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  4th Annual Real Estate General Counsels Forum (East)
New York, NY
September 29-30, 2014
  The 3rd Annual Real Estate CFO Forum East
New York, NY
September 29-30, 2014
  4th Annual Bank & Financial Institutions Special Assets Executive Conference on Real Estate Workouts (Midwest)
Chicago, IL
September 29-30, 2014
  The 2nd Annual Land & Homebuilding Real Estate Private Equity Forum (West)
Las Vegas, NV
October 7-8, 2014
  15th Annual European Real Estate Opportunity & Private Fund Investing Forum
London, UK
November 3-4, 2014
  Borrower & Investor Forum on Real Estate Mezzanine Financing & Subordinated Debt
New York, NY
November 10, 2014
  5th Annual Financing, Investing & Real Estate Development for Data Centers (West)
Half Moon Bay, CA
November 12-13, 2014
  The 3rd Annual Single Family Rental Investment Forum
Scottsdale, AZ
December 3-5, 2014
  10th Annual Non-Traded REIT & Retail Alternative Investment Symposium
Dana Point, CA
December 3-4, 2014
  12th Annual Winter Forum On Real Estate Opportunity & Private Fund Investing
Laguna Beach, CA
January 21-23, 2015
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Sonny Liston - Cassius Clay - Barney Felix
Monday, March 03 2014 | 09:16 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Liston - Clay - Felix

As tends to happen from time to time, an event that occurred long ago suddenly resurfaces. This past week, on its 50th anniversary, the famous boxing match between World Heavyweight Champion Sonny Liston and challenger Cassius Clay was all over the media. Why? Well, it certainly wasn
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

And the Oscar goes to...
Monday, February 24 2014 | 09:12 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

And the Oscar goes to...

I
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Cool retail leasing APP / 22-22-22 / A dog's tail
Monday, February 10 2014 | 08:59 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Cool retail leasing APP

I met Dan Levy in 1997 at the very first commercial real estate technology conference. This NYC event was organized by Peter Pike, an early commercial real estate blogger. Since then Dan has experienced success in both residential and commercial real estate technology. He founded CityRealty.com and REOL (Real Estate On-Line).

City Realty is the closest thing New York City has to a residential multiple listing service. Their database contains thousands of apartments for sale or rent, and will match buyers and renters with brokers that best align with the needs of apartment hunters.

On the commercial real estate side, REOL.com has developed a number of technology solutions for commercial real estate owners including corporate websites and content management systems. I visited Dan this week and was excited to be given a demo of his iPad app for multiple property types. As a former shopping center leasing person, sampling the retail portfolio app was most engaging.

I immediately saw the advantage of having a shopping center portfolio fully loaded on an iPad and ready to show - to anyone, anywhere, at any time. The dynamic mapping and site-plan functionality leverage what technology is all about: making things simpler and more mobile.

A number of Dan’s clients will be using the iPad app at the annual International Council of Shopping Centers (ICSC)convention in Las Vegas in May. If you are an owner of retail properties, you may want to check this out - before you go to Vegas with your printed presentation books and rolled-up leasing plans. With retail leasing so competitive, a tool like this might just differentiate you from your competition and show retailers that you are a forward-thinking landlord. You never know what could swing a decision in your favor. Here’s the link (http://reol.com/#).


22-22-22

When I began my working career, the normal workday was considered 9:00am to 5:00pm. But those days are long gone. One culprit is that there’s so much cross time-zone business being done. Another reason is the amazing advancements in technology. Then there is a third reason.

I was introduced to a new phrase this week: ‘22-22-22’ - a 22-year old who will work 22 hours a day for $22K. While this expression is new to me, the theme isn’t a shock – the job market is tough! Hopefully it won’t always be this way. But for now, employers have their pick of numerous applicants because there are so many people applying for every job.

I found an on-line New York Times article called ‘The No-limits Job’ (March 2, 2013 by Teddy Wayne) that offers some real-life color on this subject. Following are excerpts quoted directly from the article:
“If I’m not at the office, I’m always on my BlackBerry,” said Casey McIntyre, 28, a book publicist in New York. “I never feel like I’m totally checked out of work.”
Ms. McIntyre is just one 20-something — a population historically exploitable as cheap labor — learning that long hours and low pay go hand in hand in the creative class. The recession has been no friend to entry-level positions, where hundreds of applicants vie for unpaid internships at which they are expected to be on call with iPhone in hand, tweeting for and representing their company at all hours.
“We need to hire a 22-22-22,” one new-media manager was overheard saying recently, meaning a 22-year-old willing to work 22-hour days for $22,000 a year. Perhaps the middle figure is an exaggeration, but its bookends certainly aren’t.
*
Lots of very bright, hard-working students graduating each year seem willing to accept ‘opportunities’ to work in the field of their choice (hopefully) and be that 22-22-22 person. But I wonder: do the employers ever think about the reputation their company is developing?

Some of us have accepted a lower salary just to get the job - we had mortgages to pay and mouths to feed. But it never feels good. Those employers who feel they are getting a ‘bargain’ may tend to outsmart themselves when a really talented person leaves because they don’t feel appreciated where they are - and a better paying position comes along.

While the 22-22-22 concept is an exaggeration, the mere fact that the phrase exists says something about our society and the values being instilled in this generation. I don’t feel it’s a healthy direction at all.


A dog’s tail

What does a dog have to do with deciding which apartment to buy?

Debra Weiner is a successful residential real estate salesperson in Manhattan and the devoted owner of Daisy, a mixed-breed rescue dog.

She recently met a couple that was looking for their new home when they visited one of her apartment listings. The couple said they were interested in this building because of the close proximity to the dog run in a nearby park. Deb told them about another available apartment – on the first floor - in the same building they wanted. They almost didn’t come to see the second apartment because they thought it wouldn’t have enough sunlight for their dog. They did, however, come to see the listing – and they actually brought the dog to check out the place! When the dog’s tail did not wag upon entry, the clients knew it was not the right home.

Debra shared with me that this type of thing happens all the time. “Dogs are part of the family!”

Stay tuned for more human-interest (and canine-interest!!) stories about New Yorkers and their search for the apartment that will wag their dog’s tail! To learn more about dog-friendly apartment buildings in NYC, reach out to Deb Weiner directly (http://www.halstead.com/real-estate-agent/debra-weiner).


On The Road...
Mar. 19 - 20: PREA Spring Conference, Boston, MA
Apr. 29 - 30: PERE Global Investor, Los Angeles, CA
May 16: Annual meeting of The Hoyt Fellows, North Palm Beach, FL
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

On the Road with Steve Felix - Do you manage or lead?
Monday, February 03 2014 | 08:51 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Do you manage or lead?

Last week, while standing on the checkout line at Whole Foods, I heard an announcement over the P.A. system that made me pause: “Would someone in leadership please come to the customer service desk.” This statement got me thinking about the difference between leadership and management.

While researching this subject, I discovered a Harvard Business Review blog (published August 2, 2013) by Vineet Nayar. As vice chairman of HCL Technologies, an India-based global IT services company, Nayar suggests there are three differences between managers and leaders. How he describes these differences resonated with me. The following is quoted directly from his post:

“Counting value vs. creating value. You’re probably counting value, not adding it, if you’re managing people. Only managers count value; some even reduce value by disabling those who add value. If a diamond cutter is asked to report every 15 minutes how many stones he has cut, by distracting him, his boss is subtracting value.

By contrast, leaders focus on creating value, saying: “I’d like you to handle A while I deal with B.” He or she generates value over and above that which the team creates, and is as much a value-creator as his or her followers are. Leading by example and leading by enabling people are the hallmarks of action-based leadership.

Circles of influence vs. Circles of power. Just as managers have subordinates and leaders have followers, managers create circles of power while leaders create circles of influence.

The quickest way to figure out which of the two you’re doing is to count the number of people outside your reporting hierarchy who come to you for advice. The more that do, the more likely it is that you are perceived to be a leader.

Leading people vs. Managing work. Management consists of controlling a group or a set of entities to accomplish a goal. Leadership refers to an individual’s ability to influence, motivate, and enable others to contribute toward organizational success. Influence and inspiration separate leaders from managers, not power and control.

I encouraged my colleague to put this theory to the test by inviting his teammates for chats. When they stop discussing the tasks at hand — and talk about vision, purpose, and aspirations instead, that’s when you will know you have become a leader.”

*
Clearly, leadership is much more than a simple management style. Great leaders nourish their successors. And, as firms develop their succession plans, it is increasingly more important to attract, develop and retain high-potential leaders in the organization. The next generation of leadership becomes the focus of all stakeholders in the firm.

How would your career or mine have evolved differently if we had been exposed to extraordinary leadership skills vs. basic management techniques?

Here are some leadership perspectives from a blog by Marie Peeler of Peeler Associates, which are poignant to this discussion:
• “Managers develop policies and procedures. Leaders develop vision and strategy.
• Managers direct and control. Leaders motivate and inspire. Stated another way, managers get people to do what needs to be done. Leaders get people to want to do what needs to be done (read that again if you need to; the distinction is subtle.)
• Managers explain, “What we have to do.” Leaders explain, “Where we are going.”
• Managers give directions. Leaders ask questions.
• Managers are concerned with the here and now. Leaders are concerned with the long-view.
• Managers are bottom-line oriented. Leaders are big-picture oriented.
• Managers are concerned with projects. Leaders are concerned with people.”

After absorbing the writing of both Nayar and Peeler, I thought more about my own career; were the people I reported to managers or leaders?? I also reflected on my own style and wondered how I was seen by those I supervised.

What about you? When you look in the mirror do you see a manager or a leader? And would you like to make any adjustments to your own style? No time like the present

Congratulations...

Evelyn Dube has joined Forum Partners as Managing Director, Capital Markets, Global Business Development

James O'Neill now Head of International Distribution, Legal and General Property

Neil Golub joined BCGI Real Estate Executive Search and is opening an office in New York City.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

People make plans and god laughs
Monday, January 27 2014 | 09:24 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

For the first time in more than 30 years, Mother Nature prevented me from attending an industry event. Due to the snow and cancelled flights, I missed the IMN conference in Laguna Beach this week as well as an excellent opportunity to moderate an emerging manager panel. I would enjoy hearing conference highlights from those who attended.

Generally I try to go with the flow, although in this case I was really disappointed when plans had to change. But then I started thinking, maybe there’s a bigger reason that I was not supposed to attend the event, even though it’s not exactly clear yet what that reason is... My partner and I did get to work with an existing client face-to-face in NYC instead of via conference call and we also picked up a new client. Might these have happened anyway? Maybe. Maybe not!

This experience got me thinking about a saying used by the late-grandmother of a friend, ‘People make plans and god laughs’ (and perhaps Mother Nature chuckles as well)! Could their laughter relate to knowing something good is about to come out of the unexpected change in plans??

This all reminds me of something I have shared with you before – a passage I regularly read from the book, 'The Tao of Pooh:’

'Things just happen in the right way, at the right time. At least they do when you let them, when you work with circumstances instead of saying, "This isn't supposed to be happening this way," and trying to make it happen some other way. If you're in tune with The Way Things Work, then they work the way they need to, no matter what you may think about it at the time. Later on, you can look back and say, "Oh, now I understand. That had to happen so that those could happen and those had to happen for this to happen...Then you realize that even if you'd tried to make it all turn out perfectly, you couldn't have done better, and if you really tried, you would have made a mess of the whole thing.'

I continuously refer back to this passage – it helps to put things in perspective for me. Perhaps you’ll find it helpful as well.


Congratulations…

Scott Arden joined Hodes Weill & Associates

John Rivard joined Rockefeller Group Investment Management
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

SNOW DAY! / A Day in the Life of an LP
Monday, January 06 2014 | 09:16 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

SNOW DAY!

Blizzard conditions were forecast for a good part of the nation on Friday. And this time the weather team was right. Beginning Thursday night, New York City was blasted with 6-8 inches of snow. In some places, like Chicago, that would be considered a dusting and everything would be sort of normal. But in New York the impact was felt in many corners…with school closings, mass transit delays, companies either opening late or simply not opening at all for the day. I heard from friends who were so excited that their office was closed and they could simply stay home and stay warm. Flights were cancelled at JFK due to ZERO visibility.

