Staying Connected, Troubled Assets

Photo: Somewhere in Las Vegas recently. Thanks BF.

Last summer, I decided to experiment with Linkedin.com. Prior to that I had signed up and accepted invitations from people I knew but I never really spent the time figuring out how to use it or what good it really was. So I invited a number of people that I knew to sign up as well but still didn’t spend much time using the service, just watching it being used around my connections. Last week, after having to literally battle with Linkedin to cancel my account, I dropped out and disconnected. Something I read encouraged me to rethink whether I wanted to share my network with others and I decided that I had not needed before, nor do I need now, any third party social network to help me stay in touch with the people I know and that know me. (However, I am staying with Facebook as it's fun!).

The more things change….I was reading a NY Times article this past Monday on how those who were closely connected to the RTC (Resolution Trust Corporation) are now resurfacing to either take advantage of themselves or help their clients access opportunities today. I also was close to the RTC process and as things have deteriorated in the U.S. have thought about whether this is the time for me to leverage what and who I know. I’ve chosen not to and after reading this article I feel even better with my decision. Why? First of all, while things may look similar to 1990-1995, they aren’t. That time was unique, just like this time is and there’s no guarantee that past performance or actions are any indicator of future results. I believe that those who will be able to benefit from buying distressed assets today are those with very deep pockets and very patient money and those two characteristics are not always seen at the same movie. If we look at history as a model we have to be careful that we take all factors into consideration and not blindly dive into pools where the water is deeper than we first thought.

Having said that, I offer this excerpt from the premier issue of RCA’s Troubled Asset Radar:
“ The inventory already tops $106b and is growing rapidly. Truly distressed situations, where the mortgage is in default, the owner is bankrupt or the property has already been foreclosed, total approximately $25.7b, encompassing well over 1,000 significant assets. Of this total, approximately 200 properties valued at $4.5b have reverted back to the lender to become Real Estate Owned (REO). Thus, the majority of the distressed assets have only recently fallen into default and a foreclosure process commenced. The analysis also ignores approximately $11b of distressed situations that have emerged and already been resolved over the past year. The volume of properties that are potentially troubled is even more significant totaling $80.9b in volume and 3,736 individual properties. Potentially Troubled assets are largely those with an upcoming mortgage maturity in 2009 or those where the owner is in some financial duress, often caused by maturing loans. In these situations, the properties involved may be free of problems or issues. However, certain property issues, such as a major tenant bankruptcy or a development that has stalled or failed to live up to expectations, will qualify it to fall into the Potentially Troubled category. Distressed Assets.”

I clearly think they’re right (and the data is what supports any editorial commentary). And, there will be another generation of Barry Sternlichts, Russ Appels, Joe Roberts, Lou Ranieris and others who have made good money by buying troubled assets. But, we’re all in for some tough sledding and I wonder whether the marquee names that we already know or new ones will step up to the counter and place their orders. It's going to be an interesting year.

First time for everything: At Midway (Chicago) airport I experienced this (but took the description from a website): “New signs, color coded like those at ski resorts that warn of the difficulty level of slopes, will direct passengers to one of three lines – a green circle for beginners, a blue square for intermediate travelers and a black diamond for advanced passengers. Travelers will pick the line that fits their experience level, or security workers will direct them to the appropriate one. The goal is to reduce tension and frustration at security checkpoints and speed up the process for at least the experienced travelers who know to whip off their shoes and remove laptops from carrying cases without being told.” Recently, when I went through, the ‘experienced’ line was very light (I guess it was too intimidating for most holiday travelers ☺). But…..excuse me….what a great idea!

An article in the New York Times on Tony Bennett last week included this; “poise in the wind of uncertainty is a very old idea in American pop.” I liked the phrase and thought it had much broader relevance than just the world of American pop (that’s not ‘soda’ they’re referring to!). Poise is a characteristic I’ve always looked up to and with things being so uncertain it’s going to be an even more admirable quality to maintain.

Where I'll be:

Jan. 5-12: New York
Jan. 13-14: Cleveland, OH
Jan. 16-18: Ormond Beach, FL for the first 'annual' Felix Family Birthday Celebration
Jan. 28: Washington, DC
Feb. 17: Atlanta, GA
Feb. 18: Raleigh, NC
Feb. 19: Chapel Hill, NC to attend the Kennan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.
Mar. 10-13: Cannes to attend MIPIM, host the second annual MIPIM Summit TV show and attend INREV's Annual General Meeting.
Mar.24: New York to moderate a panel at the IGlobal Forum Real Estate Private Equity Summit
Mar. 25-26: Washington DC to attend PREA's Spring Conference
April 1: Champaign-Urbana, IL to attend a very special music recital
Apr. 24: New York, Madison Square Garden to watch Syracuse beat St. Johns (College Basketball).



