IMN: Reflections on Opportunities and Challenges

Steering though the challenges presented by the late stage of the economic expansion cycle weighs on investors’ minds. Exercising caution given these challenges, yet exploiting opportunities, were key focuses of attendees at IMN’s annual US Real Estate Opportunity and Private Fund Investing Forum held in Newport, Rhode Island, on June 25-27. Here are some insights from conference attendees on the real estate markets:

“One of our key responsibilities is forecasting, but this late-stage cycle forecasting is career suicide.” — Tim Wang, director and head of investment research at Clarion Partners

“Forget the fear of what technology can do to real estate, obviously there’ll be challenges when you suddenly start dropping packages from drones…or driverless cars. But I think there’s an opportunity here to turn more and more towards value creation. It creates an opportunity to move this industry to a higher level of performance.” — Rao Mulpuri, CEO at View

“Look for strong plays in the industrial sector, with the imbalance in supply and the logistics strategies from online and brick-and-mortar retail.” — David Kessler, a partner at CohnReznick

“Probably the much bigger opportunity is in creating steady cash-flowing assets, whether that’s on a senior or subordinate basis, and there are fewer  [general partners] who are experienced in that. We view that as a tremendous area of growth, but one that lags substantially.” — Andrew Holm, a managing director at Ares Management

“We’re under heavy pressure about fees in public space.” — Joseph Wilhelm, trustee at Hampshire County Retirement System

“I always like to call negotiations a discussion. Negotiations are normally to solve a problem and initially there is no problem.” — Kamil Homsi, president and CEO of Global Realty Capital, on a panel discussion regarding limited and general partner alignment of interest

“The productivity thing is almost purely a demographic phenomenon. Everyday in the United States, 10,000 people turn 65 and age out of the labor force at a relatively high level of absolute productivity, and every day they’re replaced by 10,000 young people aging into the labor force at a relatively low level of productivity.” —  Michael Acton, managing director at AEW Capital Management

“Transparency doesn’t just relate to details and granular information about the underlying assets. A lot of it is about the decision-making process, it’s about what’s going to come next, where do you see the market going… and probably most important, it’s the problems or storm clouds you [general partners] see in the future.” — Roy Schneiderman, principal at Bard Consulting

“It’s harder today to put out big swaths of capital given where pricing is. There are still good deals, you really have to peel back to the micro markets.” — Sujan Patel, co-head of US investment management, Colony Northstar

“We are definitely a seller of assets…because it’s a very good market to be a seller. On the buy side, we are very focused on concentration risks…so when we’re buying something in one market, we’re thinking about it relative to what else we might own there and relative to the assumptions you might trade off in looking at a similar asset in another market.” — Sean Ruhmann partner at TA Realty

 “We always require skin in the game and we want know when you’re exiting. If some of the [general] partners start to exit early, you want to know why.” — Gerald Garrett, trustee at the Oklahoma Firefighters Pension and Retirement System