Friday, June 5, 2009

On the Road-Not in the Air

A lot of us are in airplanes on a regular basis. I don’t know about you but I’ve been particularly disturbed about the news that has come out about both the Colgan Air flight that crashed near Buffalo and the Air France jumbo jet that disappeared this week. If I take what I’ve read at simply face value, the Buffalo crash was a combination of total and complete pilot incompetence and an airline who had been permitted to violate myriad rules about training and pilot behavior. While the Air France situation is brand new, the warning from AirBus yesterday was very politically unacceptable. To send out a warning, obviously prompted by their lawyers, to all owners of that model about things they should be aware of that could cause the plane to evaporate during a storm seems to point the finger right at them. If they knew about these malfunctions that indicate the planes speed why wasn’t more of a big deal made out of it before this plane evaporated into thin air? Given the amount of scrutiny and compliance that is being looked at and thrust upon the financial services industry, which, when you get down to it is dealing with people’s money and not life and death (except for those to whom money=life) wouldn’t you think there’d be a lot more of this anticipatory oversight going on in an industry where a blatant mistake causes actual death? It worries me and for now, I’m happy not to be getting on any long haul flights for a while.

One of the few email columns that I subscribe to is called “All About Presentation.” As someone who as acted as sort of a presentation counsultant himself, I like this column, probably because it mirrors a lot of the advice that I not only have given others but that I strive to remember for myself. Here is one from this week:

“So when it comes to crafting presentations or communication pieces for an external audience, consider hiring a writer or editor -- if for no other reason than to have an outside set of ears and eyes experience the communication piece. You won't believe the alphabet soup I've often encountered in external marketing presentations. It often slips by, unnoticed to ears that have grown tone-deaf to the buzz of interdepartmental acronyms. For a fun little exercise, open up any one of your recent corporate or organizational PowerPoint presentations. Do an acronym count -- it's quite likely that you'll find at least one. And before you think, "Yeah, but everyone knows THAT acronym..." please think about how little work it might take to change it. You can make yourself more clear by actually speaking the words -- instead of chanting the letters that represent the words. This one simple act may keep your suspects -- er, prospects -- from running away!”

And while I’m on the subject of things that I subscribe to (not that anyone asked me) there’s a good daily news blast that comes out from REP in The Netherlands. You can sign up for it on their website (

PEI (Private Equity International) who among other things publish Private Equity Real Estate magazine and sponsor excellent conferences were kind enough to send me a complimentary copy of their 2009 LP Survey the results of which came from their robust database of LP’s called PERE Connect. Some bullet points I pulled out for you:

• 65% said that their approach to real estate investing will remain relatively unchanged. (GOOD NEWS)

• 26% said they are likely to increase their participation in commingled limited partnerships while only 6% said their increase will be in separate accounts.

• Over the next 3-4 years the most attractive real estate investments will be in:
1. North America
2. UK/Europe
3. Asia, ex Japan

• With regard to fund investing, which term will be the most difficult to negotiate?
o Distribution Waterfall/Clawbacks
o GP commitment to the fund

• Overall, how have GP’s communicated with you during the economic crisis?
o Good enough
o Average
o (Poorly and Very Well were both considerably lower on the spectrum)

• What would your one biggest criticism of GP’s be in the wake of the crisis?
o Paid too much for properties
o Used too much leverage

• I am considering pursuing a secondary transaction to get liquidity for one of my real estate partnership interests:
o No: 84%

• I am considering buying a real estate partnership interest on the secondaries market?
o No: 68%

Surveys are good things. But one has to remember that they are don’t at a point in time and may become dated quickly. For example, there are many who believe the secondary market will become more and more vibrant as time goes on. Given the speed with which the world and our industry is changing it may be interesting for someone to start using a “Survey Monkey” type thing to get ‘real-time’ replies to a small group of question as LP’s (and GP’s) deal with continually evolving issues.

Oh, one more thing the PERE Connect survey asked (I’ve chosen to list the reasons rather than the firm names):
• What do you admire about one particular GP group?
o Good communication
o Extensive underwriting and strategic thinking
o Doing the right things
o The people and their experience
o Low management fees and sustained high performance
o Generating competitive returns with low leverage
o Disciplined consistent approach to real estate investing
o Straightforward
o Straightforward

So, with this I believe I have shared with you the things that many LP’s find most important to them and as the competition for fewer institutional dollars heats up it seems easy to make sure that your firm things you are employing these characteristics (unless you are already…but the proof is always in the eye of the beholder isn’t it?).

There was an interesting piece in the NY Times this week. Allison Arieff, who writes the 'By Design' column for the New York Times was brought to the recent ICSC convention as a juror for the organization’s inaugural Future Image Architecture Competition, which asked entrants to imagine the shopping mall of the future. “My expectations for the entries were high — and probably too preconceived. This seems like a watershed moment for malls, much as it does for housing. Surely, I thought, the entries will reflect the extent to which business as usual — i.e., massive anchor retail tenants surrounded by thousands (even millions) of square feet of specialized yet mass retail, in settings only accessible by car — cannot possibly continue. Despite near-non-existent consumer spending, the declining popularity of shopping as America’s favorite pastime and the chilling effect foreclosed homes in housing developments are surely having on nearby malls, most entries in the ICSC competition responded less to the future of the shopping mall than to the glory days to which we’ve recently bid adieu. I was struck by how little attention entrants paid to things like sustainable architecture, alternative transit or changing consumer attitudes about consumption. Architectural visions tended toward iconic futurist forms — domes or similarly curvy buildings that felt right in line with World’s Fairs past. Distressing to think that in 2059, we’ll finally get to live as the Jetsons did back in 1962.”

It’s poignant to see how many groups are holding ‘Career Counseling’ programs. Yes, there are some techniques for finding a job. Goodness knows in my life I’ve employed them. But no matter what what you do or how diligent you do it it’s very, very difficult to find a job when there aren’t any. One of the things that I learned along the way, and this may be one of the most important things anyone looking for a job can do right now, is to assess your ‘transferable skills.’ Break down who you are by skills rather than by accomplishments or job titles. I guarantee you that by doing that your world of possible paths to your next job will be dramatically increased and it may lead you to another industry completely.

Last item. Former Wall Street donut darling Krispy Kreme has announced that they will be opening a new type of store going forward which will be a "smaller, more compact retail concept.” I am assuming that these smaller stores will be selling smaller donuts. This sounds like a good idea to me given the number of really overweight people there are in the U.S. today ( I can stand to lose about 20 pounds myself). But ain’t it amazing at how good old Dunkin’ Donuts is increasing their market share? Do you think it’s only because their cheaper than Starbucks? I think there’s a lot more to it than that.

These are my views and not that of my employer.

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