Jacques Gordon: A commercial real estate industry legend who has made a difference / RCA U.S. Capital Trends

Jacques Gordon: Commercial Real Estate Industry "Legend" - someone who has made a difference!

Jacque's bio from LaSalle.com

Jacques leads LaSalle’s Research & Strategy team and is responsible for analyzing capital markets, economies and properties around the world.  He serves on the firm’s Global Management Committee and the Investment Committees for Asia Pacific and North America.  Jacques also chaired the Global Research Board of JLL and teaches International Real Estate at Kellogg School of Business, Northwestern University.

Jacques was previously a research economist at the Urban Institute an economics policy research think tank, not a member organization like ULI…often confused. In 2000, he received the Graaskamp Award from the Pension Real Estate Association (PREA) for his contribution to institutional investment research and strategy.  Jacques has a PhD from the Massachusetts Institute of Technology, an MSc from the London School of Economics and a BA from the University of Pennsylvania.

Jacques and I first met on the industry conference circuit.  I discovered he was a regular reader of this column. Jacques would write me, from time to time, both with compliments and also much appreciated suggestions.  Jacques is a master presenter and one of only a handful of what I’ve referred to as “Research & Strategy Superstars” of the commercial / institutional real estate industry.  Having seen Jacques lead the presentation of LaSalle’s Investment Strategy Annual I can personally attest to his passion about the industry and what he does.

A number of years ago, he and I found each other on the same flight to a real estate industry meeting in Chapel Hill, North Carolina. Jacques had rented a car and offered me a ride to the hotel.  We got in the car and were following our noses to the University. Then we got to talking – and got totally lost.  But, agreed that as a couple of real estate mavens, we would keep that a secret from the students we were about to meet at UNC…and that we would “enjoy the journey” by observing the amazing growth corridors between Raleigh, Chapel Hill and Durham…the famous “Research Triangle”.  

Q. How did you get started in the commercial real estate industry?

A. I was finishing a PhD dissertation, but wasn’t quite done. My wife was accepted to The University of Chicago for her own doctoral program. So, I had to get on the ball and earn some income while I was “ABD” (All But Dissertation).  I went to work for RERC (Real Estate Research Corporation) in Chicago in 1985 and got hooked on doing applied market analysis for real estate.  Having interviewed developers like Ernie Hahn and Jim Rouse as a case-writer for MIT’s new Masters of Science in Real Estate, I knew that commercial real estate was a pretty interesting field.  I had done a detailed study of private re-investment in Boston’s neighborhoods as part of a Boston Redevelopment Authority grant. I found out two things:  1) The life of an academic was not for me and 2) Investors and developers needed a foundation of strong research in order to be successful.

Q. What one piece of advice do you have for people just starting out or early in their commercial real estate career?

A. Commercial real estate is a team sport.  Find a team you like and get on it.  Figure out what your value-add to the team might be and get in there and play!

Q. Is there anything you wish you had done differently in your career? If so, what?

A. I was aiming for an academic career and took a very different path, compared to my MIT classmates.  I sometimes wonder what it would have been like to be a full-time academic.  Recently, I have been teaching at the Kellogg School of Management part-time, and I am still working closely with clients and colleagues on very interesting research projects, so no regrets.

Q.  Who has most influenced your career and why?

Bill Wheaton and Ken Rosen taught me how to apply urban and regional economic theory to the ever-changing streams of commercial and residential real estate data.

Lynn Thurber guided me to make sure that research always answered the “So what?” question. In other words, all of our charts and graphs are not worth very much, unless they shed light on what actions investors should take.   

Jacques Gordon

RCA U.S. Capital Trends

With the kind permission of RCA (Real Capital Analytics) here are some of the highlights of their recent U.S. Capital Trends report:

• Deal activity in October posted an inauspicious start to the final quarter of 2017. Year-over-year declines in deal volume accelerated into October despite gains as recently as August. The main culprit for the drop in activity is a dearth of portfolio and entity-level transactions. $32.5b -23% The fall in portfolio and entity-level activity is significant as such deals represented a sizeable portion of the market in recent months.

• Megadeal volume in October fell 38% YOY to $7.0b. The last time megadeal sales for an October were lower than the $10.0b mark was in 2012 as the industry was still shaking off the damage from the Global Financial Crisis.

• The sale of individual assets fared better in that volume fell at a more measured 18% YOY pace for the month, but the trend suggests a weak Q4’17.

• Single asset sales had only been falling at a single-digit rate early in 2017 but the pace of declines has accelerated throughout the year. The sharpest declines for the month were seen in the hotel and retail sectors. Surprising to many, hotel deal volume is falling more sharply than that for the retail sector. Also surprising is the one area where there was growth for the month.

