Pension Real Estate Association 2010The Year In Review Contents Mission and Vision 3 Letter from the President 4 Products & Services 8 Scholarships 32 John W. Koza Leadership Program 33 PREA Governance 34 PREA Staff 38 2010The Year In Review
2 Pension Real Estate Association 2010 Mission To serve its members engaged in institutional real estate investment through the sponsorship of objective forums for education, research initiatives, membership interaction and the exchange of information.
Vision To serve and educate our members in the global institutional real estate investment community regarding real estate investments
Our membership is inclusive and diverse
We meet their needs by providing valuable, balanced, useful information in a technologically advanced manner
We provide superior interactive forums
We promote high standards of industry practice 2010 and professionalism
3 Pension Real Estate Association 2010 Dear PREA Members
2010 ended stronger than it began. However, it was a year of mixed signals, with Wall Street show- ing solid recovery but Main Street still facing significant challenges. The stock market continued its nearly two year bull run, from an S&P 500 Index low of 676.05 on March 9, 2009 to its close of 1,257.64 at year end 2010. This represented the largest gain for the S&P 500 Index since the internet bubble of the late 1990s, as reported by Bloomberg. Yet retail sales, the housing market, employment numbers and geopolitical issues suggested that serious difficulties still lay ahead. These mixed messages were reflected in the real estate industry as well, with transaction volume and performance picking up primarily in the core office and apartment sectors, but far less evident in other areas. Like the flight toward US Treasury securities in the fixed income market, increased interest in stabilized, multi-tenant properties in high-demand locations was a sign of investors’ renewed empha- sis on managing risk. Throughout a tumultuous year in the real estate world and broader economy, PREA continued in its mission to serve as an unbiased resource for real estate education, research and information exchange. Our focus re- mained steadfastly on our members, with our efforts concentrated on meeting their growing information and communication needs in an increasingly complex environment. I am pleased to report that our overall membership numbers showed solid growth in all categories, includ- ing investors, managers and other industry professionals. Perhaps more importantly, our existing members con- tinued to demonstrate their support of the organization, helping us to achieve an overall 92% retention level and a 97% retention rate for investors. Our investors account for nearly 25% of our total membership, which has
Membership –5-Year Period 672 700 632 632 600 572 532 Total 500 Members 400 300 164 200 122 129 147 155 Plan Sponsor Members 100 0 2006 2007 2008 2009 2010
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been consistent over the past few years. We track this ratio as an important indicator of our membership com- position. We remained diligent in our efforts this year to offer valuable and timely products and services to educate and inform our members. Through our annual events such as our spring and fall conferences, the PREA Institute, and the addition of other smaller-scale programs such as the Regional Forums and After Hours gatherings, we provided our members with opportunities to meet with peers and learn more about the important issues facing our industry.
Membership Retention – 5-Year Period 89 700 101 76 600 91 63 New Members 500 400 300 Retained 583 200 441 509 531 556 Members 100 0 2006 2007 2008 2009 2010
Membership Composition
Others Investment 37% Managers 38.5%
Plan Sponsors 24.5%
5 Pension Real Estate Association 2010 Dear PREA Members
Our annual Spring and Plan Sponsor Real Estate Conferences maintained a strong level of attendance. After a dip in 2009, we saw increases of 6% and nearly 13% respectively, reaching an all time high for the Fall 2010 attendance number. Details of the conference content will be discussed later in this report. In addition to the annual conferences, PREA offered a number of smaller-scale, targeted events that provided a variety of oppor- tunities for members to gather and stay informed on issues important to their business activity. Our regional investor luncheons provided investors with a forum for frank discussion on topics of their choosing; PREA merely provided the forum, and investors determined the content. Our Regional Summits brought together small groups of investors and managers to continue or expand dialogue on a specific, pressing issue such as the evolving GP/LP relationship. Our new After Hours program gave members the chance to gather with their peers for a few hours after work in a relaxed, informal setting. Guest speakers were invited to address the After Hours groups and spark additional conversation. At our first After Hours in New York, for instance, Kristin Gilb- ertson, CIO of the University of Pennsylvania Endowment, spoke about her experiences managing successfully through a challenging real estate and economic cycle. Other After Hours were held in Boston and Washington, DC. They featured conversations about recent real estate performance in a long-term context and the Federal Deposit Insurance Corporation’s role in minimizing distress through structured loan transactions, respectively, and were led by the MIT Center for Real Estate’s David Geltner and PREA’s Greg MacKinnon in Boston and the FDIC’s Tim Kruse in Washington. Complementing our events is our highly successful Webinar series, which covers current industry develop- ments and topics suggested by our members. A selection of titles from the 2010 webinar series reflects the diversity and timeliness of subjects addressed: Distressed Assets: An Anatomy of Distressed Deals, Real Estate
Conference Attendees –5-Year Period
887 900 Spring Conference 878 Fall Conference 812 800 786 703 689 700 668 646 600 533 500 452 400 300 200 100 0 2006 2007 2008 2009 2010
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Pricing in a Stock Picker’s Market, Real Estate Pricing: Where Are We?, and Public vs. Private Real Estate. Our Research Department made outstanding and important strides in 2010. Greg MacKinnon, our Director of Research, released three research reports, one assessing the benefits of diversification by property size, another detailing the importance of the growing beta risk in real estate investment, and a third, REITs and Real Estate: Is There Room for Both in a Portfolio?, that was referenced by Bloomberg and Pensions & Investments. He also au- thored A Primer on Commercial Real Estate Indices, which provided descriptions of the indices available today that track the performance of U.S. commercial real estate, including the methodologies used for each index and the correlations amongst them. Director of Education and Industry Data Resources Jack Nowakowski continued his work on the Investor Report and other member surveys, daily distribution of industry news blasts, and updates to the Compendium of Statistics, a compilation of multiple data sources about commercial real estate invest- ment. Additionally, we continued to publish, distribute and analyze several industry surveys, the results of which provide important year over year information to and about our membership. The annual PREA Investor Report represents the real estate investment activities of the universe of public and private retirement plans, endow- ments, foundations, and other funds, both in the industry generally and within the PREA membership specifi- cally. The PREA Management Fees & Terms Study analyzes the fee structures and fee levels of private property investment funds. We also participate in the Investment Intentions Asia Survey, which is a joint research project by the Asian Association for Investors in Real Estate Vehicles (ANREV), the European Association for Investors in Non-Listed Real Estate Vehicles (INREV) and PREA which aims to provide a guide to the expected trends of European, US and Asian investors, fund managers and fund of funds managers active in the Asian non-listed real estate fund industry. All of these activities and efforts are possible only with the leadership, guidance and support of our member- ship. The success of our efforts is directly dependent on the active engagement of the Board of Directors, its Executive Committee, the standing PREA committees and staff. 2010 presented us all with a bounty of oppor- tunities and challenges, and PREA responded by advancing our commitment to the educational needs of our members. As we move through 2011, our goal is to maintain and expand PREA’s vital role as the institutional real estate industry’s resource for education, research and communication.