It was bitter cold yesterday morning…8 degrees…. and windy. I ventured the two blocks to see Central Park in all its snow-covered splendor. The park was full of people, as if it was a warm summer day. As you can see in the photo below, I was attacked by someone who was able to mold a snowball even though the white stuff was very powdery - I managed to escape with only a tattoo of snow on my coat.

After a late-morning breakfast at a diner I saw a movie. The brief description of Nebraska was enough to grab my attention. The theatre was relatively empty, the previews of reasonable length (i.e. four vs. 12 at another theatre last week) and the freshly popped popcorn not too salty. Nebraska is a beautiful movie based on a sensitive story. I loved it.

Leaving the theatre, the temperature had reached a balmy 18 degrees but the winds made if feel like below zero. It was great to take advantage of the weather, slowing the city down, reducing crowds and traffic and experiencing an urban winter wonderland. In some ways it made me feel like a kid again.
It was, as some call out while raising both hands high in the air, a SNOW DAY!!!



SNOW DAY in Central Park, New York

A Day in the Life of an LP

Last year I created then moderated a panel for IMN (Information Management Network) called “A Day in the Life of an LP.” During this session senior investment professionals from public pension funds and endowments spoke candidly about a typical day at work. The audience was a mixture of experienced capital raisers and executives from firms thinking about raising institutional capital for the first time.

I’ve included below some of the key points made during that panel. You might find this interesting and helpful as I know some real estate managers are preparing to hit the road early in 2014. Keep these items in mind as you set up meetings to introduce new funds or other types of real estate investment opportunities:
1. Don’t you know what ‘no’ means?? If you approach an investor with an opportunity on, let’s say, January 16th and they say that it doesn’t fit with their current investment strategy, don’t reach out to them again in February and ask them the same thing.
2. Keep it short and simple. When communicating, by email or phone, keep your message to an overview of the opportunity you’re offering. Don’t go into detail unless asked.
3. Ask someone how he or she likes being communicated with. If you ask a reasonable question you’ll get a reasonable answer. Finding out the preferred method of communication, and what they’d like to hear from you, will make it easier for you to get one step closer to the desired result.
4. Put yourself in the seat of the LP. Appreciate that pension funds, endowments, foundations, family offices, rich people, very rich people, sovereign wealth funds and consultants are virtually inundated with emails and calls from people just like you who want to get some of their time. Think about what the inbox of someone on that side of the fence looks like every day and what fills their voicemail. put yourself in their shoes, and it will help you begin to build a relationship.
If you are a real estate operating company, who has a compelling story and visions of raising institutional capital, please be patient - it takes time to build trust. Be mindful of what a day in the life of an LP is like. They will remember you in a positive way.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Another year / Life
Thursday, January 02 2014 | 10:15 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Another year…

The end of any year means different things to each of us. In real estate investing, it’s a last-minute rush to close a deal. For retailers, running year-end sales boost December numbers. ‘Using before losing’ vacation days may loom large for employees in corporate America. And the challenge in the restaurant world might be what prix-fix deal will fill the tables with revelers waiting for the ball to drop.

Celebrating the New Year, for many, is a glamorous production. Others choose to lay low. My brother always refers to this night as ‘amateur night.’ For me, New Year’s Eve has generally been relatively quiet. This year I will be with friends in New York City raising a glass to toast the past year and the excitement the future has in store.

No matter where you are in the world, and how you choose to ring in the New Year, I wish you and yours health, happiness and prosperity in 2014.


Life

My son Brian sent me this piece in August 2000. I published it last December and received a number of replies saying how much it was liked. I intend to make it part of the final OTR every year. You may have seen this before but I encourage you to reread it.

What I’ve Learned (Author unknown)

• I've learned that we don't have to change friends if we understand that friends change.
• I've learned that no matter how good a friend is, they're going to hurt you every once in a while and you must forgive them for that.
• I've learned that true friendship continues to grow, even over the longest distance. Same goes for true love.
• I've learned that you can do something in an instant that will give you heartache for life.
• I've learned that our background and circumstances may have influenced who we are, but we are responsible for who we become.
• I've learned that it's taken me a long time to become the person I want to be.
• I've learned that you should always leave loved ones with loving words. It may be the last time you see them.
• I've learned that you can keep going long after you think you can.
• I've learned that we are responsible for what we do, no matter how we feel.
• I've learned that either you control your attitude or it controls you.
• I've learned that regardless of how hot and steamy a relationship is at first the passion fades and there had better be something else to take its place.
• I've learned that heroes are the people who do what has to be done when it needs to be done, regardless of the consequences.
• I've learned that money is a lousy way of keeping score.
• I've learned that my best friend and I can do anything or nothing and have the best time.
• I've learned that sometimes the people you expect to kick you when you're down will be the ones to help you get back up.
• I've learned that sometimes when I'm angry I have the right to be angry, but that doesn't give me the right to be cruel.
• I've learned that just because someone doesn't love you the way you want them to, doesn't mean they don't love you with all they have.
• I've learned that maturity has more to do with what types of experiences you've had and what you've learned from them and less to do with how many birthdays you've celebrated.
• I've learned that it isn't always enough to be forgiven by others. Sometimes you have to learn to forgive yourself.
• I've learned that no matter how bad your heart is broken the world doesn't stop for your grief.
• I've learned that just because two people argue, it doesn't mean they don't love each other. And just because they don't argue, it doesn't mean they do.
• I've learned that you shouldn't be so eager to find out a secret. It could change your life forever.
• I've learned that two people can look at the exact same thing and see something totally different.
• I've learned that your life can be changed in a matter of hours by people who don't even know you.
• I've learned that even when you think you have no more to give, when a friend cries out to you, you will find the strength to help.
• I've learned that the people you care about most in life are taken from you too soon.

*
I’ve always enjoyed quotes. When I was in Junior High School, my parents bought me Bartlett’s Famous Quotations where I underlined some of my favorites. I remember one quote that always had meaning for me: No act of kindness, no matter how small, is ever wasted.

While not found in the collection from Mom and Dad, the above passage from my son is one of the most meaningful to me. I hope you find value in the messages it contains as you enter the New Year.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

RCA Holiday Party / MIPIM / Rolf's
Tuesday, December 24 2013 | 03:19 PM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

RCA Holiday Party

This week, RCA (Real Capital Analytics) held their joyous holiday celebration at the Chelsea Arts Tower, a 20-story commercial condominium located on 25th street between 10th and 11th Avenue in NYC. Designed for galleries and art-related business it is Manhattan’s first art gallery condominium. Everyone was ‘gaga’ over the most incredible Manhattan views.


The entertainment at RCA’s party was provided by Elliot Zimet, a master illusionist. It was difficult to comprehend anything Elliot did. I just shook my head and said, ‘That’s impossible!’ He is definitely someone to keep in mind when thinking about distinctive entertainment for your next event.

As many of you may know, I have had a close affiliation with RCA since shortly after their launch in 2000. Attending this event is special for me – having watched them evolve, from a three-person start-up to becoming the leading provider of investment sales data and capital market trends in the commercial real estate business. RCA has had a major impact on how real estate investment decisions are made. They continue to be on the leading edge of creating products and services that will take the industry to the next level. It’s a great story!

Rolf’s

Imagine that you are in the middle of a Christmas tree…a large one at that. What do you think it would look like? What would it feel like? Well, this week I had the opportunity to experience just that.

I met some friends at Rolf’s German Restaurant (Third Avenue and 22nd St.) in Manhattan. It was my first time there and won’t be my last. On the walk over I was given the following disclaimer: “It’s going to be crazy busy. We probably won’t even be able to make it to the bar and, if we get close, we won’t get a seat. But the decorations are incredible.” And, that they were! While these photos give you a taste, this is really something you need to see to believe.

Using the power of positive thinking, we managed to secure two seats at the bar before the rest of our group arrived. The friendliness of those around us was true to the season (perhaps it’s always that way at Rolfs…I’ll need to go back again to confirm!). And, sitting in the midst of the spectacular decorations, I felt like part of the tree.

The decor at Rolf’s changes with the season…a good reason to return periodically. If you are in NYC for the holidays and want a very special experience, go to Rolf’s… I recommend the eggnog. It’s a wonderful way to become one with the holiday spirit.




On The Road...
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Jan. 7 – 9: Emerging Managers Conference, Austin, TX
Jan. 15 – 16: New business development meetings, Washington, DC
Jan. 22 - 24, 2014: IMN (Information Management Network) Winter Forum on Opportunity and Private Fund Investing, Laguna Beach, CA
Mar. 11 - 14: MIPIM, Cannes, France
May 4 - 7: CRE (Counselors of Real Estate) Mid-year meetings, Austin, TX
May 16: Annual meeting of The Hoyt Fellows, North Palm Beach, FL
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Alex Hesterberg / Welco Realty Party / OTR Readers Write Back
Monday, December 16 2013 | 09:21 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Alex Hesterberg
I heard the sad news this week that Alex Hesterberg passed away after a very long fight with cancer. My thoughts are with his family during this difficult time.

Alex and I met years ago at a dinner hosted by his long-time former employer Chase Manhattan Bank. We were randomly seated next to each other during an International Council of Shopping Centers (ICSC) convention in Las Vegas. It was the start of a friendship that lasted, on and off, for almost 30 years.

I remember years ago, right around this time of year, Alex said to me, “Steve, you need to have a hat.” So he took me, protesting all the way, to this now long-gone legendary hat store on Madison Avenue and helped me pick out a dressy gray hat - like my grandfather used to wear. I was never comfortable wearing hats or thought that I looked good in a hat but I went along with it as, to me, Alex was one of those people I just couldn’t say ‘no’ to. And, I can tell you that I actually had some fun in the process. At some point, in all my moving around, that hat disappeared. But for years, whenever I saw it at the top of my closet, I thought of Alex and fondly remembered that day.

For many years, Alex and I had a Christmas tradition of getting together for a long lunch and a few cocktails. It was something we both looked forward to. If memory serves me well it was Alex that introduced me to the martini. Tonight I will raise a glass, close my eyes, and toast my friend Alex Hesterberg who made a difference in the commercial real estate industry and in the lives of people he touched. Thanks for the memories, Alex.

The email below from Mary Walker Fleishman, President of The Counselors of Real Estate (CRE), is a wonderful testimonial to Alex.

“It is with sadness and admiration that I share with you the passing of Alex Hesterberg, a 23 year member of The Counselors of Real Estate, on Saturday morning, December 7, 2013, after a long and tenacious battle with cancer.

Alex served for many years as a Managing Director of Deutsche Bank, specializing in credit risk management and valuation, a practice, which was international in scope.


Alex was known for an intense personality and a penchant for bright colors, worn with flair and the ever-present matching pocket square. He was never reticent about expressing a point of view, which he did with regularity on issues involving politics, the profession, and life in general. One always knew when Alex Hesterberg was in the room, and the world will be a quieter, far less interesting place without him.”


Welco Realty Party

During my career I’ve had the opportunity to work in several different ‘neighborhoods’ in the commercial real estate world. One that I spent many years - the shopping center industry. This past Monday night I visited that ‘neighborhood’ again. Welco Realty invited me to their holiday party hosted by partners Jerry Welkis, Allen Cooperman and David Sternchuss. It was like a walk down memory ‘mall’.

At the party were many of my old industry friends whom I hadn’t seen in years. Several times, when I caught someone’s eye, I stood still - realizing they might need a brief moment to process who I was. When I approached, there were lots of hugs and kisses. In a few instances, being introduced to someone by a friend, the other person said, “I know your name…but can’t remember from where.” The evening became an enjoyable game of ‘industry geography’ until we were able to connect the dots of our history.

It was a cozy feeling on a bitterly cold night to be amongst a group of retail real estate professionals that I had worked with - and next to -for so many years. Many of my industry connections still thought I was living in California and hadn’t realized I moved back to New York. Others, knowing I had reinvented myself a number of times were curious and asked, “What are you doing now?” When I told them about Behavioral Presentation Coaching, the response from some was, “I know exactly what you mean. I know groups who can use your help.” That is always encouraging from a new business development standpoint and I left the evening with a number of follow-up calls and meetings to be scheduled.

I’m a very lucky boy to be part of the global commercial real estate community and be able to visit different ‘neighborhoods’ from time to time. It’s very special to find those friendly faces, sincere handshakes and open arms bringing warmth to the holiday season.