These are my personal views and not that of my employer.

Year-End: 2008

Paul Summer of J.P. Morgan Asset Management Global Real Assets is one of the most creative guys I know. The holiday card, which Paul created for their group this season is something special. It’s digital, short and, well,let me share the text with you. Picture a leather-bound book……

Cover: 2008-2009: Turning the Page by Hedda Nuff and Gladys Over
Page One: It was the best of times, it was the worst of times.
Page Two: OK, so it wasn’t the best of times…But as we turn the page on a dickens of a year, let's get down on our knees and give thanks we're still on our feet.
Page Three: Every end brings forth a new beginning. Wishing you a healthy, happy
and prosperous new year. May your troubles only last as long as your resolutions

Well said Paul, well said.

I woke up this morning and felt the need to write to you as we start a new year. I thought about how my 2008 went and what is going on in our industry right now with people losing their jobs, whole business units being cut and more people fearful that they may be fired early in the new year. And I went to Wikipedia, a resource that I rarely rely on and found typed in the word ‘friend’ to their search engine.

“Friendship is a term used to denote co-operative and supportive behavior between two or more people. In this sense, the term connotes a relationship, which involves mutual knowledge, esteem, and affection and respect along with a degree of rendering service to friends in times of need or crisis. Friends will welcome each other's company and exhibit loyalty towards each other, often to the point of altruism. They will also engage in mutually helping behavior, such as exchange of advice and the sharing of hardship. A friend is someone who may often demonstrate reciprocating and reflective behaviors. Yet for many, friendship is nothing more than the trust that someone or something will not harm them.

Value that is found in friendships is often the result of a friend demonstrating the following on a consistent basis:

* the tendency to desire what is best for the other,
* sympathy and empathy,
* honesty, perhaps in situations where it may be difficult for others to speak the truth, especially in terms of pointing out the perceived faults of one's counterpart
* mutual understanding."

I’ve always been good at helping others and up until recent years it has been difficult for me to let others help me. But I’ve learned over the past few years in particular that it’s okay to accept help as the balance of giving and receiving is the healthiest approach to life. After all these years in the real estate industry I’ve developed a pretty good ‘sixth sense’ about people and my instinct is pretty darn good. I am grateful for having so many ‘friends’ but also ‘connected acquaintances’ in my life. In 2007-2008 I’ve learned who my true friends are and to them I am forever grateful. I’ve also learned that when you have an instinctive sense that you can’t trust someone, don’t ever doubt it because sooner or later they will prove to be who you think they are.

Anyway, what I’m trying to say is this: a lot of our industry friends and acquaintances are and will be going through difficult times. I would guess that all of us have gone through career challenges at one time or another in our own lives. And while we may not have an answer or be able to pick up a phone and find someone a suitable position, what we can do is spend some time talking with people, listening to what they’re thinking about and, well, being a friend. In 1995, as I was working my way out of a job doing workouts for a large commercial bank in New Jersey, someone in that bank, who I didn’t know very well, turned me on to the phrase ‘transferable skills.’ Given what is going on right now I think that we need to help coach our industry colleagues to think about how to transfer their skills and look in directions where there may be opportunities that they might not have thought of. We can all be coaches, nay, friends to each other and it pretty much starts with just being willing to take some time to meet with someone. It’s a small world and getting smaller. Not only will you feel good about trying to help someone, they will not forget you.

My band, “Everyone” used to have the song “Carry On” (Crosby, Stills & Nash, written by Stephen Stills) on our setlist every night we played. It was a song that was written about a broken relationship but I thought of it just his morning and while I recommend listening to the whole song (I’m going to do it as well) I offer this simple phrase:

Rejoice, rejoice, we have no choice but
To carry on

Let’s let 2008 be a reminder of what’s really important in life and as we ‘carry on’ never forget that we’re fortunate to have each other.

Happy New Year!

From The Great White North

Photo: The mostly frozen Rivière des Prairies, Quebec from my home office.

When I flew Southwest Airlines to Chicago last week and looked out the window in the gray of the early winter morning I could clearly see the snow grid of middle America frozen in place and all I could think of was how it reminded me of how our industry, nay, the worlds’ financial and business and consumer landscape is frozen, virtually shut down in a strange sort of hibernation. The big question: Will Spring bring a thaw? I hope so.

