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Dallas-Ft. Worth
SHAKE IT UP
Paul Landen, Brad Williams, Jody Thornton, Steve Richter and Greg Nelson
Volatility may be the story of 2011, according to a panel in Houston earlier this week arranged by Baker Botts and Ernst & Young. Our Houston reporter snapped moderator Baker Botts’ Paul Landen, Ernst & Young’s Brad Williams, HFF’s Jody Thornton (a Dallas boy who must've gone south to dodge the snow), Weingarten CFOSteve Richter, and Baker Botts’ Greg Nelson in the Houstonian. In good news, Jody says companies are again underwriting for rent and job growth. And he’s heard some surprising news: At a conference in December, every institution had a handful of multifamily startsplanned for 2011, and all were predicting double-digit rent increases. He also just sold a hotel at a 4% cap, which he’s never seen before.
 
Mark Cover, Mark Grinis, Steve Richter and Greg Nelson
Hines’ Mark Cover and Ernst & Young Global Real Estate Funds leader Mark Grinis join Steve and Greg on stage. Now for the shaky stuff: Mark Cover believes we’re at an inflection point. Risk's beeninappropriately priced for a long time, and the market will be uncertain until it’s corrected. He believes the corporate war for talent will make companies willing to pay high rents to get in Class-Abuildings. Mark Grinis says global funds have singed fingers and aren’t investing in real estate. Some ’09 vintage funds are filling the void, but active funds have very focused goals. (Jody says “fund” is the new F word, since those deals are so tough to get underwritten.)
 
Mark Grinis, Steve Richter and Greg Nelson
Steve says for a while public companies had the upper hand, but by the end of 2010, private firms were leveraging better. He and Jody are seeing investors drift away from the core properties (which have seen a bubble of their own) to chasing yield. Steve says retailers have been in good shape through the recession and want to grow. The few remaining developers should have opportunities to build this year, although most want double-digit returns. He tells us new lease rents are soft, but renewals have been more competitive with3% to 5% increases. Last, keep your eye on DC lawmakers, says Greg, tax issues could be significant in 2011. For example, watch thedeficit reduction bill, which includes a territorial tax system. If we switch to that, the US will no longer tax worldwide income for companies based here. Since the current system prevents companies from headquartering in Dallas, a change could have a big impact on CRE.