Board Meetings

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Spring Meeting April 10-11 in Chicago

It's time to mark your calendar and make your travel plans! The Graaskamp Center for Real Estate Spring board meeting is scheduled for April 10-11, 2008 and promises to be an exciting and informative event. Register online here.

Location & Lodging
The meeting will be held at the Gleacher Center, located at 450 North Cityfront Plaza Drive, Chicago, IL 60611. There are many hotel options for you with many of them being within walking distance to the Gleacher Center. Please see the attached hotel list. Please note we have not reserved or blocked any rooms at any hotels for this event. We encourage you to make your lodging reservations as soon as possible. You can reach the Gleacher Center at: 312-464-8787 (www.gleachercenter.com). Download lodging information.

Program Agenda

"An Assessment of Current Market Conditions: Pitfalls and Opportunities"

Thursday, April 10

6:00 p.m.	Networking Reception for All Invited Guests Room 621, Gleacher Center
7:00 p.m.	Dinner Program Room 621, Gleacher Center
	Welcome and Introductions Tim Riddiough, Director, Graaskamp Center for Real Estate Jim Smith, Managing Principal, Kensington Realty Advisors (Program Coordinator)
	"Chicago's Bid for the 2016 Olympics" Tom Kirschbraun, Managing Director, Jones Lang LaSalle Tom will discuss "Chicago's Bid for the 2016 Olympics" and will highlight some of the real estate aspects of the Olympic bid process, from the construction of stadiums to building a "high rise city" to house Olympic athletes and personnel.

 

Friday, April 11

8:00 a.m.	Continental Breakfast / Networking Room 100, Gleacher Center
8:45 a.m.	Introductory Remarks Tim Riddiough, Director, Graaskamp Center for Real Estate Jim Smith, Managing Principal, Kensington Realty Advisors (Program Coordinator)
9:00 a.m.	"Trends in the U.S. Real Estate Markets" Brett Wilkerson, CEO, Property and Portfolio Research
10:00 a.m.	"The Debt Markets - Current Conditions and Outlook" David Tomfohrde, Senior Vice President, Draper and Kramer (Moderator) Bruce Cohen, CEO, Wrightwood Capital Breck Hanson, Executive Vice President, Bank of America Real Estate Kieran Quinn, Chairman, Column Financial, Inc. & Chairman, Mortgage Bankers Association David Zachar, Executive Vice President, PPM Finance, Inc.
11:00 a.m.	Networking Break
11:15 a.m.	"The Equity Markets - Investor Strategies in the Current Market" Gregory S. Vorwailer, President, Investment Properties CB Richard Ellis (Moderator) Alan W. George, Executive Vice President and CIO, Equity Residential Shobi Khan, Executive Vice President and Principal, Kennedy Associates Jim Martell, CEO, Ridge Property Trust Perry Pinto, Principal and Senior Analyst, Walton Street Capital, L.L.C.
12:30 p.m.	Lunch Eugene Godbold, President, Bank of America Real Estate Room, 350 Gleacher Center

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Fall Board Meeting Recap: "Real Estate Debt Markets: Implications of Recent Innovations and Volatility on Market Fundamentals"

This year's Fall Board Meeting began on the evening of October 18 and was an enlightening evening for more than 75 members, faculty, students and special guests. Professor Tim Riddiough, Academic Director of the Center for Real Estate, and E.J. Plesko, Chair in the Department of Real Estate, kicked off the meeting with an overview of the Center's activities and financial highlights within the past year. Board members had an opportunity to meet the MBA students and hear industry and academic perspectives on the debt market from leaders in the industry.

Board Dinner Highlights -- Thursday, Oct. 18, 2007

Lee Cotton, Vice Chairman of the Centerline Capital Group and President of the Commercial Mortgage Backed Securities (CMBS) Association, was the keynote speaker on Thursday evening. Mr. Cotton delivered his timely talk, "The CMBS Market is Still Relatively Stable," which focused on the recent turmoil in the CMBS market and its consequent implications for the future of that market. Lately, the CMBS market has been struggling because of technical problems. Mr. Cotton asserts that there is currently a lack of transactions since buyers and sellers cannot agree on the value of assets. The underlying fundamentals of the commercial real estate market remain strong with one of the lowest levels of defaults occurring in recent years, but as a result of the disconnect between buyers and sellers on value, there is little activity in the market. Mr. Cotton concluded his intriguing presentation with the assertion that the value of commercial real estate will most likely fall because of these technical problems, yet it must fall in order for the market to begin to function fluidly again.

