Saturday, October 5, 2013

Phipps Houses / What's going on with China real estate? / Consultant recommendations: value-add? / World smile day

Phipps Houses

Thanks to the gracious invitation from a Trustee, I attended the annual gala for Phipps Houses on October 3.

 “Phipps Houses is the oldest and largest not-for-profit developer, owner, and manager of affordable housing in New York City. Its social services affiliate, Phipps Community Development Corporation (CDC), offers more than 30 education, job-readiness, recreation and civic engagement programs to help New Yorkers build better lives for themselves, their families and their community. Together they are changing lives in New York City.” (taken directly from their website)

New York City’s Mayor Bloomberg spoke at the event.  It was the first time I had seen him in person.  His accolades about Phipps Houses clearly conveyed sincerity.  The Mayor has an appealing presentation delivery style…it’s like he’s talking with you personally.

A highlight of the evening was an update on the multiphase Hunter’s Point South project, which will be the largest affordable housing complex in New York City since the 1970s.  All 925 Residential Units of Phase I will be permanently affordable and will include resiliency features designed to mitigate the impact of severe storms (i.e. putting the utility rooms on the second floor).

Phipps involvement in helping people goes far beyond establishing partnerships to create affordable housing. Phipps Community Development Corporation prepares individuals to find work.  And in addition to job search and career development resources, they offer After School programs, Early Childhood Education, Language and Literacy classes, a Summer Camp and Teen programs. 

I encourage you to take a look at the Phipps website ( to learn more about how this very special organization ‘empowers New York City communities.’

What’s going on with China real estate?

I first met Robert Ciemniak in 2006 when I was roaming around Europe launching a consulting business.  He was with Thompson / Reuters at the time. 

Since that time Robert has started his own business, Real Estate Foresight, dedicated to providing deep analytical data and well-informed insight into China Real Estate markets.

On the homepage is an interesting report ( called 'China Scenarios - Conditions for Real Estate Markets in China 2013-2018'. This is a “summary of our 5 core scenarios for the macro context and conditions for Chinese real estate markets over the next 5 years, from a perspective of a foreign investor…the objective of these scenarios is to help investors stress test their assumptions and follow the principle ‘you can’t predict but you can prepare’ in the investment process.”

To share his thoughts, observations, and knowledge of the market, Robert publishes a blog called China Weekly, which includes takeaways from various conferences he attends in Asia and Europe. Curious about real estate in China? You can subscribe to Robert’s blog here (

During his September visit to NYC, Robert, myself and other industry colleagues had a great time eating Pierogis at Veselka on the Lower East Side of Manhattan.  To me, there are few things that rival sharing good food and drink with friends.  The food experience was fun and we even found some time to talk business!

Consultant Recommendations:  Value-add?

“…….we find no evidence that these recommendations add value to plan sponsors.” 

Tim Jenkinson, Howard Jones, and Jose Vicente Martinez of the University of Oxford’s Saïd Business School conducted an extensive survey on the role consultants play in investing in U.S. equities.

The survey suggests that plan sponsors are engaging consultants for the hand-holding service and the shield used to defend their manager’s selection decisions. 

Quoting from the survey: 
“Investment consultants’ recommendations of funds are a function of the past performance of those funds.  But they are also heavily influenced by the two sets of non-performance factors:
1.    Soft Investment Factors (clear decision making, capable portfolio managers, and consistent investment philosophy)
2.   Service Factors (capabilities of relationship professionals, usefulness of reports prepared by the fund manager, and effective presentations).

In particular, soft investment factors have a far more powerful effect on consultants’ recommendations than past performance.  Although consultants’ recommendations to some extent reflect a return-chasing strategy, they are more heavily influenced by the consultants’ qualitative judgment of intangible factors.”

While the survey focused on U.S. equities, my take was that similar results could come from a real estate specific survey of the same type. Many in our industry are convinced that when a consultant evaluates a firm, fund or other type of real estate investment offering, the checkbox at the top of the list is directly related to track record. Is it possible we’ve been wrong in how consultants grade fund managers?

Now what do we do with this information??  Will it result in a shift in the number of pension funds that employ consultants?  Perhaps those who do use consultants will begin questioning the way managers and fund investment opportunities are evaluated.  And, more importantly, this report may get fund and investment managers to appreciate, more than ever, the importance of those soft factors.

When we reflect back on this study in 5 or 10 years from now, will we notice its impact?  If I were a consultant, perhaps addressing the findings of this study proactively with my clients would be a smart strategy.

Stay tuned boys and girls! We may be witness to a ‘sea change’ in the relationship between pension funds and their consultants. You never know!

You can read this 47-page report here (!).

World Smile Day

As I’ve received so much feedback on the recent piece about smiles, I thought you might be interested to know that Friday October 4 was World Smile Day. 

Here is a direct excerpt from an email sent by Susannah Schaefer, Executive Vice Chair and Chief Executive Officer, of SmileTrain to highlight World Smile Day:

“Smile Train has decided to celebrate the day with our student supporters. One school in the UK has already done A LOT of celebrating in preparation of today. In honor of World Smile Day®, Westinghouse Prep School, a school of 300 students in Chichester, UK, has raised enough money through various events to provide 60 children with free cleft surgery. World Smile Day® is all about bringing about smiles through kind acts and what could be kinder than giving a child a second chance, and a new smile?

Please join Smile Train in celebrating World Smile Day® by retweeting or posting to Facebook the smileygraph on this page ( along with #smileygraph. Each share triggers a $25 donation for Smile Train. 

Also, don’t forget to wear your best smile today—I know I’ll be wearing mine!"

Warm regards,
Susannah Schaefer 
Executive Vice Chair and Chief Executive Officer

On the Road...

Oct. 10 – 11:  Cornell Real Estate Annual Conference, New York, NY

Oct. 16 - 18:  Client meetings, Chicago, IL

Oct. 23 – 24:  PERE (Private Equity Real Estate) Summit: New York 2013, New York, NY

Oct. 28 – 30:  PREA (Pension Real Estate Association) Annual Investor Real Estate Conference, Chicago, IL

Nov. 13 - 15:  NCREIF (National Council of Real Estate Investment Fiduciaries), Fall Meeting, Miami Beach, FL

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