How will recovery from the Great Recession likely play out over the coming year? Several industry experts shared their thoughts and forecasts for the general economy, real estate capital markets, and property supply-demand fundamentals. The consensus: Economic and employment growth might stall a bit but aren’t likely to recede. Plentiful equity will chase investment opportunities, as debt markets broaden collateral preferences. And already rising property values should continue upward, as rents and occupancies bottom out and slowly reverse course with recovering user demand.
From the Current Issue
During the recent “Great Recession,” the federal government has engaged in unprecedented manipulations of the economy in an attempt to prevent further economic collapse. In fact, I would give the most credit to the Federal Reserve for implementing 11 programs, including the TALF (Term Asset-Backed Securities Loan Facility), that helped stabilize the markets by “lending into the panic” largely through their emergency powers. Following its significant efforts to rescue the money-center and investment banks, the government has been attempting to forestall a deluge of commercial real estate repossessions — as occurred in the aftermath of the savings and loan crisis of the 1980s.
Our industry has been working on evolving information standards for more than 15 years. Our success matters to the industry simply because the Real Estate Information Standards (REIS) foster transparent, consistent and complete reporting of financial and operating information relevant to investors.
During challenging economic times, investors in real estate joint ventures need to be creative and flexible when considering strategies to preserve the viability of the venture and its projects. This is especially true when it comes to deciding if and how additional capital should be raised, if that becomes necessary to see the venture through difficulty.
This past February, The Economist magazine had one of its periodic special inserts titled: “The Gods Strike Back.” While it focused on the lack of risk management in the financial services industry in general, it contained a number of lessons we in the real estate investment management business can and need to learn. It struck a particular chord with me as over the past 18 months or so I have been helping several large institutional investors work through their “challenged” real estate investments. The thrust of The Economist article is how very few financial managers really had a risk management culture or function or, even if they did, how even fewer executed it correctly.
Iam sitting at The Montage in Laguna Beach, Calif., where we have just wrapped up our Fall Editorial Advisory Board meeting for The Institutional Real Estate Letter – North America.It was another phenomenal exchange of outlooks and opinions.