Offering expert insight into topics ranging from global financial trends to risk mitigation to building a successful career, 16 top commercial real estate investors spent the morning of Oct. 3 treating some 300 listeners at the University of Virginia to a range of perspectives on their industry.
The investors – all either U.Va. alumni or parents of current students or alumni – made their comments in three panel discussions during the McIntire School of Commerce’s 2014 Fall Forum, “Opportunities and Risks in Real Estate Investment: From Wall Street to Main Street.” Sponsored by the school’s Center for Growth Enterprises, the three-hour event was held in Old Cabell Hall.
“We were incredibly privileged to hear from such a talented and accomplished group of commercial real estate investors,” said George Overstreet, a McIntire finance professor and director of the center, who noted the broad range of public and private firms represented by the panelists. “Not only did they offer a fascinating look at a number of successful approaches to an industry characterized by high levels of risk and heterogeneity, but they also provided a remarkably clear picture of how those approaches operate within a larger global, financial and regulatory context. Even more importantly, they demonstrated that personal integrity is essential to successful careers in commercial real estate.”
Moderator Robert White, founder and president of Real Capital Analytics, asked the first panel, representing publicly held firms, for their thoughts on the status of the industry’s recovery from the 2008 financial collapse. The panelists were overwhelmingly bullish – but pointed out that recovery varies significantly depending on geography and sector, and is subject to changes in federal monetary policy and tax law.
Owen Thomas, CEO and director of Boston Properties, whose expertise lies in the ownership, management and development of first-class, metropolitan-area U.S. office properties, said that technology-based markets such as San Francisco and Boston have proven extremely strong, while other large markets – notably Washington, D.C. – have remained stagnant. Saying that it was “hard to generalize,” Thomas characterized the recovery as “multi-speed.”
Tim Naughton, chairman, CEO and president of AvalonBay Communities, said the apartment development and construction industry is “well beyond recovery,” and that he anticipated a period of growth similar to that of the 1990s – and “maybe even better.” Likewise, Earl Webb, president of U.S. operations for Avison Young, said a revolution in the shipping and warehousing of goods, led by companies such as Amazon, has injected new life into the industrial real estate sector. After a long lag, he said, the sector is “back in a healthy spot.”
Still, he and his fellow panelists said the question of a broad, prolonged recovery in commercial real estate defies a simple answer. “It really depends on where you are, and what you’re investing in,” Webb said.
Leaders of highly successful privately held commercial real estate firms brought a different set of perspectives to the event during the second panel, offering insight into the keenly felt challenges and rewards of operating in the absence of shareholder-related pressures, as well as the expertise they have developed in niche markets and sectors.
George Maloomian, president of Cambridge Properties Inc., said he was “passionate” about the retail-related real estate sector, maintaining an abiding fascination in its requisite market research and relishing the processes of creating value and overcoming the challenges associated with its highly cyclical nature. “I like the deal-making, and I like the planning,” Maloomian said. “I’ve found that if you follow your heart – and deal with honesty and integrity – profits will come.”
Indeed, the panelists said, the secret to their success lay in learning how to mitigate risk by developing deep expertise in a particular niche, geographic market or set of core competencies that they found most interesting and rewarding.
“You can’t control market risk,” said Karen McJunkin, regional partner and vice president at Elm Street Development. But, she said, it is possible to mitigate some of the risk associated with imperfect information. “At Elm Street, we decided early on that each partner was going to focus on one geographical area (within the Baltimore/Washington region), and we were going to know that area absolutely inside and out.”
Ramon Breeden Jr., president and CEO of The Breeden Company – a developer of multifamily, commercial and single-family projects on the East Coast – pointed out another key factor in his success.
“My father told me I needed to be able to control my own destiny,” the 1956 McIntire graduate told the audience. “My McIntire education gave me the skills and the confidence to do that.”
Wisdom of Experience
Focused largely on what it takes to succeed in real estate, the event’s third panel advocated hands-on experience of the sort that fosters deep understanding of an industry. The panelists advised would-be real estate investors to find a career path – whether corporate or entrepreneurial – that sparks their passion and matches their values.
“Working is hard,” said Chris Nassetta, president and CEO of Hilton Worldwide. “You really have to find an organization whose culture and people are right for you. Otherwise you’ll hate it.”
The panelists advised students to seek out international experience, stressing not only the increasingly global nature of business, but also the critical importance of understanding cultural nuances.
“You have to have a global mentality, even if you never plan to leave the U.S.,” Real Capital Analytics’ White said. “Real estate fundamentals are the same everywhere – it’s culture that’s the key factor.”
For all the conference’s talk of globalization, constant change and market uncertainty, though, the panelists’ advice was of the time-honored variety: “Work hard, be unfailingly honest, and – when you’re starting out – be willing to do whatever people ask you to do,” Bruce Wardinski, president and CEO of Playa Hotels & Resorts, said.
Added Scott Kelley, founder and CEO of Aetos Capital Real Estate, “Do something you really enjoy, take some risks and don’t be afraid to fail.”
Other participants included Rob Harper, senior managing director and head of Europe at Blackstone Real Estate Debt Strategies; Thomas O’Hern, senior executive vice president and CFO at Macerich; Anne Raymond, managing director of Crow Holdings; and Shawn Todd, CEO of Todd Interests.
Panel moderators included White; Tracey Brownfield, co-founder and principal for development at Land Veritas; and Don King, former vice chairman and global head of real estate at Deutsche Asset Management.