Gail Haynes President
7 Pension Real Estate Association 2010 Products & Services 2010 PREA’s products and services are community to speak on today’s critical issues. designed to provide our members with a We also provide opportunities for smaller full complement of information resources. group interaction and dialogue with peers. Our From conferences and events to webinars to newly revamped Affinity Groups, which meet publications, we seek to educate our members at every conference, are an example of more and facilitate an objective and unbiased personalized discussion on issues of particular exchange of information. We continually seek interest to attendees. In response to our investor new formats, media and content to meet the constituency’s request, we launched the CEO evolving needs of our members. Leadership Forum in 1999. Held the day before We host two major conferences each year, the Spring Conference, the Leadership Forum the Spring Conference and the larger Annual is an invitation-only event designed to facilitate Plan Sponsor Real Estate Conference. At each of high-level communication between investors, these events, we feature leading experts from managers and consultants. 2010within and outside of the real estate investment
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The PREA Institute is held in cooperation with Our publications and webinars augment our major universities and real estate centers across events by furthering the dialogue begun at the United States each year and is designed to the conferences. Or, they are valuable formats explore the academic aspects of managing public through which to introduce new concepts or and private real estate investment portfolios. The analyze current issues facing the industry. Our curriculum is taught by both academicians and research reports seek to explain an issue raised practitioners, blending theory and practice for a by a member or the research committee and balanced understanding of the relevant issues. deemed important to all. The annual surveys Regional investor only luncheons and regional and other publications serve as an important summits are additional localized meetings that reference for year over year data and a way to offer members the chance to get together and track and understand emerging trends. address matters that are mutually interesting or important. Our new After Hours program is an informal after work gathering that encourages 2010networking and dialogue among peers.
9 Pension Real Estate Association 2010 Spring Conference 2010 Organized by industry leaders Keith Following the keynote, a panel of leading CEOs Barket, Garry Garrabrant and Roy March, the 2010 discussed the state of the institutional real estate Spring Conference took an adaptive approach to market and their outlook for property types in which the uncertain economic environment, inspired they specialized. Given that the markets had recov- thematically by parallels between the signals sent ered rather quickly relative to their lows, there was by a stoplight—red, green or yellow lights—and now growing concern about fundamentals. While the complexities of deciding when to re-enter or the experts all noted that fundamentals were slowly increase commitments to the commercial real estate improving in their sectors, with the possible excep- market. The conference opened with an engaging tion of office, all noted that there would continue to keynote discussion between renowned broadcaster be challenges or pockets of weakness until employ- Charlie Rose and former Secretary of State Henry ment recovered. Kissinger. They began with a discussion of the United As capital raising is an important indicator of mar- States’ place in the world, particularly with respect to ket sentiment and stability, the next panel discussed China’s growing stature and economic strength. They the outlook for different sources of debt and equity also spoke about Israel, Iran’s nuclear ambitions, the capital in 2010 and beyond. The remarkable recov- war in Iraq, the European debt crisis and the Obama ery in the REIT market was discussed with agreement administration’s foreign relations efforts to date. that debt and equity securities could become “even more dominant than they are today.” From here, the panel expounded on the future of the private equity model, which encompasses a wide spectrum of investment options. A growing trend observed was that of investors “shifting down the capital structure,”
10 Pension Real Estate Association 2010 Conference Speakers
Co-Chairs: Keith Barket, Senior Managing Director, Angelo, Gordon & Co. Gary Garrabrant, Chief Executive Officer and Co Founder, Equity International Roy March, Chief Executive Officer and Senior Partner, Eastdil Secured, L.L.C.
Speakers: Charlie Rose, Executive Editor and Anchor, Charlie Rose Dr. Henry Kissinger, Secretary of State, 1973-1977, Nobel Peace Laureate Roy March, Chief Executive Officer and Senior Partner, Eastdil Secured Alan Leventhal, Chairman & CEO, Beacon Capital Partners, LLC David Simon, CEO, Simon Property Group, Inc. Barry Sternlicht, Chairman and CEO, Starwood Capital Group Global, LLC Thomas Flexner, Global Head of Real Estate, Citigroup, Inc. Martin Cohen, Co-Chairman and Co-CEO, Cohen & Steers, Inc. Douglas Linde, President & Director, Boston Properties Bill Walton, Co-Founder & Managing Member, Rockpoint Group LLC Conference Co-Chairs Gary Garrabrant, Chief Executive Officer and Co-Founder, Equity International Keith Barket Peter Ballon, Director - Real Estate Investments, CPP Investment Board Gary Garrabrant William Benjamin, Managing Director, AREA Property Partners UK, Ltd. Roy March Anurag Bhargava, Chairman, India Real Estate (IREO) Patrick Boot, Managing Partner, Pacific Alliance Real Estate Fabio Nogueira, Co-Founder and President, BFRE Andrew Ross Sorkin, New York Times chief mergers and acquisitions reporter and columnist Michael Humphrey, Managing Principal and Co-Founder, Courtland Partners, Ltd. Benjamin Brady, Senior Vice President, Harvard Management Company, Inc. Joshua Daitch, Senior Managing Director, Mesirow Financial Jeff Friedman, Principal, Mesa West Capital Jeffrey Kiley, Partner, PricewaterhouseCoopers LLP Melissa Quackenbush, Director of Real Estate Investments, Honeywell Capital Management LLC Tom Sauvageot, Real Estate Investment Officer, West Virginia Investment Management Board Keith Barket, Senior Managing Director, Angelo, Gordon & Co. John Burns, President and CEO, John Burns Real Estate Consulting, Inc. Ara Hovnanian, Chairman, President & CEO, K. Hovnanian Homes Bert Selva, President and CEO, Shea Homes Alice Schroeder, Bloomberg News Columnist and former regulator, CPA and all-star Wall Street Analyst Dean Adler, CEO and Co-Founder, Lubert-Adler Partners, L.P. Thomas Barrack, Chairman & CEO, Colony Capital, LLC
11 Pension Real Estate Association 2010 Spring Conference 2010Continued accepting less reward for less risk. This led to a discus- transparency, alignment of interests, consistency and sion on asset allocation and the balance between standards were covered as well as specifics on how liquid (public) and illiquid (private) investments that to evaluate managers in terms of leverage, market real estate offers. cycles and style drift, prompting a lively discussion, A subsequent panel on international investment with more agreeing to disagree than not. explored the motivations for investing outside of the A session on the For-Sale Housing industry fol- United States, especially when so many domestic lowed. Panelists delved into issues such as foreclo- opportunities presented themselves. Panelists listed sure rates, excess housing supply, industry consolida- factors supporting investment in a particular market, tion and construction costs. It was noted that weak such as high GDP growth in India, strong fundamen- demand from lower household formation was a tals in China and favorable demographics in Brazil. greater concern than oversupply and that principal They noted both advantages and risk in investing reduction rather than rate changes were more im- internationally and all said that local partners were portant in absorbing shadow supply. The cost of land, key to succeeding in foreign markets. and what it implied for future development, was also After a full day of sessions, New York Times colum- discussed. nist Andrew Ross Sorkin addressed the dinner crowd The last session of the conference looked at with an interesting and often shocking account of the appeal of the FDIC’s pool of non-performing the information he discovered while researching his loans to investors. While there are pros and cons book Too Big To Fail. By analyzing public records and involved in such investments, the FDIC was de- interviewing dozens of individuals at the center of scribed as a “willing seller” providing attractive the financial crisis, he was able to piece together a opportunities to prospective investors. That point factually precise and fascinating narrative of the gov- was countered with the argument that there were ernment’s efforts to rescue Wall Street. too many “willing buyers” driving up prices on the Day two began with a panel of investors, manag- pools. There was concurrence on the fact that only ers and consultants who offered their perspectives time would tell who was right. on measuring manager performance. Topics such as
12 Pension Real Estate Association 2010 The Year In Review
IN MEMORIaM Keith F. Barket 1961–2010
n behalf of the entire institutional real estate com- munity, the PREA Board of Directors and PREA staff dedicate this page to the memory of Keith Barket, a respectedO leader and friend. An active member of PREA, Keith most recently chaired the 2010 Spring Conference. Over a career that spanned more than two decades, he built a strong reputation within the broader real estate world for both his investment acumen and his ex- ceptional personal qualities. Following graduation from Georgetown University with a bachelor’s degree and the University of Pennsylvania’s Whar- ton School with an MBA, Keith became active in the property investment community, achieving noteworthy success through recognition of the great opportunities that emerged during the recessionary period of the early 1990s. He joined Angelo, Gordon & Co. in New York in 1997. He rose to become global head of Angelo, Gordon’s real estate group, which under his leadership has expanded geographically and programmatically, reaching new levels of distinction within the industry. Combining business success with a warm and congenial manner, Keith was widely admired for his kindness and gen- erosity. Keith will be missed by the many people who had the good fortune to know him. His many contributions to the orga- nizations and communities within which he lived and worked will not be forgotten.