From a NYTimes editorial on 12/24:
“The world may never again be able to gaze at its photo with awestruck wonder. But two startlingly fresh images of our planet come to mind. The first is the virtual globe that appears when you open Google Earth. The planet as information tool, waiting to fly you anywhere you choose. The other is a haunting image from the movie "Wall-E" of a brown husk left lifeless by consumption. The real Earth seen from the Moon is surely as lovely as ever, even with thinner ice caps, smaller forests, fewer gorillas and tigers and a few billion more people. We are still brothers and sisters in the eternal cold, but increasingly connected by invisible threads, able to see — and hear and understand — one another as never before. That, at least, is reason for optimism.”

From Tom Asacker: Nine Predictions for 2009 (BTW, I learned some time ago that nine is the maximum number of things you should put on a list; seems like this fellow read the same thing! And, yes, I skipped some ☺):

#2: Many things will change, but many people will not.
Most of us will be doing, thinking and feeling more or less the same things this time next year as we are now. If you don’t want that sameness, grab yourself by the collar and yank yourself off that comfortable, well-worn path and onto the one less travelled by you. Let go of your past and grab on to your future. Because while you’re waiting for that grand insight to point you in the right direction, the beauty if life is flying right on by. (SF

#3: Most people will sit quietly in their seats and watch life unfold around them.
Grab the wheel and get moving. Let the pull of what excites you and what you care most deeply about be your guide.

#5: Many “friends” will be lost and many new ones made.
Many of the people who have “friended” you through social networking did so for a reason; their reason. And once that reason goes away, so will they. Don’t sweat it. Keep connecting. Keep reaching out and sharing with people with similar interests and beliefs. But also spend more slow and deep time with your family and your true friends; those who accept and care about the real you, not the social status you. “In prosperity, our friends know us; in adversity, we know our friends.” –John Churton Collins.

#6: The passionate will not only survive, they will thrive.
The future belongs to those unwilling to accept the stifling status quo; to those who stay puzzled, excited , frustrated and surprised.

#7: Success will go to those with the best questions, not those with the cleverest answers.
Successful people know that they’ll never know enough, especially about what really matters. So, they pay attention. They catch on and refocus rapidly. They never stop trying and learning. They’re driven by the questions, by their desire to understand and to change things. “All you need in this life is ignorance and confidence, and then success is sure.” –Mark Twain

#8: Execution is the new strategy.
E.L. Doctorow wrote, “Planning to write is not writing.” Sure, vision and planning are important. But with the accelerating pace of change in today’s world, the important insights are more likely to come through doing and editing, than through speculating and strategizing.

#9: Making a difference will trump making a buck.
Walt Disney’s mantra was, “I don’t make movies to make money. I make money to make movies. “ What about you? Why do you make money? Think really had and long about that simple question. If you’ve been putting off being passionate about your work in order to make a lot of money, now may be the time for you to make a change. Why? Because the business of making money simply to make more money is quickly coming to an end. The future is not in making a buck, it’s in making a difference. “We make a living by what we get, but we make a life by what we give.” –Winston Churchill

And, please, as things get more and more hectic and frantic, don’t forget the famous Princess Louise Principal: When you’re off you’re off! If you work at it you can do it. You can turn your work phone and BlackBerry off when you’re off. Just give yourself and those around you a break!

I discovered an interesting blog last week.
http://pensionpulse.blogspot.com and will be meeting with the author next Tuesday in Montreal.

2008 has been a challenging year in one way shape or form for almost all of us. I’ve had my own personal adventure this year which has, as many things in life, resulted in me being in a better place (not just physical). I have met some terrific people for the first time and visited places I had never been before. I have also really learned who my true friends are and I cherish their friendship. For me, growing as a person, exploring new things, living with my eyes and heart open and being grateful for so many little things is the essence of my life. Having your support in the launch of this blog means a great deal to me. 2009 will bring us challenges, some leftover, others pushing us to be more creative, more enthusiastic and more disciplined. But throughout it all, I have learned that it is the small things that matter and that in this time of stress, reaching out to help someone makes a difference.

My best to you for a happy and healthy 2009!


