Summer Internship with Real Capital Solutions

So, one of the greatest parts of going to grad school is the opportunity to do a summer internship. It is a great opportunity to have a trial run with a company and see how different companies and personalities operate the real estate industry. As I started school in the fall, I knew that I wanted to spend the summer with a company that enabled me to see a lot of different properties and give me experience working in either a REIT or a private equity shop. I also was really interested in trying out the Denver market, because 1) my wife’s family have been angling for us to try Denver since we first got married, 2) we are having another baby this summer and it would be great to be near family to help with this next crazy transition, and 3) it’s pretty dang nice to be located right next to gorgeous mountains.

Well, I was lucky enough to be offered a position fairly early in the process to Real Capital Solutions, a real estate private equity firm that concentrates in “work-out” properties/distressed real estate. They have a really interesting story of growing a real estate company through buying at the right times in the real estate cycle, and I was excited to see it first hand. Right now the company sees the bottom of the market in the residential sector, so they are buying principally broken condo buildings, stalled land developments, and also have targeted distressed apartment properties. The process of acquiring distressed real estate is very different from the typically acquisition process and has taught me that as one speaker to Cornell has said “it’s not who you know, it’s ALL who you know”. Finding the right distressed deal requires insider knowledge or the right contact, and that is why most of RCS’s deals are sourced from their local operating partners that have seen the deal with their own eyes go from land to promising development to stalled project. I’ve learned a lot in my short time at RCS, but that is probably the biggest lesson-get to know everyone in the industry!

RCS has recently gone from being principally a firm that was funded by internal capital to growing their company through other capital sources, and it really interesting to see a company in the early stages of making that transition. The group is super entrepreneurial and it is great to be part of a significant change in a company. Check Real Capital Solutions out, the story of the founder and CEO, Marcel Arsenault, is an exciting example of smart investing and correct timing.

I’m excited to be in Colorado!

REview Articles Ideas

I have had the fantastic opportunity over the past year to be an assistant editor for the Cornell Real Estate REview, the nation’s oldest student edited and student managed real estate academic publication. The 2011 REview is going to knock everyone’s socks off so look out for it! This next year it looks like Hugo Medina and I are going to serve as the editors for next years journal, it’s still not confirmed but we’re crossing our fingers and things are looking good. Part of this role is finding people to write intriguing articles that fascinate readers and increase the dissemination of the REview both online and in print. I have been thinking lately about interesting topics lately, and I would invite everyone and anyone to consider writing about and submitting an article to the REview (click on the image above to visit our website). Here are a few topics that were interesting to me:

1. In September 2010, Bill Ackman of Pershing Square Capital, came to Ithaca and spoke to the Program in Real Estate and the Cornell Real Estate Council, and spoke about the equity companies like Target have tied up in their real estate, and how often that real estate is not adequately priced into their stock price. The solution, called “opco propco” or operating company and property company, is to basically split the two and create a retail company and a property company. I think an interesting article could be written on the structure, and the pros and cons, and maybe how the hot market in 2006 spurred a lot of these transactions. And consequently, how the market has dropped since, and why, if the value is still locked up in the real estate? In the great REIT market of 2011, you would think today would be the best time for these companies to create an UPREIT.
2. In that same address, Ackman questioned why more real estate owners do not hedge their portfolio by purchasing credit default swaps or by going short on their tenants. It presented an interesting view of how real estate companies, both small and large, can hedge their investments, and it has  a ton of room for both quantitative and qualitative analysis. Another hedging strategy could be playing the REIT market in addition to direct investment due to their low correlation (REITs follow stocks more than direct real estate).
3. While reading the Marketwi.se blog I saw an article by John Reeder called “Emerging Trends Say Get Long Industrial Real Estate“. It had some good points about how retail companies with online strategies are going to need less big box retail space and more industrial space along shipping corridors. He also spoke about the increased need for data centers due to increased cloud computing. This brought up two ideas for articles, 1) Is Retail going the way of the dinosaur? and 2) Is Industrial going to continue growing and where? I think both have a lot of merit. The retail article could focus on the growth strategies of America’s top 50 retailers, and highlight Americans purchasing habits. The industrial article could focus on Reeder’s points, and could likely be co-written with him and a Pro-logis/AMB researcher as well.
4. The REview was approached by a net lease broker to co-write an article contrasting an investment in a single tenant asset leased long term to a credit rated tenant compared to investing in that company’s bond. This would provide an in depth analysis into the net lease market which was one of the best performing real estate markets over the downturn.
5. Another unique article could be how the decline in defined benefit pension plans due to the rise to defined contribution plans will affect the real estate private equity space. Looking at it from a high level it should dry up a large portion of the pension fund money, because defined contribution plans usually are more focused on stocks and bonds, and don’t invest directly in REPE markets.
6. Another interesting topic could be the different modes of real estate investment, and the legal implications of those company structures, public REIT, versus non-traded REITs, Private Equity Fund, Real Estate Hedge Fund, TICs, and it could focus on the benefits and weaknesses of the different strategies.