13 Pension Real Estate Association 2010 PREA Institute 2010 The 2010 PREA Institute was held at Columbia Next, attendees had the opportunity to exam- Business School in New York City. Facilitated by Jef- ine a real world example in depth: a case study of frey Barclay and Columbia’s Lynn Sagalyn, the pro- Normandy Real Estate Partners’ distressed debt gram’s focus was an analysis of restructuring in the investment in Boston’s John Hancock Tower and real estate world. Garage. This was an interesting case with impor- The Institute began by exploring prospective tant issues discussed including valuation, strategic opportunities and strategies emerging from the due diligence and tactical considerations. In current environment. Three principal topics were analyzing this particular “loan to own” opportunity addressed: the real estate and economic environ- and what elements combined to made it attrac- ment, present and future; the set of choices investors tive to Normandy, it became clear that distressed might make to participate in such an environment, debt investment requires more than just real and the considerations involved in making these estate skills. Normandy had debt evaluation and choices. Detailed discussion covering points such as special due diligence capabilities and they rec- weak fundamentals, differences between the current ognized that the banks involved in the building environment and the down turn of the early 1990s, were in a weak position and capitalized on that. the current high levels of leverage and deleveraging, After the case study, the discussion broad- complexities in debt and equity structures, and wild ened to capital markets and real estate finance. cards to watch for such as inflation followed. Taking The recovery in capital markets was described all these into consideration, investors could partici- as striking but uneven, with dramatic declines pate through equity investments with an emphasis in mortgage backed securities while not all on income generation or through investment in forms of securitization were so deeply affected, recovery assets, it was noted. Alternatively, investors as credit card and auto loan issuance showed. could purchase debt which requires real estate skills Moving to the public real estate securities area, as well as an understanding of the debt market. As REITS were discussed in terms of their recent a whole, distressed property investment was seen “amazing” recapitalization, and advantages they as providing “good opportunities to make money, exhibited such as transparency, liquidity and coupled with the risk of a long and ugly process” best generally favorable long term performance rela- navigated by a skilled real estate team. tive to stocks.
14 Pension Real Estate Association 2010 Jeffrey Barclay Marty Cicco Managing Director, ING Clarion Partners Senior Managing Director & Head of Real Estate, Adjunct Professor of Real Estate Finance, Evercore Partners Columbia Graduate School of Business Administration
Lynne Sagalyn Josh Feltman Earle W. Kazis and Benjamin Schore Professor of Partner, Restructuring and Finance, Watchell, Real Estate Finance and Economics and Director Lipton, Rosen & Katz of The Paul Milstein Center for Real Estate, Columbia University
David Sherman Amanda Burden President, Metropolitan Real Estate Equity Urban planner, civic activist and Chair of the Management LLC Adjunct Professor of Real New York City Planning Commission and Estate Finance, Columbia Graduate School of Director of the Department of City Planning Business Administration
Chris Mayer Glenn Rufrano Senior Vice Dean and Paul Milstein Professor of CEO, New Plan Excel Realty Trust Real Estate, Columbia University Graduate School of Business, The Paul Milstein Center for Real Estate
David Hodes Sheena Iyengar Managing Director, Hodes Weill & Associates S.T. Lee Professor of Business at Columbia University, a recipient of the Presidential Early Career Award and author of the recently published and acclaimed book, The Art of Choosing
Following this presentation, a roundtable panel The Institute wrapped on the second day with spoke about opportunities for investing in restruc- a case discussion of debt restructuring by Centro tured debt and equity positions. In the current Properties Group, an Australian based retail invest- environment of restructuring, many investors have ment firm. The parent company had taken on dan- to choose between investing in their own assets or gerous levels of debt during its acquisition of a retail investing in new ones. When restructuring, finding a REIT, which became apparent when banks would path forward can be difficult when investment out- not roll over more than a billion Australian dollars comes diverged from expectations at the beginning of short-term debt set to expire over the next few of the investment period. Stressing the importance months. These lenders were brought together and of bringing the right people to the table, the panel presented three options: liquidation, a recapitaliza- concluded that restructuring issues would have tion of the company or a three-year stabilization to be addressed through negotiations during the plan. Ultimately, the stabilization plan was selected current cycle, and may perhaps be avoided in the and still being executed. This successful outcome future through changes in documentation. was dependent on three crucial elements, accord- Property tours of New York’s new High Line Park ing to former CEO Glenn Rufrano: being open and and the Caledonia, a 545,000 square foot mixed-use honest, convincing creditors that the current man- tower that was built alongside the High Line, con- agement team could best manage the assets and cluded the day’s sessions. putting a fair deal on the table.
15 Pension Real Estate Association 2010 PREAFallConference 2010 Though the real estate markets and and Senior Managing Director, Real Estate, for broader economy had shown considerable signs General Electric Asset Management, led an illu- of improvement by the closing months of 2010, minating dialogue with leading investors about impending debt maturities, legacy issues and the real estate opportunities they perceive and doubts about the staying power of the recovery how they relate to widespread legacy issues. itself were serious causes for concern among in- Among other things, Riordan asked panelists to vestors, as encapsulated in the theme, Weighing describe their institutional missions, how long- Opportunity Against Risk, developed for the 2010 term objectives and shorter-term demands can Annual Plan Sponsor Real Estate Conference. be balanced, how they evaluate managers, and Conference Co-Chairs Dan Cummings and David the importance of communication with their Julier put together a dynamic program that al- partners (in terms of both quantity and qual- lowed for a thorough exploration of this theme. ity). Next, Jacques Gordon, Global Strategist The conference opened with a lively debate, with LaSalle Investment Management, elicited moderated by CNBC’s Ron Insana, between Greg a multitude of perspectives (those of researcher, Mankiw, economist and former Chairman of the consultant, investor and manager) on public and President’s Council of Economic Advisors, and private real estate investment. Panelists shared Robert Reich, political economist and former their expertise and opinions on issues including Secretary of Labor. The two professors shared the advantages and disadvantages of public or their often opposing—and sometimes overlap- private property allocations (in such domains as ping—accounts of the causes of the financial investment returns, niche specialization, volatility crisis and economic downturn as well as their and transparency), the perceived paucity of plan outlooks for recovery. During the following panel session, Phil Riordan, Chief Investment Officer
16 Pension Real Estate Association 2010 Fall Conference Speakers
Co-Chairs: Dan Cummings, Managing Director of Real Estate, Harvard Management Company, Inc. David Julier, Director, Real Estate, DuPont Capital Management
Speakers: Ron Insana, Senior Analyst, CNBC Greg Mankiw, Harvard Professor and former Chairman of the President’s Concil of Economic Advisors Robert Reich, UC Berkeley Professor, former Secretary of Labor and member of President-elect Obama’s Transition Economic Advisory Board Phil Riordan, Chief Investment Officer, Sr. Managing Director, Real Estate, General Electric Asset Management Susan Carter, Director, Real Estate Investments, North Carolina Retirement System Joan Fallon, Manager, Real Estate Investments, U.S. Steel & Carnegie Pension Fund Gloria Gil, Managing Director, Real Assets, University of California Regents Michael Speidel, Managing Director, Brown University Investment Office Jacques Gordon, Global Strategist, LaSalle Investment Management, Inc. Steven Hason, Managing Director and Co-Head, Americas Real Estate, APG Asset Management US Inc. Mike Kirby, Chairman and Director of Research, Green Street Advisors Micolyn Magee, Principal, The Townsend Group Kenneth Rosen, Chairman, Rosen Real Estate Securities David Sherman, President, Metropolitan Real Estate Equity Management LLC Edward Schwartz, Co-Founder, ORG Portfolio Management LLC Russell Appel, Founder and President, Praedium Group LLC Conference Co-Chairs William Grubbs, Senior Director, Portfolio Manager, Invesco Real Estate Dan Cummings Eric Lang, Managing Director, Real Assets, Teacher Retirement System of Texas David Julier Brian Schneider, Managing Director, Medley Partners Howard Margolis, Principal, Willett Advisors Brian Liikala, Administrator, Real Estate, Bureau of Investments, State of Michigan Retirement Systems Neil Madsen, Executive Vice President & Head of Private Equity, AEGON USA Realty Advisors, LLC Yvonne Nelson, Executive Director for Real Estate, New York City Office of the Comptroller Michael Lewis, journalist and bestselling author of Moneyball, Liar’s Poker, The Blind Side and The Big Short Penny Pritzker, Chairman and Co Founder, Artemis Real Estate Partners Neil Bluhm, Principal and Founder, Walton Street Capital, L.L.C. Hamid Moghadam, Chairman and Chief Executive Officer, AMB Property Corporation Paul Morgan, Senior Consultant, Director of Capital Markets, Evaluation Associates LLC Joseph Dear, Chief Investment Officer, California Public Employees’ Retirement System Jane Mendillo, President and CEO, Harvard Management Company
