NOVEMBER 3, 2011
Reported by Andrew Stone, ULI New York Young Leaders Group
The Emerging Trends ULI event, held on Nov. 3 at the Bar Association in Midtown brought together hundreds of real estate professionals to hear about the PricewaterhouseCoopers Energing Trends survey results as well as four distinguished panelists’ viewpoints. The Emerging Trends Survey was released and the main topics revolved around seven key issues: job arbitrage, productivity costs, debt – personal/public, demographics, global financial morass, global financial industry change, and government disarray.
Additionally, the survey pointed out several “best bets”, or short industry insights, as reported by industry participants. These included: it’s good to be a seller right now in a gateway city; job centers are key; repositioning class B apartments; cheap fixed rate debt; recapitalizing equity is good; there is a distressed investment opportunity; watch for apartment development to soften in 2013/2014; go green to save on costs; fortress malls are key; coastal port industrial properties will benefit from a widened Panama Canal; invest in major 24 hour city hotels, trophy assets and medical office properties have performed well, and suburban office is looking like a bright spot.
The four panelists, Jeffrey Barclay of Goldman Sachs, Stephen Furnary of Clarion Partners, Blake Hutcheson of Oxford Properties, and Ralph Rosenberg of Kohlberg Kravis Roberts & Co. also discussed their views on the emerging trends. Moderator Christopher Ludeman of CB Richard Ellis let Hutcheson lead it off with a discussion on what he sees as an opportunity. Hutcheson noted that it is probably wise to take a contrarian look at the latest Emerging Trends report. The panel was asked about return expectations for core funds and they seemed to agree on high single digit returns. A discussion on the best place to be in the capital stack saw the panelists liking many different areas including making mezzanine loans at 50% – 70% LTV and preferred equity investments. They also mentioned that this is a tough opportunity to find in the current market. Perhaps the most humorous moment occurred when Furnary agreed with Barclay because he “taught Barclay everything he knows”, referring to Barclay’s time at Clarion Partners. The panelists also mentioned that the near term future looks tough for small private equity firms that have had trouble raising capital recently. One potential compelling investment opportunity mentioned by the panelists was finding hotels that have procrastinated on capital expenditures and making a preferred equity investment to fund it.
The 2011 Emerging Trends event was a great learning experience with a remarkable turnout. Don’t worry, there are many other ULI events coming up over the next month. Stay tuned for more event updates!