Board Meeting Highlights -- Friday, October 19, 2007

The board meeting reconvened on Friday at the Fluno Center for a morning session covering the "Real Estate Debt Markets: Implications of Recent Innovations and Volatility on Market Fundamentals." Morris Davis, Assistant Professor of Real Estate and Urban Land Economics and former liaison to Alan Greenspan on housing issues at the Federal Reserve Bank, initiated the morning session with an economic overview and a discussion of the potential implications for the commercial real estate market.

Professor Davis covered a "Macro Economy Overview of Housing and the Real Economy," and began with a recap of his predictions last year on the economy, where he had said that home prices would decelerate and then decline. These predictions were compared to the data in home prices over the past year, where it was seen that home prices have decelerated but they have not declined yet. The prices remain somewhat overvalued and may still fall. This led into the real economy forecasts and the link between the economy and commercial real estate. Professor Davis's first point was that home prices will decrease in the near term, which will in turn slow GDP growth. With a slowdown in GDP growth, there will be a corresponding decrease in commercial investment. If there is a slowdown in GDP and a decrease in commercial investments, there tends to be a flight to quality and a rise in cap rates. This will decrease property values but there will also be more downturn in value because as GDP slows down, rents generally decrease. The combined factors have left Prof. Davis with a bearish view on commercial real estate.

Real Estate Professional Panel: "Real Estate Debt Markets: Implications of Recent Innovations and Volatility on Market Fundamentals"

Following Professor Davis' discussion on the economy, a panel of distinguished professionals working in the real estate debt market gave brief presentations on their views of the market.

Brian Lancaster, Head of Structured Products Research at Wachovia Capital Markets, LLC

Mr. Lancaster presented "The State of the US CMBS Market," discussing the overall effects that have been seen in the commercial real estate debt markets. Since 2004, commercial property cap rates have been decreasing and market fundamentals have improved leading to large price growth in commercial property values. Recently, the trend has been changing. The fundamental cash flows on properties have remained strong, but the slowdown in the market has put pressure on cap rates to increase. He has seen that term defaults on mortgages have remained at lows and believes they should remain low in the near term.

Bob Karner, Executive Director at Morgan Stanley

Mr. Karner gave a trader's view of the market and began with an overview of CMBS trends. He sees both positive signs in the market and negative signs echoing the sentiments of Brian Lancaster and Morris Davis. There are negative signs with the market such as increasing cap rates and a slowing economy, however, there are some positives such as controlled construction limiting supply and a weakening dollar bringing foreign investment. He also showed the trends in the CMBS market as a whole. This year and next there will be a decrease from past years in the issuance of securities. While the overall number of deals will be smaller, the deal size tends to be increasing.

David Friedman, Managing Director at Wrightwood Capital

Mr. Friedman presented the CMBS markets from a user's perspective and discussed how the changes in the cost of capital would affect the typical structure of a real estate transaction. Since late in the summer, the cost of capital across all portions of the capital stack has increased. This increase even includes first mortgage debt, where the number of providers of this capital has decreased and most are requiring a higher risk premium in their terms.

Margie Custis, Managing Director of Principal Real Estate Investors

Ms. Custis concluded the panel presentations with a brief perspective as both a buyer of debt and a lender in this market. She felt that there would be a long period of time until the market recovered. As a buyer of CMBS, she feels that there is potential to find good values at this time, but she cautioned that buyers should beware and understand what they are purchasing.

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2006 Fall Board Meeting Recap

September 13: "Sound Strategies"

Flutist Stephanie Jutt plays softly and slowly holding out each delicate note for as long as possible before breaking into the next one.  At the same time Stephanie Sant’Ambrogio pulls a quick series of independent, energetic notes from the strings of her violin.  The two instruments clash loudly making an important point about the importance of collaboration in creating harmonious chamber music, and also about the importance of collaboration in doing good business.  Music is being used metaphorically to teach business strategy through a program called, Sounds Strategies: Understanding the Art of Strategy, Collaboration and Market Insights.  