17 Pension Real Estate Association 2010 PREAFallConference 2010Continued sponsor allocations to REITs, marking to market informative and humor-filled conversation about and the implications of Eugene Fama’s Efficient Lewis’s re-engagement with Wall Street following Market Hypothesis with regard to REIT pricing. his publication of Liar’s Poker and the experience Moderating a panel of managers and investors of learning about the financial trades (and color- with a variety of positions on core, value-add and ful personalities behind them) profiled in The Big opportunistic investing, Edward Schwartz of ORG Short. Portfolio Management provided a broad defini- The second day of the conference opened tion for the core space and asked panelists to with a conversation about the economic re- speak to the advantages and drawbacks of core covery, government’s role in the recovery, and in terms of cap rates, return expectations (gener- opportunities in commercial real estate invest- ally and by property type), the possibility of rising ment, led by business leader Penny Pritzker. After interest rates and other considerations. The dis- sharing her own insights through remarks on the tinction between core assets with financing and/ above subjects, Pritzker moderated a discussion or operational distress and more typical oppor- with Walton Street Capital’s Neil Bluhm and AMB tunistic properties was also discussed. Horward Property Corporation’s Hamid Moghadam that Margolis of Willett Advisors then moderated a focused on issues including trade and tax policy, panel of leading investors about executing on the outlook for interest rates, proposed financial real estate strategy. Their discussion covered reform legislation, the future of Government topics including manager selection, regulatory Sponsored Enterprises and the state of real estate and accounting concerns (i.e. capital charges finance, on both the private and public sides. The and FASB 157) and competition for capital with conference’s concluding session, moderated by other asset classes. For the dinner reception, Paul Morgan of Evaluation Associates, featured CNBC’s Ron Insana engaged Michael Lewis in an an educational series of observations and ques- tions to leading investor chief investment officers about their plans’ liabilities, allocations, changes in light of the economic downturn, views of alternative asset classes and investments in the real estate asset class. 2010
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19 Pension Real Estate Association 2010 Winter Quarterly 2010 Two distinct but related themes encom- by PREA for the first time in November 2009. pass the Feature articles of theQ Winter 2010 issue: In a special Plan Sponsor Corner Roundtable, global property investment and real estate debt John Baczewski, President of Real Estate Fidu- investment. As noted in the Editor’s Letter, the ciary Services LLC, spoke with leading investors market downturn brought into greater relief the about timely issues including real estate alloca- risks and opportunities present in both these tions and valuations, manager performance and areas. PREA called upon experts in portfolio objectives. In Capital Markets, PREA a number of geographic markets, in- Director of Research Greg MacKinnon offered cluding the United States, the United an alternative to the conventional wisdom that Kingdom, Europe, China, Japan, and lenders were the primary culprits behind the Australia, to share their insights into formation of a real estate bubble and advised the drivers of investment perfor- equity investors on ways to avoid feeding into mance in these countries and regions. a price-leverage spiral. In Global Markets, Simon In the first of two debt-related Fea- Fairchild observed the first new signs of signifi- tures, the CMBS market was exam- cant decoupling between different geographic ined chronologically, beginning with real estate markets since the onset of the finan- the mid-decade period of exuberance, covering cial crisis, amid a general trend of slowing capital the subsequent overreaction that sent CMBS depreciation. In the Washington Update, William spreads skyrocketing, and looking forward to Stern examined the possible effects of financial forthcoming securitized debt concerns. In the services reform, namely the Wall Street Reform second such Feature, recently issued guidance and Consumer Protection Act of 2009, on real es- from the Federal Financial Institutions Examina- tate investors and asset managers. In Real Estate tion Council on commercial real estate workouts Securities, Michael Bilerman outlined the ways in and mortgage modifications was assessed from which REITs could help investors gain exposure the perspectives of the banking community as to the asset class, regardless of whether they had a whole and of well-capitalized investors in par- taken a defensive or optimistic position on the ticular. strength and durability of economic recovery. In Event coverage in the Winter issue included a Point of View submission, a group of leading both the 2009 Fall Conference, with a focus on asset managers pointed to a real estate equity Fareed Zakaria’s keynote address, and the As- absolute return strategy as a way to combine the sociation for Real Estate Securitization’s Pen- best aspects of private (low volatility) and public sion Fund Forum, held in Tokyo and co-hosted (price discovery, liquidity) property investing. In the One-on-One, we spoke with Stanford hydro- geologist Steven Gorelick about his research into US and global oil supplies, the concept of peak oil, and the outlook for energy prices.
20 Pension Real Estate Association 2010 Spring Quarterly 2010 The size, scope and timing of economic recov- Global Markets writers analyzed certain “myths and ery were the subject of four FeatureQ articles in the realities” of international real estate investment, in- Spring 2010 issue, written by respected industry cluding those involving correlations between real figures Jacques Gordon, William Maher, Jay Kloep- estate returns and GDP growth rates fer, Patrick Halter, Andy Warren and Mark Gibson. as well as property income and sta- One such article assessed the prospects for recov- bility of returns. Marshaling evidence ery across all major asset classes, whereas the other from other markets, In Capital Mar- three focused on different aspects of recovery kets, PREA Director of Research Greg within the real estate market in particular. Together, MacKinnon forecast improvement in they provided a comprehensive sense of where we pricing for secondary properties and were in the recovery and what we might be able to locations, in line with the upward ad- expect going forward. Special contributions to this justment that had already occurred issue included a Point of View submission about among trophy properties and within the evolving role of investor relations personnel in top-tier markets. Real Estate Securities assessed the property investment organizations, as well as an In- likely effects of low levels of new construction on dustry Oversight essay on the importance of Real the outlook for real estate investors generally and Estate Information Standards to the industry with REITs particularly, with additional analysis by loca- respect to risk management, index construction, tion and property type. In the Plan Sponsor Corner, and other important concerns. Michael Humphrey spoke with Susan Doyle about The One-on-One interview with former Federal the process of manager evaluation, touching upon Reserve Board Governor Frederic Mishkin (who had issues including style drift and performance mea- previously given a well-received address at PREA’s surement. Conference highlights in this issue cov- 2008 Annual Plan Sponsor Real Estate Conference) ered all sessions of PREA’s 2010 Spring Conference, was devoted to the European debt crises and their with a particular focus on the opening panel on possible effects on global economic recovery. capital-raising in today’s market environment. The Washington Update focused on the potential implications of financial reform, and specifically a proposed Senate bill, for oversight of real estate fund managers, especially as it relates to registra- tion with the Securities and Exchange Commission.
