IREN Investment Manager Guide Second Quarter 2007 Transaction Analysis Directory of Retail Investors _______________________________ Job Postings RFP
Specialist — Los Angeles, Portfolio Analyst III — Tacoma, Wash., Principal Financial Group Registered Rep., REIT/TIC Executive — Bannockburn, Ill. (Chicago), America 2030 Equity Conference Content Manager — San Ramon, Calif.,
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Conversation with Ethan Penner
(December 2006)* Investment Manager Capital Flows (First Quarter
2007) IREI Conference Series White Papers
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“Part and parcel of investing in emerging markets is that there is risk: political, economic and legislative,” says Ron Cheshire, vice president and chief investment officer with global securities investor Presima Inc. “You know share prices are going to go up, but you know it will be volatile on the way up. However, in terms of volatility, at least for this year, you can also say that about the U.S. REIT market.” Cheshire and other listed property investors are drawn to Asia Pacific’s prospects for growth. China is the world’s growth story now, and it seems all of Asia Pacific is swept up in the drama. “I don’t see growth prospects in the U.K. market, and with what has gone on with the credit markets, investors are renewing their assumptions for rent growth expectations globally as a measure of where to invest,” says Cheshire. It is hard not to view the explosive growth in the region with some skepticism, considering the boom and bust nature of investment markets during the past decade. Investors are clearly rushing in, and many will make good returns, but as with previous booms, someone at some point usually is left holding the bag. If you are investing in the emerging markets, a long-term horizon can help you sleep at night, but it might be best to sleep with one eye open. “I’m not sure you can say the shift to emerging markets is a trend, but we are placing almost half of our portfolio in Asia Pacific,” says Cheshire. “It is still fairly early. I will call it a trend if looking back in 12 months or so the emerging markets are still performing as well.” Cheshire points out there is still a lot of capital to be invested (something you hear and read about on a daily basis) and property prices in Asia Pacific are still going up, but he admits “at some point the affordability question will come up.” _______________________________
Emerging Trends in Las Vegas In advance of the meeting, ULI and PricewaterhouseCoopers released their Emerging Trends in Real Estate 2008 report. To illustrate how the report lives up to its name here is a comparison of a few chapter titles and subheads from the 2007 and 2008 reports: “Nothing Lasts Forever” (2007) and “A Dose of Fear” (2008) “More Fundamentals, Less Frenzy” (2007) and “Recession Concerns” (2008) “Time to Question?” (2007) and “Credit Market Correction” (2008) Here are a few more excerpts that stand out from the current report: Emerging Trends interviewees cross their fingers: their hopeful consensus view recognizes that “the industry will be walking on eggshells for a while,” leading to a “healthy,” long-overdue correction. “This turmoil could be good for the industry,” says an institutional investment adviser. “It will stop a lot of development, a flight to quality will flush out low-quality investors, and trash will get repriced so buyers can get more upside.” The 2008 report also reflects another trend gaining traction in the industry: sustainable or green initiatives. Where green issues were largely absent from the 2007 report, the latest edition covers the topic in two subchapters: “This is not about Al Gore and global warming,” insists an interviewee. “It’s good for business, and it’s good for marketing.” In other words, green makes sense if green makes cents. On the list of important issues, Emerging Trends respondents rank green and sustainability behind more traditional bottom-line influencers like interest rates, jobs growth and construction costs, but ahead of terrorism and hot-button political tempests like immigration. The interviewee consensus contends that green is “here to stay and not a fad,” and advises developers and building owners to “wise up” and get on the bandwagon. _______________________________ If you have a comment or question about IREI Weekly, send an e-mail to d.campbell@irei.com. We won’t use your comments without your permission.
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___________________________ “[Plan sponsors] are
tending to pick strategic relationships more so, focusing in on those and
less on building new relationships with new
managers.” _______________________________
___________________________ “One [economist] sees
the economy on the precipice of recession driven by a housing meltdown and a
crisis of confidence in the credit markets; the other sees no economic basis
for recession, predicting that politics, not the economy, will drive any
recession. Both gentlemen are smart, glib and entertaining, but the takeaway
is that you can still lay all the economists end-to-end and never reach a
conclusion.” _______________________________
_______________________________ “Asking rental rates
for warehouse/distribution space have increased 3.4 percent over the past
four quarters. Overall, this was an encouraging performance in light of the
credit squeeze and the shaky outlook for retailers, who are big users of
warehouse/distribution space.” _______________________________
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