On the Road with Steve Felix

Friday, September 17, 2010

Getting back on the road

INREV conducted structured interviews with twenty-two people recently. This group included 13 fund managers and nine investors (of which three were fund of funds). I found the results to be pretty poignant (something be pretty poignant or just poignant?). Here are some of my takeaways:

1. Both fund managers and investors agree that a failure to exercise a fiduciary duty to investors has led to a breakdown of trust between actors in the private real estate vehicle industry (at this point this relates to a minority of fund managers).

2. Those interviewed commented on the lack of communication and transparency that pervaded as the debt crisis worsened and real estate values declined.

3. For funds lacking a regular and established reporting procedure, investors had to force information flow. However, investors did indicate that smaller platforms provided greater transparency of information).

4. Investors are keen to establish more effective an participatory advisory boards.

5. Investors want to use the shift in the balance of power to ensure the efficient removal of a non-performing manager (No-Fault Divorce provision).

Friday, September 10, 2010

Amsterdam

First let me apologize for the size of the font on last weeks column. It was unintentional and I appreciate a few of you letting me know about it.

Having been a journalist since college I appreciate good journalism and what you can learn from it. But we’ve all seen how the media’s lack of responsible reporting distorts facts and events. I’m sure you’ve seen this more than once yourself where you’ve been somewhere personally and when you read or heard what the media reported about it you said to yourself, “That’s not the way it was!” Which simply is my introduction to why attending important industry conferences is, well, so important. This week I attended the INREV conference in Amsterdam. There were 150 people representing 50 institutional investors and 66 fund managers. In addition to the general sessions there were breakout sessions which put the investors and the managers in their own rooms to discuss things openly. There were also committee meetings (I’m a long-standing member of INREV’s membership committee) and clearly believe in the benefits of membership to anyone doing business or wanting to do business in the European institutional real estate world (Commercial announcement!).

But the real benefit of physically being there (and I know to a large degree I’m preaching to the choir here) is the ability to chat informally with people, perhaps over some type of beverage, about things that you wouldn’t write in an email or maybe even talk about on the phone. There is the ability to randomly run into someone, that you’ve known before or are just meeting for the first time. And, this week, there was some unexpected and very positive feedback that I got from an investor about the firm that I work for. You just can't put a value on that kind of stuff.

So, with this as a lead-in, I’ve typed up some notes and quotes and present a few for you below. If you’d like all my notes please email me and I’ll send it to you).

Notes and quotes from the INREV conference in Amsterdam this week:

1. Solvency II will have a dramatic impact on insurance company real estate asset allocation when it’s adopted (2013).

a. Introduce economic-risk requirements across the EU to incentivize insurers to develop suitable, adapted-risk control tools.

b. The overriding purpose is risk management and how to protect the solvency of insurance companies (i.e. insuror is considered solvent if it has enough free capital to cover unexpected losses).

c. It’s like commercial bank ‘reserve for loan loss requirement’s and as it’s being discussed now, bonds will have a 0% capital set-aside requirement and real estate will have 25%!!!

2. “The building industry should do something with governments rather than having governments do it to us.” (Sustainable development).

3. The sustainability discussion in corporate board room seems to center on this:

a. Have to?

b. Want to?

c. Ought to?

4. “Be careful of the ‘green-only grand gesture’-it’s not necessarily right, economically or environmentally.”

5. “Investors who moved away from diversification in their real estate portfolios will move back to it.”

6. “We are looking for managers who have great ideas-we need choice.” (Fund of funds manager)

I had a great time as I saw a lot of industry friends that I’ve gotten to know over the past five or six years starting when I launched Institutional Real Estate’s business in Europe. As I’ve said before, even on a global scale, our industry is a small world.

The other morning, after turning on the shower, I noticed a tiny spider trying desperately to make it’s way up the side of the tub to get out of harms way. We live in the country and have more than our fair share of spiders (and especially spider webs) and many times a tiny spider seems expendable. I don’t know what was different that morning but I reached down with a tissue and saved that little guy and put him down on the floor of the bathroom and watched him, well, scamper would be too poetic of a word, more appropriate if it were a dog, move pretty quickly away from the scene of the crime to safety. How long he’ll survive is a mystery but that day, I gave him another chance at life. I’m not bragging about this, just relating what may have crossed my mind in that instant, the moment we have to choose one thing or another (Malcolm Gladwell’s “Blink”). But what this whole thing is about is our opportunity to change a life. And it doesn’t have to be something dramatic or extreme; it could just be a ‘random act of kindness.’ It could be as simple as saying to someone who just joined your firm “Let me know if I can be of any help.” You know what it’s like when you start a new job, right? It’s like your first day in a new school and you don’t know anyone and they don’t know you. Was there someone who reached out to you, to break through the fear of the newness? And if there was, haven’t you appreciated what that person did and remembered him/her for the rest of your life?