21 Pension Real Estate Association 2010 Summer Quarterly 2010 The Feature articles of the Summer Issue In the Washington Update, three legal experts were devoted to a series of factorsQ influencing pen- examined the SEC’s adoption of Rule 206(4)-5, sion fund investment. Douglas Elliott of the Brook- which is designed to minimize “pay-to-play” prac- ings Institution examined government intervention, tices among certain investment advisors. In One- which he analyzed along the lines of regulatory on-One, Jeffrey Barclay interviewed leading bank- reforms such as the Dodd-Frank Act, the possible ruptcy lawyer Harvey Miller about the changes introduction of new taxes, the state of the Pension in restructuring law that have occurred over the Benefit Guaranty Corporation (PBGC), and the po- past several decades, and how market dislocation tential for increased government could lead to real estate investment opportuni- involvement in the management ties. In Capital Markets, PREA Director of Research and accounting of state and lo- Greg MacKinnon noted the double-edged sword cal pension plans. Asieh Mansour of real estate’s increasing integration into the capi- of RREEF looked into some of the tal markets, focusing in particular on the potential shortcomings of traditional asset inflationary effects in the United States of trends allocation models in terms of the in trade with and currency pricing in China. Con- sometimes unsafe assumptions ference coverage focused on both the 2010 PREA upon which they are constructed, Institute, held at Columbia Business School, and assumptions which include the the 2010 RERI Research Conference held at DePaul normal distribution of returns, consistency of re- University’s School of Business. A special Point of turns over time, lack of serial correlation and equal View contribution considered a number of “non- weighting by investors of return deviations on the market forces,” including investment pacing, due upside and downside. While recommending quan- diligence, portfolio monitoring and construction, titative responses to each of these factors, Mansour and expectation setting regarding risk and return, advocated a continued focus on qualitative risk upon which investors could focus in preparation management as well. Bryan Boudrea of Mercer de- for the next market correction. In Real Estate Se- scribed how asset-liability mismatches can lead to curities, recent REIT performance was reviewed, volatility in pension fund performance, and how and the kinds of economic environments in which liability-driven investing (LDI) could help minimize property stocks would either continue to thrive such volatility. He looked into a number of the plan, or, alternatively, experience greater difficulty, were sponsor, and market issues that must be taken into considered. In Global Markets, additional evidence account to make LDI work in a variety of circum- supporting the case for decoupling was observed, stances and commented on the possible effects as were currency impacts in different countries and on the capital markets of the shift toward liability- potential investment opportunities in particular re- driven investing. gions and metro area markets.
22 Pension Real Estate Association 2010 Fall Quarterly 2010 As noted in its Editor’s Letter, writers and and investment managers were contemplated. The contributors to the Fall 2010 issueQ of the Quarterly Real Estate Securities Department took note of included individuals with a wide range of exper- REITs’ significant contributions to acquisition activ- tise and multiple perspectives. Among them were ity in recent quarters, looked into REIT pricing, and investors, asset managers, consultants, academics observed a profusion of new REIT offerings special- and highly regarded political observers. For the is- izing outside the core property types. In Global Mar- sue’s Cover Story, the University of Chicago’s Joe Pa- kets, updates were provided on property markets in gliari led an informative roundtable discussion with the US, UK, Ireland, Australia, the Netherlands and leaders from the investor, consultant, and manager Canada, and further divergence between markets constituencies: Keith Barket of Angelo, Gordon & based on local factors was described. After recount- Co., Jon Breautigam of the Michigan Department ing relatively strong private equity real estate per- of Treasury, Pat Halter of Principal Global Invest- formance over the most recent quarter (Q2 2010), ments, Jamie Shen of Callan Associates and Marc PREA Director of Research Greg Weidner of Franklin Templeton Real Estate Advisors. MacKinnon underscored the im- The group examined subjects including the US and portance, in his Capital Markets global economy, property investment strategies, report, of situating such perfor- fee structures (and the investment management mance in the context of invest- model more broadly), risk measurement and the ment alternatives, namely fixed development of investment capabilities and hu- income and public equities (or man talent within investment teams. One of the is- more specifically, the dividend sue’s Feature articles explored the commercial real yields of utility stocks). In the One- estate debt market, with particular focus on CMBS on-One interview, we sat down and CDOs. Another Feature highlighted the possi- with Clive Crook of the Financial Times for an en- ble advantages of global real estate allocations and gaging discussion about the connections between discounted concerns over currency fluctuation. A US politics and economy, including a look both at final Feature examined the future of the US dollar short term considerations and longer term issues in particular, forecasting long-term erosion as a re- that will require greater accommodation between serve currency. the political parties. In the Washington Update, the likely effects of Section 619 of the Dodd-Frank Act (which consti- tutes part of the “Volcker Rule”) on real estate funds
23 Pension Real Estate Association 2010 PREA Quarterly Writers 2010 Department Writers Spring 2010 Washington Update QAnthony J. LoPinto and William E. Stern and Associates, Goodwin Procter Richard Marshall, Korn/Ferry International Real Estate Securities Frederic Mishkin, Alfred Lerner Professor of Banking Michael Bilerman, Citi Investment Research and Financial Institutions at Columbia Business Global Markets School, former member, Federal Reserve Board Simon Fairchild, IPD of Governors Capital Markets Jacques Gordon and William Maher, LaSalle Greg MacKinnon, PREA Investment Management Jay V. Kloepfer, Callan Winter 2010 Patrick Halter and Andy Warren, Principal David Geltner, MIT Real Estate Investors Colin Lizieri, Cambridge University Mark D. Gibson, Holliday Fenoglio Fowler Gianluca Marcate, University of Reading Susan Doyle, General Electric Asset Management Yongheng Deng, National University of Singapore Michael Humphrey, Courtland Partners Yuichiro Kawaguchi, Waseda University Douglas Poutasse, NCREIF David Higgins, Royal Melbourne Institute of Technology Summer 2010 Patrick Sargent, CMSA Board of Directors Douglas Elliott, Brookings Institution Sam Chandon, Real Estate Economics Asieh Mansour, RREEF John Baczewski Real Estate Fiduciary Services LLC. Bryan Boudreau, Mercer Jamie Behar, Promark Global Advisors Harvey Miller, Weil, Gotshal and Manges (formerly GM Asset Management). Jeff Barclay, ING Clarion Partners Charles Carpenter, State of Wisconsin Paul Mouchakka, Pension Consulting Alliance Investment Board Field Griffith, Virginia Retirement System Fall 2010 Alan Snoddy, Church Pension Fund Joe Pagliari, University of Chicago Steven Gorelick, Stanford University, Glenn Lowenstein, Lionstone Group author of Oil Panic and the Global Crisis Keith Barket, Angelo, Gordon Drew D. Fox, Indraneel Karlekar and Marc Weidner, Franklin Templeton Joseph P. Smith, ING Clarion Real Estate Securities Jamie Shen, Callan Jared Chase, PREA Patrick Halter, Principal Real Estate Investors Susan Marshall, consultant to PREA Jon Braeutigam, Michigan Department of Treasury Clifford Lai and Jake Blum, Ranieri Real Estate Partners Camilla Sutton, Scotia Capital Milan Khatri, Alessandro Bronda, and Antonio Alvarez, Aberdeen Asset Management Clive Crook, The Financial Times
24 Pension Real Estate Association 2010 Research Review 2010 In 2010, the PREA Research Review made the Recent reviews include: full transition from an annual printed document Does Money Grow on Trees? The Diversification to an on-line, electronically distributed publica- Properties of U.S. Timberland Investments tion of the Pension Real Estate Association. This allows immediate member access to important Slicing, Dicing, and Scoping the Size of the U.S. Com- and relevant research as it is published. As before, mercial Real Estate Market PREA enlisted recognized professionals in the in- Risk and Returns of Commercial Real Estate: A Prop- stitutional real estate investment industry to offer erty Level Analysis original reviews and commentary on recent ar- ticles previously published in various industry and Does Skin in the Game Matter? Director Incentives academic research journals. Since 1996, nearly and Governance in the Mutual Fund Industry 400 academic papers have been reviewed. The Secular and Cyclic Determinants of Capitaliza- tion Rates Understanding Commercial Real Estate: How Differ- ent from Housing Is It? The Real Estate Risk Premium: A Developed/Emerg- ing Country Panel Data Analysis International Diversification Strategies for Direct Real Estate
Each review includes a general description of the research, an overview of the paper’s research and methodology, how the research might apply to investors, and any limitations in the study’s ap- plicability.
