Not letting the “things-that-legends-are-made-of” power blackout of the 2011 Spring PREA conference deter them, 900-plus institutional real estate managers, investors, consultants and “others” returned to Boston in early March to discuss the issues of the day — and network of course. Because connections at PREA conferences tend to be quick (Hey! Good to see you. Let’s get together when we get back to the city. Great. See ya then), it made sense to summarize the event in the same way.
Best applause line
Jacques Gordon, global strategist at LaSalle Investment Management, was talking about a time “when women didn’t work.”
Martha Peyton, head of strategy and research, global real estate division at TIAA-CREF, jumped in with “We always worked. We just didn’t always get paid for it.”
The comeback was met by a round of applause from the increasingly large number of women in the audience.
General observations
- Last child entering college in the fall is a catalyst for searching for a new job.
- Dress codes are slowly getting more casual, but Mohawk haircuts still stand out.
- No matter how long the lunch break, people will still be late for the after-lunch panel.
- Howard Marks, chairman, Oaktree Capital Management, is always good for a quote or two (or 10 or 20).
A few of Howard Marks’ observations
“Market price is the fair price because it is the consensus of those who vote. No one wants a fair price — they want to buy below fair price. Doing so, however, requires the help of someone who is willing to sell below fair value.”
“When people say they are buying conceptually, it means they aren’t getting caught up in the numbers, like price and cap rates.”
“We’ve all heard, ‘If you build it they will come.’ Well, in our industry, ‘If you lend it, they will build.’ Interest rates are so low you have to take advantage — they’ve become coercive.”
“We get so involved in the fundamentals that we forget that price is always the number one factor. It’s not buying good things — it’s buying good things well.”
“Buying a good asset at the wrong price is worse than buying bad stuff at the right price. Noting is so good that it’s a good investment at any price. And nothing is so bad that it’s a bad investment at any price.”
“It doesn’t matter when tapering happens. We know it is going to happen. It’s a tremendous waste of time to debate when.”
Other tweetable tweets
From the Research Panel
Ray Torto, global chairman of research, CBRE — “I don’t have a lot of faith in investor intention surveys because every morning I wake up and say, ‘Today I’m going to start a diet.’”
Martha Peyton — “Given the inflow of capital into the U.S., this is an opportunity to shed poor properties and reposition the portfolio to improve NOI.”
Jacques Gordon — “We are in unchartered territory; no Fed Board has ever done what we’re doing now. There is no road map for this. We don’t know where this will end. I don’t know, but here’s what I think:
- Interest rate growth will be closer to 4 percent on 10-year Treasuries than 3.5 percent.
- Net-lease deals will be hammered. There will be destruction in the value of bond-like investments when rates go from 2.7 percent to 4 percent.
- Demography, tech, urbanization are themes to look at.
- We are looking around the world for things that will grow.
Need to focus on things you can control (price, location, financing, etc), understand the things you can’t control (inflation), and have the wisdom to know the difference.”
From the investor panel
“Pension funds are not nimble. To change allocations or strategies is like turning an aircraft carrier. It doesn’t happen on a dime. So a new ‘opportunity’ might be of interest, but actually committing capital can be problematic.”
“The great thing about real estate is that you can manufacture any return you want.”
From the DC/DB panel
“We don’t have a marketplace for DC plans yet. We still need to define best practices, as well as common standards. We need a common story to tell consultants and plan sponsors. Best place to start is with those sponsors that already have real estate in their DB plans because they already understand real estate.”
“When you leave a meeting on including real estate in a DC plan, everyone is always smiling and nodding in agreement. But a soon as you are out the door they make five phone calls:
- They call HR — Can you communicate the details to participants in an understandable way?
- They call the administration group — Can you administer this new product?
- They call the investment committee — Are you comfortable with the investment parameters?
- They call the ERISA counsel — Is this legal?
- They call their consultant — Are you familiar with this product?
If you haven’t pre-answered these questions, you can be blackballed by someone you’ve never met.”
“I hate losing to the status quo just because it’s easier to just keep doing what I’m doing now than make a change.”
In closing
Unfortunately, I can’t tell you what Robert Gates and David Gergen talked about during the closing session. It was a closed-door session, and everyone was asked to refrain from tweeting, reporting or emailing. But, suffice to say, Gates was as entertaining, thought-provoking and controversial as you’ve been led to believe — and listening to his take on a variety of subjects was a great way to end one of the must-attend events of the year. If you ever get a chance to hear him speak — go. You might not agree with everything he says, but you certainly won’t be bored. And how many conferences can you say that about?
Not a subscriber to IREI Insights blog? Sign up to receive alerts on new blog posts.
Sheila Hopkins is managing director – Europe and infrastructure at Institutional Real Estate, Inc.