Where I'll be:

Dec. 26-Jan. 2, 2009: Montreal.
Jan. 13-14: Cleveland, OH
Jan. 16-18: Ormond Beach, FL for the first 'annual' Felix Family Birthday Celebration
Feb. 17: Atlanta, GA
Feb. 18: Raleigh, NC
Feb. 19-, 2009: Chapel Hill, NC to attend the Kennan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.
Mar. 10-13: Cannes to attend MIPIM, host the second annual MIPIM Summit TV show and attend INREV's Annual General Meeting.
Mar.24: New York to moderate a panel at the IGlobal Forum Real Estate Private Equity Summit
Mar. 25-26: Washington DC to attend PREA's Spring Conference
April 1: Champaign-Urbana, IL to attend a very special music recital
Apr. 24: New York, Madison Square Garden to watch Syracuse beat St. Johns (College Basketball).



These are my personal views and not that of my employer.

"Made-Off", Frozen Chicago, Optimism

<<<<<Chicago-Frozen Lake Michigan from my hotel room.
>>>>>>>>>>>>>>>Brian Felix/Joel Cummins Annual Holiday Keyboard Fundraiser for Keys 4 Kids in Chicago last night. Annual sing along song was The Beatles-A Day in the Life.

Well, what a week. So this dude ‘made-off’ with a lot of people’s money and here I thought Ponzi was just a sauce you dipped dumplings in! In this era of finger pointing rather than accepting responsibility for our own actions, investors with Mr. Maydoff were operating in the trance that was part of the euphoric period of the ‘wall of capital’ days. Well, the dyke in the wall of capital broke and no one’s finger is big enough to stop the rush of filthy water, carrying hopes and dreams down the sewer. And while “Caveat Emptor” is not intended to scold those who got caught in this scheme, it is and even better rule for us to remember going forward. No, we can’t change deeds that have been done or words that we’ve said but we can change the way we approach things, our attitude if you will and thus the future and boy, is there going to be change. What I don’t understand is how could someone knowingly screw foundations, many foundations, out of money that was donated to those organizations out of the goodness of the hearts of others to help people in need? And, the Cheney-like smirk that Madoff seemingly proudly wears in recent photos of make me feel like throwing much more than some shoes at him. What a scumbag! If this guy doesn't really pay for what he's done, we've got more of a problem here in the U.S. than I ever thought. But we also need to restrain from lynching or public flagellation and respect 'due process.' As a friend of mine in Chicago said to me yesterday, “All we can hope is that this is the end of things because the accumulation of all the ‘bad press’ about the financial world and the 'guilt by association' real estate is suffering can really damage the short term future of our industry.” I echo that hope but I’m just not sure that we’re finished as in I don’t think the bottom is yet in sight and as we know we'll only know when we hit the bottom after it's happened. This is like a bad movie but, it’s not, it’s real.

Desperate to read something at breakfast this morning I thumbed through USA Today and found a short Op-Ed piece by founder, Al Neuharth (age 84). Allow me to share some excerpts with you:

• In a recession you can not only survive but thrive by practicing these two things:
o Realism
o Optimism
• The reality today is to tighten you belt as much as necessary.
• Optimism means you must understand that if you handle this problem properly, you can ride high on the wave of recovery and prosperity that follows every recession….
o That means investing now in everything worthwhile you can afford.
o It means spending only what is necessary on necessities and funneling what you can into the future. The sooner the better.
• We launched USA TODAY during the 16-month recession of 1981-82. Because it was a popular new product, it rode the recovery.
• If you invest in the future in time of recession, the best of times are ahead of you.

Having been a real estate contrarian for much of my life, I tend to agree with Al in a number of ways. But I guess, the idea of ‘riding high on the wave of recovery and prosperity’ sounds a little too much like what we’re suffering now from over-doing it. Anyway, I leave it to you to chose your poison as we all attempt to navigate a wide and deep global unraveling. And, there are enough “What was he thinking?” type of news pieces to actually bring a smile (or a shaking of the head) to our day. I’ve always said, “Real life is much more entertaining than any TV show or movie.” Governor of Illinois. Auto execs private jet. Auto bailout…just announced by the U.S. President (where’s mine?) Wearing boots just in case you need something to throw ad someone.

There has been a lot of talk this week about the new Troubled Asset Radar report launched by RCA (Real Capital Analytics) this week and available to subscribers only. To my knowledge this is the only such aggregation of timely information on the state of and the potential opportunities in commercial real estate.

Restaurant of the week: Lazzaras Pizza, 221 W. 38th Street, New York (http://lazzaraspizza.com). I have eaten a lot of pizza and I have to say that this is one of the top three pizzas I have ever tasted. No slices, just pies. Go with someone who loves to eat!