25 Pension Real Estate Association 2010 Research Reports 2010 2010 saw the continuation of the PREA Research Report Series, prepared by PREA’s director of research Greg MacKinnon. Published online, these reports are designed to provide unbiased research on timely topics important to our members. Many times, the questions posed in the research report are generated by our members in discussion with our research department.
Does Property Size Play a Role Is Beta-Risk Becoming More in a Portfolio? Important to Real Estate? Is there a benefit to diversifying a real estate Over the last twenty years real estate has portfolio by size of property? Do large and become increasingly integrated with the small properties typically have different risk- broader capital markets. But if real estate is return characteristics? Whether the investment becoming more integrated with the capital characteristics of properties vary by market value markets, might this change the nature of the is a question of direct relevance to investors as risks to which real estate investors are exposed? they structure real estate portfolios, and is the Basic financial theory breaks the risk faced by issue to which this report is directed. The report an investor up into two sources: (1) beta-risk, begins by reviewing existing academic research due to risk factors affecting the overall market on the issue of property size, research which has and therefore all properties in a common overall shown mixed results, and then presents a manner, and (2) diversifiable risk, due to factors new look at the issue of property size using data affecting only a particular property or location. If up-to-date through the most recent cycle. properties become more exposed to common factors deriving from capital markets issues, it stands to reason that beta-risk will become
26 Pension Real Estate Association 2010 The Year In Review
more important as a component of overall REITs and Real Estate: Is There risk. This report uses returns on the forty-nine Room for Both in a Portfolio? MSAs that have consistently been represented This report examines important questions regard- in the NCREIF Property Index (NPI) since 1990 ing the advantages and drawbacks of investment and calculates the proportion of overall risk in private equity real estate versus REITs. Among (by volatility of quarterly returns) for each MSA these are returns over short-term and long-term that can be attributed to market-wide, national horizons, liquidity, and suitability for investors factors, or beta-risk. with varying degrees of risk tolerance. A central element of the analysis involves an assessment of how public and private real estate can act as substitutes for, or complements to, one an- other. The result is a comprehensive look at the roles the two forms of property investment can play, separately or in concert, within a broader portfolio, using up-to-date data that includes the most recent market cycle. Included in the report is an appraisal of the similarities and differences between public and private real estate, and of whether one can rightly be considered a proxy for the other.
27 Pension Real Estate Association 2010 Webinars 2010 Webinars are internet- based forums where members can access panel discussions complete with graphic presentations directly from their offices. These forums focus on a specific topic and provide participants with valuable insight into current industry issues. Members can participate in real time or can access the replay of the broadcast at their convenience. PREA continued this highly-successful series with four timely topics:
Distressed Assets: An Anatomy of Real Estate Pricing Distressed Deals in a Stock Picker’s Market March 1, 2010 June 29, 2010 On PREA’s first webinar of 2010 Terri Herubin of PREA’s series of webinars continued with a discus- The Townsend Group delved into the nuts and sion of asset-level developments in the private bolts of prominent distressed asset purchases with and public markets and commercial property Jeffrey Dishner, Senior Managing Director, Star- investment activity. Moderator John Baczewski wood Capital Group Global and Richard Saltzman, of Real Estate Fiduciary Services asked the panel, President, Colony Capital. Their discussion focused which included Craig Leupold of Green Street Ad- on the motivations behind distressed asset invest- visors, Allen Smith of Prudential Real Estate Inves- ment to date, what opportunities currently exist, tors and Robert White, Jr. of Real Capital Analytics, and which companies are currently competing about current trends and the outlook for the re- in the distressed asset segment. The group also mainder of 2010. Among the questions the panel provided an outlook for future transactions in this considered were: area. n Are we experiencing a durable market recov- ery? What are the signs? Webinar Participants: n As the market begins to recover, what kinds of n Terri Herubin, The Townsend Group pricing differences can be found between core, n Jeffrey Dishner, Starwood Capital Group Global, LLC value add, and opportunistic investments and n Richard Saltzman, Colony Capital, LLC between primary, secondary and tertiary markets? n How is capital availability influencing pricing in the market?
Webinar Participants: n John J. Baczewski, Real Estate Fiduciary Services n Craig Leupold, Green Street Advisors n Allen Smith, Prudential Real Estate Investors n Robert White, Jr., Real Capital Analytics
28 Pension Real Estate Association 2010 Real Estate Pricing: Where Are We? Public vs. Private Real Estate November 30, 2010 December 16, 2010 David Geltner, the George Macomber Professor of This webinar continued the debate over pub- Real Estate Finance at the MIT Center for Real Es- lic versus private commercial real estate. What tate and one of the world’s preeminent experts on roles do public and private real estate play in the real estate markets and trends, reviewed the third portfolios of institutional investors? PREA’s Greg quarter Moody’s/REAL Commercial Property Price MacKinnon set the ground work for this discussion Index data and shared his insights in a dialogue with a review of a recent research paper, “REITs moderated by PREA Director of Research Greg and Real Estate: Is There Room for Both in a Port- MacKinnon. Dr. Geltner discussed notable obser- folio?” Then moderator Martha Peyton, Managing vations and trends from the data and identified Director, Global Real Estate Strategy & Research the sectors within the market that have been over at TIAA-CREF, discussed the options with T. Ritson and underperforming, and discussed what the fu- Ferguson, Chief Investment Officer, ING Clarion ture may hold for commercial real estate markets. Real Estate Securities, who argued from the public point of view, Kevin R. Smith, Managing Director Webinar Participants: and Senior Portfolio Manager for Prudential Real n David Geltner, MIT Center for Real Estate Estate Investors flagship, who reviewed private n Greg MacKinnon, Pension Real Estate Association equity real estate and consultant Cate Polleys of Hewitt EnnisKnupp, who looked at both sides of the coin.
