Hoyt Fellows.
June 9-10: London to moderate a panel at the PERE Forum-Europe.
Photo: Daytona Beach, FL. Exit from restaurant parking lot. Obviously intended for children riding in the car with their parents! Although, from what I see, most kids in cars have headphones on, are into their own thing and are very quiet (not necessarily a good trend in my opinion).
These are my views and not that of my employer.
Friday, February 4, 2011
VIP, Losing Touch & RCA's Good News
'
VIP Conference
For my money, there is no better facilitator in the industry than Geof Dohrmann of IREI. This was evident again this week at the VIP meeting which attracted a good-sized crowd of pension funds, endowments, foundations, fund of funds and people who want money from them (as well as various service people). Being an attendee for the past two years has been an interesting experience and I will admit that it was not nearly as much fun for me as when Geof and I shared the hosting duties. But, enough of a trip down memory lane.
VIP has some rules that attendees ‘swear’ to adhere to. And, at the risk of violating the “What is said/heard at VIP stays at VIP” oath, I wanted to share a few of my own observations:
• The plan sponsor community appears to be willing and able to reengage in the business of investing in real estate again. The question is: are they ready? And that varies from entity to entity.
• The mood was one of a realistic optimism but a clear recognition that we’re not ‘out of the woods.’
• While ‘concern’ may be too strong, there is an awareness of the possible three to five year ramifications of the mountain of money invested in and queued up for open-end core commingled funds.
• Things are not ‘business as usual’ whatever that will look like.
• While 95% of the managers surveyed believed that they communicated at least fairly well, the plan sponsor community, similarly and separately polled disagreed. However there was a real atmosphere of reasonableness from both camps-and maybe that is what the ‘next normal’ will look like-more like what we’ve been taught about deal-making in general-both parties have to walk away from the negotiating table feeling they have won. But, there needs to be an open, regular dialogue that includes formal reporting, throughout the relationship, and that type of communicating is a two-way street.
To finish up about VIP: While I knew a bunch of the attendees, I got to meet and talk with some folks I had never met before and as those of you who’ve been with me for a while know, that’s what makes things totally worthwhile for me.
Losing Touch
For the first time, this week, I lost my mobile phone. I won’t be getting a replacement until Monday so it’ll be four days. It’s been a funny sort of feeling, realizing what a lifeline, crutch, helpmate that device has become. But, as I think we may all admit, it’s also an umbilical cord of sorts which doesn’t let us get too far from, well, anywhere or anybody. And, there really aren’t many excuses for not being reachable. My computer still works but my magical USB connector to the Internet doesn’t; so it’s only when I can get a real connection (I’m noticing that more airports are offering free Wi-Fi…. is that like the coffee shops and other establishments? Airports feel you’ll use them more if they give you free Wi-Fi? (Just kidding, I think). Suffering from phonis-interruptus, I don’t think there’ll be any adverse impact on me, although having suspended the service the message installed by the provider is pretty abrupt: this phone don't work no more. But, after my first full cell-less day yesterday, I sort of liked it. It feels like I have a little more control over my existence and while no one likes to feel controlled by others, having some control over yourself, in today’s world, is, well, sort of priceless.
RCA: U.S. Capital Trends/February 2011: U.S. Markets Dominate Global Rankings
In it’s just released U.S. Capital Trends report, RCA states:
• US markets dominated the 2010 global rankings with 12
of the world’s top 30 markets by sales volume.
• With $16.3 billion in sales, nearly triple the previous year’s total.
• New York was followed by Washington, DC (ranked six), Los Angeles (seven) and San Francisco (eight).
• US markets not only dominated the top 30 rankings, but also registered the most observable year-over-year spikes in transaction volume.
And, as the legendary Sam Cooke sang, “Ain’t that good news, man, ain’t that news.”
Family idea. One of my good Forest Hills friend told me about something his daughter has launched. It’s called, Families in the Loop. While it’s Chicago-centric there are some very excellent ideas and resources that you can use wherever you are.
Hotel of the week: DaVinci Hotel, 56th Street, between Broadway and Eighth Avenue, New York. I am a little reluctant to share this one with you as it can only make this great little hotel more popular (and drive prices up). My wife found it for me online and I’ve already stayed there more than once. It’s 24 rooms. Very European. Not a place that many businessmen would choose to stay at (no gym, etc). But I like it very much. Nice people. Free wireless. An authentic Italian restaurant in the basement (also open to the public) called Joe G’s. Coffee and pastries in the morning. Great location. Clean. Interesting guests (many European). And, for Manhattan, truly an unbelievable bargain.
Photo: Daytona Beach, FL. It was pretty darn cold for Florida that day and as we walked on the elevated boardwalk to an oceanfront restaurant I noticed these girls; they were the only ones on the entire beach. They were huddled together against the cold and wind, committed to getting a tan (or at least telling their friends they were on the beach). Funny, their bathing suits are almost the identical color.
On the road....
Feb. 5-9: New York
Feb. 10-11: Chapel Hill, NC to be a judge in the University of North Carolina-Kenan Flagler Real Estate Challenge (Thanks to Dave Hartzell & Susan Drake, for the kind invite).
Feb. 12-15: West coast
Feb. 16-17: Des Moines, Iowa
Feb. 18-22: New York
Feb. 23-26: West coast
Feb. 27-Mar.1: Santa Monica, CA to attend NAREIM's Senior Executive Officer's Meeting (National Association of Real Estate Investment Managers).
Mar. 16-17: Washington, DC for the PREA Spring Conference
Mar. 30: New York to attend IMN's inaugural Real Estate Investment & Search Consultants Congress
Apr. 13-15: Venice to attend the INREV Annual General Meeting
May 12-14: North Palm Beach, FL for the annual meeting of the Homer Hoyt Fellows.
