For only the second time since my publishing of OTR began in 1999, I’m posting this issue in mid-air, somewhere between Pittsburgh and Omaha, on my way to Los Angeles. When I first started intensive traveling as a real estate consultant to Volkswagen of America in 1975, air travel was so much more civil. I remember being able to drive to Newark Airport and park ‘this’ close to the terminal. That was long before TSA security rules and before so many passengers felt so entitled. I guess lots of things were just so much simpler back then. On the Internet (huh?) in mid-air? Can you say ‘science fiction’ meets real life?
UNC Real Estate Case Challenge
I’ve always enjoyed being invited by Dave Hartzell, distinguished professor of real estate, to serve as a judge for the UNC Kenan-Flagler Real Estate Development Case Challenge. Of all the cases that I’ve been exposed to over the years, this one was the most complex – both from a real estate development and a political constituency standpoint. With that complexity and the great job done by so many of the teams, getting agreement amongst the 18 judges took a monumental effort. Kudos to all the students who invested a serious amount of time and effort preparing their case under very tight time constraints.
Here are the schools that participated:
UCLA, University of Chicago, Columbia University, University of Virginia, Duke, University of California-Berkeley, Northwestern, University of North Carolina – Chapel Hill, USC, University of Texas – Austin, Georgetown, Vanderbilt, University of Michigan, New York University, University of Pennsylvania and Dartmouth College.
To avoid favoritism, the teams adopt ‘aliases’ and the judges are not informed of their true identities until the conclusion of the event. The deliberations, both first and final rounds, are very interesting as judges hone in on different aspects of a team’s presentation – design, construction, leasing, management, finance and feasibility. My focus (of course!) was on how the teams presented themselves and their case.
We, in the commercial real estate industry, can rest assured that the next generation is very well prepared – now all they need is a chance! While a number of the team members were first year graduate students, a majority were second years, graduating in May and looking for jobs. There is emerging talent all over America! When considering your next hire, think about whether you’re allowing an unconscious (or perhaps conscious) bias towards or away from a certain school – and reach beyond your comfort zone – you may just find a gem of a person, passionate about real estate and just what you need to compliment your existing team.
The top finishers were:
#1 UNC (simply a random coincidence)
Congratulations to all!!
NORC - Torto Wheaton Research Reincarnated?
Jon Southard, Abby Rosenbaum and Jared Sullivan, colleagues formerly with CBRE Econometric Advisors, have joined non-profit NORC and launched a real estate research and forecasting group. Speaking with Jon on the phone last week he told me the new group will operate “like the old Torto Wheaton Research” (TWR). TWR was one of the most highly-regarded firms in the industry which was acquired by CBRE. The NORC group will focus on objective forecasting, providing a much-needed resource to the professional real estate researchers in the commercial / institutional real estate community. Congratulations Jon, Abby and Jared!
As a kid, I was a huge fan of the New York Yankees baseball team. For a few years running, my Dad would take me to Yankee Stadium and we’d sit in box seats down the left field foul line. In two consecutive seasons, we had exactly the same seats, just four rows from the field. At the end of the visitors batting practice session one day, a player tossed me a ball as a souvenir. It was great – I’m sure he tossed it right to me! Then, the next year, we were there to watch the same team play the Yankees, sitting in the same seats and, you know what?? That very same player tossed me another ball! I kept those balls as souvenirs for many years, until one day my friends and I needed a baseball for our pick-up game. It’s an experience I’ve never forgotten but was reminded of it just the other day when reading about the death of Minnie Minoso, the player who tossed me those two baseballs.
From the New York Times obituary: “Minnie Minoso was the hugely popular All-Star outfielder from Cuba who became the major league’s first black player out of Latin America and a treasured figure in the history of the Chicago White Sox… His true age was never entirely clear, but by an account in his autobiography, he would have been 89 when he died…President Obama said in a statement that “Minnie may have been passed over by the Baseball Hall of Fame during his lifetime, but for me and for generations of black and Latino young people, Minnie’s quintessentially American story embodies far more than a plaque ever could.”
