Create buzz and develop your relationships
What I heard from global leaders at REITWorld in Scottsdale
This week’s buzz about Real Estate Investment Trusts
___________________________________________________________________________________
The consensus view at the three day conference: the wheels got off quickly, REITs showed their resilience, and sooner or later depending on government intervention, some of them will benefit from a tremendous buying opportunity.
I met a number of leaders below and, if you are interested in what they said about REITs near death experience, where the money is coming from and where it’s going, scroll down. I had a chance to speak with Roy March (CEO Eastdil Secured), Steven Wechsler (NAREIT CEO), Reggie Winssinger (Board Member W.P. Carey and Owner NAI Horizon), Mika Brzezinski (Anchor MSNBC), David Stanford (Executive Director RealFoundations), Hans Nordby, Research Strategist, Property & Portfolio Research, Gordon DuGan (CEO W.P. Carey), Joseph Harvey (President, Cohen & Steers Capital Management), Mike Kirby (Chairman, Green Street Real Estate Advisors), Paul Adornato (Director, BMO Capital Markets), Walter Rakowich (CEO, ProLogis), Michael Fascitelli (Vornado CEO), Anton Troianovski (Wall St Journal Reporter), Ralph Block (The “dean of REIT analysts”) and Michael Hudgins (VP, JP Morgan Asset Management).
Here are some of my personal favorites (in addition to conversations with many CREOpoint members in Phoenix).
Quoted on CREOpoint:
“Pretend, extend and it may never end!”
- - Roy March, CEO of Eastdil Secured
Back from a near death experience - the downturn has demonstrated REITs strength
- Mike Kirby, Green Street Real Estate Advisors: 100-year floods happen about every 15 years and when they do, they hurt.
- Paul Adornato, Director BMO Capital Markets: I was surprised how quickly the wheels got off
- Walter Rakowich, Prologis CEO: the performance of REITs' management teams during the last 18 months is a major factor in the industry's survival
- Joseph Harvey, Cohen & Steers Capital Management: the reason REIT were able to raise the money needed for survival starting last March is that stocks were really cheap. We are now at the beginning of a new economic cycle.
- Ralph Block, “The dean of REIT analysts”: We have avoided Armageddon, REIT stocks are up 90% from their March 6th lows but now we have to be patient
- Michael Fascitelli, Vornado CEO: Leverage is risky; the debt maturity schedule really matters. Many REITs still have their own balance sheets to worry about. You’ve got to worry about covering your own ass before you tattoo someone else’s ass.
REITs as grave dancers…
- Cedrick LaChance, Senior Analyst, Green Street Real Estate Advisors: Thanks to government action in last couple months, income-producing assets probably won’t become distressed
- Paul Adornato, Director BMO Capital Markets: Banks owning real estate is known to be a disastrous situation so they’ll prefer to wait a couple years to allow their borrowers to get back on their feet. Nevertheless there is: $1.8 trillion loans coming due in next three years
- Jeff Horowitz, Head of Americas Real Estate, Bank of America Merrill Lynch: Some of the debt that’s maturing has to go away and will be lost
- Michael Hudgins, VP JP Morgan Asset Management: Leverage juices your return on your way up and his a sword on the way down.
- Ralph Block: REITs will buy from banks and the FDIC but tranche warfare is slowing sales down
Ideas in action
______________________________________
Follow the money…
- David Fick, MD Stifel, Nicolaus: Many local banks are doing well, getting deposits and interested in real estate
- Roy March, CEO, Eastdil Secured: We are seeing capital from Asia, Mideast and German funds
- Hamid Moghadam, CEO, AMB: there’s a ton of money in pension and sovereign funds
- Debra Cafaro, the new Chair of NAREIT: REITs demonstrated they have access to the public equity markets. Beyond that, the unsecured bond markets are opening to REITs and spreads have compressed considerably, she said. "With that access to capital, some of the stronger REITs will be a solution to some of the commercial real estate overleverage and debt maturities that are coming in 2011, 2012 and 2013
Crystal ball anyone?
