Institutional Real Estate Americas

September 2011: Vol. 23 No. 8

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From the Current Issue


Honor Roll: Real Estate Degrees Offer Academic Training and Practical Experience

As real estate career paths have become more prominent in the financial sector, so too have undergraduate and graduate level programs at some of the nation’s top universities. These programs offer a variety of real estate–related courses that can prepare students for one of the widest career selections in the business world today. Residential and commercial real estate brokerage, property management, land development, mortgage banking, urban planning, real estate counseling, appraisal and research are all aspects of a career in real estate. In today’s extremely competitive job market, a specialized degree and some hands-on experience can provide an edge for recent graduates.


A Beta Approach: Proper Sector Allocation Can Produce Long-Term Core Returns with Below-Average Volatility

The unprecedented volatility in private real estate, and all asset classes, during the past several years has sparked a great deal of interest in investment strategies that can help to insulate portfolios against violent swings in the market. For investors in private real estate, the simple and obvious solution is to forgo debt altogether, regardless of how attractive borrowing costs and terms might be. But as the steep decline in the unleveraged NCREIF Property Index (NPI) demonstrates quite clearly, a zero leverage strategy is an imperfect solution, and such a strategy may produce results that are inferior to a prudently leveraged portfolio in terms of both risk and returns.


A Casualty of Hope: Better Days Are Ahead ... But No One Knows When

At the 11th hour, Congress managed to pass a provision for raising the ceiling on the national debt. While the result was a compromise that will enable the U.S. government to continue to function, the process highlighted just how dysfunctional the U.S. political system has become.

Raising the debt ceiling, of course, was only a temporary measure and did not stave off the downgrading of American government debt. Even though a deal was eventually reached, ratings agency Standard & Poor’s downgraded U.S. debt from AAA to AA+, noting, “The downgrade reflects our view that the effectiveness, stability and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges.”


Do You Care? An Examination of Standards of Care

Investors with capital currently available to invest may have expected that the recent economic downturn would enable them to obtain better terms in commingled funds. The leverage of available capital may have resulted in favorable changes in some terms, but one term that continues to be the subject of extensive negotiation is the sponsor/manager’s “standard of care.” The standard of care describes both the manner in which the manager must perform its responsibilities and the duties the manager owes to the investors. This article discusses various standards of care commonly applied to managers in commingled funds, and what each means to investors.


Industrial Roundtable: Positive Signs Point to Improving Fundamentals

The industrial sector is as strong as any commercial real estate sector in the current economy, according to Cassidy Turley’s U.S. Industrial Trends Second Quarter Report.Nationally, the net demand for industrial warehouse space registered 21.9 million square feet in the second quarter, following a gain of 24.4 million square feet in the first quarter. Vacancy has been steadily trending downward for 12 straight months. U.S. industrial vacancy fell 20 basis points from the previous quarter to 9.3 percent. According to the Federal Reserve, industrial production increased 0.2 percent in June after having decreased 0.1 percent in May. For the second quarter as a whole, total industrial production increased at an annual rate of 0.8 percent.


Real Estate Market on the Rebound: But Regulatory Changes Could Impact Depth and Speed of Recovery

The recession, financial crisis, pullback in the credit markets, and high-profile fraud cases, such as the Bernie Madoff scandal, took a toll on real estate private equity over the past few years, causing the market to shrink to about a third of its 2007 peak based on total capital commitments. There are now signs the sector is reaching the bottom, and fund managers should brace themselves for an acceleration of deals and financing activity to hit the sector over the next several years. However, certain regulatory and accounting changes will call for a different approach, other than business as usual.

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