On the road....

Sept. 13-17: San Francisco Bay Area

Sept. 20-21: New York

Sept. 27-29: Tysons Corner, VA (NMS Fall Conference)

Oct. 4-7: The City By The Bay (PREA Conference)
Oct. 12-15: City of Magnificant Distances (ULI Fall Conference)Sept. 30: The City That Works

Oct. 1: A Great Place on a Great Lake.
Oct. 26-27: The City So Nice, They Named It Twice (PERE New York Forum)

Nov. 5: The City of the Big Shoulders

A beautiful walk between the Amsterdam Hilton and the INREV office

Restaurant of the week: Roberto's, inside the Amsterdam Hilton. I was so tired last night that I just went downstairs in my hotel to their restaurant not knowing what to expect. I had one of the best, truly, meals ever with service that was on a par with almost anywhere I've even been (and if you ask most Dutch they will admit that their country is not well-known for customer service).

These are my views and not that of my employer.

Friday, September 3, 2010

Early Adopters?

Is the term early adopter used anymore? Maybe, I guess, in terms of adopting iPhone type aps but probably no longer in the original sense. I was talking with a friend the other day about the early adopters in the commercial real estate industry. There is no doubt in my mind that the first one to realize the power of the Internet and use it is an old friend of mine, the late Ted Kraus. Ted was truly an early adopter who had a vision to create a commercial real estate community that was both information and deal oriented. Dealmakers is still thriving and the archive of Ted's "My Way" column are a great read, even today. He was as outspoken an individual as our industry has ever known but he could back that up with real experience in the shopping center and retail real estate world. He started blogging in 2005 and his last post is in March 2007, shortly before the bottom fell out. Boy, he would have had a field day with everything that has transpired since the day the real estate music died.

I know a number of parts of the country have already started school but growing up, the tuesday(or wednesday) after Labor Day was always the start of public school. One of my favorite things was going to buy my new looseleaf binder, see-through plastic pencil case (three-hole punch of course) and creating the tabs with the subjects (Math, Science, English, History, what am I forgetting?) It was always a fresh start, not unlike the beginning of a new year and actually it was identical as it was the beginning of the next 'school' year. So I know many of you, like me, have been getting your fall conference schedule together. The interesting thing about the institutional real estate niche is how few actual investors attend most of the conferences. When I look at the names of the panelists, they're either someone from a firm who is a conference sponsor (i.e. a lot of lawyers) or they're people on the the non-investor (i.e. pension fund, endowment, foundation, family office) types. And I guess a lot of what I see resembles people "preaching to the choir." But I know that there is some industry prestige that comes with being on a panel or moderating a panel (I've moderated my share of panels in my career and really like it, not so much for the prestige, but for the interaction you can create amongst the panelists and between the panel and the audience). But like in many things in life, what you get out of conferences and trade associations is a result of what you put into them. I look forward to seeing many of you 'on the road' this fall.

Thanks to those of you who wrote to me about Nick Tyrrell last week. His death has obviously touched a lot of folks in the industry.

Sean Felix-almost 15 months

On the road....
Sept. 8-10: IAmsterdam (INREV Meeting)
Sept. 27-29: Tysons Corner, VA (NMS Fall Conference)
Oct. 4-7: The City By The Bay (PREA Conference)
Oct. 12-15: City of Magnificant Distances (ULI Fall Conference)Sept. 30: The City That Works

Oct. 1: A Great Place on a Great Lake.
Oct. 26-27: The City So Nice, They Named It Twice (PERE New York Forum)

Nov. 5: The City of the Big Shoulders

Restaurants of the week:
1. La Mangeoire. 1008 2nd Avenue, New York (bet. 53rd and 54th street). Excellent food. Sit on the sidewalk or just inside on a nice night. It's a happening area.

2. Midi, 185 Suter St, San Francisco. California Brasserie menu in a cool spot inside the Galleria Park Hotel, a joie de vivre property.

These are my views and not that of my employer.

