Friday, February 20, 2009

UNC Case Competition

I had a great experience today, serving as a judge in the University of North Carolina (Kenan-Flagler School of Business) MBA Real Estate Challenge. The development case was really complex and all of the 16 schools that participated did a remarkable amount of analysis, preparation and presentation in a short time. The winner, in very tight voting was, North Carolina. The runner-up was UCLA. Tied for third place were Columbia and Dartmouth. After the presentation and getting a chance to chat with a number of these students in a more relaxed environment after the challenge, believe me, there is hope for the future of the commercial real estate industry! In the library of the Carolina Club at the University of North Carolina I found a shelf of books called “The Yackkety Yack” which was the college annual (yearbook as it were). I pulled out the very first issue for the first ever graduating class of 1901 and found a couple of interesting things: 1. This from the preface: “It has passed into a proverb that success is reached through failure-repeated failure has come to all. We have made many mistakes. Man, at best, only moves towards what is perfect, and the goal is reached through the lessons taught by repeated mistakes.” 2. These may be the best. Copy from two ads: a. Abbot & Stephens Real Estate & Investments Charlotte, NC “From 20-100% made on real estate investments through this agency. Money will always bring sure and quick returns when judiciously paced in this line of investment.” b. Bank of Chapel Hill: “A word to the wise is sufficient. Don’t run a risk by keeping your money in your room or pocket. We solicit student deposits.” Given that I’m thinking seriously of starting to keep my money in my room I’m not so sure about this one but the real estate above is a classic! Some quotes from the presentations at the real estate conference yesterday: 1. Every thorn has its’ rose 2. Underwriting is back and if you’re a user of capital it’s a real bummer. 3. I never saw a developer who saw an escrow he liked. 4. What deals are getting done today (worst to best): Hospitality, retail (grocery anchored shopping centers), office/industrial, multi-family. 5. In 2008 only two asset classes did well: Treasuries and Wal-Mart. 6. 65% LTV is looking like the new ‘full loan.’ 7. Multi-family is the only asset class that has even a shred of normality. 8. Ideas for the future of CMBS: a. Let the originator hold the B piece b. Of every 10 loans originated, one loan, randomly, must stay on the originators books 9. Buy paper, not property 10. If you’re offered a destination or resort hotel in a city whose name you cannot pronounce-pass on it. 11. We expect this to be one of the best distressed environments ever. 12. Capital will be weighted towards opportunistic strategies. The With 4Q08 valuations starting to flow into the hands of institutional investors in real estate, the impact is yet to be seen. And, in an article on the New York office market this week by real estate journalist Terri Pristin in the NYTimes, when several industry experts were questioned, Bob White of RCA (Real Capital Analytics) was the only one to be brave enough to give what I and many others feel is the real answer. “The true answer about where prices are right now is, ‘I don’t know.” And, my friends, I believe that is the answer to most questions about where our economy is and where it’s going and maybe more importantly, when. Except from a letter to the editor in the NY times last Sunday talking about a book that had been banned in the Miami Dade (Florida) school system: “When I was a sophomore in high school, my history teacher assigned "Masters of Deceit," by J. Edgar Hoover. My father, ever engaged in his children's education, skimmed the book and thought it a nasty piece of anti-Communist propaganda. No friend of Communism, my father — a Holocaust survivor — had left Poland in 1945 to escape the Soviets. He directed me to read an additional book, "The Communist Manifesto." I knew very little of Karl Marx or his book. When I asked why I should read it, he told me I couldn't possibly understand the Hoover book unless I knew what he was writing against. After I had finished both books, my father and I had a long conversation about both, in which he helped me to refine my understanding of the books, of the world, of politics and of what it takes to be truly educated. I recall very little of those books, 40 years later. What I do remember is a father who cared deeply that I learn to think for myself, and his lifelong lesson that the best way to combat bad or insidious information is with more information, with careful thought and with exposure to the broadest possible array of ideas. Too bad he didn't have a chance to talk to that father in Miami." First. Can you believe that we’re still, in 2009, seeing the banning of books in the United States? Second, I believe that the two most powerful things that a parent can instill in a child is a feeling of self-esteem and the ability to think for themselves. Where I'll be: Feb. 22-29: Vacation in Mexico….totally offline! Mar. 2-5: New York Mar. 6-9: Montreal 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.24: New York to moderate a panel at the iGlobal Forum Real Estate Private Equity Summit Mar. 25-26: Washington DC to attend PREA's Spring Conference April 23-25: Athens, Greece (not Georgia) for INREV’s Annual General Meeting and Conference These are my personal views and not that of my employer.

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