Where I'll be:

Dec. 20-Jan. 2, 2009: Montreal working from home in between the holidays.
Jan. 13-14: Cleveland, OH
Feb. 19-20, 2009: Chapel Hill, NC to attend the Kenan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.
Mar. 10-13: Cannes to attend MIPIM, host the second annual MIPIM Summit TV show and attend INREV's Annual General Meeting.
Mar.24: New York to moderate a panel at the IGlobal Forum Real Estate Private Equity Summit
Mar. 25-26: Washington DC to attend PREA's Spring Conference

These are my personal views and not that of my employer.

Reuters Real Estate, RCA and Christmas in New York and London

<<<<Fifth Avenue & 57th Street, New York last night.


>>>>Gracechurch, London, Wednesday night.


Last night I attended the Christmas party thrown by Real Capital Analytics at one of New York’s hottest places, Strata. Both in London and New York I was talking to people about the American habit of saying “Happy Holidays” vs. “Merry Christmas.” Maybe it’s one time that Americans tread lightly and don’t want to risk offending anyone who either doesn’t celebrate Christmas at all or may celebrate Chanukah, Kwanzaa or something else. Anyway, I have felt for a long time that while Christmas has religious significance for some, in many ways it has transcended religion and is just a special time of year when we celebrate the good things with our families, friends and colleagues. Anyway, I have a scoop for you:this week RCA will be releasing a powerful new feature to their subscription service focused on global distressed opportunities. I’ll be able to say more next week once it’s public.

While in London I moderated a panel at the Second Annual Reuters Real Estate Property Outlook-2009. Last year, Reuters charged a registration fee for the event. This year they found that tough sledding. But we should salute Reutersrealestate.com for producing the event as originally planned but without charging delegates any fee. It remained an invitation only event and although there were only 250 seats, 600 people wanted to attend. In this, Reuters Real Estate has shown that they are a dedicated servant to an industry which has fallen from lofty heights in a rather short time and Robert Ciemniak and his colleagues are to be congratulated for a first class and timely event. Here are some of my takeaways:

1. No one is really sure of anything.
2. “We don’t have to worry about data when we’re talking about the future.” Head of Research and Strategy for household name investment manager.
3. “The key to the future is our frame of mind.”
4. “Forecasting: the number, any number, is wrong.”
5. “We knew there was risk in the market but we chose to ignore it.”

And here are the results of a few of the audience response questions:

1. Total return expectation Eurozone-2009:
a. -10% or worse: 56%
b. -10% to 0: 37%
c. 0-10%: 5%
d. 10% or better: 2%

2. Total return expectation-Developed Asia-2009
a. -10% or worse: 48%
b. -10% to 0: 35%
c. 0-10%: 15%
d. 10% or better: 3%

3. Total return expectation-Developing Asia-2009
a. -10% or worse: 41%
b. -10% to 0: 30%
c. 0-10%: 24%
d. 10% or better: 5%

4. Which sector will provide the best returns in UK-2009
a. Office: 13%
b. Retail 23%
c. Ind/Whse 34%
d. Residential 18%
e. Hotels 12%

5. What will be a better investment in 2009?
a. Stocks/Equities 39%
b. Bonds 35%
c. Real Estate 12%
d. Other 14%

6. How long before things get better?
a. 1-3 months 1%
b. 3-6 months 7%
c. 1 year 25%
d. More than 1 year 67%

7. Expected total returns UK-2009:
a. -10% or worse: 51%
b. -10% to 0: 36%
c. 0-10%: 11%
d. 10% or better: 2%

8. Expected total returns US-2009:
a. -10% or worse: 57%
b. -10% to 0: 32%
c. 0-10%: 10%
d. 10% or better: 1%

9. How confident are you in the views you just expressed (in the voting)?
a. Very 17%
b. Just my best guess 44%
c. Not sure, loads of uncertainty 28%
d. Frankly, no idea 12%

What a difference a year makes. The further we get into this thing the longer it’s taking for us to hit bottom (although there’s an old blues song that has the line, “been down so long it looks like up to me”) and the more strain there’s going to be, everywhere in the food chain. I’ve been finding that there is money still flowing into real estate but more into distressed opportunities and secondaries than traditional property deals. But, we won’t know when where the bottom is until we pass it, right?