OTR Readers Write Back

I received emails this week from OTR readers sharing their memories of Christmas in New York City. Here are two I want to share with you:

“I love the tree too. And you are right...this is what NYC is about! I came here in November 1985 from California with my job located at 1 Rockefeller Center. Can you imagine a California girl arriving in New York City, working at that address, watching all the skaters and seeing the lighting of the tree?? I thought I had died and gone to heaven. Still get chills thinking about it 28 years later.”
***
“I enjoyed your recent posting about New York at holiday time. I have always loved going to the city at this time of year. My first visit, right after grad school, was during early December. I was like a kid in a candy shop as we rode in the cab to our luncheon meeting, turning one way and then the other to see all of the decorations. I only wished I could stay and not zip back to the airport right after lunch for the trip home.

And my claim to fame, I have actually skated on the Rockefeller Ice Rink during one of my holiday visits. My daughter and I got up early to be there when it opened so that we could actually skate and not be hemmed in by the crowds. What a cool memory!”

I’d love to hear your story of spending the holiday season in New York. Or let me know when you’ll be in town – we’ll create a new memory!
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Historic Real Estate In New York City / Commercial Real Estate 101
Thursday, December 12 2013 | 09:49 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Historic Real Estate In New York City


This week I had the opportunity to celebrate the holidays at two historic real estate landmarks. On Tuesday night it was the Apollo Theatre in Harlem - a legendary music and cultural venue. Former Doobie Brother pianist and lead singer Michael McDonald brought his "Evening of Holiday & Hits" to New York City.


The Apollo theatre is in beautiful condition and the sound was exceptional. The staff couldn't have been friendlier. McDonald and his band played holiday songs as well as a number of big Doobie Brothers hits. The audience was on their feet dancing! It was so much fun!! His message of peace and understanding was punctuated in the final encore song, 'Takin' It To The Streets.'


But this was only the appetizer. On Wednesday night I had the privilege of attending the Rockefeller Center Tree lighting ceremony with my business partner, Liz Weiner. Thanks to the generosity of Steve Wechsler of Tishman Speyer, we were in attendance at the 81st Annual Tree Lighting Ceremony. It was a beautiful night in New York. Thousands of people had lined the streets by late afternoon hoping to get close enough to see that special moment when the tree lights are turned on.


Having an invitation allows you direct access to the party held in the Sea Grill restaurant. Interestingly enough, once inside, you find yourself wanting to go back outside and be closer to the tree! When we got out and worked our way up to one of the observation areas it was truly a site to behold - in addition to the thousands in the street, there were hundreds of people standing in the windows of the office buildings that look down on the tree; their silhouettes looked somewhat surreal. As the time for the tree lighting drew closer, the windows filled up, as did the carpet-covered ice skating rink.


While I have previously attended this festive event, this was the first time I was able to find a spot outside, right in front of the tree, and be there when New York City Mayor Michael Bloomberg and Tishman Speyer's Jerry Speyer flicked the switch that lit the 45,000 colored lights on the 76-foot tree.


All major cities of the world have architectural wonders. For me, New York's Rockefeller Center always brings back fond memories during the holiday season. I remember the tradition of driving my sons in from New Jersey when they were young, on a random Sunday evening, just so they could see the tree.


But it's more than the 'tree'.it's the people ice skating, the flags blowing in the wind, the lightshow of snowflakes on the skyscrapers and the confluence of a global community. It's the feeling and the energy created by the season and the enjoyment that fills us up during this time. Many tourists seeing the tree for the first time, and others - New Yorkers like me - who take every opportunity to walk the promenade (I especially like to see the statue 0f Prometheus on that promenade overlooking the ice) smiling to themselves with the thought, "This is what New York City is all about."


Come visit New York City this holiday season. It's magical!




Commercial Real Estate 101


During a breakfast meeting this week the talk turned to the number of college students in university real estate programs and their plans after graduation. Both my breakfast partner and I agreed on a recommendation for these students: learn the business from the ground up!


We talked about the life cycle of income-producing real estate and all the disciplines and jobs necessary to create or re-create profit from real estate.


I'm not certain but it feels like the real estate industry is different than others. Maybe not. If there is a difference, perhaps it's that developed real estate - office buildings, apartments, shopping centers, manufacturing facilities, hotels - is part of our everyday existence. we live, work and play in real estate. Could that be what attracted me to real estate more than 30 years ago - and what still attracts young people today?


When a college student asks you about the type of summer internship that might be most useful to them, share the concept of getting in on the ground floor and the value of gaining experience on the way up. Come to think of it, taking an internship, or even a part time job, where you carry bricks on a construction site could help build the foundation of a career in real estate.


Commercial real estate is a great industry. No matter whether you have dreams of owning and operating - or investing - in real estate, you should know everything about what makes a property tick and how to make money for yourself and your investors. Observe those that have been successful. Learn what they did. Talk with people in all different types of jobs connected to the property - leasing agents, building managers, the maintenance team and even the mailman - you can gain more knowledge, as well as a fresh perspective, from everyone you speak to. Learn how to manage costs, increase income, attract and retain tenants and be financially and environmentally responsible. And, when it comes to decision making, the 'gut' instinct (Is this a good location? Is this a good investment?) should not be ignored.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

The Tallest Building? / Always Thanksgiving
Friday, November 15 2013 | 02:57 PM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

The Tallest Building?

On November 12, the Council on Tall Buildings and Urban Habitat announced that the new One World Trade Center in Lower Manhattan has officially been ruled taller than the Willis Tower in Chicago. Because I thought you might be intrigued, I offer the following excerpt from the New York Times’ article that day titled, “By a Spire, Manhattan Regains a Title From Chicago.”

“New York’s tallest building was deemed taller even though it has six fewer floors and its roof is more than 100 feet lower than the top side of the Willis Tower. (Formerly known as the Sears Tower, the Chicago building captured the title in the 1970s from the twin towers.)
How can that be?

It all depends on what the definition of an antenna is.

Both buildings have long masts poking skyward from their roofs. But those on the 1,451-foot Willis Tower are considered antennas, which the council does not count in calculating the height of a building.

The 408-foot long mast on 1 World Trade Center, on the other hand, is more than just a means of improving radio signals, its developers argued. They called it a spire and insisted it was a critical and permanent element of the architects’ overall design.

When 25 members of the council’s height committee met in Chicago on Friday, they heard the spire argument from the chief architect, David Childs of the firm Skidmore, Owings & Merrill, and representatives of the Port Authority of New York and New Jersey, which developed the trade center.

The New York contingent said the spire had always been part of the plan to achieve the symbolic height of 1,776 feet.

The committee members unanimously agreed that the spire should be counted.”

*

In the Chicago Tribune, Mayor Rahm Emanuel responded to the announcement. "I just saw the decision. And I would just say to all the experts gathered in one room, if it looks like an antenna, acts like an antenna, then guess what? It is an antenna.”

One might think that measuring the height of a building is a simple matter…especially with the technology available today. Not so. I visited the website of the Council on Tall Buildings and Urban Habitat and read their ‘Criteria for the Defining and Measuring of Tall Buildings.’ Definitely complicated (Check it out for yourself - http://www.ctbuh.org/LinkClick.aspx?fileticket=zvoB1S4nMug%3d&tabid=446&language=en-US). And when there is room left for deliberation and debate, the human component brings subjectivity.

Is it also possible that the decision makers had some sub-conscious sentimental reasons for the final decision?? We’ll never know….


Always Thanksgiving

A good friend and I wanted to celebrate Thanksgiving together but will not be in the same city for the holiday. We decided to celebrate our own Thanksgiving this past week.

Never having cooked a turkey and trimmings before, it was a fun adventure – planning the meal, buying the food, choosing which recipes to use for the turkey, stuffing, sweet potato casserole (with marshmallow topping, of course!) and making do with my limited kitchen paraphernalia. Somehow we managed. The meal was table-ready a little later than we had planned and the white meat may have been just a little bit dry - but it was delicious.

Sitting down to the meal and toasting our accomplishment I closed my eyes for just a moment and realized how lucky I was – to have my health, to have a wonderful family and to be working at a business I love. And I knew what it felt like to give ‘thanks’ and to share a special moment with a true friend.

I hope you are able to celebrate the Thanksgiving holiday with family and friends you want to be with and that you are able to appreciate all you have, as well as all you have to give.

As we all know, the feelings of thanks and giving are not limited to just one day. Think about what you can do for someone else by giving just a little bit of your time…it may make all the difference in the world to the other person...and, I guarantee, to you too. Happy Thanksgiving!

Congratulations…
Glenn Rufrano returning to O’Connor Capital Partners as Chairman and CEO

On The Road…

Nov. 20 - 21: Johns Hopkins University to conduct a workshop for students in the Edward St. John Real Estate Program, Washington, DC

Dec. 4: Tishman Speyer and RCPI Landmark Properties, 81st Rockefeller Center Tree Lighting, New York, NY

Jan. 22 - 24, 2014: IMN (Information Management Network) Winter Forum on Opportunity and Private Fund Investing, Laguna Beach, CA

Mar. 11 - 14: MIPIM, Cannes, France
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Music & Business Mix / Where Angels Play
Monday, November 04 2013 | 09:08 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

I’m including a link to an interesting Forbes posting on ‘reverse mentoring’ which talks of the benefits of generational knowledge sharing. I challenge you to read this 2011 article, if you haven’t already, and not think differently.
(http://www.forbes.com/sites/work-in-progress/2011/01/03/reverse-mentoring-what-is-it-and-why-is-it-beneficial).

Music and Business mix

Last Monday night two well-known industry personalities hosted their third annual music event. Fred Gortner of Paladin Realty and Ryan Krauch of MesaWest were the orchestrators of this get-together.

Held in Chicago’s House of Blues, it was one of the most fun evenings I’ve had in a long time. A blues band had been hired and alerted to the fact that some of the audience may want to sit in with the band – and that’s just what happened!!

Gortner is a fabulous guitar player with whom I’ve jammed before. Joining us was Triton Pacific’s Scott Arden, a solid drummer. Steve Vittorio of Prudential and Joe Nahas of Equus Partners were dynamic rhythm guitarists – Vittorio also adding vocals to the mix. I have known Steve a long time but until that night didn’t know he was a musician. Quilvest’s Ione Permission and her tambourine added a special dimension and I played keyboards and sang a few songs. This band may have a future!

It was a real treat to mix business and pleasure and share the stage with industry friends who happen to be talented musicians as well. Thanks Fred and Ryan for thinking outside the ‘box set’ of business.

Where Angels Play

It’s been a year since Hurricane Sandy devastated the northeast and almost one year since the senseless shooting massacre at Sandy Hook Elementary School in Newtown, Connecticut.

Last weekend while visiting friends in Island Park, Long Island we stopped at the site of a brand new playground, which replaces the one damaged by the hurricane. A group of New Jersey firefighters created a non-profit organization called The Sandy Ground Project to build 26 playgrounds in 26 different communities - one for each of the 26 Newtown victims. ‘Where Angels Play’ is the theme of the Sandy Ground project.

The new pink 2,600 square-foot playground in Island Park is named after 6-year-old Sandy Hook victim, Caroline Previdi. She loved the color pink. Seeing her photograph at the entrance to the playground was so very sad. The loss of the possibilities of life that Caroline left behind is unfathomable. The naming of playgrounds after her and other young victims is a beautiful, simple and powerful tribute.


Congratulations...

Doug Abbey has joined Swift Real Estate Partners as Chairman Mike Coster has launched Kimberlite Advisors Benjamin Linder joined LGT Clerestory
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Phipps Houses / What's going on with China real estate? / Consultant recommendations: value-add? / World smile day
Monday, October 07 2013 | 09:11 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Phipps Houses

Thanks to the gracious invitation from a Trustee, I attended the annual gala for Phipps Houses on October 3.

"Phipps Houses is the oldest and largest not-for-profit developer, owner, and manager of affordable housing in New York City. Its social services affiliate, Phipps Community Development Corporation (CDC), offers more than 30 education, job-readiness, recreation and civic engagement programs to help New Yorkers build better lives for themselves, their families and their community. Together they are changing lives in New York City." (taken directly from their website)

New York City's Mayor Bloomberg spoke at the event. It was the first time I had seen him in person. His accolades about Phipps Houses clearly conveyed sincerity. The Mayor has an appealing presentation delivery style.it's like he's talking with you personally.

A highlight of the evening was an update on the multiphase Hunter's Point South project, which will be the largest affordable housing complex in New York City since the 1970s. All 925 Residential Units of Phase I will be permanently affordable and will include resiliency features designed to mitigate the impact of severe storms (i.e. putting the utility rooms on the second floor).