Friday, August 27, 2010

Nick Tyrrell

Some very sad news came out this week. Nick Tyrrell, formerly Head of Real Estate Strategy for JPMorgan Asset Management in London has died. Nick had been battling something for quite a while and now his battle is over. But his passing was not expected and is a shock to his family and friends. Nick and I met when I started roaming around Europe in 2004/5, working on launching The Institutional Real Estate Letter in Europe. We'd continue to see each other over the years at various conferences in Europe and the U.S. Nick was passionate about the real estate industry. He was considered one of the brightest of the bright and was never at a loss for an opinion. One of the connections that Nick and I (and his wife Joanne) had was love of music. Don't tell anyone but we used to spend time at business conferences talking about this concert or that concert that we had seen! Nick was full of life and energy. He was a great ambassador for his employer and for the industry. Nick was always available for advice and to share his knowledge. He was very active in INREV, the European Association for Investors in Non-listed Real Estate Vehicles from the start. People reacted to Nick.....as he pushed you to think; he was a deep thinker. It was fun to be around he and Joanne and there was a lot of laughing: Nick had a great sense of humor. I was very, very sad to read the news about Nick this week. But in addition to these memories I can picture him, on his motorcycle, riding into work in London or somewhere out in the countryside. Something I just learned about Nick was that he was an avid Motorcycle Madness and Car Madness player on Facebook. He was a renaissance man and I am privileged to be able to call him my friend. My sincerest condolences to his family. Our industry has lost a good man.

I'm pretty sure that all of us, in one way, shape or form, has had some anxiety about public speaking. My long-time friend, Ivy Naistadt's book "Speak Without Fear", originally published in 2004, has just been released as an audio book, read by the author herself. The public speaking tools that she provides can help us with situations ranging from a job interview, to a small meeting, to giving a keynote speech. When I first read it I got some great takeaways but, like a lot of things I read, I need to remind myself of what I learned so I'll be listening to Ivy the first chance I get.

On the road....
Aug. 30- Sept. 7: California Wine Country
Sept. 8-10: IAmsterdam (INREV Meeting)
Sept. 27-29: Tysons Corner, VA (NMS Fall Conference)
Oct. 4-7: The City By The Bay (PREA Conference)
Oct. 12-15: City of Magnificant Distances (ULI Fall Conference)
Oct. 19-21: Lost Wages (IREI's Dealmaker's Conference)
Oct. 26-27: The City So Nice, They Named It Twice (PERE New York Forum)

These are my views and not that of my employer.

Friday, August 20, 2010

A street from long ago

I saw Zygi Wilf's name in the news this week. I guess if I were a follower of the NFL (National Football League...no, it's not soccer!) or of the Minnesota Vikings, I would know every move Zygi makes. But I don't and I'm not too sure that I ever met Zygi but if I did it was after his uncle Harry died. Let me explain: In the 1980's a good friend of mine, Stan Berenzweig, who founded and operated a retail chain called "Rag Shop" introduced me to Harry Wilf. Harry and his brother Joe (Zygi's father) came to the U.S. after surviving the holocust and got into the real estate business. They developed and operate tens of thousands of garden apartment units (aka mutli-family housing) and eventually shopping centers which were built on the commercial parcel of one of their large apartment communities. Harry took a liking to me and I used to go over to his modest house in Hillside, NJ (the same house he lived in for a long time) and we'd go for a walk, his constitutional, after dinner around the neighborhood. I'll never forget the first walk. We started from his house and we're walking down the street and we run into a guy. Harry introduces me and as we walk away he says, "He's one of my partners." I learned that Harry had a lot of partners. During the time Harry and I knew each other I was working for a developer in New York called Mall Properties and he was always interested to hear what we were doing as I was to hear about what he was doing. He listened to me and often gave me good advice....particularly when I moved from one house (that I could afford) into one I couldn't afford and for the wrong reasons. I'd see him from time to time. After a relatively long period between walks someone told me that Harry was sick; that he had cancer. I called his house and said I had heard he was sick but did he want to go for a walk? He said, not that night but to call him in a couple of days. I did and he said, "Come over." I got there and his wife met me at the door. "He hasn't been out for a walk in quite a while but he wanted to walk with you tonight. Don't let him go to far." We walked. We talked. Only once about his health and then the subject was dropped. He died the following week. When I went to their home during the "Shiva" period his wife told me that I was the last one who he walked with. He was only 68, the same age as my mother was when she died of cancer. I sat down in a chair in their living room near his brother Joe who was totally distraught as you can imagine. He was sitting with his head hung low. After a few minutes, he looked up at me. I said, "I was very sorry." He said thank you and then asked me how I was doing; I realized that Harry and he talked about me. Who knew? I didn't stay too long and haven't had any contact with the family since. Harry and Joe were from the old country as they say. They built a business on being smart and tough. One time when we were walking, I said, "Why don't I come work for you?" Harry's said, "I don't pay my people anywhere near what you're making in New York (their company was based in New Jersey). I have a lot of family that works for me. I don't pay them all that much but they earn a little piece of a deal that they work on." He was describing the typical real estate family business model if you can call it that. I have always cherished those walks I took with Harry. I don't have anything more profound to tell you. I guess I was just thinking back on those days after reading that Zygi Wilf lent three of his players his private jet to go to Hattisburg, MI to convince Bret Favre that he should play for the Vikings for one more season. Seasons change. Harry used to fly coach to Florida every winter!

