What Does Re-Engineering Mean for Real Estate?
Dr. Ray Torto, Global Chief Economist, CBRE; ; Joseph Azrack, Managing Director, Apollo Commercial Real Estate; Brad Case, Vice President " Research & Industry Information, NAREIT; Tom Garbutt, Managing Director, TIAA"CREF Global Real Estate; Doug Linde, President, Boston Properties; Lynn Thurber, Chairman, LaSalle Investment Management
Description: Who better to comment on current realities of real estate investment than practitioners immersed in the business at the highest level? Moderated by prominent real estate economist Ray Torto, this panel includes five senior executives with well over a century of collective experience at major development and investment firms and an industry information organization.
Kicking off the discussion from the audience, Jacques Gordon of LaSalle Investment Management asks about the stark contrast in previous panels between views of academics espousing the "complexity" of markets, historical data and prognostications, and the "simplicity" of the perspective of renowned developer Gerald Hines. The consensus is that quantitative analysis and technical skills are dazzling, but it is essential to streamline and make a case that real estate investors can easily comprehend. Joseph Azrack tells his staff, "You've got to be able to figure it out on a piece of paper. Don't give me all the spreadsheets." Lynn Thurber acknowledges that complexity is inevitable but you have "to focus, to make a decision andcourse correct when the information later on tells you that you're going the wrong way."
Torto invites the panelists to nominate one key term to epitomize what students must learn for real estate careers. Tom Garbutt offers "global" -- adding, "Get experience outside the US See how decisions are made in other cultures." Thurber's mantra is "risk management"; investment success comes from "being able to understand that risk and price that risk correctly." Brad Case stresses discipline. Firms must have mechanisms in place to "minimize the opportunities to destroy value." Azrack, citing renegade musician Frank Zappa, believes in being contrarian. He advises departing from conventional wisdom to identify fruitful investment opportunities in out"of"favor assets and markets.
On the critical topic of the impending trillion dollar debt rollover, Doug Linde refutes doomsayers, forecasting that well"located properties will provide redeeming value. "As long as the financial system has maintained enough cushion," declares Linde, "I don't think systemically we are going to be into this sort of Armageddon." With measured optimism, Garbutt concurs that in today's climate the risk premium for investors in real estate is better than in alternative assets, and high quality properties should create inflation protection.
All the speakers embrace environmental sustainability as paramount to their business. Energy efficiency is an ever"present consideration, and measuring a carbon footprint is common parlance. Azrack states, "If you have a choice between a LEED building and another oneyou're going to go with the LEED." Thurber agrees that green buildings help "attract and retain tenantsreduce our operating expensesand our investors are interested in the subject matter. Sustainability is going to be an integral part of everything we doto make sure that our assets remain competitive." Garbutt draws an analogy to the 1950s when air"conditioned office buildings came into vogue; without this amenity, "you were in big trouble," unable to satisfy tenant demand.
In closing, Torto asks for research ideas that might enhance the real estate industry. Case proposes "a set of indexesthat will bring a lot more transparency to the market," and the development of effective hedging instruments. He would also like to learn which methods of entering the asset class produce superior returns -- for example, REITs versus private funding.
About the Speaker(s): Ray Torto is a widely recognized analyst and prognosticator of the macroeconomics of commercial real estate. As cofounder of CBRE Econometric Advisors (originally Torto Wheaton Research), he furnishes research and commentary to guide institutional investors in commercial real estate.
His roles as international consultant and spokesperson evolved as a culmination of many years in academia and the public sector. Torto was an economics professor and department chair at the University of Massachusetts, and prior to that, a policy manager in state and local government. He participates on the boards and committees of numerous national and local real estate organizations, including the Pension Real Estate Association. Torto is the author of four books and an array of articles in the field of real estate market economics. He earned his bachelor's, master's and doctorate in economics from Boston College. In 2007, he received the Graaskamp Award for Real Estate Research Excellence.
Host(s): School of Architecture and Planning, MIT Center for Real Estate
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