These are just a few of the ideas that could really provide provocative articles and increase our readership. The past editors have done a fantastic job and the publication is something that should be in the office of every real estate executive in America. Making sure the 2011 REview reaches quality readers will definitely continue to be a goal of the REview next year. The 2011 REview is going to be a great publication and we need to make sure everyone sees it! In addition I think in the fall semester the focus of the REview staff should be on marketing the REview and getting industry and student articles right away. That can be accomplished by getting on the phone and emailing the professionals that already publish and might be looking for a new venue (companies that come to mind are RCLCO, JLL, HVS, The Scion Group, Townsend Group), and by speaking with students in detail about ideas like the ones above.

Back of the Envelope Iphone App

As a real estate finance guy, something that I’ve always talked about with colleagues and fellow geeks is how nice it would be to have an accurate application for Iphone, Android or Blackberries that provides pro forma analysis. While perusing Joe Stampone’s blog A Student of the Real Estate Game I saw Real Estate Back of the Envelope, which looks like an excellent app. I’m still behind the times and am waiting till June to get my first smartphone, but this will definitely be one of my first purchases.

Social Media @ ULI

So I got the bug again at the ULI fall meeting in Washington DC. Social Media is the bombizzle, and I really believe that if it is used correctly you can create a strong brand for yourself and your company. I am putting together a proposal to better use it within my program, so that we can not only be the most comprehensive real estate program in the country, but  also the most social. But this video gave me the extra push I needed. There is definitely movement in the social media space, even if some of these statistics are a little manipulated. Here it is:

 

First Week of the PRE

Well, after travelling from Portland, OR, to Green River, WY, to Bigfork, MT, to Lethbridge, AB, Canada, to Denver, CO, to Coralville, IA we (my wife, son and I) are finally in Ithaca, NY. It was quite the trek, especially with a 16 month old toddler, but we played enough Elmo on the DVD player to make it enjoyable for him–though I am sure you know how I felt about Elmo singing for hours on end. Coming into Ithaca, I had no idea what to expect. Due to lack of time I couldn’t make it out for a campus tour prior to coming so I was coming here on complete faith, and it has more than exceeding my expectations-although the shopping is underwhelming according to my wife (which is probably a good thing considering I’m going to graduate school). The campus is beautifully set on a hill overlooking Ithaca and Cayuga Lake and the mid 1800′s architecture is stunning. It is definitely different than any campus I have seen out west, although the look and feel of Ithaca is surprisingly similar to Portland.

The first week in the Program is referred to as Orientation and gave the students an excellent opportunity to get to know all 25 first year students. We have quite an amazing group, one that is highlighted with a strong international presence, there are 3 Indians, 2 Chinese, 1 Thai, 1 Mexican, 1 Japanese, 2 Canadians(how exotic…I’m one of them), 1 Korean, and 14 American students. Everyone brings a different strength to the group from their differing backgrounds, there is an architect, a civil engineer, a sustainable energy consultant, a community farming expert, an appraiser and students with backgrounds in finance, planning and development. It’s quite a diverse group which means that the students will have a host of differing opinions, thoughts, and ideas about the cases that are worked on. I think it’s going to be quite interesting and I am sure that this will be the learning opportunity that I was looking forward to.