He has always held a special place in my heart too!
RCA - US Capital Trends
Real Capital Analytics recently published its US Capital Trends – Month in Review for January 2015. With their kind permission, here are a few of the key highlights, taken directly from the report, that I’d like to share with you:
- Sales of significant property totaled $42.3b in January, up 30% year over year. These figures are a great start to the year but this volume was heavily dominated by portfolio activity. The sale of individual assets was up only 9% year over year in January.
- Portfolio sales totaled $16.3b for the month with $9.7b concentrated in just four transactions. Only the industrial sector and development sites saw less portfolio activity in January than a year earlier. Not coincidentally, these were the only two sectors which saw volume decline on a year over year basis. Still, the sale of individual assets was up 23% year over year for the warehouse component of the industrial sector.
- Cap rates continue to trend downward on a year over year basis. The biggest decline was seen in the industrial sector which is down 50 bps from this time last year. Still, most of these declines happened earlier in 2014. The trend over the last month was for cap rates to be virtually unchanged or up slightly: 10 to 20 bps.
- Just under a third of all investment activity for the month was captured by private investors. While this share represents a big commitment by these groups, this figure is actually down relative to all of 2014 where the share was at 46%. The big gain in January came from the public investors.
- US commercial property overall saw growth in market share of private investors in 2014 versus a pullback in investment activity by the public investors. The picture is not universal across sectors and the full year however. The office, retail and hotel sectors saw gains in market share by the public investors, though these were generally small. Gains in the apartment and industrial sectors by private investors were quite large so on a net basis the composition of buyers tended to favor the private investors.
- The activity of cross-border investors has grabbed many headlines of late, but there are mixed signals in the figures here. The overall share of their activity fell to only 9% of total acquisitions in 2014 relative to 2013. Still, they were just as active as in 2013 with volume up 1%: the spent essentially the same amount. There is hope that a bill which recently cleared the Senate Finance Committee will roll back some of the provisions of FIRPTA and allow more cross-border capital to flow to the US. Still, similar provisions have got to the one-yard line and died like the Seahawks many times in the past so believe it when you see it.
We’re really living through a boom in the commercial real estate industry. There’s talk about when the ‘boom will drop.’ But not all that much talk as people are so busy raising capital and investing that they simply don’t have time to think about what might be coming and when. There will always be time then to talk about it.
(Advertisement) – Women’s Leadership Workshop – Los Angeles
Following the success of two Women’s Leadership Workshops in NYC, and one each in Chicago, Houston and Dallas, we are bringing the program to Los Angeles this Friday, March 6. We continue to receive extremely positive feedback from attendees – at various levels in the industry and different points in their careers. Please share the link with those in your network who may have interest in participating. I’ll continue to post these workshops below as we bring them to other cities in the US and Europe. Thanks.
My good friend, Kevin Higgins, who has joined the State of New Jersey, Division of Investment
On the Road...
March 6: Commercial / Institutional Real Estate Women's Leadership Workshop, Los Angeles. Learn more and register here
Mar. 16 - 17: NAREIM Executive Officers Spring Meeting, Miami, FL. Learn more and register here
Mar. 18: Commercial / Institutional Real Estate Women's Leadership Workshop, Miami, FL. Learn more and register here
Mar. 19 - 23: Reunion with my buddies from Forest Hills, NY who all grew up together a long, long time ago, Las Vegas, NV
Mar. 26 - 27: PREA (Pension Real Estate Association) Spring Conference, Washington, DC. Learn more and register here
Apr. 29 – 30: PERE Global Investors Forum, Los Angeles, CA. Learn more and register here
May 5: Commercial / Institutional Real Estate Women's Leadership Workshop, Chicago, IL. Learn more and register here
May 6 - 7: NAREIM Accounting and IT Meeting, Chicago, IL. Learn more and register here
June 15 - 16: IMN US Real Estate Opportunity and Private Fund Investing Forum, New York, NY. Learn more and register here
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