During the nine years I was living in Napa, California, Copia opened to much fanfare. Copia was billed as “the center for food, wine and the arts” and was initially financed by a large infusion from the late vintner, Robert Mondavi. Having seen many businesses come and go in my years in the real estate and especially shopping center industry I bravely but confidently predicted that Copia would not last long. Opening in November 2001, Copia mysteriously closed its doors a few weeks ago. I bring this up because in my opinion Copia’s model from the get-go was totally flawed, it’s marketing campaign geared to the few, not the many and it’s value proposition to a town that was struggling with it’s own identity and success somewhat cloudy. But it’s like that in any business: if you launch a product or service that is for mass-consumption it will look and feel one way; if it’s for the hoity-toity, then it will have a different appeal. But Marketing 101, which I believe was developed by civilizations long ago, says: Know Your Customer. It’s not any different in the real estate fund management business, which creates real estate investment products for institutional investors. Especially in times like these, any new product must pass the test of being one that investors actually have an interest in. Hello! With companies facing both certain and uncertain challenges for the first time and with our society facing it’s own set of issues for the first time in my generation it’s more important than ever to stay close to your customer, understand what they’re going through and act accordingly. Put yourself in their shoes and appreciate that right now, it may be a smarter marketing strategy to not market at all but to become a resource (which we should always be to our customers anyway) to help them navigate their choppy seas. Long term it will pay off and right now, long-term is how we need to look at our turnaround. But only if we want to be realistic.

Periodically I’ve been writing short feature pieces for Private Equity Real Estate’s website (http://www.privateequityrealestate.com). You need to sign up to get past the headlines but it’s free. If you are not registered there I highly recommend it as it is one of the premier publications in the private equity/institutional real estate domain. I had dinner in London with the two managing partners of PEI (who also have publications on private equity in general), David Hawkins and Richard O’Donohue. And as our relationship grows I have found they and their teams of journalists, researchers and conference people simply top notch and a pleasure to work with. They also have a subscription service called PERE Connect that is a robust database of valuable information on LP’s. You can get a free trial access to this service through their website.


Restaurant of the week: Gaucho, 1 Bell Inn Yard, London EC3V 0BL
1 Bell Inn Yard, London EC3V 0BL; T 020 7626 5180; Authentic food and wine from Argentina in a very fun environment-great music and service (and a lot of smiles even amongst the line cooks). The beef is out of this world. (http://www.gauchorestaurants.co.uk/restaurants/restaurant.php?id=city) Note: they have multiple locations in London.


Where I'll be:

Dec. 15-17: New York
Dec. 18 & 19: Chicago for meetings and on the 18th at 8pm to attend the Third Annual Holiday Keyboard Concert to Benefit Keys-4-Kids. Schuba's (3159 N. Southport) and features Joel Cummins of Umphreys McGee, Brian Felix of OM Trio and special guests. It’s only $18 and I already know a few real estate folks who I'll be sharing some holiday cheer with. (773.525.2508). Hope to see you there.
Dec. 20-Jan. 2, 2009: Montreal working from home in between the holidays.
Feb. 19-20, 2009: Chapel Hill, NC to attend the Kenan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.
Mar. 10-13: Cannes to attend MIPIM, host the second annual MIPIM Summit TV show and attend INREV's Annual General Meeting.
Mar. 25-26: Washington DC to attend PREA's Spring Conference

Christmas in New York

<<<Rockefeller Center Christmas Tree lighting with thanks to Rock Center owners Tishman Speyer.

>>>>The tree in the lobby of our building, The Chrysler Building. It's beginning to look a lot like Christmas....

A long time industry friend and recruiter John Peters, attended IMN's 8th Annual Borrower's & Investors Forum on Real Estate Mezzanine Loans and Preferred Equity Financing this week in NY. Knowing how diligent John is, I asked if he would share his personal notes from the conference. So, I pass long some of his key take-aways:

1. In general, doom and gloom was the theme with no let up in sight.
2. The denial phase is in full bloom as very few wanted to give much if any consideration to the fundamentals and the implications if they weaken dramatically.
3. Some of the multi-cycle veterans believe that few recognize how bad it can and probably will get as cash flows deteriorate and push pricing down further. Many back into value from yield targets versus cash flow analysis.
4. "The only glimmer of hope: There's so much pent up demand that when the bottom's found, we'll be rolling in two weeks."
5. Unintended consequence of the TARP (Troubled Asset Recovery Program) program is the slowing of transactions that would have continued to address pricing realities.
6. “I don't understand short term borrowing for long term investing.” (Experienced developer/investor)
7. Disclaimer within a written MAI appraisal: We have done the best we can to find comparables but considering the current market realities, do not count on our opinion.
8. Will lenders extend maturities? A rolling loan gathers no loss.
9. No matter where you are in the capital stack take a long hard look at the collateral.
10. Asking for the outlandish might just be successful.
11. There is a LOT of fear out there.