- Steven LeBlanc, Senior MD Teacher Retirement System of Texas: The model is changing from financial whiz kids to people who understand how to operate real estate. There will be a mass liquidation and this time there’s cash
- Hamid Moghadam, AMB CEO: When you have close to a near death experience you become more conservative. Expect more focus on debt to EBIDTA (which went as high as 8) rather than debt to asset value
- Michael Hudgins, VP, JP Morgan Asset Management: There will be a very rare and tremendous buying opportunity for blue chip REITs whether it’s distressed with big or small d
- Anton Troianovski, Wall St Journal Reporter and CREOpoint member: REITs may soon go back to paying their dividends in cash
Other Takeaways
__________________________________
When I asked Mika Brzezinski, Anchor, MSNBC about the future of traditional media, she replied that it was going out of business. “I’d rather read my Twitter news feed and respond to comments on my blog rather than watch TV.” I was reminded that Tom Toomey, UDR CEO had earlier recommended to his peers to embrace change as he predicted that “technology will make our operations more efficient while creating jobsI”
Steve Wechsler, NAREIT President, explained that NAREIT had been expanding its website and presence on Web 2.0 channels like Twitter, LinkedIn and FaceBook. I followed up with others who are open to going outside their comfort zone to join the movement. When I met with Gordon DuGan, WP Carey CEO, he told me he should never had signed up on LinkedIn as he keeps getting annoying requests to connect. I also had a chance to continue a similar conversation with David Stanford, Executive Director of RealFoundations, and he was also more interested in exclusive online forums.
On my way to the airport I had the pleasure of meeting again with Reggie Winssinger, WP Carey Board Member and owner of one of the top brokerage firms in Arizona. Reggie offers a unique global and local perspective so I thought CREOpoint members would like to see what one of their peers has to say (click here for exclusive video).
The next REITWorld will be held in New York November 15-17 next year, celebrating 50 years of REITs. Wish I could predict what the anniversary will look like…
___________________________________________________________________________________
The consensus view at the three day conference: the wheels got off quickly, REITs showed their resilience, and sooner or later depending on government intervention, some of them will benefit from a tremendous buying opportunity.
I met a number of leaders below and, if you are interested in what they said about REITs near death experience, where the money is coming from and where it’s going, scroll down. I had a chance to speak with Roy March (CEO Eastdil Secured), Steven Wechsler (NAREIT CEO), Reggie Winssinger (Board Member W.P. Carey and Owner NAI Horizon), Mika Brzezinski (Anchor MSNBC), David Stanford (Executive Director RealFoundations), Hans Nordby, Research Strategist, Property & Portfolio Research, Gordon DuGan (CEO W.P. Carey), Joseph Harvey (President, Cohen & Steers Capital Management), Mike Kirby (Chairman, Green Street Real Estate Advisors), Paul Adornato (Director, BMO Capital Markets), Walter Rakowich (CEO, ProLogis), Michael Fascitelli (Vornado CEO), Anton Troianovski (Wall St Journal Reporter), Ralph Block (The “dean of REIT analysts”) and Michael Hudgins (VP, JP Morgan Asset Management).
Here are some of my personal favorites (in addition to conversations with many CREOpoint members in Phoenix).
Quoted on CREOpoint:
“Pretend, extend and it may never end!”
- - Roy March, CEO of Eastdil Secured
Back from a near death experience - the downturn has demonstrated REITs strength
- Mike Kirby, Green Street Real Estate Advisors: 100-year floods happen about every 15 years and when they do, they hurt.
- Paul Adornato, Director BMO Capital Markets: I was surprised how quickly the wheels got off
- Walter Rakowich, Prologis CEO: the performance of REITs' management teams during the last 18 months is a major factor in the industry's survival
- Joseph Harvey, Cohen & Steers Capital Management: the reason REIT were able to raise the money needed for survival starting last March is that stocks were really cheap. We are now at the beginning of a new economic cycle.
- Ralph Block, “The dean of REIT analysts”: We have avoided Armageddon, REIT stocks are up 90% from their March 6th lows but now we have to be patient
- Michael Fascitelli, Vornado CEO: Leverage is risky; the debt maturity schedule really matters. Many REITs still have their own balance sheets to worry about. You’ve got to worry about covering your own ass before you tattoo someone else’s ass.
REITs as grave dancers…
- Cedrick LaChance, Senior Analyst, Green Street Real Estate Advisors: Thanks to government action in last couple months, income-producing assets probably won’t become distressed
- Paul Adornato, Director BMO Capital Markets: Banks owning real estate is known to be a disastrous situation so they’ll prefer to wait a couple years to allow their borrowers to get back on their feet. Nevertheless there is: $1.8 trillion loans coming due in next three years
- Jeff Horowitz, Head of Americas Real Estate, Bank of America Merrill Lynch: Some of the debt that’s maturing has to go away and will be lost
- Michael Hudgins, VP JP Morgan Asset Management: Leverage juices your return on your way up and his a sword on the way down.
