Sunday, October 5, 2014

PREA Fall Investor Conference / Research / The 'E' Train from JFK

Pension Real Estate Association (PREA) Fall Investor Conference

Every time I hear about a deal with a low cap rate (I had thought that 4 was getting pretty low) another story surfaces quoting an even lower cap rate.  Believe it or not, at the PREA conference in LA last week, someone was talking about a deal with a 2% cap rate [although it hadn’t been verified].  I hadn’t heard anything that low since the Japanese bought Rockefeller Center in New York City at 0%; their investment decision was based on the plan to hold those assets for 100 years – but, in hindsight, they simply paid way too much.

There were a handful of PREA panels that discussed how long real estate will continue the great run it’s having.  Everyone seems to have an opinion – but all (or almost all) will admit that no one really knows…  It almost feels like no one wants to talk about the ‘what ifs’ for fear of jinxing things. 

The robust agenda also included a number of first-time PREA panelists – in my opinion, a very healthy decision.  It’s great to hear different perspectives from senior industry professionals.  And, it’s especially nice that virtually all of these speakers were open to sharing their knowledge and experiences. I find this much more interesting than hearing someone simply talk about how great their firm is, which seems more and more prevalent at many industry events.

Many of my individual conversations while at the conference were with people from firms looking to hire not only analysts with some experience – but mid-level folks as well.  Amazing to me were two conversations where I was told that firms were looking to hire women but couldn’t find any.  I thought, “Where are you looking?” – there are SO many qualified women in our industry. 

When speaking with the younger professionals at PREA - which I always enjoy - I heard a common theme:  how do we start conversations or approach groups when we don’t know the people?  My suggestion:  start conversations with other younger attendees you may not yet know.  It’s easier and less intimidating.  A couple of them tried this idea and came back thanking me for the suggestion – it worked for them!

Sharing a taxi to the airport with a long-time industry friend, he told me about his approach to choosing a seat at meals – he sits at an empty table and sees who joins him.  I’ve embraced that very same approach for many years instead of always sitting with people I know.  The mix of people that join you is usually very interesting and diverse.  It’s a great way to expand your network.

As a side note, this was the first PREA conference where an App was available to registrants.  It was very easy to use and, among other tools, provided the agenda and list of attendees.


Prequin’s Real Estate Spotlight – October 2014

Their feature story this month is called ‘Investor Confidence in Real Estate and Changing Allocations.’  Here are a few interesting excerpts I want to share with you:

  • Investors’ average current and target real estate allocations have slowly increased from 6.7% of total assets under management in 2011 to 7.6% in 2014.
  • Many investors are planning to make their maiden commitments to real estate, or are seeking to return to making investments after having been inactive.
  • Greater numbers of Asian-based investors are looking to invest internationally with these institutions likely to be an important source of capital for managers raising Europe or North America focused funds.
  • The fundraising market remains a challenging one, and while there is a large pool of institutional capital set to enter the asset class in the coming years, fund managers may need to cast the net wide to be successful in raising capital, and be prepared to target investors across the globe.

Real Capital Analytics (RCA) – U.S. Capital Trends

Here are a few highlights from RCA’s September 2014 U.S. Capital Trends Report, which I thought you would find interesting:
  • Sales of significant commercial property totaled $29.0b in August, up 6% year over year.
  • The most robust gains in August were reported in the hotel sector (up 71% year over year) and for CBD office (up 46% year over year).
  • Institutional investors seeking higher yields have turned to the industrial and retail sectors where their acquisitions are up 78% and 53% respectively. 

The E Train from JFK

To avoid traffic - and save a few bucks - the best way to travel from JFK airport into Manhattan is via the AirTrain and NYC subway.  On the way home after my flight back from PREA/LA late Thursday night, I experienced some nostalgia:  some of the stops on the subway were Forest Hills, Rego Park and Elmhurst (all in the NYC borough of Queens).

I was born at Elmhurst General Hospital, lived in Forest Hills during the early formative years, and visited my grandparents in Rego Park.  In the midst of the Jewish New Year holiday I thought back on all the years I would go to synagogue and sit next to Grandpa Herman during the ‘High-Holiday’ services.  He always stayed until the end, which some years was well past sundown (the ceremonial start/end of the holiday).  I’d then walk with him - he was a world-class walker - back to his apartment, talking about who knows what.  We would be greeted by much of the immediate family, most of whom had waited for us to eat – after fasting on Yom Kippur.  We would ‘break fast’ together having the meal my mother said annually was “The best meal of the year.” 

Things were so much simpler back then.  Our world today is so complicated.  Concerns about identity theft, safety on the Internet, strife in so many parts of the world, Ebola in Liberia and West Africa, security threats and a lot more.  Some days I feel like moving - to a simpler place than Manhattan.  And, perhaps one of these days, I’ll throw what are now minimal possessions in my car and do just that.  But for now, I feel a renewed energy and purpose in my life – that I’m happiest when helping others.  This is the essence of my work and of my existence.  It feels good to have found some peace of mind in the on-going quest.

Ted Eliopoulos was promoted to Chief Investment Officer at CalPERS (California Public Employees Retirement System).  (Note:  it's very rare for a real estate person to be made CIO of an institutional investor!).

Tim Brosnan has joined LBA Realty.

Jerome Nichols now with CBRE Global Investors.

On The Road…

Oct. 21 – Oct. 23:  ULI Fall Meeting, New York, NY (t)

Oct. 26 – Oct. 29:  CoreNet Global, North American Summit, National Harbor, MD (t)

Oct. 30:  Careers in Real Estate / Interview Skills, Drills & Thrills workshop, Edward St. John Real Estate Program, Johns Hopkins Carey Business School, Washington, DC

Nov. 14:  James A. Graaskamp Center for Real Estate/
Wisconsin School of Business Global Real Estate Markets Conference, New York, NY

Dec. 3 – Dec. 4:  NAREIM (National Association of Real Estate Investment Managers) Capital Raising / Investor Relations meeting, Chicago, IL

Jan. 15 – 16, 2015:  NAREIM Asset Management and Acquisitions Meeting, San Francisco, CA

Mar. 10 – 13, 2015:  MIPIM (The World’s Property Market), Cannes, France

Mar. 17 – 18, 2015:  NAREIM Executive Officers Spring Meeting, Miami, FL


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