Phipps involvement in helping people goes far beyond establishing partnerships to create affordable housing. Phipps Community Development Corporation prepares individuals to find work. And in addition to job search and career development resources, they offer After School programs, Early Childhood Education, Language and Literacy classes, a Summer Camp and Teen programs.

I encourage you to take a look at the Phipps website (http://www.phippsny.org ) to learn more about how this very special organization 'empowers New York City communities.'

What's going on with China real estate?

I first met Robert Ciemniak in 2006 when I was roaming around Europe launching a consulting business. He was with Thompson / Reuters at the time having just unveiled Reutersrealestate.com.

Since that time Robert has started his own business, Real Estate Foresight, dedicated to providing deep analytical data and well-informed insight into China Real Estate markets.

On the homepage is an interesting report (http://china.realestateforesight.com ) called 'China Scenarios - Conditions for Real Estate Markets in China 2013-2018'. This is a "summary of our 5 core scenarios for the macro context and conditions for Chinese real estate markets over the next 5 years, from a perspective of a foreign investor.the objective of these scenarios is to help investors stress test their assumptions and follow the principle 'you can't predict but you can prepare' in the investment process."

To share his thoughts, observations, and knowledge of the market, Robert publishes a blog called China Weekly, which includes takeaways from various conferences he attends in Asia and Europe. Curious about real estate in China? You can subscribe to Robert's blog here (http://china.realestateforesight.com/index.php/real-estate-foresight-weekly/refweekly ).

During his September visit to NYC, Robert, myself and other industry colleagues had a great time eating Pierogis at Veselka on the Lower East Side of Manhattan. To me, there are few things that rival sharing good food and drink with friends. The food experience was fun and we even found some time to talk business!

Consultant Recommendations: Value-add?

"...we find no evidence that these recommendations add value to plan sponsors."

Tim Jenkinson, Howard Jones, and Jose Vicente Martinez of the University of Oxford's Saïd Business School conducted an extensive survey on the role consultants play in investing in U.S. equities.

The survey suggests that plan sponsors are engaging consultants for the hand-holding service and the shield used to defend their manager's selection decisions.

Quoting from the survey:
"Investment consultants' recommendations of funds are a function of the past performance of those funds. But they are also heavily influenced by the two sets of non-performance factors:
1. Soft Investment Factors (clear decision making, capable portfolio managers, and consistent investment philosophy)
2. Service Factors (capabilities of relationship professionals, usefulness of reports prepared by the fund manager, and effective presentations).

In particular, soft investment factors have a far more powerful effect on consultants' recommendations than past performance. Although consultants' recommendations to some extent reflect a return-chasing strategy, they are more heavily influenced by the consultants' qualitative judgment of intangible factors."

While the survey focused on U.S. equities, my take was that similar results could come from a real estate specific survey of the same type. Many in our industry are convinced that when a consultant evaluates a firm, fund or other type of real estate investment offering, the checkbox at the top of the list is directly related to track record. Is it possible we've been wrong in how consultants grade fund managers?

*
Now what do we do with this information?? Will it result in a shift in the number of pension funds that employ consultants? Perhaps those who do use consultants will begin questioning the way managers and fund investment opportunities are evaluated. And, more importantly, this report may get fund and investment managers to appreciate, more than ever, the importance of those soft factors.

When we reflect back on this study in 5 or 10 years from now, will we notice its impact? If I were a consultant, perhaps addressing the findings of this study proactively with my clients would be a smart strategy.

Stay tuned boys and girls! We may be witness to a 'sea change' in the relationship between pension funds and their consultants. You never know!

You can read this 47-page report here (http://sbs.eprints.org/4785/1/TJ3.pdf#!).



World Smile Day

As I've received so much feedback on the recent piece about smiles, I thought you might be interested to know that Friday October 4 was World Smile Day.

Here is a direct excerpt from an email sent by Susannah Schaefer, Executive Vice Chair and Chief Executive Officer, of SmileTrain to highlight World Smile Day:

"Smile Train has decided to celebrate the day with our student supporters. One school in the UK has already done A LOT of celebrating in preparation of today. In honor of World Smile Day®, Westinghouse Prep School, a school of 300 students in Chichester, UK, has raised enough money through various events to provide 60 children with free cleft surgery. World Smile Day® is all about bringing about smiles through kind acts and what could be kinder than giving a child a second chance, and a new smile?

Please join Smile Train in celebrating World Smile Day® by retweeting or posting to Facebook the smileygraph on this page (http://www.smiletrain.org/wsd/#) along with #smileygraph. Each share triggers a $25 donation for Smile Train.

Also, don't forget to wear your best smile today-I know I'll be wearing mine!"

Warm regards,

Susannah Schaefer
Executive Vice Chair and Chief Executive Officer
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

The wallet / The love of a brother / The cloud / Square Dancing
Tuesday, October 01 2013 | 02:31 PM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

The Wallet


Something incredible happened this week.

Very early Wednesday morning, for the first time in my life, I lost my wallet. It fell out of my bag while I was riding my bike. When the realization struck me I was beside myself and started the process of canceling my credit cards.


Within two hours I received a call. "Mr. Felix, this is Jose. I am a truck driver and I found your wallet. Can we meet so I can return it to you?" OMG! "Thank you, thank you, Jose!! Just tell me where and when." Before the morning was over, Jose drove his tractor-trailer to a meeting place actually convenient to me. With a big smile, he handed me my wallet. "Everything that was there when I found it is still there," Jose said. I didn't even look inside, other to pull out some cash to show my appreciation. Before he went on his way Jose related a story about his own wallet loss and how it was returned by a teenager - completely intact.


When I got back to my destination, I did check.everything was in the wallet!


Later that day I called Jose's supervisor. He appreciated that the call was a compliment. He said that Jose is a 'good guy' and that he would tell him about my call. I offered to write a letter and the supervisor said, "That would be great! I'm always getting grief from the higher-ups about something or other regarding our drivers. This would be a good thing for me to show them."


This still seems dreamlike. In New York City, I got lucky enough to have a man with integrity find my wallet and reach out to me and return it. The very same day. With all its contents. A truly noble act from Jose, which I will never forget.


Maybe there's a lost wallet somewhere waiting for me to find and return..




The love of a brother


Central Park boasts a wonderful and vibrant tennis center. The other morning, while having coffee at the courts, a friend and I were approached by a lovely older gentleman. He handed us a piece of paper and said the information was about a book of poems written by his younger brother. He asked that we check out the sample, consider buying it and telling others about the book. A few minutes later I ran into him in the men's room. The full story came out. His younger brother had died. His brother's poems including the ones that were previously unknown - even by the family - were published after his death. I got teary.


Later this week I did 'check it out.' The book is called, "Thoughts of Being." The author, Daniel Polsky, M.D.


From the introduction written by his older brother (the one we met): "This is a tribute to my brother, who always wanted to be a writer...After his death in 2008, many of Danny's poems were found. Some were handwritten on available pages of student spiral notebooks; many were typed on an ancient pica Underwood, some on an electric typewriter and more with a PC word processor. Aware of the coming of the end of his life, Danny revised and made copies of the poems he loved.this selection is representative of Daniel Polsky's lifetime endeavor."


As I have gotten to know many of you who read this column, whether you like or connect with the poems or not, I am fairly sure you will feel the same as I do about the post-mortem publishing of this poetry. Oh, if only Danny had been around to see this happen. But, perhaps he knows what his family has done to memorialize his life and his writing.
Here is the link so you too can sample Danny's poems. (http://www.amazon.com/Thoughts-Being-Daniel-Polsky/dp/0984054006)




The cloud


Last night, just before midnight, my friend and I were treated to a curious and wonderful light show in the clouds (Yes, the clouds in the sky. I bet you thought I was going to share a cloud computing story...).


From a Manhattan rooftop we noticed four beams of light rising up from an unknown source hitting the clouds, forming 'dot' type shapes. These lights moved, almost as if choreographed. They moved quickly. Then shut down, only to have more dots reappear a few brief moments later. 16 we counted, then 19, then 21. Then gone. Then back again, across a huge expanse of the night sky. If it had been a clear night, this show could not have occurred as the clouds were the canvas.


Aliens? UFO's? Young people at play?? We couldn't find any mention of it anywhere on the Internet. Perhaps we were the only audience for this spectacular and unexpected display. Could it possibly have been communication with beings on another planet? We were not able to see any pattern or rhythm to the movement. So, we stopped trying to figure it out and just enjoyed the show.




Square Dancing


The sign outside the main branch of the New York Public Library on Fifth Avenue and 42 Street simply said, "Bryant Park Square Dance."


Bryant Park is a wonderful space behind the library which, for many years, had been neglected. It is now the home to year 'round activities including outdoor restaurants, movies, ping pong and a wonderful ice skating rink in season.

My friend and I looked at each other and said, "Let's go!" So, the next day we returned to the park at 5:30 dressed in jeans and cowboy boots to listen to the opening band, The Boston Boys. Hundreds of people started gravitating towards the stage for the start of the dance. For the next two plus hours we had a wonderfully fun time learning and doing a variety of square dances to the music of The Remedies.


Funny. The last time I square danced was many years ago at summer camp. When the 'caller' started guiding us through the moves, it all came back to me. "Bow to your partner, bow to your corner, circle right, circle left, swing your partner, swing your corner, allemande left, allemande right, do-si-do and promenade home."


There were all different levels of dancers amongst the 500+ people. We had an incredible free, fun New York City evening, under a beautiful early autumn sky. We danced in the light of the Bank of America building and under the stately, watchful eye of the Empire State Building. One of those special times where you seize the opportunity and 'Just do it!' Yee haw!
Check out what's going on in Bryant Park . (http://www.bryantpark.org ).


On the Road...


Oct. 10 - 11: Cornell Real Estate Annual Conference, New York, NY. (Note: There are still a limited number of tickets available. I've previously attended and it's a wonderful event. You can register here .


Oct. 16 - 18: Client meetings, Chicago, IL


Oct. 23 - 24: PERE (Private Equity Real Estate) Summit: New York 2013, New York, NY


Oct. 28 - 30: PREA (Pension Real Estate Association) Annual Investor Real Estate Conference, Chicago, IL


Nov. 13 - 15: NCREIF (National Council of Real Estate Investment Fiduciaries), Fall Meeting, Miami Beach, FL
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Scarcity of smiles / Transferable skills / The day of atonement
Monday, September 16 2013 | 09:37 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Scarcity of smiles

For as long as I can remember I’ve enjoyed people watching. I believe there is no better show in town than observing others - on the street, in restaurants, in stores, on subways and buses…basically everywhere. In New York City you’re not ‘supposed to’ make eye contact with anyone on a subway car and it’s a curious phenomenon to watch people not watching each other.

But my commentary here is a sad one. It’s about how few of the people I see actually smile these days. Maybe it’s that everyone is in a hurry…or maybe, as my brother Jay and I were discussing, it’s a result of people just focusing on themselves… “Whatever happened to people simply showing some consideration for each other?” Jay lamented.

In my travels I have learned that there is seldom a more powerful communication tool than a smile. When you are in a country where you don’t know the language and you need help finding the nearest - dare I say – Starbucks or McDonalds, it’s all about how you approach someone that makes the difference. ‘If you smile at me I will understand ‘cause that is something everybody everywhere does in the same language,’ wrote and sang David Crosby in the song Wooden Ships (Crosby, Stills & Nash). It’s truly a beautiful concept and, in addition to a communication vehicle, a smile brings a wonderful inner feeling.

A friend recently introduced me to an organization called Smile Train (that trains doctors to do cleft palate surgery on kids in need and more recently adults. “I’ve always felt that a smile can open doors and that these kids with cleft palates need our help,” says my friend with a million-dollar smile.

There are many people who are not physically able to smile and yet desperately want to. What a shame that so many who can smile don’t.

See if you’re able to catch yourself not smiling; think about those that simply are not able to and find it within you to smile as you walk down the street, drive in traffic or wait in line at airport security. Trust me on this one – smile, as often as you can – you’ll find it improves your day, and that your smile is contagious.

Transferable skills

Many years ago, a friend related some career advice her father gave her: “Decide what you’re good at; decide what you like to do and then go find a place to do it!” Ah, if it were only that simple for everyone. And, with the popularity of real estate, it’s never been more competitive for jobs at every level. Something that helped me early on was being introduced to the idea of transferable skills. This includes evaluating yourself in terms of your skill set and what you’re good at, but not defining yourself by just one job title.