Orientation started with a weekend class on Microsoft Excel where REFM (Real Estate Financial Modeling) a consultancy out of Washington, DC, came and provided the incoming students with a weekend tutorial on how to model in Excel. On Monday, Robert Abrams, founding Director of the Cornell Program in Real Estate, took the students for a history tour of the campus outlining the interesting founding of the University  in 1865 and showed the students the  buildings housing PRE classes across the campus. Following the history Rosemary Oliver, the wife of Pike Oliver, Program Lecturer, and a registered dietitian, provided lunch and counseled the class about how to maximize brain power by eating right. Following Rosemary, the class was led by Pike Oliver on a hike in Ithaca where many of the students got their first experience trekking through the woods and near the gorges of Ithaca.

Tuesday, the Program chartered “The Haendal” a 45′ steel research vessel from Tiohero Tours and was taken on a guided sightseeing tour of Cayuga Lake. The class took the time to hear history on the Finger Lakes region, the health of the water in Cayuga lake, waterfront property on the lake, and got another opportunity to learn more about each others experience and personal goals for their time at Cornell. On Wednesday, the Program had its first formal Orientation event at the Statler Hotel, where the program was introduced to the students in detail. Thursday, Kim Schwartz taught the students the importance of the Cornell Real Estate Council, introduced them to Career Services, and provided an etiquette lunch that the Canadian students needed desperately!

Friday, the class took a bus tour of real estate projects in Ithaca. The first stop was at the Ithaca Gun site, where Dr. David Funk, Program Director, discussed environmental remediation and the costs that can pile up that can kill projects unless they receive federal, state or local funding. The next stop was Ithaca College where the class was directed through the building of the new Athletic complex at the college by the Integrated Properties team that are acting as the owners representative on the project. The size of the project and the complexity involved provided the students with an example of a large institutional project. Following Ithaca College, Bob Abrams led the class through a tour of Wegman’s Grocery Store.  Wegman’s is practically worshipped here in Ithaca, and with the influx of students this past week has made it a maze to get through, however, it definitely tops the list of grocers that I’ve seen. The Wegman concept is to have something for everyone, so instead of catering only to the rich and organically inclined (Whole Foods) or focusing more on price than quality (Winco, Aldi), it provides products for both groups and those stuck in the middle. You will find the most gourmet spaghetti sauce from NYC, but you will find in the same section Ragu and Prego.  Wegman’s understands retail, and I guess part of that is that they understand people, and it shows as their store is always packed full of them. Following Wegman’s we boarded the bus and headed to a walking tour of downtown Ithaca. For a town of only 30,000, it has a fairly substantial downtown, one that is highlighted by Collegetown and The Commons. The Commons is a pedestrian mall that runs for two blocks through downtown Ithaca and has a bunch of local shops and restaurants, and is considered the #1 tourist destination in Tompkins County (other than Cornell).

Collegetown borders The Commons and the entrance to the Cornell Campus and is neat area with 5 floor brick buildings with ground floor retail that houses bars, restaurants, burrito and pizza joints, a barber shop and the other college necessities.

Following our tour of downtown Ithaca’s housing and retail we stopped by Seneca Place on the Commons, a relatively new project in Downtown Ithaca that houses a Hilton Garden Inn and 100,000 sf of office space. There we were met by Frank Apeseche, CEO of the Berkshire Group and Thomas LiVigne, Director of Cornell Real Estate, who both took time to address us during lunch. After lunch we hit the road again, this time heading to Ithaca Mall, where Duane Stiller, President of Woolbright Development, addressed us his path in real estate and what we could learn from his experience in real estate. Mr. Stiller also discussed his current focus with his group and where he sees retail going in the short term. For our last stop we met with an Ithaca homebuilder who was building out a neighborhood just east of the Ithaca Airport, his product had high end finishes and provided exterior maintenance so it seemed ideal for the Empty Nester profile.  The tour of Ithaca definitely helped us first year students get a better feel of Ithaca, and opened my eyes to the possibilities real estate offers even in relatively smaller markets like Ithaca.

