Founder of CREOPoint, Jean-Claude Goldenstein, is at it again (ULI Event). This time, he’s covering the happenings at REITWorld, where the global leaders came together to discuss where REITs are and where they’re headed. Here’s Mr. Goldensteins’ coverage of the event:
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.
From top left to right: I met 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).
From lower left to right: I also had a chance to talk to Joseph Harvey (President, Cohen & Steers Capital), Mike Kirby (Chairman, Green St Real Estate Advisors), Paul Adornato (Director BMO Capital Markets), Debra Cafaro (Chairperson NAREIT and Ventas CEO), Walter Rakowich (ProLogis CEO) and Mike Fascitelli (Vornado CEO).
Here are some of my personal favorites:
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 REITs 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. With that access to capital, some of the stronger REITs will be a solution to some of the CRE 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
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.
- 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, MSNBC Anchor, about the future of traditional media, she replied that it was going out of business and continued: “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 jobs.”
- 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, W.P. Carey CEO, he told me he should never had signed up on LinkedIn as he keeps getting annoying request 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.
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…
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- ULI Fall Meeting Review: What the Global Leaders Had to Say in San Francisco
- Milken Conference – Reviving Commercial Real Estate Panel
- What I Heard from the Global Property Leaders at the ULI Spring Convention
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