Be a Correspondent: if you attend a conference and want to share your takeaways with the folks who read this column please send them along. It only needs to be five bullet points and I will share them either with attribution or anonymously as you wish. Thanks.

PERE Awards. Which people, firms, funds and deals stood out in 2008? Cast your nominations now in the only industry awards that are voted on entirely by the participants in the private equity real estate market.

On those days that I take the train from my place in Long Beach, NY into my office in 'the city' I see a lot of backyards, some may call these alleys but whatever the label it's the rear of a house or business. My route includes water views, backs of industrial (the mfg type) buildings, single family homes and apartment projects, a university with great athletic fields, a lot of rooftops of very old and run down businesses that I'm sure the EPA (environmental protection agency) has no idea exist. My point? No matter what a house or business looks like from the front the back or backyard may be tellingly different. For now fugeddaboutbasements! It's the same with all businesses, backyards, backrooms, bullpens, what have you. When you decide to do business with a firm it's based primarily on the 'front of the house' (dare i use the "F" words...facade?) but it's important, maybe now and going forward more than ever, to look beyond the marquee and get to know and become comfortable and feel confident with those behind the scenes who like nurses (sometimes more than doctors) are oft times more directly responsible for your health/survival or that of the properties you've invested in. Institutional real estate investors simply do not get involved with slumlords although I have known a couple and in the early 90's handled the workout of a legendary one, Morty Ginsburg, but that's a whole other story. All I'm saying is as you take a break from allocating money to or investing in real estate waiting for this year to end and the new one to begin also take the time to get to know those you entrust your money to better than ever. How investors behave in difficult times says a lot about how they'll handle themselves in the next cycle.

Sorry but I couldn’t pass this up. Reading a quote from a REIT CEO recently: “Investor relationships are the key to getting through the recession. You need equity to get through this period.” Hello! I guess investor relationships became key as things got bad. Not quite Mr. CEO. It’s a full time commitment to stay close to your investors, to keep them informed and to give them the continued comfort that you know what you’re doing. All the time.


Best new strategy name: Rescue Equity!


On the Road with Steve:

Dec. 6: Cathedral of St. John Divine to hear their newly refurbished organ. Click here to see their real estate initiative .
Dec. 8-11: London and to moderate a panel at the Reuters Real Estate Global Property Outlook 2009 on the 9th (Invitation only).
Dec. 12: Real Capital Analytics (RCA) holiday party.
Dec. 15-17: New York
Dec. 18 & 19: Chicago for meetings and on the 18th to attend the Third Annnual Charity Christmas Concert of Joel Cummins (Umphrey's McGee) and Brian Felix(Om Trio) starting at 7pm at Schubas.
Dec. 20-Jan. 2, 2009: Montreal working from home in between the holidays.
Feb. 19-20, 2009: Chapel Hill, NC to attend the Kenan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.
Mar. 10-13: Cannes to attend MIPIM, host the second annual MIPIM Summit TV show and attend INREV's Annual General Meeting.
Mar. 25-26: Washington DC to attend the PREA Spring Conference




These are my personal views and not that of my employer.

Craziness and Gratefulness

“The bottom line here is that there’s going to be a lot of money going back and forth.” I heard this on the streets of New York on Wednesday and figured I’d share it with you as it seems to be the definitive statement on what will be happening in the world over the next 12-18 months. What the guy who said it meant or what he does I have no idea but it sounded as good as anything I’ve heard lately.

The annual Top 14 Restaurant and Hotel Food Trends from international restaurant consultants, Joseph Baum & Michael Whiteman Co. has been delivered. Here are a couple of their views. I’d be happy to send you the full pdf. Just email me (steve@simplicate.com) and put “Food” in the subject box.

• Dust off those meatloaf recipes. Tough times are here.
• The bistros are coming, the bistros are coming.
• It’s comfort food time again.

I’ve been reading about the real estate service companies who are creating groups focused on distress. As someone who spent a fair amount of time turning around distressed assets, working out distressed loans and selling blended distressed portfolios (the blended part were the good assets), working out problems is not a skill that automatically appears when you change the title on your business card or create a new business unit. It’s a relatively small community of us that have real workout experience. One of my peers in that area is Ted Leary of Crosswater Realty Advisors. Don’t get me wrong, there are others. But you need experience to handle problem assets and loans and experience has to come from somewhere; it’s just that a lot of experience this time will be gained on the lenders or distressed owner’s dime.

Does this ever happen to you? You’re somewhere and you see somebody that reminds you of somebody else you know that you’ve either been thinking of calling or weren’t but now there is? It’s happened to me a number of times but several times in short order recently. Fascinating how the mind works, isn’t it?