The career conversations I have these days, with both professionals (who may be unemployed or underemployed) and students (looking for internships and first jobs) have a similar tone: some just want to find a job (understandably so) while others are searching for a place to do something they love, believe they will love in the future, or are simply good at.

I work at helping people understand the concept of transferable skills when they are looking for new employment or a new career choice. It’s all about presenting oneself in the right way. Being able to see one’s own strengths and value in a different light will allow confidence to shine through. People want to work with others who have that bright light to share and can bring value, often from a fresh perspective.

If people come to you looking for career advice, you may want to open their eyes to the concept of transferable skills. They too may benefit from that holistic approach to a career.

The Day of Atonement

Tonight begins Yom Kippur, the Jewish ‘Day of Atonement.’ It’s the holiest day of the year for Jews, which features a 24-hour fast – from sundown tonight through sundown tomorrow. As in most religions, there are different degrees of observance, depending on one’s belief system. While not religious (and having been basically non-observant for a number of years) I have fond memories of going to a ‘synagogue’ set up at the Lost Battalion Hall on Queens Boulevard in Rego Park and, after the service ended, walking home with my Grandfather to the group of family waiting to sit down to ‘break fast’ with traditional Jewish delights.

For years, while I didn’t attend religious services, I fasted – out of respect for my grandpa. Then, detached from family, I began to neglect this one holiday that conceptually meant something to me – a day to reflect on the past year, atone for any ‘sins’ and start with a clean slate. In researching the holiday I was reminded that while that’s not the exact definition, I’ve chosen to personalize the holiday to what is meaningful for me.

Yom Kippur is an ideal time to remember what we did, forgive ourselves and move forward…it’s also a great opportunity to forgive others. And so, tomorrow I am going to fast, go to Central Park and reflect on the past year.

I will then ‘break my fast’ with a pumpernickel bagel with whitefish spread ready to approach the New Year with a fresh outlook.
Wishing you all a year of health, happiness, prosperity and peace.


On the Road...

Sept. 15 – 17: NAREIM (National Association of Real Estate Investment Managers), Executive Officers Fall Meeting, New York, NY

Oct. 10 – 11: Cornell Real Estate Annual Conference, New York, NY

Oct. 23 – 24: PERE (Private Equity Real Estate) Summit: New York 2013, New York, NY

Oct. 28 – 30: PREA (Pension Real Estate Association) Annual Investor Real Estate Conference, Chicago, IL

Nov. 13 -15: NCREIF (National Council of Real Estate Investment Fiduciaries), Fall Meeting, Miami Beach, FL
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

The emerging class, On the Road...literally!
Monday, September 09 2013 | 09:58 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

The emerging class

A term that has become more and more popular in recent years is emerging manager. Although making a convincing case is challenging, some pension funds have distinct allocations for emerging managers. Perhaps this is one of the key driving forces behind the appearance of so many emerging managers lately.
But, the competition is fierce and the patience required is saintly. Over the years, as ‘potential’ emerging managers approach me and ask, “Steve, how long will it take for us to raise our first fund?” my answer has been, “If you’re not prepared to invest three years of time and money just to be invited to the dance, don’t start.” Now, three years may be somewhat conservative and I qualify my answer by adding, “But it could take less time. You never know.”
One thing is certain: when an institutional investor or their consultant (or my grandson Sean), looks ‘under the hood’ of your company, they’d better see what they’re looking for…a strong engine, plenty of battery power, a clean windshield and headlights that function. If they don’t it’s perfectly reasonable to assume that you will be told, “Come back when we can check all the boxes on our preliminary review form. Oh, and also when you’ve gotten some of our peers to invest with you already….we don’t favor being the first investor in any new fund, particularly one with an emerging manager.”
But almost every institutional real estate investment manager emerged at some point. And, with some very successful and talented niche real estate operating companies gaining traction, the lure of the pot of gold at the end of the rainbow is an enticement that cannot be ignored. A word to the wise: remember the importance of the two ‘P’ words – patience and presentation. They are linked and are important allies as you navigate the waters from being a ‘submerged’ to an emerged manager.

On the Road…literally!
The 11-hour drive between New York and Asheville, North Carolina, over the Labor Day holiday weekend was pretty smooth. Fortunately, I adopted a fairly Zen approach to driving some years back – rather than getting upset at something a driver does I simply expect that people will do the dumbest thing possible and when they prove me right I smile to myself and say, “I knew you were going to cut in front of me, across three lanes, almost missing your exit because you were talking on your phone!”
Making a last minute decision to visit my older son, his wife and their two sons (ages 4 & 2) was a great idea – for all of us. Based on our collective schedules, I wasn’t certain when the next time a family visit would be possible.
Spending lots of time with the boys was really fantastic. Seeing how much they had grown, even in the past few months, is remarkable (as was the increased curiosity level of of all things mechanical - especially cars - of the older brother Sean). We played with puzzles, built a car wash with Legos and invented some new games including ‘close-your-eyes-and-when-you-open-them-see-the-magic-that-happened.’ A special treat was a visit to Splasheville (as in Asheville) …an interactive fountain where children of all ages get wet walking / crawling / running through randomly sequenced bursts of water. Seeing the joy of the children as they watched the water spurting out of the ground and observing the smaller children get braver and braver about getting wet was a treasure. While Sean got soaked, Gavin thoroughly enjoyed himself running around the perimeter of the fountain. Actually, it wasn’t really about what we were doing at all - it was just the time we spent together that truly mattered.
People have talked about the concept of ‘quality time’ with children as being important. I decided many years ago it’s also the quantity of time that is just as important with kids. More is usually better.
Physical distance between families creates a challenge, which Skype - although making a good attempt – cannot replace. When seeing you on a computer screen your grandson can’t climb on your lap and say, “Tell me a secret, Grandpa.” He can’t take your hand and say, “Come out and watch me ride my bike” or “Show me the motor of your vehicle!!” (This really happened!) Face to face interactions are precious times, and overnight visits create a dynamic that often doesn’t surface with a brief meal or a short trip to the zoo. I think it’s important to be in the same place for evenings and mornings to create that safe environment where sharing occurs.
Being on the road alone for that 22-hour round trip experience gave me the chance to simply think, and not do. I was able to evaluate where I’ve been investing my time wisely and where I should consider making changes. It was a healthy process, one that is more difficult when you’re caught up in the day-to-day affairs of making a living, doing your laundry, exercising and blending healthy smoothies. Oh, don’t forget about having some fun!
One key decision made on the trip is that I will do whatever possible to schedule regular visits with my family (luckily my younger son, his wife and their two kids live much closer to me).
It’s good to take a solo journey every once in a while and rediscover who you are and what is important.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Tomorrow never knows, The U.S. Open, Fire Island
Friday, August 30 2013 | 10:27 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Tomorrow never knows, The U.S. Open, Fire Island
Thank you for the congratulations and good wishes on the early success of our Behavioral Presentation Coaching business. It means a lot!

Tomorrow never knows

We often plan our ‘tomorrows’ and then wake up in the morning and follow that plan. But there’s no telling what may happen ‘tomorrow’ that could change our lives.

Even when heading out the door to go to the same place and job that we’ve been going to for years, a magical moment may be waiting for us right around the bend. So how do you know??? The simple answer is – you don’t. If you’re open to what the Universe has in store for you, then you know it’s always possible …

I believe these are not chance happenings…they are part of the master plan. As stated in this excerpt from The Holstee Manifesto:
"Some opportunities come only once, seize them. Life is about the people you meet, and the things you create with them so go out and start creating."
When the Universe conspires to give you the chance to seize an opportunity – just do it! We probably all look back from time to time and say to ourselves, “shoulda, coulda, woulda,” and goodness knows I have my share of these moments. But it’s a great feeling to ‘go for it’ when we have the chance and it’s right in front of us, within our grasp.



The U.S. Open

This week, the U.S. Open Tennis tournament began in Flushing Meadow, New York. On Friday, some friends and I watched a day of qualifying matches - players who were competing to be in the main tournament draw. We had a great day, saw lots of inspired tennis and couldn't wait until the next time we got on the court ourselves.

In the matches where an American was playing, even an unknown player, the New York crowd rooted for them. The beauty of a global sport being played in NYC is the diversity of the audience. Players from different parts of the world all found local support in the stands.

Every match on Friday was singles. The players are out there – on the courts, on their own – trying to get to the big show. It can be a lonely game; the competitors are alone, with just their racquet, skill set, and mind. The difference between winning and losing can often be attributed to the mental game. Internal chatter can sometimes make or break the match.

Players do have supporters - family, coaches, friends - in the stands to turn to from time to time for encouragement. We all need that to lift our spirits when we’re down ‘Love-40’ in the crucial game. People to cheer us on with a smile, a fist pump, or simply a nod. These moments of connection can help get someone out of their own way.

I’ll be watching the U.S. Open looking for these players that we saw making their way through the tournament. And, having observed their battle last week, I’ll be rooting for them too!

The U.S. Open runs from August 26-September 9: Here’s the link.

Fire Island

Last week I was invited to Fire Island, a barrier island located off the south shore of New York’s Long Island. Taking the ferry to my destination made the short get-away seem like a real vacation.

Fire Island has been a well-known ‘summer share’ location with singles and groups, many unrelated, renting a house together and enjoying the summer beach environment.

As you might imagine, Fire Island suffered serious damage in last fall’s Hurricane Sandy. Seeing building sites where houses once stood was difficult. But many folks, like me, just get a glimpse of the devastation and are not living the experience on a daily basis. Noticing boarded-up residences and commercial buildings with lots of construction going on was a vivid reminder. The recovery and rebuilding efforts will still take years to complete. Oh, the power of Mother Nature.

Allowing myself to shift perspectives, while standing on the sand and looking out at the ocean, it’s as if nothing had changed. The beach itself was gorgeous.

We swam, played Kadima and a little beach volleyball. A new group approached the court after we were all warmed up. I immediately thought, ‘Gee, here come some real players intent on kicking our butts!!’ We accepted their challenge and quickly discovered they were not the hotshots they resembled but rather people playing on par with us who were just looking for some fun and friendly competition (btw, we won the best two out of three games!).

It’s funny sometimes, how the mind works. At one moment, this new group looked like a bunch of ‘ringers’, perhaps having played competitive volleyball in college. In life, our imagination can run wild when we let it. Living in the moment, it’s nice when we’re pleasantly surprised!

Enjoy the Labor Day Weekend

Early Friday morning I’ll be on the road driving from New York to Asheville, NC to visit my son, his wife and their two sons.

To all of you in the U.S., enjoy a happy and safe Labor Day weekend.
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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

Data Center Incentive Paradigm Shift
Tuesday, July 09 2013 | 01:16 PM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

It’s been a long time coming, but after many months of planning, discussions and lobbying, a consortium of stakeholders, comprised of industry members, City and State officials, lobbyists and, of course, the legislative members and honorable Governor who worked in unison, were successful in passing into law a tax reform package in the State of Arizona, now known as SB 2009. Tax mitigation and reduction legislation has been signed into law in at least 14 states, so although noteworthy on its own, many would not consider it particularly newsworthy. That is, of course, unless one understands the potential impact of this specific bill. What really makes this piece of legislation exemplary is the fact that the incentives are not tied to employment and the capital expenditure thresholds are very low compared to that of other states. By coupling these two key features, Arizona has proven that it not only grasps, and acted upon, the fact that although data centers are the essential infrastructure fabric of modern society, culture and business, they don’t directly create a lot of jobs. Governor Brewer and the State’s Legislature have recognized that the 21st Century Jobs Initiative necessitated a change in how data centers operate in the State of Arizona.

In other states, full time employee requirements range from 20 to 50 with an accompanying wage scale condition that such jobs created pay between 120% to 150% of the average wages in that particular locale. Furthermore, capital expenditure thresholds in most states with significant sales and use tax exemptions require a much higher investment level ranging from $150M to $250M. Additionally, exemption periods in many of these states do not exceed 15 years.

The legislation provides two tier levels of investment for new developments. To qualify, for the higher tier level, the developer/owner/operator and Qualified Colocation Tenant (“QCT”) must invest $50M within a 5 year period in a county with a population of more than 800,000. For the lower tier level, the developer/owner/operator and QCT must invest $25M within a 5 year period in a county with a population of less than 800,000. For prior investments, the party must have invested at least $250M since 2007.