• Over most of 2017, deal volume in the 6 Major Metros (6MM) has fallen more than that for secondary and tertiary markets. With higher yields on offer, deal volume is down only 3% for the year to date in these locales versus a 13% decline for the pricier 6MM.

• The trend in October was different, however, with 4% YOY growth in the 6MM. Despite falling deal volume, prices have been growing throughout 2017.

• Growth in the RCA CPPI has accelerated from a 6.0% annual pace early in 2017 to an 8.4% pace in October. This falloff in deal volume along with an acceleration in price growth is indicative of pullback in assets being brought to the market.

(Steve's comment):  While our industry continues to work at a fever pitch, especially these last couple of weeks at the end of the year, one continues to wonder:  When do things change?  Downturn (I'm not really a fan of the word - but something's got to give, right?  It's just a matter of when).  I was part of a conversation a couple of years ago at a NAREIM (National Association of Real Estate Investment Managers) where senior industry executives were asked to share what they're doing to prepare for the next 'shift' that was different than the last time.  It's probably no surprise that a lot of firms were caught off-guard in 2008.  One of the most interesting comments was from a CEO who said that they were creating a plan to 'retrain' or 'transfer' people within their firm, like from Acquisitions - when that slows to a halt - into Asset Management, for example. I mentioned I thought it was smart given that some real estate investment managers were criticized by their investors when they laid off people as activity declined. In everything in business and life there are lessons to be learned.  The important thing is to remember those lessons and do our best to not repeat the mistakes again. 

Some terrific views from offices I visited in Chicago on Wednesday

Industry Legend: Peter Hobbs / Monday, Dec 4 - Steve's Pre-Holiday Pizza / Drink Thing

Here's the 2nd in my series of interviews with people who have made a significant contribution to the global commercial real estate industry - to me, they are all legendary.  

Peter Hobbs

Peter is Managing Director at London-based bfinance. With nearly 30 years of real asset experience, he is a leading expert in the private asset classes, covering all stages of the investment process including valuation, portfolio management and investment strategy. Peter also has significant experience in real asset research, risk management, as well as organizational growth and change for companies.

Peter is a regular contributor to industry events and initiatives. In 2015 he was shortlisted for Outstanding Industry Contribution at the IPE Real Estate Global Awards, and in 2017 he chaired the PERE European Conference. He has a PhD from the University of Reading and is a member of the Royal Institution of Chartered Surveyors (MIRCS).

I met Peter when he was with PPR (Property & Portfolio Research), which was founded by the truly legendary Susan Hudson-Wilson who passed away a few years ago.  As I started spending more time in Europe he saw each other more frequently and became friends.

One experience we shared was at an industry event in the U.K. I was asked to ‘moderate’ a session. The session was Peter presenting meaningful data to an audience of about 200 people.  It was the first time that Peter and I had ‘worked’ together on stage and he didn’t know what to expect.  In my typical ‘engage the audience’ style (which, was different than what European audiences were used to) Peter and I had a lot of fun – and got really good feedback from the group.

Peter has made a difference in the global commercial real estate industry and I’m proud to call him my friend.

I asked Peter to respond to three questions the answers to which I feel will be helpful to younger people in our industry:

1.    Q. Tell me about how you got started in the commercial real estate industry.

A. I started in the mid 1980’s by taking a PhD on Real Estate cycles rather than joining the throng in the run up to that particular cyclical boom!  That learning and the desire to use such insights to advise others set me in good stead for the next 30 years! 

2.    Q.  What one piece of advice do you have for people just starting out or early in their commercial real estate career?

A.  Take it slowly but keep it moving. Keep exploring options to find what is best for you and to broaden your experience. Don’t rush to find the ideal but don’t stay in any specific area too long.  

3.    Q.  Is there anything you wish you had done differently in your career? If so, what?

A.  Some of my ventures, such as PPR into DMGI/CoStar or IPD into MSCI, didn’t work as well as I’d hoped but I’ve had a fantastic time with some wonderful people and wouldn’t change the journey - I’ve been very lucky!

Peter Hobbs

**

Steve's Pre-Holiday Pizza / Drink Thing

When:   Monday, December 4

Where: Joe G's Restaurant, 244 W. 56th St (bet. B'way & 8th and downstairs from the Da Vinci Hotel)

Time:     6 - 9pm

Who:     A diverse group of commercial real estate industry folks

The deal?  You buy your own drink - I supply the famous Joe G pizza!

Hope you can drop by on Monday evening!

Steve

OMG...Thanksgiving is this week?!!

Thanksgiving is Thursday!

