I thought you’d be interested in seeing a few audience response things from a very recent industry event (Note: Respondents are pension funds, endowments, foundations, consultants, managers and others):1. How much will property values change in 2009?
a. Increase 1.7%: 2%
b. Decrease 4.2%: 9%
c. Decrease 8.3%: 24%
d. Decrease 12.4%: 34%
e. Decrease 16.9%: 31%
2. How will your real estate allocation in 2009 vary from 2008?
a. Increase: 27%
b. Decrease: 14%
c. Stay the same: 59%
3. At this moment (Feb, 08), I most want to be invested in:
a. U.S. Real Estate: 23%
b. Overseas real estate: 2%
c. Infrastructure: 6%
d. Cash: 26%
e. Debt: 37%
f. Gold bullion: 7%
4. As a plan sponsor, will your new commitments to real estate in 2009:
a. Increase: 8%
b. Decrease: 69%
c. Stay the same: 23%
So, while these responses represent only a sample of the sentiment of U.S. institutional investors they are interesting all the same. What I have found in talking directly with investors is that for many things are ‘month-to-month’ regarding their ability to invest new money in any strategy. However, there are a number of them who not only have new money to put into real estate but also are working their way to finding additional money to take advantage of opportunities that are becoming available given the circumstances in the market today. While some ‘pundits’ (which may or may not include economists, strategists, educators and some actual practitioners) suggest writing off 2009 completely I don’t think anything could be further from the truth (But, see next paragraph).
From the recent PERE Forum in Hong Kong, a friend reports:
My principal take-away from the conference is that investment managers in Asia are dead-in-the-water for 2009, and maybe into part of 2010. This is due to (a) lack of investment capacity among institutional investors (they would have to sell common securities at a depressed price in order to fund new real estate commitments); (b) lack of sufficient financing to make most opportunistic or even value-add strategies work; and (c) most investment managers expect prices to be lower a year from now than they are today.
The real answer is: Nobody really knows!
A friend sent me this notice they had seen:
Economy Notice: Due to recent budget cuts and the cost of electricity, gas and oil, as well as current market conditions and the continued decline of the economy, the Light at the End of the Tunnel has been turned off. We apologize for any inconvenience.
Sort of reminds me of those pages like this:
You Have Reached The End Of The Internet There is nothing more to see or do here. Turn off your computer. Take a break. Go for a walk. Read a book. Have a cup of tea. Sit and stare at the natural world. You get the idea.... Remember to wiggle your toes and get out of your head. Thank you and have a nice day!
For many music fans, last night offered a sign of hope amidst all the uncertainty. The band Phish reunited and played its first gig since 2004 in Hampton Coliseum in Virginia (I saw Neil Young in that venue in the 1980’s as I was spending time in the Tidewater Virginia area working on a shopping center redevelopment where I made the first ever Circuit City Superstore lease….how times have changed). Phish has developed a huge cult following as the heirs to The Grateful Dead. And while I have never attended one of their shows I know that these guys are ‘the real thing’ and are accomplished and serious musicians. I mention this so if you hear one of your younger colleagues mention it this week you can be up to speed on it and they’ll know you are cool!
Next week at MIPIM in Cannes I will have the privilege of moderating two events. One, the MIPIM Summit which I’ll co host with Janice Stanton of Cushman & Wakefield is produced as a live TV show with a small (40 person) audience who will be engaged in the discussion/debate with panelists Joe Valente (Allianz), Pete Reilly (JPMorgan), Dietrich Heidtmann (Morgan Stanley) and Hans O’pt Veld (PGGM). I believe some of the best direct feedback on the state of the industry that I’ll be able to give to you next week will come from this event. Also, I’m moderating a panel at the Finnish Property Breakfast where the audience will be a select group of Finnish property investors. There may be a few seats left for the MIPIM Summit. If you will be there and would like to put your name in for consideration for a seat please let me know right away (steve@simplicate.com).
Final note: I don’t know about you but I’ve been feeling tired lately and that is not usual for me. It’s not the travel that is the cause. I think it’s more the conscious and subconscious strain and drain of all of what is going on now in our industry, in business in general and in the world, both financial and human. Some days I wake up and wonder if there isn’t something more important for me to be doing with myself right now, helping people, helping children, helping animals all whom in one way or another are suffering. Recently, all I’ve been doing is making small donations (they all add up) to some charitable organizations but it’s really the time and the involvement that makes the difference. As my schedule has been what it is makes it difficult for me to commit regular time to any organization. But, there is one thing that I continue to do and it’s something that we call can do and that is to spend some time, on the phone or in person with someone who is facing challenging times these days. It isn’t important that we have a definitive answer but rather that we’re there to listen. Recently I’ve been talking with a lot of real estate MBA’s who will be graduating this spring. Most are desperately seeking a path to a position in our industry and I don’t really know what direction to point them in. But, they have told me that just talking with them and giving them some of the benefit of my years in the industry whether it be tips on networking, following up, resources is helpful. So, if you get a call from someone, whether it be a soon to graduate student or an someone in the industry who has been laid off, just think for a minute “What if this were me?” and take a few minutes to listen to them. It’s a small world ladies and gentlemen and getting smaller all the time. A little kindness goes a long way.
Where I'll be:
Mar. 10-13: Cannes to attend MIPIM, host the second annual MIPIM Summit TV show (March 12-Invitation Only) and attend the INREV seminar and moderate a session with Finnish investors.
Mar. 16-19: Philadelphia
Mar. 23 & 24: New York to moderate a panel at the iGlobal Forum Real Estate Private Equity Summit on the 24th.
Mar. 25-26: Washington DC to attend PREA's Spring Conference
Mar. 27-Apr. 2: NY
Apr. 3-6: Montreal
Apr. 6-9: New York
Apr. 10: See Umphrey’s McGee at the Nokia in NY
Apr. 13-17: NY
April 23-25: Athens, Greece for INREV’s Annual General Meeting and Conference
May 14-16: North Palm Beach, FL to attend the annual Homer Hoyt Institute and Weimer School sessions with some of the industry’s leading academics.
Photo: Giant Pelican (my favorite bird) on Isla Holbox, Mexico.
Restaurant of the week: B Cafe, Amsterdam bet. 87 & 88, New York (also 240 E. 76th St.). A lot of Belgium beers, very French speaking crowd, good bistro menu (great frites!) and reasonable prices.
These are my personal views and not that of my employer.
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