Sustainable Redevelopment Projects are also recognized under the legislation. A project can obtain Certification if it is either a Revitalization Project or a Green Building. In the Revitalization scenario, a project must have been more than 50% vacant for 6 of the 12 months prior to Certification. As a Green Building, if the project attains certification under a recognized greed building standard, including the Leadership in Energy and Environmental Design (LEED) green building standard developed by the United States Green Building Council, then it can be certified under S.B. 1486.

Once Certified, Owners and Operators receive tax relief for 10 years from the date of Certification, unless the data center is classified as a Sustainable Redevelopment Project in which case it receives benefits for 20 years. Likewise, Qualified Colocation Tenants the same consideration. Furthermore, the definition of Computer data center equipment under S.B. 1486 includes: all equipment necessary to outfit or operate a computer data center, including power management facilities, water conservation systems, environmental control facilities, software, servers, modular units, and related equipment.

For example, a rough order of magnitude calculation for a capital investment of $50M (not including the cost to build the shell of the data center) would yield an initial TPT Tax abatement of $3,550,000. For a Qualified Colocation Tenant, using a base rent number of $75,000 per month (500 kWh x $150 per kWh per month) for a 5 year contract (Lease) would yield a rent savings of $90,000. Additionally, the cost of any IT equipment also falls under this bill. Assuming that a 500 kWh commitment might include 1,000 servers at a cost of $4,000,000, the TPT Tax savings would be another $80,000 and this savings continues through the refresh cycle for the next 10 to 20 years. Those are some very compelling savings.

In conclusion, taking advantage of the savings requires some degree of planning, administration and a thorough understanding of the “total cost of ownership” whether related to a purchase and development, or lease.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Pizza & Drink Thing / Email Recall? / Feeling Like A Kid Again
Monday, June 24 2013 | 09:24 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

My Summer 2013 Pizza / Drink Thing (as it’s come to be known) will take place Monday evening, June 24. These events have typically attracted a collegial group of commercial real estate professionals - some known to each other; others meeting for the first time. I’ve been doing this kind of get-together for many years but this one will have a different twist – something fun and specifically constructed for the commercial real estate folk. You’ll need to come by to experience it! Bring your inner child, and a hard hat (just kidding about the hard hat)!

Where: Joe-G Restaurant
244 West 56 Street, NYC
(between Broadway & Eighth Ave)
Downstairs in the DaVinci Hotel

When: Monday, June 24
6pm until 9ish

What: I supply the famous Joe-G pizza;
You buy your own drinks.

Why: Why not??

I look forward to seeing you there! Bring a friend.

What’s the rush?

A few times a year I purge my email folders. Some messages make me feel proud of my communication skills; reading some of the ‘less than perfect’ emails reminds me how important it is to pause before hitting ‘SEND’. (Perhaps I should have a ‘PAUSE’ button added to my program to help me remember!)

It’s prudent to have a trusted colleague read a draft before the final version blasts off into cyberspace. But we don’t always have that luxury. It helps to remember the old adage about sitting on a letter overnight and reading it the next day, perhaps in a different frame of mind. In certain situations it’s just better to PICK UP THE PHONE. Ugh, the importance of hindsight.

But alas, sometimes we forget – especially if our emotional button has been pushed. Interestingly, it’s not always another person that does the pushing – I am very capable of doing this myself. Is anyone aware of an email 'recall' feature on Gmail?? This tool would be extremely helpful when you've hit SEND too quickly....Perhaps this feeling is familiar?

I vow to be more mindful of the messages I send - putting myself in the shoes of the recipient. After too many instances of allowing my emotions to get me in trouble, I realize it’s simply the proper thing to do. The willingness to reevaluate myself, and be receptive to ideas from people who care about me, is a life-long adventure. And it feels good when I make progress – after all, it’s all about baby steps, isn’t it?

Feeling Like A Kid Again

When I was a kid growing up in Forest Hills, Queens, my friends and I would come into ‘the city’ (Manhattan) and go to FAO Schwartz, which may possibly be the coolest toy store EVER. The staff allowed us to just hang around and play with stuff, even though they knew we probably wouldn’t buy anything. It was so much fun!

The other day a friend and I stopped in to this toy wonderland. FAO Schwartz’s approach has hardly changed over the years; their ‘hands-on’ policy endures – shoppers are encouraged to explore and try out new toys. The employees are very knowledgeable and act as ‘specialists’ in their respective areas. Roaming from department to department, we had fun.

Unfortunately, there was one interaction that made us both cringe; we were accosted by a salesperson as she trained a new hire. The veteran was simply over-the-top with her approach and didn’t listen when we explained what we were looking for. This got me thinking: Every employee is a customer service representative. So - I ask you now: What’s happening in YOUR company? Remember: there’s only one chance to make a good first impression!

(Note: We also hit another large toy store which offered pretty mediocre customer service {name purposely withheld} but had a wonderful indoor Ferris wheel. The kid in both of us felt the need to take a spin. It was fun and the view of Times Square from the top of the wheel was very cool. Woops. Did I give away the name of the store?)

‘Hello Herman’ (Update)

I learned this week that ‘Hello Herman’ is only available on iTunes and Amazon Video On-Demand. If you didn’t see my last column, here’s the link. This movie addresses the impact of bullying and is definitely worth a look.

Correction

Last week I mentioned the June 29th Summer Gala for the East End Hospice on Long Island. Here is the correct link to that event.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Felix Family Reunion / 'Hello Herman' / Manhattan Residential Bidding Wars Return / Proud Dad
Monday, June 17 2013 | 09:26 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Felix Family Reunion

Greetings from Black Mountain, North Carolina, the site of this weekend’s Felix Family Reunion!

From my perspective - in attendance we have:
Two sets of brothers.
Two sons and their wives.
Three grandsons.
One granddaughter.
One nephew and his wife.
One niece once removed.
And five cousins (all under the age of 4).

It’s a very special time to be together. The kids are getting along fabulously, as are the adults. Cooking and cleaning chores have all been divvied up and pre-assigned. My brother Jay and I are the clean-up crew.

The mountain setting is spectacular although there are multiple warnings about the active bear population in the neighborhood! Some bears have actually been known to break into garages seeking garbage!

We’re a family that is distributed around the US – San Francisco, Asheville, Manhattan and Brooklyn! It’s rare for us all to be in the same place. Our trademark friendly-competitiveness has been evident at Ping Pong, Foosball and Bumper Pool. Unfortunately, my brother Jay beat me in Ping Pong and my son Kevin and I lost in Foosball to his wife, Marissa, and Bri’s wife, Bridget. But, there is always tonight!

These are special times, to be remembered and savored. It’s also fabulous to watch the cousins interact for the first time!

‘Hello Herman’

I can remember my father telling stories of growing up on the Lower East Side of Manhattan where people from different nationalities were drawn to certain neighboring blocks. There was a sense of bullying in his descriptions of the street fighting that went on - but that was with bare knuckles, not guns.

Years ago, Seung-Hui Cho killed 32 people. He was bullied by fellow high school students who mocked his shyness and the strange way he spoke. Cho, who was a senior and English major at Virginia Polytechnic Institute and State University in Blacksburg, killed 32 people in two attacks before taking his own life.

More recently, as I’m sure you’re well aware, there have been too many of these horrific tragedies related to bullying. I could begin to list them all, but prefer to share with you a more positive movement that is occurring.

Jerry Katell is a real estate developer-turned-producer and actor. Last weekend he invited me to the premier of his latest venture, Hello Herman, an independent film about a 16-year old boy who kills 42 people in his school. Jerry is both Executive Producer and has a part in the picture. It’s an inspiring film about how bullying affected one young man. The movie handles this disturbing subject in a tasteful manner – if you can imagine – and has spawned THE HELLO HERMAN PROJECT, which is raising awareness of the horrible events and psychological damage that result from bullying. I recommend taking the time to see this film.


Manhattan Residential Real Estate Bidding Wars Return

In her newsletter, Debra Weiner, Licensed Real Estate Salesperson with Halstead Property in Manhattan, cites content from the firm’s newly introduced “Absorption Report” which substantiates that “Inventory is incredibly low throughout Manhattan and bidding wars are becoming the norm”.

Manhattan residential real estate never suffered as much as other US markets during and following the Global Financial Crisis. Today it is truly a seller’s market with cash being king. In one case, I heard a story which I’m sure is regularly repeated: A couple visits an apartment for sale; later that day they submit a respectable offer; the seller calls them, “Sorry, someone came in after you and offered us more than the asking price…all cash!” How do you compete with that??

Proud Dad

My older son Brian is Assistant Professor of Music at the University of North Carolina in Asheville. On Wednesday night I was in the audience when he played organ and keyboard bass in a trio. The performance of jazz standards and some of Bri’s own tunes was at a high level (the sax player is a member of Michael Bublé’s touring band!). In addition to hearing excellent music, something else happened that really moved me. When introduced to a few of my son’s students, each told me individually that Brian was their mentor. One student was going to transfer schools and, with Brian’s guidance and sincere musical interest in her, decided to stay – a decision she is very happy with. Hearing these students talk about my son that way…well, what better Father’s Day gift can you imagine?

A Worthy Cause

A long-time OTR reader informed me about a special event that I want to share with you. On June 29 the East End Hospice is hosting their summer gala.

From the invitation: “East End Hospice provides care and comfort for all terminally ill patients, their families and loved ones living on the North and South Forks of Long Island. No one shall be denied care by East End Hospice because of inability to pay.”

Are you looking for a worthy cause? This event is open to all.


On The Road…

June 24: Spring Pizza / Drink Thing with a new spirited twist!
Join fellow commercial real estate folk at:
Joe-G Restaurant
244 W. 56th Street (bet. Broadway and Eighth Avenue)
6 – 9pm
Famous Joe-G pizza on me – drinks on you.
I look forward to seeing you there!

June 25 – 26: NAREIM Asset Management and Acquisitions – Summer Meeting, Georgetown University, Washington, DC.

Sept. 15 – 17: NAREIM Executive Officer Fall Meeting, New York, NY

Oct. 23 – 24: PERE Summit, New York, NY
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

On the Road with Steve Felix - Quotes from IMN / Utopia in NYC?
Monday, June 03 2013 | 09:28 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

IMN U.S. Real Estate Opportunity & Private Fund Investing Forum

This week I attended the Information Management Network conference in New York City (along with 899 of my closest friends!). This event is one of the few in the industry that attracts a true cross-section of commercial real estate industry professionals.

A sampling of the panel topics included: Fund Raising, Acquisition Due Diligence, Mezzanine Loan Origination, GP/LP Relations, Regulatory Trends, Multi-family financing, and - my own panel - A day in the life of an LP. Consider attending their next event if you’re looking for an immersion experience and useful takeaways on the art of raising and investing real estate funds.

In keeping with my practice of publishing non-attributable quotes, here are some I heard at this conference:
• “When real estate goes up there’s nothing better; when it goes down you’re depressed.”
• “We use 100 basis points as our theme; buying at a 5 cap and selling at a 6 cap is ideal.”
• “Everyone is searching for yield.”
• “The next stop on the capital train is suburban nodes.”
• “We’re going to invest our own money [vs. institutional dollars] and our bet is on New York City. It may be very pricey but that’s where you’ll get the biggest bang for your buck.”
• “Baring a meltdown in Europe, U.S. pension funds will continue to increase their real estate allocations.”
• “The risk profile of the cash flow is what determines whether an investment is defined as core, value-add or opportunistic.”
The mood and chatter at the conference was optimistic during the breaks. There’s a lot of positive energy in the commercial real estate space these days.

Bike to Work (or just around town)

Manhattan’s very own bike-sharing service called Citi Bike was launched over Memorial Day weekend. The adoption was instantaneous. Walking the streets over the past couple of weeks, i first noticed the racks appear, and then the bikes arrived.

The scale of operation is in line with the city it serves, with up to 40 bikes available in some locations. This is awesome!

An article in Crain’s New York on May 5 offered these comments: “The program sold thousands of memberships last month within the first 12 hours of their becoming available. Landlords are touting proximity to docking stations as a selling point. And while plenty of individuals plan to use the bikes to commute, some companies are even offering annual memberships as a newfound benefit for employees.” While this may sound utopian I see this program having the potential to positively impact the human body, the city streets and ultimately the planet.