June 9-10: London to moderate a panel at the PERE Forum-Europe.
These are my views and not that of my employer.
Friday, January 28, 2011
Keith Barket
My cousin, Jeffrey Smiley, passed away in 1988. He was 47. He was a captain in the Air Force and graduated from the Air Force Academy. He flew B-52 bombers during the Vietnam War. He contracted leukemia and died within a year. His funeral, in a military cemetery outside Washington, DC is something I will never forget. Jeff was not as successful in business as he was in the military. But he was a nice guy; a gentle soul with a great sense of humor and playfulness. I remember arriving at the gravesite for the cemetery. There were some people there already. But there were also a line of cars, entering the cemetery, as far as I could see. I bet, at the end of the day, there were more than 200 people there. The line of cars reminded me of that final scene in the movie, “Field of Dreams” or “Pay it Forward.” Jeff touched a lot of people.
Last night, there was “A Celebration of Life” in New York to honor Keith Barket, the managing principal of Angelo Gordon who passed away just before Christmas. Keith was 49. There were about 200 people there. The buzz as guests enjoyed drinks and h'ordeuvres was just like the buzz at any real estate get together only a little more so. It appeared to be somewhat of a who’s who of New York City commercial real estate although some folks travelled much further to be there. They came to celebrate the life of one of their fallen brothers in arms. The veterans among the throng had had more experience with dealing with the loss of a peer. After all, we’ve been around more years. What struck me was how many young real estate professionals there were. The next generation of real estate movers and shakers-some of whom were already making their impact on the industry. And there was solemnity in the buzz as well-another wake-up call to all to remind us of just how fragile this whole thing really is. With accidents, it’s hard; “It was just her time.” In battle, well, to me it’s all senseless, yet we don’t seem to be able to find ways to love rather than hate our fellow man. But with illness; illness is something else. Why do certain children die young? But youth is a relative thing. As, Bernard Baruch said, “I will never be an old man. To me, old age is always 15 years older than I am.” But Keith, at 49, was way too young to be taken down and so quickly. Is it better to pass into the night quickly, quietly or to linger, to fight, to keep believing you can beat whatever the heck it is that has grabbed on to you…and won’t let go. When something like this happens, even to someone you only know casually or just by reputation, it’s time for some soul searching. One think I’ve recently decided is to become an organ donor. It was also prompted by a recent death-Christina Green, who died in that senseless shooting in Tucson. I read an article the other day about how her parents found some solace in knowing that Christina’s organs were helping others stay alive. And then, there’s simply the prioritization of things in life…
As I mentioned a couple of weeks ago, I didn’t know Keith Barket well but after listening to the speakers last night, I feel I know him better. Please allow me to share some of the statements made by people ranging from John Angelo, Michael Gordon, Peter Linneman, Aliana Spungen, Dean Adler, Young Woo, Keith L. Barket (father) and Sol Barket (brother).
· “When something was successful, he didn’t want the credit. But when something went wrong, he was the first to take responsibility….and learn from it.”
· “In all the years, I never heard one person in the industry say anything bad about him.”
· “He never put himself first.”
· “He loved seeing those around him do well. It’s not something he worked at…it’s just who he was.”
· “He was happiest when he was working and having fun at the same time.”
· “He had the ability to see the positive in people and not get caught up in their faults.”
· “He was inclusive by nature and fed off the energy of others.”
· “He helped me realize that arrogance has no place in life.”
· “The only things that matter are integrity, honesty and how to conduct ourselves. Keith had integrity, was honest and conducted himself properly.”
· Keith’s advice to a colleague: “The really big decisions in life you have to rely on your own judgment.”
· “He believed you always had to put yourself in your investor’s shoes; listen to the questions they’re asking; answer their questions in English, simply and directly, no mumbo jumbo.”
· “He was infectiously enthusiastic.”
· “He had the ability to forge friendships-real friendships and bring divergent groups together.”
· “He never veered far from who he was.”
· “He was a genuinely a good man and a fair person.”
· “He challenged people he really cared about-it was a push/pull type thing-it was a waste not to be the best you can be, he always said, if you fall, you fall forward.”
· “He lives on in the echo of his laughter.”
What will people say about us at our memorial services?
Restaurant of the week: L'Etoile, Madison, WI. A gem. Thanks to Kev and Marissa who said this was the best meal they had on their entire two-month car trip, Portland to Portland.
Another restaurant: Lola's, Cleveland, OH. First time I've seen an iPad wine list. Very cool....until someone who's had too much to drink drops it!
Final cool item: Aweditorium. Avery cool iPad ap that I learned about from a couple sitting next to me on the flight from Chicago to New York yesterday. I hadn't been thinking about getting an iPad but this music ap may change my mind.
On the road....
Jan. 28: New York; Umphrey's McGee in concert at the Best Buys (formerly Nokia) Theatre in Times Square (tickets still available)
Feb. 1-3: Laguna Nigel, CA to attend IREI's Fifth Annual VIP Conference.
Feb. 7-9: New York
Feb. 10-11: Chapel Hill, NC to be a judge in the University of North Carolina-Kenan Flagler Real Estate Challenge (Thanks to Dave Hartzell, who runs the real estate program, for the kind invite).
Feb. 14-18: West coast
Feb. 27-Mar.1: Santa Monica, CA to attend NAREIM's Senior Executive Officer's Meeting (National Association of Real Estate Investment Managers).
Mar. 16-17: Washington, DC for the PREA Spring Conference
Apr. 13-15: Venice to attend INREV's Annual General Meeting
May 12-14: North Palm Beach, FL for the annual meeting of the Homer Hoyt Fellows (no secret handshake required!)
June 9-10: London to moderate a panel at the PERE Forum.
These are my views and not that of my employer.
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