Social Media for Real Estate: A Time Suck, or Time Well Spent?

It’s been months since I last blogged! I know that there is really no good reason to cut yourself off from the world, but I did for the past 2 months and I learned a ton in that time period.  I thought I should share those thoughts even though this is a real estate blog, it is a blog and if you’re reading it you’re consuming social media so it applies to you too! First off, social media opens up a world of information that previously we haven’t been exposed to, and that’s the world of opinion on niche topics. My niche is commercial real estate and through social media I can learn about the industrial market in San Jose, or the multifamily market in Seattle, or the Houston CBD office market by visiting well written blogs, that don’t just provide me with data that was prepared last quarter, but tell me in real time whats happening in that market. It’s useful data, especially in an inefficient market like real estate where information flow lacks in comparison to stock markets.

The problem is that with that large amount of information that we now have at our fingertips, we have to recognize valuable information and choose what we need to consume. I like to compare consuming Social Media to eating out. I can easily go to Chuckarama or the Golden Corral for cheap food and lots of it, but (in my opinion) the quality of the food might not be up to par and you might be feeling sick after eating way too much. Or you could go to a nice, well known restaurant that provides a small but fantastic meal, but you have to pay for it, the portion sizes are small and you have to wait weeks or months for a reservation. Or, the third and my final restaurant experience is the relatively unknown, decently priced, great service restaurant that serves fresh and delicious food. The problem is that there are lots of Chuckarama’s, we all know about the fine dining places, and it’s hard to find those amazing places. So what you end up doing is going to Chuckarama’s way too often because you don’t want to have to deal with the pricey guys and the great restaurants are hard to find.

That is the problem with Social Media…at least for me. But, I think I have found the answer. Limit what you read. Once you find a blog that you like ask the blogger for suggestions on his favorite blogs. The good restaurateur isn’t going to send you to Chuckarama, he knows the good stuff. With that kind of access you can create a list of data you find helpful, and don’t go out browsing blog links to find good blogs because you’ll end up at the end of the night popping Tum’s, and on the pot.

I’ve found three blogs that I find helpful. The best in my opinion is A Student of the Real Estate Game by Joe Stampone a NYU Real Estate Graduate student who always posts applicable information for real estate professionals, his posts are always really well done . Another is the Llenrock blog, done by the Llenrock Group (a real estate investment banking group out of Philadelphia), they always address interesting topics that are applicable in todays real estate environment, and they interview successful practitioners who share their wisdom which I find really interesting. The third is Globe St.. Now it’s hard to call Globe St a blog, when it is really a news source, but it has a bunch of bloggers, who are practicing real estate professionals who take time each week to write their thoughts on their niche in the commercial real estate industry, and it is never fluff.

I know this may have been a disorganized rant, but as I start my fall semester in the Cornell Program in Real Estate, I have thought a lot about where I spend my time and I have realized that a lot of my time spent on social media is a waste and I can be more productive as I limit the flow of information to only the quality sites.

With that said, Is my blog a quality site??? The short answer is not yet…ouch… But I am working on it and over the next few weeks I’ll be posting interesting topics relating to my classes and our visiting professionals that I think will be very helpful to anyone in real estate so don’t give up yet!! The reason I blog is not for page views so I can monetize my blog, it is because I find I learn a ton when I sit down and write out my thoughts and things I learn, so I know that the content will be strong. Thanks for reading!

Reviving the Commercial Real Estate Market

I saw this video on Joe Stampone’s blog A Student of the Real Estate Game. If you haven’t been to his blog it has a TON of great content. Go. Now. After listening to this discussion it is clear that investment grade real estate is going to be a tight market for the next few years, and returns will likely be anemic. I love listening to Barry Sternlicht, I feel like he doesn’t really have an agenda when he speaks and just tells it how it is. That is so refreshing, and it helps that he is super intelligent and uber-successful, so obviously his opinion carries some weight!!