Curiously, there is no bike helmet law in New York (or 28 other states for that matter) but annual Citi Bike members receive a $10 coupon to purchase a helmet. Why someone would ride a bike around Manhattan without a helmet is beyond me but I’ve seen a bunch of people doing just that already. Go figure!

Under Mayor Bloomberg’s administration, designated bike lanes have increased the safety of cyclists. Living in California I learned about the ‘rules of the road’ hierarchy: Pedestrian, bicycle, car. While I don’t know if that is universally accepted it seems to make sense. Don’t you think? Several times a cyclist has nearly struck me believing that I should make room for them. Now people on foot need to be even more alert crossing a city street as it’s not only the aggressive and competitive taxi drivers who are threats but also an increased number of very assertive cyclists who are sharing the road.

I’d love to hear some feedback from anyone who has used Citi Bike.
Check out their site.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

On the Road with Steve Felix - Decisions, Decisions
Monday, May 20 2013 | 09:31 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

It’s pretty incredible, the number of decisions we make on any given day. Actually, just thinking about it can be exhausting.

What should I wear? Eat for breakfast? Walk or take the subway to work? Carry an umbrella? Where to have our company Christmas / Holiday party? Renew the lease for our current office space or look elsewhere? Is today the day I speak with that underperforming employee? Accept the invitation from that good-looking colleague in the accounting department? How will I vote when the investment committee meets about buying that $200 million shopping mall? Should I sign a three-year employment contract that seems too good to be true?

Of course, if we don’t make a particular decision, we’ve still actually made a decision…to not make a decision! But does putting off making a decision help or just prolong the process and perhaps create accumulated stress that moves with us from day to day in a seemingly never-ending cycle?

Every decision - small, medium or large - has consequences and trade-offs and offers us the opportunity down the line to second-guess ourselves. Afterwards, we may feel great about the decision, or realize that it may not have been the best choice or the right choice at this time. In the worst case scenario, we may learn that it really was the wrong decision.

For many years, in any given week, I have had heart-to-heart career-related conversations with real estate people in different stages of a decision-making process. I am aware how stressful those times can be for someone in transition. I know from having gone through this process in my own career numerous times – and learning along the way about mistakes I made and try not to repeat!

There are no guarantees in life; we believe we’ve made the right choice at the time we make it. Only time will tell but remember, we usually have the option to change our minds. As a counselor once told me, whether it’s a decision that involves millions of dollars or your career or life in general, we do the best we can at that precise moment in time and should trust our instincts. Yet, it often helps the process to have someone to bounce things off.

We’re all in this together, people. We need each other. When someone calls you, asking for advice, even if you’re really busy, consider taking just a few minutes to talk. I guarantee that as much as it will help them, you will find it helps you too. As Bill Withers wrote and sang, ‘Lean on me, when you’re not strong, and I’ll be your friend, I’ll help you carry on. For, it won’t be long ‘Til I’m gonna need somebody to lean on.” (From the song Lean on Me)
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

On the Road with Steve Felix - Sound Counsel / World Trade Center-NYC / The Marketing Brilliance of LInkedin
Monday, May 06 2013 | 09:12 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Sound Counsel

Last weekend a bunch of folks who, like me, count music as an important part of their lives, gathered in a rehearsal studio in New York. All are musicians from varied backgrounds – jazz, school bands, choirs, blues and rock and roll. The common thread includes love of music and membership in The Counselors of Real Estate (CRE).

In many bands, the foundation is the rhythm section (Walt on drums, Ray on bass). The next layer is the guitars (Anthony, Jay and Noah) and keyboard (me). Add in vocals (Mary, Noah, Jay, Greg, Anthony, John and myself), horns (Buck, Jim and Neil) and harmonica (Greg) and on this day you have Sound Counsel. Boy did we have fun - playing songs like Moondance, What I Like About You, 25 or 6 to 4, Jumpin’ Jack Flash, Stormy Monday and other rock and blues classics. The key was teamwork. There was no ‘star.’ No one was seeking the spotlight. It was simply a group of individuals who loved music and wanted it to sound great.

The concept of teamwork is also critical to business success. While Sound Counsel gets together only twice a year, business teams congregate in one form or another every working day. Both band and work team members should appreciate each other’s talents and contributions – the whole being greater than the sum of its parts. Whether it’s the lead singer or the chief honcho, the importance of teamwork cannot be over-emphasized.

Rock on Sound Counsel!

World Trade Center-New York

In mid-August 2001, my son Kevin and I took in a live music performance on the plaza between One and Two World Trade Center. It was a beautiful summer night and I remember us tilting our heads back, looking up at the buildings and commenting on how tall and massive these structures were.

A few weeks later, on September 11 I was driving to work in California when my wife called me; my father had just called in a panic, “Where is Steve?!?” She told him I was not flying that day. My Dad was relieved and said that there had been an airplane crash. I turned on the radio and heard the newscaster say, “A plane has hit the World Trade Center tower.” I thought this was referring to the radio tower at the top of the building. A little while later I learned what really happened. It was simply unfathomable. And still is today.

Earlier this week I participated in a very special tour of the World Trade Center site in New York thanks to the generous invitation of Clarion Partners. Walking inside the construction fence was a bit surreal. I took the picture below from the 43 floor of the under-construction 4 World Trade Center. The photo shows the almost complete ‘spire’ that will bring the height of One World Trade Center to 1776 feet. (Note: the spire was topped-off this week).

When the tour was finished, I headed for the subway and noticed how dusty and dirty my shoes had become. Stopping to wipe them off, the ashes of the remains of the buildings flashed through my head. I couldn’t help thinking about the people that innocently went to work that day and never came home. They just never came home again. But the dust and dirt on my shoes this week represented rebuilding and hope for a more peaceful world.

The loss of lives on September 11, not only in New York but in Washington, DC and Shanksville, PA was horrific. 2,996 people died that morning. That number is simply a statistic. The reality is that all of these people were in exactly the wrong place at the wrong time. Who can figure these things out?

Many have experienced tragedy in their lives. When it happens, we are turned upside down. We suffer. We mourn. At some point, we do our best to carry on. This week, walking on that property in Lower Manhattan, the reminder of not taking anybody, or anything, for granted flooded my mind… To cherish every moment we have on earth. To let those close to us know we love them and are thinking about them. To be kind to each other. To hug. And never forget that the victims of September 11 didn’t have a chance to reflect on such things.

The Marketing Brilliance of Linkedin

How many of us are on LinkedIn? Overnight it seems to have become a global, cross-industry standard for making business connections. As we watch it evolve, some of LinkedIn’s marketing and business development techniques may be helpful to companies looking to bring more traffic to their websites.

Linkedin has mastered the art of increasing visits to their site. First, we were offered an irresistible way to post a profile. Free! This was coupled with the means to connect with others - those we already knew and those we wanted to know. Also free! That was pretty cool although I have only recently overcome my resistance to accept invitations from those I don’t know. To increase traffic further - bring on the “Recommendations” – a feature where anyone can ‘recommend’ someone else in a testimonial-type way. Free. This offers ample opportunity for multiple site visits from the recommender and the person recommended. Then LinkedIn got even smarter and realized that it was taking people too long to complete the Recommendation. Could they engage more people with a simpler process?? Bring on the “Endorsement.” Free. We could then ‘Endorse’ someone for a ‘Skill or Expertise’ simply by clicking a word. How brilliant is this?? It’s easy and it ‘promotes’ someone else as that person’s network gets to see a new posting announcing the endorsement. Along with that, the endorser’s photo is posted in the endorsement section, and the endorsee gets to feel good about themselves. Talk about win-win-win!

The moral of this story is that Linkedin.com continues to do a brilliant job of creating an environment that pushes an emotional button and creates an addiction of sorts. All social media aspires to achieve this. The more traffic to the site, the more advertisers are willing to pay. That’s where the money is. It’ll certainly be interesting to see the next feature that LinkedIn offers. Until then……
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Hot Air or Helium? / 'No Limits' Real Estate Sculptures / Over-thinking / Five Fruit Feedback
Tuesday, April 23 2013 | 09:35 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Hot Air or Helium?

From far and wide capital is flowing into U.S. commercial real estate. My long-time friend, Ed LaGrassa, of Chilton Realty in New York said, “I’m concerned that a bubble is once again forming. Prices for individual properties are really heating up.”

Whether it’s hot air or a helium bubble really makes no difference. Prices for prime properties in gateway cities are pushing cap rates down. Availability of cheap debt is also contributing to the current state of affairs. Many people I speak with are looking deeper into secondary and even tertiary markets for ‘sensible’ deals and those areas are benefiting from the appearance of previously absent brand names in real estate. As a result, these markets may experience a bonus of new job creation and the reestablishment of their economic foundation. ‘Wouldn’t that be loverly?’ (From Wouldn't It Be Loverly by Alan Jay Lerner and Frederick Loewe, written for the 1956 Broadway play My Fair Lady).

“No Limits” Real Estate Sculptures

While walking down Park Avenue this week I was stopped dead in my tracks by a unique structure; I paused for a moment to figure out exactly what I was looking at. There was a building incorporated into a piece of art. Once home I did an Internet search and must share the results with my real estate community.

The “No Limits” exhibit is found on Manhattan’s Park Avenue, between 53 and 67 streets and is totally mesmerizing. Ten sculptures are based on well-known NYC buildings. I shot the photo below on Wednesday, April 17 and plan to walk the entire ‘show’ very soon.

The artist is Alexandre Arrchea. Mr. Arrechea says he's tried to position his representations as close as possible to the actual building. Taken from his website, “The Seagram Building sculpture, like the Chrysler one, appears to unravel from a giant coil, a fire hose with sinuous lines, and looks like it's almost dancing in front of the building itself.”

If you are in the New York area, and especially if you are in the real estate industry, this is a ‘must see.’ The exhibit runs through Sunday, June 10. Hey, if you’re going to do the tour - let me know…I’d love to walk it with you!

Over-Thinking

Dr. Susan Nolen-Hoeksema, a psychologist and writer, died at 53 on January 2, 2013. She conducted work that helped explain why women are twice as prone to depression as men. This resonated with me.

Her studies, first in children and later in adults, exposed a pattern of rumination - the natural instinct to dwell on the sources of problems rather than their possible solutions. “The way I think she’d put it is that, when bad things happen, women brood — they’re cerebral, which can feed into the depression,” said Martin Seligman, a professor of psychology at the University of Pennsylvania, who oversaw her doctoral work. “Men are more inclined to act, to do something, plan, beat someone up, play basketball.”

“We are suffering from an epidemic of over-thinking,” Dr. Nolen-Hoeksema wrote in 2003.

As a man, I can relate to the concept of 'over-thinking.' I’ve seen this in myself at times. Sometimes it drives me crazy. I’ve found it helpful to go out and play – tennis, music, take a walk. These things feel good and help get my mind off thinking for a while. I can then refocus brain activity with a healthier outlook later. I’m wondering if anyone else uses a different technique of distracting your mind from over-thinking…

Five fruit feedback

Many thanks to those who sent me helpful suggestions for increasing my daily fruit intake. The most popular suggestion was, by far, the fruit smoothie. Now that I own a serious blender, I will be experimenting with this drink (or is it a food?). This is just one facet of me taking better care of myself. I believe you will agree that knowing what to do - and actually doing it - are two completely different things. But, I’m working at it. As I like to say, we are all works in progress.

On The Road…

April 27: Noon to midnight jam session with Sound Counsel comprised of fellow Counselors of Real Estate (CRE) members, New York, NY

May 16: Annual meeting of The Hoyt Fellows, North Palm Beach, FL

May 29 – 30: IMN (Information Management Network) U.S. Real Estate Opportunity Fund and Private Fund Investing Forum, New York, NY

June 4 – 5: PERE Summit (Private Equity Real Estate Magazine), London, UK
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Sleep / A Tree Grows in Manhattan
Monday, April 15 2013 | 10:57 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Sleep

For most of my life, even when I was playing rock ‘n roll for a living, I slept no more than six hours a night. That was all I needed - or so I thought. A few months ago, in a valiant attempt to turn back time, I discovered that my biological age was 55. That made a guy who is, chronologically, a little older than that feel pretty darn good. Actually - knock on wood - I don’t look, feel, or act my age. The report included suggestions that may contribute to a longer and healthier life, including sleeping more and eating five servings of fruit every day. While I love fruit and have been eating more, reaching the daily goal of five has not been easy. (Feel free to send me your suggestions to incorporate more fruit into my routine.) Of most interest to me is that after taking that report to heart, I’ve been getting more sleep and have been feeling better than ever. Who said you can’t teach an old dog new tricks?