Webinar Participants: n Martha Peyton, TIAA-CREF n Greg MacKinnon, Pension Real Estate Association n T. Ritson Ferguson, ING Clarion Real Estate Securities n Catherine Polleys, Hewitt EnnisKnupp n Kevin R. Smith, Prudential Real Estate Investors
29 Pension Real Estate Association 2010 Other Events
Pension Real Estate Association PREA Affinity Groups Program 2010 Affinity Groups were launched Regional Summits were created Affinity Groups San Francisco PREA’s Affinity Group program is the outgrowth of a strategic priority—enhancing the membership experience—set forth by the Association’s Board of Directors. The program is one with the goal of providing an- to give the investor and manager Regional Summit of several initiatives undertaken in recent years to maintain the sense of personalized member interaction for which PREA is known, even as the organization expands in terms of membership and stature. Investors/Managers: Looking to the Future An Interactive Roundtable Discussion Following the mandate to preserve opportunities for small-group interaction, membership in other avenue for small group constituencies the opportunity to each affinity group is limited to 40 individuals, balanced by member constituency between Tuesday, December 1, 2009 institutional investors, asset managers and others. Additionally, members are expected to engage at 10:00 a.m. actively in group discussion at meetings held in conjunction with the major conferences as well The Westin St. Francis as during conference calls or other ad hoc collaborations organized in the intervals between 335 Powell Street formal gatherings. interaction, this time focused meet locally and hear about current San Francisco, CA 94102 Alexandra’s Room Thematically, the affinity groups are designed to bring multiple perspectives to bear on topics of specific interest. As such, they allow for an exploration of niche or specialized subjects that might not previously have been featured in plenary conference programs. Indeed, the affinity groups may serve as a springboard for the development of new and unexplored content for the major on shared interests. In 2010, the market events. These summits are conferences.
All affinity groups share a common mission of elevating investor education and a universal dedication to the exchange of best practices among members. They will both complement existing programs and offer a new forum through which participants can stay informed by program was revamped to better also chances to continue dialogue focusing on one or more particular aspects of the real estate and investment markets. Advantages of Affinity Group Membership accomplish its goal. Each affinity that was started at a recent confer- Specialized Focus n Discussion between members with shared interests n Presentations by experts in the field n Related news and updates during meetings and by email Engagement group, open to a maximum of 30 ence or other event. The Chicago n Limitation on membership size n Peer-to-peer exchange n Opportunities to build relationships n Balance between member constituencies individuals from member firms by Leadership summit, for example, was a continu- n Participation in a group recognized for subject matter expertise and experience n Enhanced standing as an active member of PREA invitation, is devoted to a specific ance of the GP\LP dialogue that be- topic, such as green building, gan at a conference and continued international investment or capital markets. Af- in a webinar and a New York regional summit. finity groups meet during the Spring and Annual These regional summits are an excellent forum conferences and members sign on for two year for smaller groups to address pressing issues im- terms. pacting the industry.
The new After Hours event is an opportunity Regional Luncheons/Breakfasts were estab- for members to gather informally after work to lished at the request of the Plan Sponsor Council network with their colleagues and to exchange and were intended to provide a private forum for information in a casual, low key environment. investors to meet with their contemporaries for Often a guest speaker will offer a short presenta- candid and open dialogue. Investors determine tion on a particularly timely and interesting topic. the content and format of the meeting, and After Hours were held in New York, Boston and PREA helps coordinate logistics. Washington DC in 2010 with more planned for
the upcoming year. PREA after hours
Pension Real Estate Association Investment Industry Presentation Series May 18, 2010 5:30pm to 7:30pm
30 Pension Real Estate Association 2010 Other Publications 2010 A Primer on Commercial Real Estate PREA Management Fees Indices This report provides an introduction & Terms Study The objective of the study to the indices available today that track the is to analyze the fee structures and fee levels
January 2010 performance of U.S. commercial of private property investment funds with A Primer on Commercial Real Estate Indices Part 1: Overview
Executive Summary real estate. It includes a one-page the aim of creating a systematic approach to This report is Part 1 of a two part primer on the indices available today that track the performance of the U.S. commercial real estate market. Part 1 consists of a brief overview of the available indices. Part 2 will contain an analysis of the statistical relation- ships between the indices and their lead/lag structure. Part 1 contains three sections: Section A provides a one-page tear-sheet on each index with basic factual information. This is meant to provide users with an easy reference guide to basic information on each index. Section B provides a brief, point-form overview of each index, covering methodology employed, some major issues involved in interpreting each index, et cetera. This is meant to provide users with a quick way in which to become familiar with tear sheet on each index covering gathering and reporting information on fee each index, the differences between them and some of the issues in their use. Section C provides a look at the returns over time on the indices and their correlations.
Contents Introduction 2 factual information, a point-form structures, increasing the transparency and Section A: Index Tear-Sheets NPI 4 IPD US 5 TBI 6 Moody’s/REAL CPPI 7 NFI-ODCE 8 overview of the methodologies of comparability of fee structures and levels of NCREIF/Townsend Fund Indices 9
Section B: Methodologies and Issues NPI 10 IPD US 12 Research Report Research Association Real Estate 2010 Pension TBI 14 Moody’s/REAL CPPI 17 each index, and a brief look at the private real estate investment funds. NFI-ODCE 18 NCREIF/Townsend Fund Indices 19
Section C: Correlations and Basic Statistics 20
Glossary of Abbreviations 25 correlations amongst the indices.
Greg MacKinnon Director of Research, PREA [email protected] Project Steering Committee: The report is directed at two audi- The Investment Intentions Asia Survey Jim Clayton, Cornerstone Real Estate Advisers LLC Fabiana Lotito, TIAA-CREF Mark Roberts, INVESCO Real Estate 1 Research Report January 2010 ences. For those unfamiliar with the is a joint research project by the Asian As- indices it provides a quick way to become ac- sociation for Investors in Real Estate Vehicles quainted with each index and some of the issues (ANREV), the European Association for Inves- in their use and interpretation. For users already tors in Non-Listed Real Estate Vehicles (INREV) familiar with the indices the report can serve as a and PREA which aims to provide a guide to useful reference guide, providing a summary of the expected trends of European, US and index characteristics in a single source. Asian investors, fund managers and fund of funds managers active in the Asian non-listed The PREA Investor Report represents the real real estate fund industry. estate investment activities of the universe of public and private retirement plans, endowments, Compendium of Statistics This com- foundations, and other funds, both in the indus- pendium compiles data on commercial real try generally and within the PREA membership estate markets from a wide variety of industry specifically. sources into one comprehensive resource. Pension Real Estate Association This data is updated on a monthly basis or more frequently as needed. Examples of data INVESTOR available in the compendium include: REPORT n NCREIF/IPD Property Returns n REIT Returns n Vacancy Rates by Geographic Region n Rent Growth by Geographic Region n Real Estate Transaction Volume n CMBS/CMBX Spreads
Published August 2010
31 Pension Real Estate Association 2010 Scholarships 2010 In keeping with our educational mission, PREA awards scholarships on an annual basis to promising students studying real estate at the undergraduate and graduate levels. PREA also partners with the Robert A. Toigo Foundation to grant a PREA/Toigo scholarship which is awarded to minority and women students. Since 1994, PREA has awarded nearly $500,000 in scholarships to more than 168 students studying real estate and related fields across more than forty academic institutions in the United States and Canada.
