Tag Archive for: newsletter

In this day and age of hype, fluff, one-word book titles and Twitter-induced ADD, it is a delight to see what can still be done by focusing on clients’ interests, serving up good helpings of content, taking the risk of having a clear point of view, and writing intelligently.

Consider this example from Will Silverman, an MD in Studley’s Capital Transactions Group (Studley is in the commercial real estate business).  You don’t have to be a corporate real estate client to sense the value of the information and perspective that Will provides.

I have excerpted only about half of what Will writes; you’ll have to contact him if you want the rest. You can reach him at [email protected]

I have just returned from this year’s ExpoReal conference in Munich. As I’m wont to do, I’ve written a letter detailing what I learned and experienced at the conference. If you’re not familiar with ExpoReal, it is one of the largest real estate conferences in Europe with representatives of 1600 firms from 34 countries in attendance. The dominant categories are German open and closed end funds, as well as German banks. This year I visited with my colleague Tony Smaniotto of Studley’s Chicago office and we met with over 20 investors and lenders whose aggregated US investments and allocations number in the tens of billions. The themes which emerged in those meetings are detailed below.

Tenor of the conference
As has typically been the case at industry conferences in 2009, attendance was down by 15%. There seemed to be substantially less English spoken in the halls and fewer Americans in attendance than in prior years. American attendance suffered from a famous Keynesian conundrum as the average firm seemed to believe that the average firm was not sending Americans, therefore it did not send its own.

Disjointed message
Last year I wrote that in the wake of the financial crisis the European firms were taking a longer view and were less spooked than Americans were last October. This year I would say the tables were turned, American investors now feel more confident that they understand the era they’re entering. For example, in prior years I returned from the conference and reviewed my notes only to realize that I only needed to take notes during one meeting, because every investor and bank had virtually identical criteria and concerns. Not so this year. This year some investors were eager to enter the New York market, others preferred Washington D.C. Some funds wanted to pursue JV/preferred equity structures, others only want absolute ownership. Some banks were reluctant to sell their notes on troubled deals, others suggested that sales are likely. Some funds are flooded with investment capital, others are fighting off redemptions that could take them under. In short, there was no consistent message, and hence, the themes below were discernable amid the noise, but not universally expressed.

The Der Spiegel effect:
Der Speigel is one of the most influential and widely read publications in Germany with weekly circulation of over one million. For a sense of its influence and tone, imagine that Time, Newsweek and US News & World Report were all one magazine, but they were as well written as the Atlantic Monthly. Therefore, when Der Spiegel published an article (both the article and a photo featured in it are attached to this email) about the impact of the financial crisis on the quality of life in New York, it sent shockwaves through upper-middle class Germany (which is the class that generally invests in the large open and closed end funds that have invested billions in the US). The author of the article is about as bullish on New York as Michael Moore is on capitalism. One of main profiles in the article begins “Cathy used to be a banker. Today she is homeless and living in Tomkins Square. She thinks about the heroin and the stench.” You get the idea. Several investors told us that thanks largely to this article, there is significant headline risk for German funds to invest in New York as people fear the return of the Taxi Driver era. This article has even broader significance though.

If you’re among the hundreds who have seen the market update that Woody and I have been presenting, then you may already know where I’m headed. One of the arguments we’ve been making is that a key difference between today’s recession and those of the 1970s and 1990s is that during both of those recessions the economic contraction was compounded by New York’s deteriorating quality of life. A distinction, so far, in this recession is that quality of life and therefore New York’s relative position vis-à-vis other cities, has not slipped the way it did in the 70s and 90s. In the prior recessions companies actually contemplated leaving New York, this time they are merely occupying less space.
This distinction accounts for the “higher bottom” that we’ve experienced thus far in terms of employment and residential pricing. The underpinning of quality of life is safety; crime went down 80% from 1990 to 2008. Such a dramatic decrease has created a peculiar headline risk as a 30% jump in crime would bring New York back to very safe 2003 levels, but would likely be reported as the return of the 1970s. If the rest of the world perceives New York as unsafe, then we’ll have trouble attracting young human capital, keeping jobs here, and attracting investor capital. This Der Spiegel article is the first tangible evidence we’ve seen of this risk. We’re alerting REBNY and the Mayor’s office and we strongly encourage everyone in the industry with press influence to exert it against articles that perpetuate this false and dangerous concern.

New entrant preferences
Thankfully, not everyone was dissuaded….

Fundamentals matter more than capital market
When you strip away everything else in real estate valuation you are basically left with two components, the income and the number by which it’s multiplied…

Lessons from London
London has been a more active sales market than New York in 2009…

The “after you” market
We’ve long described investor preference as the “race for silver” as investors all say they are interested in buying today, but would prefer to watch someone else go first. Therefore the response to Deka’s purchase ….

Still early for many institutions
Several mentioned that they don’t believe their moment will come for some time… They have, astutely in my view, realized that…

Conclusion
Last year it was Americans who seemed disjointed and Europeans who appeared to have a better handle on matters..last October I wrote “Europeans have a tendency…

Will Silverman
Corporate Managing Director
Capital Transactions Group, Studley 

Thanks Will for a great object example.  It’s easy to see why people trust you.