Up until yesterday, I thought Thanksgiving was next week.  Like isn’t it usually the last Thursday in November?

Anyway, I take baths regularly and some of my best thinking is done when I’m trying to meditate of sorts in the bath (is that TMI - too much information?).  I can’t help my mind from going where it wants to – vs. where I want to take it – into a peaceful state even if just for a few minutes.  The trick for me is remembering the ‘brilliant’ idea after I get out of the tub. And the idea that came to me just a short while ago was to write to you today.  

I have a coffee mug in my apartment that says, “Don’t Let Yesterday Take Up Too Much Of Today.”  I don’t know if any of you can relate to that saying but I can.  The reminder, when I use the mug is poignant as I had, for many years, thought about what could have been, what might have been, if only I had done this or hadn’t done that.  It’s draining and not very helpful.  Even before the mug message I had done a good job of putting the ‘yesterday’s behind me and only referring them for guidance – as in ‘Don’t make the same mistake again.’  And, if I do say so myself, I’ve done a pretty good job of it, not perfect mind you, but pretty darn good so I'm patting myself on the back as I sit here early on a Tuesday morning (if we don't pat ourselves on the back once in a while, who else is going to do it for us?). 

I’m going to equate giving thanks for being grateful for purposes of this column and I am grateful for many things – don’t worry, I won’t list them all (and I’ll probably forget to include some).

I’m grateful to have my health.  Yes, I’ve got some little things to deal with but it’s so sad to see folks that I’ve known over the years who aren’t as fortunate.

I am thankful that my sons, their wives and their children (yes, 4 grandchildren!) are all healthy and happy; they all like each other and they seem to like me as well.  I’m thankful that my sons are doing things in their careers that each are good at and love what they do.  I’m so proud of them.

I’m grateful for having conducted a business with a partner like Liz Weiner for the past almost 5 years.  I’ve learned a lot from her and, even though we get on each other’s nerves sometimes, we’re a good team (and our clients tell us that as well). 

I’m thankful to those in the Asheville, NC area who have made me feel welcome. - after just over two years here I've started making some friends.

I’ve been fortunate to have lived in a number of places:  Forest Hills, NY; Livingston, NJ; White Meadow Lake, NJ; Parsippany, NJ; Millburn, NJ; Short Hills, NJ; Sea Bright, NJ; N. Plainfield, NJ; San Francisco, CA; Napa, CA; the upper west side of NYC; Montreal, Quebec, Canada; Around Columbus Circle, NYC and now in Arden, NC (just outside Asheville).  (I think that may be the first time I’ve written down all those places).  And, I'm grateful for the acquaintances and friendships resulting from those stops along the way.  

I’m also grateful for having had the opportunity to have worked for and alongside some terrific people in the great global commercial real estate industry.  I want to single one out here.

Many of you know Geof Dohrmann, founder and CEO of Institutional Real Estate, Inc. (IREI).  In the summer of 1998, Geof hired me to join IREI and relocate from NJ to the San Francisco Bay Area. For 10 years, Geof and I worked side-by-side (although we were both ‘on the road’ independently quite a bit).  Until joining IREI, my involvement with the ‘institutional real estate world’ had been limited to doing workouts for banks and insurance companies on the ‘real real estate side.’  Geof opened me up to a whole new community and that experience has made a huge difference in my life and my career.  Many of you who read this column have come into my life as a result of my time with IREI and the industry friends I have made along the way, across North America, Europe and Asia are very special to me.  And, this column had it's birth when I was at IREI. Thank you Geof!

With everyone being so busy and in some cases living far apart, it’s not always easy for families to physically get together to celebrate what may be the only universal, non-sectarian ‘family’ holiday in America – Thanksgiving.  With the luxury of technology, we can see each other and wave hello or throw kisses into our computers and phones.  It’s not the proximity that matters; it’s the feeling behind it all.

For those of you who read this and are in a country that celebrates Thanksgiving, I wish you a Happy Thanksgiving!  If you aren’t in a place that officially celebrates Thanksgiving think about starting to – just on your own, without any fanfare or governmental permission!  

We are all in this thing called ‘life’ together and we need each other now more than ever before in my lifetime.  We need to let our love for each other blanket the earth.  We’re all the same – just human beings no matter where we live, what we believe in or what we look like or wear.  Each of us can make a difference towards creating a more peaceful society.  Maybe starting on Thursday would be as good a day as any.

In the great movie, "Bill and Ted's Excellent Adventure" the Abraham Lincoln character has a great line:  "Be excellent to each other...and PARTY ON DUDES!"

Enjoy your Thanksgiving and safe travels.

Steve

Last week from the Arboretum, Asheville, NC