- Ralph Block: REITs will buy from banks and the FDIC but tranche warfare is slowing sales down
Ideas in action
______________________________________
Follow the money…
- David Fick, MD Stifel, Nicolaus: Many local banks are doing well, getting deposits and interested in real estate
- Roy March, CEO, Eastdil Secured: We are seeing capital from Asia, Mideast and German funds
- Hamid Moghadam, CEO, AMB: there’s a ton of money in pension and sovereign funds
- Debra Cafaro, the new Chair of NAREIT: REITs demonstrated they have access to the public equity markets. Beyond that, the unsecured bond markets are opening to REITs and spreads have compressed considerably, she said. "With that access to capital, some of the stronger REITs will be a solution to some of the commercial real estate overleverage and debt maturities that are coming in 2011, 2012 and 2013
Crystal ball anyone?
- Steven LeBlanc, Senior MD Teacher Retirement System of Texas: The model is changing from financial whiz kids to people who understand how to operate real estate. There will be a mass liquidation and this time there’s cash
- Hamid Moghadam, AMB CEO: When you have close to a near death experience you become more conservative. Expect more focus on debt to EBIDTA (which went as high as 8) rather than debt to asset value
- Michael Hudgins, VP, JP Morgan Asset Management: There will be a very rare and tremendous buying opportunity for blue chip REITs whether it’s distressed with big or small d
- Anton Troianovski, Wall St Journal Reporter and CREOpoint member: REITs may soon go back to paying their dividends in cash
Other Takeaways
__________________________________
When I asked Mika Brzezinski, Anchor, MSNBC about the future of traditional media, she replied that it was going out of business. “I’d rather read my Twitter news feed and respond to comments on my blog rather than watch TV.” I was reminded that Tom Toomey, UDR CEO had earlier recommended to his peers to embrace change as he predicted that “technology will make our operations more efficient while creating jobsI”
Steve Wechsler, NAREIT President, explained that NAREIT had been expanding its website and presence on Web 2.0 channels like Twitter, LinkedIn and FaceBook. I followed up with others who are open to going outside their comfort zone to join the movement. When I met with Gordon DuGan, WP Carey CEO, he told me he should never had signed up on LinkedIn as he keeps getting annoying requests to connect. I also had a chance to continue a similar conversation with David Stanford, Executive Director of RealFoundations, and he was also more interested in exclusive online forums.
On my way to the airport I had the pleasure of meeting again with Reggie Winssinger, WP Carey Board Member and owner of one of the top brokerage firms in Arizona. Reggie offers a unique global and local perspective so I thought CREOpoint members would like to see what one of their peers has to say (click here for exclusive video).
The next REITWorld will be held in New York November 15-17 next year, celebrating 50 years of REITs. Wish I could predict what the anniversary will look like…
Comment
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Comment by Robert J. Meulmeester, MRICS on November 22, 2009 at 10:39am -
Very informative. Thank you JC. I actually attended NYU's Capital Markets' conference last Thursday, and your write up confirms the general consensus that was voiced during this conference. One thought I have heard a few times at different places is the "foreigners are coming and will invest...." as if that will change the real estate landscape as far as values and performance improvement are concerned. Don't forget that the foreigners are also dealing with many issues at home, and the other very simple fact is that the economy is still really really sick with many people out of work and that is not going to change for now. Unfortunately, real estate is the most lagging indicator and highly depend on higher employment numbers, so improvement is not going to happen soon. Other issues to come is likely to be a rapid increase in inflation and interest rates.
Sam Zell had a few interesting things to say during the conference which you can read about in the Wall Street Journal, see link:
http://blogs.wsj.com/developments/2009/11/19/sam-zell-disses-wilbur...(WSJ.com:+Developments+Blog)&mod=realestate
Best regards,
Robert Meulmeester
Independent International Real Estate Advisor
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Comment by Michael Cole on November 21, 2009 at 9:53pm -
Thanks for the update on REITs worldwide.
Over here in China we are getting close to having locally established REITs that will be available worldwide. Our company, RightSite.asia will be having a forum this week with a speaker from PWC presenting the latest steps toward this eventuality.
More information on the event is available here
And I will do my best to get together the facts on what happens at the event later this week.
Michael Cole
RightSite.asia
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Comment by Stephen T. Crosson on November 21, 2009 at 12:06pm -
Well done! The information is useful in staying abreast of market dynamics.
Steve Crosson
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