Developed by Kay Plantes, a corporate strategist and Stephanie Jutt, a professor in UW-Madison’s Music School the program joins each partner’s talents in creating a highly original presentation that is a great alternative to stale power points.

Performed for the first time at the James A. Graaskamp Center for Real Estate’s annual alumni dinner September 13^th Sound Strategies provided entertainment as well as advice. 

The idea for the program formed when longtime friends Plantes and Jutt got into a discussion about the dynamics of chamber music, music written for a small group with one part for each person and no conductor.  “We were amazed by how many similarities there are between the collaborative process Kay’s clients go through and chamber music,” said Jutt. 

Plantes who has always tried to incorporate alternative types of learning opportunities into her presentations believes in giving the audience a new setting to encourage creativity.  She said, “’new’ setting[s] cast a light on ideas that do not come from the traditional mind-dumb brainstorming exercises.”

Thus the two began developing a program which would allow them to have a conversation about business using a “musical vocabulary.”  The presentation alternates between Plantes who discusses different business lessons and the musicians.  Jutt, along with Jeffrey Sykes, solo pianist and Stephanie Sant’Ambrogio, concertmaster of the San Antonio Symphony use music to emphasize Plantes points.  The musical selection included: Bach, Telemann and Astor Piazzolla.  The pieces chosen are what Jutt terms “conversational” this allows the artists to demonstrate whether or not they are thinking the same because it requires one artist to play a line and another to repeat it back.

All the presenters of Sound Strategy have business experience as entrepreneurs.  Plantes has a Ph.D. in economics from MIT and started her own corporate strategy firm, Plantes Company in Madison in 1989. 

Jutt and Sykes are business as well as musical partners.  Together they founded Bach Dancing and Dynamite Society, a music festival they hold every summer in Madison.  Sant’Ambrogio has also started a similar type of program in San Antonio, Texas called the Cactus Pear Music Festival. 

In the future Jutt and Plantes hope to continue expanding Sound Strategies.  Plantes says the goal of her work is to help unleash potential so that companies can thrive.  “Thriving businesses create stronger communities, happier families and opportunities for those in a community that are most in
 need.”
 

September 14:  Academic and Professional Perspectives on the Real Estate Markets

 Why is everyone talking about the residential housing market?  For starters, residential property represents approximately 56% of America’s fixed tangible wealth.  Secondly, the current housing boom is the longest period of year-over-year growth in housing prices since 1975.

These issues were addressed at the James A. Graaskamp Center for Real Estate Fall Meeting where both the academic and professional real estate panelists shared their opinions and insights on real estate markets.  The overall take-away from the discussion is that the residential market is vulnerable regardless of positive or negative macroeconomic effects. 

According to the academic panelists, Stephen Malpezzi, Morris Davis, and Francois Ortalo-Magne, the recent residential boom has been spurred on by an increase in residential land values and not residential structure values.  This trend is consistent coast to coast.  Both the Fundamentals of Land Pricing Model and the Asset Market Approach, imply land was fairly priced until 2003 or 2004 but neither approach can explain the 2005 and 2006 growth rates.  Based on historical data if the boom is coming to an end, housing prices can be expected to decelerate for 1 to 3 years followed by 4 years of negative growth.  Residential properties with high land to structure value can expect to experience the greatest depreciation in value.

Concurrently, according to the profession panelists Doug Poutasse, David Shulman, and Joseph Williams, there may actually be a free lunch.  Beginning around 2003 was the first time in U.S. history that median monthly increases in housing value (based on a 36 month average) was higher than the median monthly mortgage payments.  This implies home owners were actually being paid to own a home!  This is great news for homeowners but bad news for housing affordability.  In order to maintain housing affordability, yearly housing value increases must slow down or decline inducing a rebalance of the market.

While the residential market rebalances, the professionals optimistically turn their attention to the office market.  Contrary to common belief, the labor market will not tank with the upcoming retirements of the baby boomers.  Baby boomers have not accumulated enough wealth to successfully match their longer life expectancies.  As such, most baby boomers will have to maintain a job after retirement which will lead to higher office occupancy rates.   Additionally, there is approximately a six month lag in job creation.  Jobs added six months ago are just now being reflected in occupancy rates and with current office absorption rates being relatively low, office development is anticipated to resume.