On the road....
Aug. 23-Sept. 3: The City That Never Sleeps
Sept. 3-7: California Wine Country
Sept. 8-10: IAmsterdam (INREV Meeting)
Sept. 27-29: Tysons Corner, VA (NMS Fall Conference)
Oct. 4-7: The City By The Bay (PREA Conference)
Oct. 12-15: City of Magnificant Distances (ULI Fall Conference)
Oct. 19-21: Lost Wages (IREI's Dealmaker's Conference)
Oct. 26-27: The City So Nice, They Named It Twice (PERE New York Forum)

Photo: My view from a beautiful grand piano in a classic hotel lobby this week.

These are my views and not that of my employer.

Friday, August 13, 2010

While summer had historically been a slow time for business (it still is in Europe as they know how to live and take real vacations), this summer, like the summer of 2009, has been anything but slow. We've been seeing and hearing about pension funds making new commitments to real estate. Many of those are with managers with whom they have a pre-existing relationship. But a number of them are with, for lack of a better term, emerging managers. Some of these emerging managers are refugees from other, larger firms who have gone out on their own and who had built up excellent relationships with investors in their previous lives. More investors have been telling me that they are getting ready to start investing with new managers again but probably not until 2011 (which amazingly is not really that far off). European investors have really picked up the slack investing especially in opportunistic strategies (which has a more broad interpretation than ever before). But then there's the question of "are there good deals to be had?" Which takes us back to the overriding issue, in my mind, of managing the expectations of the buyer and the seller....the familiar 'bid/ask' spread. There's been some serious Canadian money flowing into the U.S. recently and that is a good indicator as Canadian pension funds have typically taken a more conservative approach to real estate investing (not unlike the overall Canadian culture). So, as we get closer to "Back to School" (actually where I live in CA schools start on Aug. 18th) we are optimistic about the future as the commercial real estate industry has never been one to let a little thing like a global recession get it down.

Given the amount of airplane travel I've done in my career I feel compelled to at least mention something about that Jetblue flight attendant who made the news last week. While there are always three sides to every story: your side, my side and what really happened only those people who were there know for sure. Flying is no fun anymore and hasn't been for some time. I don't know how some flight attendants stop themselves from really telling some passengers where to get off. I think that the Jetblue guy may have had a lot going on in his head personally and that this was just the straw that broke the camels' back so to say. But the fact is that there are a lot of passengers who have no consideration at all for anyone else and that in itself is very sad as it's just representative of how our society has deteriorated. But, I've seen some inconsiderate behavior on the part of the flight crew as well; so, it's like "F--k me? F--k you! But to me it all boils down to this: The experience of air travel is so not fun that from the get-go (i.e. getting to the airport, checking-in, waiting on security lines, going through security and then waiting for your flight) equal an exasperating experience and one which, for some people, manifests itself in an "I don't give a shit about anyone else" attitude. But, because I've loved (and tried my best to practice) Gandhi's quote, "You must be the change you wish to see in the world", I believe there is hope and it won't take much work. Just be conscious of what you're doing and your surroundings and treat others like you want them to treat you. You may have to grit your teeth as this is not going to change quickly but at least we can try. Taking some poetic license with Arlo Guthrie's masterpiece, "Alice's Restaurant" I propose this: If one person, just one person changes their ways it's a start. And if two people do it, well, it's an increase of 100%. And if 50 people, can you imagine 50 people doing it, well it then it's a movement. We can call it "The Be Kind To Your Fellow Passengers (and flight crew) Movement". And all you have to do to join the movement is be nice.