Leadership Lessons: Here are some of the ‘headlines’ from a book called “I Wanna Tell You A Story” written by a UK friend of mine , Trevor Gay:

1. Never, ever assume.
2. Be humble, you are still learning: you can learn from anyone. You are a role model-think about how you want to be remembered.
3. “Make it up as you go along” works as a strategy sometimes. Policies help and act as a guide but sometimes you just have to get on and ‘do it.’
4. Actually you don’t know all the answers-you can always learn; beware especially of those old well-established systems that everyone is comfortable with-don’t protect them blindly.
5. The best way to gain power is to let go of power. Your front line staff knows all the answers. You cannot possibly know the dynamics and relationships as well as your staff. Learn to let go.
6. Know what it is that you do…. and more importantly, know how you can prove it.
7. You are as powerful or as weak as you believe you are. Strive for change and improvements…No one should be punished for trying too hard.
8. “Walking the talk’ means getting your hands dirty. You never lose the responsibility of making sure the job gets done. Your credibility is linked to how dirty you are prepared to see your hands become.
9. Never underestimate how powerful you are perceived to be as a manager. You hold the key to the joy or grief of many people and you probably do not realize it. Respect that power and use it to make the job of your staff easier.
10. Cherish the basics. When you begin your leadership journey as a junior member of staff, cherish the experience you gain in doing the basics well. Your ‘old’ bosses may appear pedantic-but you will remember that detail when you are a leader and just how important detail can be.
11. Take responsibility personally as a leader. Small thing to you may be a big thing to someone else.
12. You don’t need to shout. People know when they have made a mistake.
13. Rules are made to be stretched….and sometimes broken.
14. Decisiveness is both listening and doing. Decisiveness is about listening respectfully and then setting a clear direction.
15. Make up your own mind. Don’t always believe what you hear about your bosses. Make your mind up based on how they treat you.
16. Always be ready to change your plans. Never make assumptions about other people’s motivation and when you make plans be prepared to change them.

News Item: Edna Parker, a former Indiana schoolteacher who was certified as the world's oldest person, died Wednesday at a nursing home in Shelbyville, Ind. She was 115, a former schoolteacher and ate a lot of meat and starch over the course of her exceptionally long live. Parker especially enjoyed eggs, sausage, bacon and fried chicken. Parker, who credited her longevity to various factors, including education, remained relatively free of health problems in her last years. According to family members, she took few medications and at 113 could still walk. The reason I include this is, and I haven’t shared this with hardly anyone, I plan and believe I will live to 120. Why? Because there is too much to see and experience and I need all those years. It’s also because I really have no interest in dying and feel that with the right attitude I can avoid it for many more years.

Final thought: We need to be kind to each other. In this world of growing craziness and uncertainty we can help things by being more considerate of each other and putting ourselves in the other persons' shoes. Tolerance and patience have never been needed more. And the gratefulness that this week's Thanksgiving in the U.S. has reminded us of (as a number of you have written me about) need to be a part of our daily lives.

Thanks for reading my blog and passing it along.
Many of you know that my life is built on people, on community, on collaboration and on sharing. This platform gives us all a chance to connect and reconnect. I am grateful for and sincerely appreciate your support, suggestions and contributions.

Steve

Photo: Many people say the ‘crane’ is the national bird of the real estate industry. Walking to my office the other day I glanced up to see one of these modular construction cranes above me. Sadly, this is the type of crane that has collapsed a few times in recent past in New York, killing several people. When you look up at it like this, it’s amazing that it can stand at all, don’t you think?

Where I'll be:

Dec. 1-5: New York (Dec. 1 getting together with some of my friends in CRE journalism and P.R. for a holiday drink).
Dec. 6: Cathedral of St. John Divine to hear their newly refurbished organ. Click here to see their real estate initiative .
Dec. 8-12: London and to moderate a panel at the Reuters Real Estate Global Property Outlook 2009 on the 9th (Invitation only).
Dec. 15-19: New York
Dec. 20-Jan. 2, 2009: Montreal working from home in between the holidays.
Feb. 19-20, 2009: Chapel Hill, NC to attend the Kenan-Flagler Center for Real Estate Development’s Annual Conference and Real Estate Challenge Case Competition.
Mar. 10-13: Cannes to attend MIPIM, host the second annual MIPIM Summit TV show and attend INREV's Annual General Meeting.
Mar. 25-26: Washington DC to attend PREA's Spring Conference




Note: These are my personal views and not that of my employer.