PREA Real Estate Scholarship Recipients
Alireza Bozorgi Julia Freybote Robert Sajovich Virginia Tech Georgia State University Cox School of Business at Southern Methodist University
James Conklin Jesse M. Keenan Columbia University Josh Troxel Pennsylvania State University University of Pennsylvania’s Wharton School
Mark Ambrose Damiani Kristen Link University of Southern California University of Washington
Elizabeth DiLorenzo Brian Roland Massachusetts Institute Northwestern University of Technology
PREA-Toigo Scholarship Recipients
David De La Rosa Robert Lopez University of Chicago Stanford Graduate Brian Wong School of Business Harvard Business School
32 Pension Real Estate Association 2010 John W. Koza 2010 Leadership Program
Named in recognition of former chairman John Koza, a respected industry leader and ex- ponent of investor education, the Leadership Fellows Program is designed to promote engagement in PREA among up-and-coming leaders in the institutional investor community. The objective is to famil- iarize young investors with the organization early in their careers to ensure that they are fully aware of the educational resources available to them. The program will also be a source of the association’s next generation of institutional leadership. Fellows are nominated by senior executives of their investor organizations to participate for a two- year period. Those selected as Fellows receive a conference fee waiver and travel expense stipend to attend the Spring Conference, the Annual Plan Sponsor Real Estate Conference and the PREA Institute. At that time, Fellows will be asked to contribute their time and skills to the association through partici- pation in one of PREA’s standing committees and/or affinity groups. Experience within the leadership structure will give Fellows the opportunity to maximize the benefits of membership for their own firms as well as the association at large. Additionally, their participation in PREA’s educational forums will give them opportunities to expand upon their knowledge of industry trends and developments.
Winners of the 2010 John W. Koza Leadership Program:
Clemenz Fraessdorf Ashley Strange ATP Real Estate Teacher Retirement System of Texas
33 Pension Real Estate Association 2010 Board of Directors 2010 n2011 Jamie Behar Russell Appel Micolyn Magee Chairman Praedium Group LLC The Townsend Group GM Asset Management
Jon Braeutigam Yvonne Nelson Raymond Torto Michigan New York City Office Vice Chairman Department of Treasury of the Comptroller CB Richard Ellis
Quintin Primo III Theodore Eliopoulos Capri Capital Partners LLC Field Griffith California Public Treasurer Employees’ Virginia Retirement System Retirement System
Jeffrey Fisher Dale Anne Reiss Indiana University, Ernst & Young LLP Charles Leitner Center for Real Estate Secretary Studies RREEF
Gloria Gil Karl Smith Jr. University of California KHS Real Estate Partners Steven Hason APG Asset Management US Inc. Plan Sponsor Council J. Alan Snoddy Executive Committee Jonathan Gray Church Pension Fund The Blackstone Group
William Heitmann Andrea Stephen Verizon Corporation Cadillac Fairview Corporation Ltd.
Glenn Lowenstein Barry Sternlicht The Lionstone Group Starwood Capital Group Global, LLC
Mary Ludgin Heitman
34 Pension Real Estate Association 2010 Plan Sponsor Council Executive Committee
Steve Hason Gloria B. Gil Plan Sponsor Council Executive University of California Committee Chairman APG Investments US Inc.
Laurie Dotter Eric Lang Plan Sponsor Council Executive Teacher Retirement System of Texas Committee Vice Chairman Texas Treasury Safekeeping Trust Company
Juri Pill Edgar Alvarado Oxford Properties Group Allstate Investments LLC
Ville Raitio ATP Real Estate Jamie Behar
GM Asset Management
Michael Speidel Brown University Investment Office Peter Crosson Alaska Electrical Pension Fund
Marjorie Tsang New York State Common Retirement Fund Joan Fallon U.S. Steel & Carnegie Pension Fund
35 Pension Real Estate Association 2010 PREA Committees 2010 Conference Committee Institute Committee NEW programs Committee
Spencer Haber, Co-Chairman, H/2 Capital Partners LLC Jeffrey Barclay, Chairman, Goldman, Sachs & Co. Gadi Kaufmann, Chairman RCLCO/Robert Charles Lesser & Co. Howard Margolis, Co-Chairman, Willett Advisors Sheila Kneeshaw, City of Detroit— General Retirement System Linda Assante, Oak Hill Investment Management Trina Bigby-Sanders, Los Angeles County Employees Retirement Association Mary Ryan McCarthy, Hines Julie Brenton, Ranieri Real Estate Partners LLC
David Boyle, Morgan Stanley David Sherman, Metropolitan Real Estate Equity Field Griffith, Virginia Retirement System Alternative Investment Partners Management LLC Steve Quazzo, Transwestern Investment Company Peter Katseff, Tennessee Consolidated Pamela Wright, Greenhill & Co., LLC Retirement System Michael Speidel, Brown University Investment Office Eric Wurtzebach, Macquarie Capital (USA) Inc. Greg Moran, Dividend Capital Group Publications Committee Membership Committee Government Affairs Committee Kevin Maxwell, Chairman, TIAA-CREF Robert Vogelzang, Chairman, Triton Pacific Capital Joel Rubin, Chairman, Seyfarth Shaw LLP Susan Swindell Carter, North Carolina Victor Del Pizzo, Alcatel-Lucent Retirement System Joseph Christian, DLA Piper US LLP Brent Elkins, Colony Capital, LLC Joan Fallon, U.S. Steel & Carnegie Pension Fund Scott Darling, American Realty Advisors Joyce Frater, Morgan Stanley Ritson Ferguson, ING Clarion Jay Farris, Alston & Bird Patrick Kendall, Cornerstone Real Estate Advisers LLC Robert Kochis, The Townsend Group Steven Greenspan, JPMorgan Asset Management Jeffrey Kusumi, Rubenstein Partners Dennis Martin, RREEF Lawrence J. Hass, Paul, Hastings, Janofsky & Walker LLP Christian D. MacDonald, Buchanan Street Partners Herbert Krueger, Mayer Brown LLP Research Committee Tuba Malinowski, Stockbridge Real Estate Funds John H. Kuhl, Cox, Castle & Nicholson LLP Jeffrey Fisher, Indiana University, Barbara McDowell, ORG Portfolio Management LLC Center for Real Estate Studies Lennine Occhino, Mayer Brown LLP Melissa Quackenbush, Honeywell Capital Jacques N. Gordon, LaSalle Investment William Salisbury, Fiduciary Services, Inc. Management LLC Management, Inc.
Timothy V. Schlitzer, Mass PRIM William Hughes, UBS Asset Management
Jamie Shen, Callan Associates, Inc. Youguo Liang, Prudential Real Estate Investors
Max Swango, Invesco Real Estate Will McIntosh, Fund Evaluation Group
Christopher White, BNP Paribas, Investment Partners Martha Peyton, TIAA-CREF
Juri Pill, Oxford Properties Group
Ville Raitio, ATP Real Estate
36 Pension Real Estate Association 2010 Affinity Group Leaders Alternative Real Estate Investment Green Building & Sustainability Faye Beverett Denise Stake Bard Consulting Cornerstone Real Estate Advisers LLC Matthew Hershey Vance Voss Brookfield Asset Management Inc. Principal Real Estate Investors Doug Lee UBS Investment Bank International Real Estate Investment Lisa Amzallag Capital Markets LBA Advisors Devin Murphy Joshua Daitch Morgan Stanley Mesirow Financial Frank Schmitz Park Hill Real Estate Group Reporting & Valuation Douglas Poutasse Development Trends, Redevelopment Bentall Kennedy and Repositioning Trends Michael Buckley Research UTA School of Architecture Sam Chandon Dan Moore Real Capital Analytics Hines
37 Pension Real Estate Association 2010 PREA Staff
Gail Haynes Amy Laffargue Wanda Molina President Director of Meetings and Events Executive Assistant
Greg MacKinnon Sandra McDermott Sue Marshall Director of Research Director of Member Services Consulting Director of Communications Jack Nowakowski Darlene McIntosh Director of Education Accountant Elizabeth Reegan and Industry Data Resources Consulting Director Jared Chase of Advertising Sales Staff Writer & Editor 2010
38 Pension Real Estate Association 2010 2010The Year In Review Pension Real Estate Association
The Year In Review
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