On the road....
Aug. 19: America's Comeback City
Aug. 20: The Steel City
Aug. 23-Sept. 3: The City That Never Sleeps
Sept. 8-10: IAmsterdam (INREV Meeting)
Oct. 4-7: The City By The Bay (PREA Conference)
Oct. 12-15: City of Magnificant Distances (ULI Fall Conference)
Oct. 19-21: Lost Wages (IREI's Dealmaker's Conference)

Photo: Amazing shot of the Schultz forest fire north of Flagstaff, AZ in late June. 22 Square Miles. Caused by careless campers.

These are my views and not that of my employer.

Thursday, July 29, 2010

July 30, 2010

There's a difference between diplomacy and politics. Others have told me that I'm diplomatic so let's assume that I am. Some people are good at playing politics. I'm not talking about professional politicians although some of the folks I'm thinking of while writing this may have attended a Politics at Work Seminar at one point or another. I've never been good at politics at work and when dealing with the pol pros sometimes, actually most times, I've lost out. Not too bright of me you may be saying. A light bulb, or better a warning alarm accompanied by a police flashing red light should go off to alert me. But the idea of game playing just always been something I can't and won't do. Listen, I try not to shoot myself in the foot anymore like I did earlier in my career and the way I do that is by biting my tongue instead of flapping it. I've realized that not everything I think or say is right (only most of it :-) But to me that then gets into the realm of diplomacy (can you say 'keep your job'?) So maybe, after many years in this great industry and working in so many different environments (entrepreneurial, family-controlled, big, public, start-up) I've been exposed to lots of dynamics and yes, office politics. But things are not going to change just because I want them to and so I need to change (I guess you've realized by now that I'm writing this as an aide to me but maybe some of you may have struggled with these things as well and if you have any suggestions...please send them...maybe, like with other things we've shared over the years we can once again help each other).

I love sitting in the far reaches of restaurants. it's not because of the old mafia adage 'don't sit with your back to the window' it's more that I like the show, I love people watching and as I eat a lot of meals solo, well, it's a substitute for a dinner conversation. I've been convinced for years that real life is more interesting, engaging and amusing than movies or TV (actually my cousin who for years was a top Hollywood TV comedy writer and producer (Mary Tyler Moore, Cheers, Wings, etc) told me once that most of his ideas come from observing life. So in addition to stopping to smell the roses I suggest living with eyes open and enjoying the show.

Some interesting takeaways I saw on Creopoint.com. They have been hosting 'impromptu' get-togethers of Creopoint members in various cities and the topics of discussion are pretty wide-ranging. But one topic that comes up at all these sessions is how to better use, for lack of a better term, 'social networking' resources to build business. Here are some of the comments from attendees:

Real estate professionals have to extend even more their personal digital branding and improve their networking.
The question is no longer "Should we network online?" but "How do I maximize my time on various platforms without making mistakes?"
Creopoint members cite one major advantage: Creopoint is exclusive: one needs to be invited and vetted before becoming a member.
CREOpoint and other data mining tools are now allowing people and organizations to regain control of their online reputation while cutting marketing expenses.

More than virtually anyone in our industry, Creopoint founder, JC Goldenstein, has continued to develop tools to help us learn more about each other, about different markets, about how to use the Internet (it seems like such an ancient word now) to market services, promote deals, raise our own visibility and share ideas and knowledge. I salute JC for his dedication and tireless energy over the past two years. In an industry that has been one of the, if not the, slowest to adopt new technology, it appears that after trying out general business and social networking services, more and more people in our industry are turning to Creopoint. As I've mentioned before, collaboration and networking is a cornerstone of my life, both business and personal. Creopoint is a powerful tool and some of its more recent data-mining capabilities are very cool. It is becoming, as they say, a "24/7 Meeting Place" for the global commercial real estate industry. If you have not yet checked it out I think it would be worth your while.

On the road....
July 30-Aug. 6: Vacation
Aug. 7: Santa Barbara for my nephew's wedding
Aug. 9-Aug. 13: West Coast
Aug. 17-19: Midwest
Aug. 23-Aug. 27: New York

Photo: Bob White of RCA and me on a beautiful NY summer night last night at a Baby Shower on the rooftop "conference room" of RCA's HQ on lower Fifth Avenue in NY.