If you couldn’t make the ULI Fall Meeting and Urban Land Expo this week at the DC Convention Center, don’t fret—we’ve got you covered. Bisnow reporters from Chicago, New York, and DC descended on the nation's capital to bring you the latest analysis and trends from top industry experts.
In the opening general session, panelists told a crowd of 4,000 that the American dream won't involve homeownership for everybody. Former HUD Secretary Henry Cisneros says the government should focus on creating policies that allow for more decent rental housing near public transit, while Enterprise Community Partners' Bart Harvey says rental housing affordability hasn't increased because of complications the patchwork of government programs created to help out low-income renters. Former HUD Secretary Steve Preston says the government has spent $48B on housing programs this year, but the lack of definition in the programs hasn't increased home building, which is crucial to creating jobs. Trammell Crow Residential's Ron Terwilliger says his company hasn't delivered any new units in 2009 or 2010 so far, and that eventually the 35% of Americans who rent will need more than the 75k units that are being delivered annually.
Keynote speaker FDIC's Sheila Bair doesn't think lenders have learned their lesson, since she's still getting mail about 3.75% fixed-rate loans for 125% LTV. With 2.4M housing loans in foreclosure and another 2.7M more than 60 days past due, she says lenders need to move away from their lax underwriting, and robo-signers have underscored the problem. She encouraged commercial lenders to restructure some of the $1.4 trillion in commercial loans coming due over the last few years, if necessary. The Dodd-Frank Act should improve the ratings system across the board, preventing the financial crisis from taking such a serious turn again.
|ULI chairman Jeremy Newsum shared his thoughts on the role of real estate in the current recession and how the business is changing as result. He opined that a “flexible and adaptable” real estate business that attracted the brightest professionals was necessary for bringing the best resources and strategies to bear. Long-term strategies implemented by dedicated real estate professionals focused on ownership and appreciation over current income would be a return to business fundamentals and best practices. The next era could be a return to the real estate business using money instead of the money business using real estate.|
We lived large, then experienced three years of dislocation and loss. Now we’re entering the “Era of Less” in 2011, predicted Miller Ryan’s Jonathan Miller, ULI senior resident fellow Steve Blank, and PricewaterhouseCoopers’ Mitch Roschelle yesterday, as the trio released ULI’s annual “Emerging Trends” report. The transition will be difficult, Jonathan says, but there’s somewhat of a bright spot—there are tempered but improved prospects for all markets and sectors. Part of the thaw includes a revival of the CMBS market. Also expect the gap to close between the buy, hold, and sell. However, many of the 875 respondents expressed concern about problems outside of real estate, including the US economy, inflation and deflation, regulation, and taxes.
City ratings have gone up over the year, even though some were marginal improvements. DC always takes the top spot when the economy is in the tank, Jonathan says. TARP and fed funds directed at banks helped NYC take second place, and the Big Apple moved up higher than any other city in the report. Rounding out the top 10 were San Francisco, Boston, Seattle, Houston, LA, San Diego,Denver, and Dallas. Other markets to watch are Austin and San Jose. Any 24/7 city that attracts brainpower jobs, Echo Boomers, and Baby Boomers will do well. Apartments are the only sector in the green, thanks to those demographics and housing-bust refugees. Following in strength is industrial, hotels, office, and lastly, retail. Welcome to a period that will be more like The Waltons, with more intergenerational households, less reliance on cars, and less credence on space—this less is going to become more, they say. Good night, John Boy—and good night, 2010.
A packed room joined Holliday Fenoglio Fowler’s Dan Cashdan, Liberty Mutual Group’s Peter Lewis, The Davis Cos’ Cappy Daume, and Hawkeye Partners’ Bret Wilkerson for hot tips on fundraising, especially as more product comes to market. Davis Cos. was able to raise a $230M fund in nine months, made of 200 high net-worth individuals and institutional investors, notes Cappy. Dan likened the past 18 months to a National Geographic video of a starving polar bear, but we’ve finally caught a whale and have been feasting on it. There are tremendous buying opportunities, but extremely competitive. Investors are looking for a solid track record, proof of discipline over cycles, conservative structuring with multiple exit opportunities, transparency, minimal loss of equity, and the fund’s ability to get to the finish line, notes Peter—and you certainly don’t want 30 different investors with 30 different viewpoints. You spend part of your time as a psychologist to your investors, says Dan.
Trademark Property’s Tommy Miller at yesterday’s retail panel along with Macerich’s Bob Aptaker, Jerde Partnership’s Rick Poulos, and Steiner + Associates’ Ralph Miller. Tommy says 65% of the nation’s regional malls are considered weak or transitional, and even some of the stronger ones have room to improve. Padre Staples Mall in Corpus Christi, for example, was pulling in a respectable $420/SF in rent, but was under siege by a competing mall rising nearby. After a $50M renovation and a repositioning as La Palmera, he believes it can reach $550/SF. A big emphasis on the panel was multi-purpose destination centers, and Rick mentioned that people have begun to treat some Jerde projects as gathering spots: “Let’s meet at the Bellagio,” or, “Let’s meet at the plaza,” the common area at Santa Monica Place, which opened last month at the head of the Promenade with 60 retailers.
Hotel transaction volume YTD this year has increased 210% over the same period last year. That’s according to JLL Hotels managing director Arthur Adler, who moderated a standing-room panel featuring Host Hotels and Resorts’ James Risoleo, Interstate’s Edward Blum, RLJ Development’s Jeffrey Dauray, Morgan Stanley’s James Chung, and Metlife Real Estate Investment’s Steven Taylor. James Risoleo says going into 2010, Host expected its RevPAR to be down as much as 5% or flat but as of Q3 2010, it’s up 8%. Jeff says at this stage we’re seeing some correction of the overreaction cutting room rates. Steve says Metlife is underwriting to current cash flow but will look at peak-year performance. Edward says Interstate, as the largest third-party manager of hotels, has been taking on assignments from lenders and special servicers. Jeff says RLJ is IRR-driven and is looking for double-digit RevPAR growth in its investments. And James Chung of Morgan Stanley says that CMBS won’t solve the lack of capital in the marketplace, given that CMBS pools include only about 10% hotel.