Wednesday, September 21, 2011

PERE Global Forum/Are we in the wrong business?/Solving the European financial crisis

I'm sending this out while I can.  I'm in Amsterdam and shortly will be off-line until Friday evening when I return to New York after a really long flight that takes me from Amsterdam to Moscow (10 your layover there) and then on to New York.  The price of the ticket when I booked it was really good but it's going to be a long 24+ hours. 

Some notes and quotes from this week's PERE Global Forum in Amsterdam:

1.  Today's market:  Overcast with frequent violent storms.
2.  There are many investment opportunities available today if you have equity; it's difficult to raise equity unless you have a significant track record or niche strategy; specialist managers are in vogue.
3.  In the past 90 days the world has come to a screeching halt.
4.  The denominator effect exists again as equities are down.
5.  Someone is going to create a better mousetrap.  You need a compelling story about why pension funds should invest with you.  Otherwise it's like shifting deck chairs on the Titanic.
6.  This is the most difficult period to predict in my 25 years as an economist because it's all about politics.

Hidden gem-Amsterdam:  In the same low-cost vein as my flight this week, I found a wonderful three room apartment literally a two minute walk to the PERE conference venue.  I'm pretty lucky with these type things and will probably continue to seek these accommodations out as some of the rates charged by some conference hotels are, well, in my opinion, just too much.  Here's my hidden gem of a place:  BoekEnzo.  If you contact them please send Joost my regards.

At the PERE Global Forum in Amsterdam this week, a good friend of mine came up and told me that he had woken up that morning with a thought about the financial crisis in Europe.  He feels it resembles an already tired marriage going sour and there are four options that can be pursued:

1.  Ignore it:  Didn't work; won't work.
2.  Let's muddle through it.
3.  Forgive them; here's a gift (i.e. bail Greece out); let's truly make up (i.e. what ever caused the rift won't happen again) although in the case of Europe it's all about politics and lack of trust.
4.  Break up the EU (Euro Currency Countries).

Sounds like there may be some common sense to this but since when do things that involve money and politics operate with common sense?

Here are some interesting numbers about the Private (not real estate) Equity world 
(Source:  Private Equity International).

1.  10 Weeks.  How long it took Vista Equity to raise $1.6Bn for it's fourth fund which included some LP friendly terms.
2.  $4.5Bn.  Amount of capital raised by Berkshire Partners for its' eighth fund.
3.  50% of LP's expected to increase their private equity allocations in the next year.
4.  $80Bn.  Amount of private equity deal volume in the first half of 2010.
5.  $130Bn.  Total private equity deal volume for the first half of 2011.
6.  $240Bn.  Estimate of total private equity deal volume for 2011.
7.  $14Bn.  Amount changing hands in the global secondaries (not real estate) market in the first half of 2011.
8.  22.5%.  CalSTRS return from their private equity portfolio for the 12 month period ending 6/30/11.
9.  $3.00.  Average amount a GP makes in management fees for every $1.00 of performance based carried interest.

Question: Are we all in the wrong business?!

I found this on the placemat at a restaurant in Amsterdam this week and thought you'd like it:  "The spirit of "ichigo ichie"-a Japanese phrase derived from the tea ceremony means, "Treasure every encounter, for it will never recur."

And this one which I saw on the wall in the New Jersey Transit waiting room at Pennsylvania Station in New York:  "Loud in the quiet night, warning me not to mistake a hill for a mountain."  Sometimes you find something like this at just the right time in your life don't you think?

Deep-thinking moment of the week:  World cultures don’t agree too often but I believe it’s safe to say that right now we all agree on one thing:  that nobody know what tomorrow will bring in any facet of our lives.

Other than being a a professional musician, I am a life-long real estate person.  I truly believe that the real estate business is not about buildings or cash flows or IRR’s: it’s about people.  And as our industry has become truly global, we have been able to do business with people in other parts of the world based on one simple word:  trust.  We have learned and continue to learn that we can trust each other and while trust takes time to develop it has to begin somewhere.  

I see our industry as ambassadors of building bridges between regions and cultures and in doings so, between people.  Coming together in forums like this week’s PERE Global Forum in Amsterdam gives us a chance to talk with and learn more about each other.  Representatives from many countries attended this event.  Some will become friends and people who end up doing business with each other.  But more than someone to do a deal with, we are all in this  together and from time to time we all need someone we can lean on.  Meeting someone and exchanging a handshake and a business card is just the beginning.  To connect with each other takes some effort.  The one area I’ve observed that could use some more effort is in the follow-up.  So, in the spirit of community and collaboration, I offer this challenge to you: within three days of attending a conference, write an email to everyone whose business card you collected and simply say, “Good meeting you at the XYZ Conference.  Looking forward to staying in touch.”  I don’t care how many cards you collected; this process doesn’t take long (I incorporate it with the entering of a persons’ contact information in my database.)  Of course, some of the connections will result in more substantive follow up communication about a deal that was discussed or a service being offered.  And that’s great.  But at a minimum, if we simply take that handshake, that exchange of business cards and that look into one anothers eyes just one step further we have contributed in a small way to bringing the world closer together.  And isn't that be a wonderful legacy to leave the next generation?

On the road:
September 26-28:  Colorado Springs to attend the first NAREIM Executive Officers Meeting hosted by their new CEO, and my good friend, Gunnar Branson.  
September 20-October 3:  Asheville, NC to see my newest grandson, Gavin, for the first time.
October 4-6:  Las Vegas to attend and be a panelist at CBRE's Americas Summit.
October 17-19:  Chicago to attend the PREA conference
November 1-4:  Washington, DC to attend the CRE Annual Convention
November 9-10:  New York to moderate a panel at the PERE Forum

These are my views and not that of my employer.

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