Friday, April 24, 2009

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.

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

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