Friday, April 3, 2009

On the Road

“Will there be new capital invested in real estate by institutional investors in 2009?” Not long ago, this would have been the $64 billion question. But this year it’s much less; perhaps much, much less. Recently an investor answered this question by saying, “There will be money but a lot of it will be related to prior commitments.” Now we can guess all we want but the reality will only be understood when someone who is raising a fund starts calling on the global pension funds, endowments and foundations to sell their wares as it were. Capital raising friends of mine suggest a bleak year; asset management seems to be the focus. But some of us are either in the market now or will be coming out shortly with new funds and I, for one, believe that there is money out in them there hills, it’s just going to be like the ‘Gold Rush’ and that finding it may require wading into water up to our butts before we get lucky. But given track-records, experience, trust and, for some, co-investment if the strategy is right for the current market, funds will be raised although not the super-sized ones of yesteryear. However, once you have successfully navigated those waters, the next obstacle on the course is investing it and those whose strategies focus on investing in things other than actual properties may have an advantage. Cash is both king and queen right now and it rules the game.

Congratulations to Private Equity Real Estate (publication and website) for the coverage of the recent PREA conference on their website. Senior Editor Zoe Hughes was omnipresent at the event and filed updates from panel sessions in virtually real time (is that an oxymoron?). Today, she wrote an interesting piece regarding the auction of the mortgage on the John Hancock Tower in Boston. There was only one bidder for the mortgage defaulted on by Broadway Partners. If there were one less bidder it would be like ‘what if they gave a party and no one came?’ But to me it’s still a significant indicator of the state of the market. This, coupled with another large job loss report today and other reality based financial news, not the least of which is the seemingly surge in people in the global private equity real estate industry quitting their jobs means something. Of course, what we read is not always what actually has happened (except here ☺ but there’s definitely “Something in the Air” (listen to one-hit wonder Thunderclap Newman).

As a Christmas present, one of my sons gave me Season One of the TV show “Friday Night Lights.” As I watch very little TV I didn’t even know this existed, although I did see the movie when it was out. I have become addicted to the show. It’s the first time anything like this has happened to me. Yes, the show is based on a Texas high-school football team but the main characters and the plots are what make this very special. And, after watching this season’s episodes on I am up to date on all the action. Funny, this week NBC announced that it was renewing this show for two more years. Woo-hoo! I’m hoping to catch the new episode tonight (if my TV picks up an NBC affiliate).

Some references I chose to delete this week:
1. White Castle, Verona, NJ: ordering bags of burgers, car-hop service, well after midnight after band gigs.
2. The media’s failure to provide follow up stories on major events (i.e. Buffalo plane crash)
3. iGlobalForum Private Equity Conference: I moderated a panel at this event two weeks ago in New York. While there were hardly any institutional investors in attendance it was well done event, which attracted interesting players. They also hosted a pre-event reception for speakers which was a very nice idea and well attended.

Where I'll be:
Apr. 6-9: New York
Apr. 10-11: New York to see Umphrey’s McGee at the Nokia Theatre (a great band in a great venue)
April 23-25: Athens, Greece for INREV’s Annual General Meeting and Conference
Apr. 26-Apr. 30: Chicago to record my second CD of original music for the benefit of Keys-4-Kids.
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.

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

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