Spring in New York

The cherry blossoms are blooming, the overcoats almost ready for storage, and the tennis courts in Central Park are open! Spring has sprung in New York City. It’s my first spring since moving here last year and it feels great. Of all the cities I’ve visited, none has the energy of New York. Outside my window at the rear of numerous apartment buildings is a vigorous tree, barren over the winter and now blooming. Who would have thought that after so many years living in a home in Napa, CA, with some great old trees in my back yard, that my NYC tree would be so meaningful? But that’s the feeling I have living here, in my small studio apartment with my name on the mailbox. It’s very special.

Congratulations

Ville Raitio, now Director, Fund Management with Aberdeen Asset Management.

On The Road…

May 16: Annual meeting of The Hoyt Fellows, North Palm Beach, FL.

May 29 – 30: IMN (Information Management Network) U.S. Real Estate Opportunity Fund and Private Fund Investing Forum, New York, NY

June 4 – 5: PERE Summit (Private Equity Real Estate Magazine), London, UK
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

The Viral World / Tennis to the Max / Too many ifs
Monday, April 08 2013 | 09:16 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

The Viral World

During the first generation of commercial real estate websites, I offered a service called “Website Scorecard.” I would click through a company’s website and ‘score’ each page with a 1, 2 or 3. A rating of ‘1’ meant all was fine; the ‘2’ rating included a suggestion; and ‘3’ was given with the statement ‘fix this fast!’

With the Internet, it’s basically figuring out how to get people to navigate to your site. At this stage there are lots of tools and gimmicks but it’s not really all that complicated; just post a music video that grabs people’s attention and the viral community will take care of everything else. Case in point: Taylor Swift’s YouTube video of ‘Back to December’ has had more than 40 million viewers! Perhaps hard to fathom until you look at her song, ‘You Belong With Me’ with more than 230 million views!! Clearly none of us in the commercial real estate industry needs to achieve that kind of traffic but there is a lesson here: if you give people something they want, the word will spread.

When you are thinking about your own website, it may be a good idea to step back and consider whether you’re giving a visitor a reason to contact you. Are you offering something they want or need? Are you providing a call to action? What is your website for? If you’re not inviting your potential clients to reach out to you, then your website is basically providing information to your competitors. Why would you want to do that? I encourage you to take a look at your own information through the eyes of a potential client and make sure your website is meeting your needs.

Tennis to the Max

Tennis to the Max is a unique training program about much more than improving your tennis strokes. In fact, that’s not the primary focus. Tennis pro, Fred Sperber, and Sport Psychology Consultant, Tina Greenbaum, have teamed up to teach tennis players how to build confidence, trust themselves on the court and eliminate negative self-judgments.

On approximately my 11th tennis comeback, I have benefited from this program. What I have taken away are self-development tools that can work in all parts of my life. For example, the concept of focusing on things you actually have influence over is making a big difference for me.
Tennis to the Max has reminded me that exerting energy on things I can’t control is futile. I’m now focusing on areas in my control, such as how I toss the ball for my next serve and how I walk away from the last point. If my opponent won that point, I can brush it off and focus on me and not them. But like all habit changes, it will take time.

I anticipate that this program will provide me with long-term benefits both on and off the court. If you’re in the New York area you may want to check it out!

Poem of the Week

'Too many what ifs'
Written by James McInerney
What if you loved, or if you cared, or even dared?
What if your heart didn't start when you stared?
What if your mind couldn't stop thinking of me?
What if you knew it but you just couldn't see?
What if it happened then how would you feel?
What if the thoughts in your head became real?
What if you loved me if only the once?
And pictured the future being us?
What if I wrote this to remind you of me?
What if it worked?
Then where would we be?


On The Road…

Apr. 9 -10: PERE (Private Equity Real Estate Magazine) Global Investor Forum, Los Angeles, CA
May 29 – 30: IMN (Information Management Network) U.S. Real Estate Opportunity Fund and Private Fund Investing Forum, New York, NY
June 4 – 5: PERE Summit (Private Equity Real Estate Magazine), London, UK
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

On the Road with Steve Felix - The Myron Violation
Monday, April 01 2013 | 09:41 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Myron Silverman

The only remaining relative from my mother’s family is uncle Myron (Mike) Silverman. While not very close, we have stayed in touch. A few weeks ago, anticipating his 89th birthday, I called to see about visiting he and his wife Connie in Connecticut. I found their phone disconnected. Some research revealed that both had been moved into a nearby assisted living facility.

The facility manager would not give me any details as I wasn’t on ‘the list.’ They said the estate administrator was one of my aunt’s niece's whom I did not know. A staff member took my phone number to pass along to Connie’s niece. To date, I have not heard from my Aunt’s niece and have a gut feeling I never will.

I was told that I couldn’t even visit Mike and Connie unless sanctioned by the niece. It’s sad when things come to this. I’m sure many of you have experienced even more challenging and upsetting situations with your family members. They’re rarely easy.

Myron is a fairly passive but creative man. Like my mother, he worked in an office with stuff all over the place. “I know where everything is,” he once said reminding me of a sign over my mother’s desk that read, ‘A neat desk is the sign of a sick mind.’

These events got me thinking: time is a commodity in limited supply. The tricky part is we have no idea just how much, or how little, we have left. That makes what we do with our time so important. Reflecting on this now, I feel great clarity about my priorities. Things weren’t always this clear.

For many years I was ‘chasing after rainbows’ (from “Most of All You”, Music by James Newton Howard and Lyrics by Alan Bergman and Marilyn Bergman from the film Major League). But rainbows can’t be contained. They bring beauty for an instant and then - POOF - they vanish.

What is important to me? Finding someone to go through time with who cares about me and whom I care about; my children, their wives and my grandchildren; appreciating every day and never forgetting that once it’s gone we can never get it back; remembering the power of kindness and the gift of laughter. While not rainbows, they are the colors of my life.

Please permit me to share one Myron Silverman anecdote with you. Many years ago, on a boys-only family camping trip, we noticed that Myron had a tendency to talk about some other meal while he was eating the food in front of him. It was annoying. Sometime later, we came up with “The Myron Violation.” This occurs when someone with whom you are dining begins talking about another meal. So you call them out on it. But not all situations are clear-cut violations. For example, what if you’re eating and someone talks about a recipe? Is that a Myron Violation? Over the years, my brother, sons, and nephew (and now the extended family) have found amusement in this and the related debates. At some point, I actually told Myron about it and he laughed. I realize now that this will be his legacy to us.

I am determined to see Mike and Connie. Stay tuned.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

On the Road with Steve Felix - NAREIM Executive Officers Meeting / Heidi Latsky Dance / Customer Service Excellence
Monday, March 25 2013 | 09:06 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

NAREIM Executive Officers Meeting

What happens when 70 seasoned commercial real estate executives gather in one place? Well, if it’s the NAREIM (National Association of Real Estate Investment Managers) Executive Officers Meeting in Santa Monica, CA it becomes a think-tank with ideas being exchanged in a collegial environment. From March 17-19, 2013, the conversations were not about routine matters.

Since taking over as NAREIM President in 2012, Gunnar Branson, with support from the organization’s Board of Directors, has kicked the content up several notches. The panels and facilitated discussions challenged attendees to open their minds and consider different solutions to the same old problems.

A particularly animated session tackled the human capital factor:
• Why do some team members perform better than others?
• What are employees committed to?
• How to retain top performers.
• Just how important is compensation?
• Are you addressing succession planning?
• How does having a diverse team benefit your investors?’
Lively discussion on these and other related subjects appeared to have struck a nerve with many executives. I anticipate these topics are being discussed back in the office!

NAREIM has created an internship opportunity page on their website. If you are seeking interns this may be an efficient recruitment tool.

Heidi Latsky Dance

Somewhere Over The Rainbow, written for the movie The Wizard of Oz by Harold Arlen and E.Y. Harburg, may be my favorite song of all time. When I learned of a dance program performed to that song I just had to go. What an incredible experience. Heidi Latsky choreographed the dance to various versions of the same song recorded by a diverse group of artists including Metropolis (a barbershop quartet), Jewel, Phoenix Boys Choir, Straight No Chaser, Israel Kamakawiwo’ole (whose performance at the end of the movie Finding Forester has always gotten me teary) and of course Judy Garland who sang it in ‘The Wizard of Oz.’ It was only after the show ended that my friend and I realized the dance company was comprised of mixed-ability dancers, some with physical challenges including muscular dystrophy or prosthetic limbs.

Perhaps it’s safe to say that we all live with some sort of adversity in our lives. And those things are frequently difficult to accept. What can help make a difference, as seen in these dancers, is one’s approach to life. It appears to me that in building a dance troupe around mixed-ability performers, Heidi has invested in the faith of the human spirit.

Customer Service Excellence

Molyvos Restaurant (871 Seventh Ave @ 55th St.) in Manhattan was the scene of a terrific customer service experience. It’s a Greek establishment with a wine list of more than 400 labels, all from Greece. Wine from that region is not something either my dining companion or I knew much about. Being that dinner was a celebration of sorts, I wanted it to be special. After emailing the sommelier, and explaining our lack of knowledge, he replied with a beautifully written and comforting message ending with an offer to help us choose a wine. What he did in reality was far beyond his simple offer.

I arrived first and he came to the table, introduced himself, and said he was looking forward to meeting me. After a brief introductory chat he brought out three different wines and six glasses. Once my friend arrived, the sommelier proceeded to delight and entertain us with a private wine tasting - including the story behind each wine. While we did enjoy all three, we both agreed that one stood out. Our dinner was outstanding. We ordered interesting menu items for the first time, enjoyed our choice of wine, and ended up closing the place down! It’s these types of experiences that are long remembered and shared with friends. We were made to feel very special. Molyvos will be seeing us again.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

On the Road with Steve Felix - / Heidi Latsky Dance / Customer Service Excellence
Monday, March 25 2013 | 09:06 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Heidi Latsky Dance

Somewhere Over The Rainbow, written for the movie The Wizard of Oz by Harold Arlen and E.Y. Harburg, may be my favorite song of all time. When I learned of a dance program performed to that song I just had to go. What an incredible experience. Heidi Latsky choreographed the dance to various versions of the same song recorded by a diverse group of artists including Metropolis (a barbershop quartet), Jewel, Phoenix Boys Choir, Straight No Chaser, Israel Kamakawiwo’ole (whose performance at the end of the movie Finding Forester has always gotten me teary) and of course Judy Garland who sang it in ‘The Wizard of Oz.’ It was only after the show ended that my friend and I realized the dance company was comprised of mixed-ability dancers, some with physical challenges including muscular dystrophy or prosthetic limbs.

Perhaps it’s safe to say that we all live with some sort of adversity in our lives. And those things are frequently difficult to accept. What can help make a difference, as seen in these dancers, is one’s approach to life. It appears to me that in building a dance troupe around mixed-ability performers, Heidi has invested in the faith of the human spirit.

Customer Service Excellence

Molyvos Restaurant (871 Seventh Ave @ 55th St.) in Manhattan was the scene of a terrific customer service experience. It’s a Greek establishment with a wine list of more than 400 labels, all from Greece. Wine from that region is not something either my dining companion or I knew much about. Being that dinner was a celebration of sorts, I wanted it to be special. After emailing the sommelier, and explaining our lack of knowledge, he replied with a beautifully written and comforting message ending with an offer to help us choose a wine. What he did in reality was far beyond his simple offer.

I arrived first and he came to the table, introduced himself, and said he was looking forward to meeting me. After a brief introductory chat he brought out three different wines and six glasses. Once my friend arrived, the sommelier proceeded to delight and entertain us with a private wine tasting - including the story behind each wine. While we did enjoy all three, we both agreed that one stood out. Our dinner was outstanding. We ordered interesting menu items for the first time, enjoyed our choice of wine, and ended up closing the place down! It’s these types of experiences that are long remembered and shared with friends. We were made to feel very special. Molyvos will be seeing us again.
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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

Visioning the Data Center of the Future
Monday, March 18 2013 | 12:02 PM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

I’ve always been a late bloomer. By the time I enrolled in college, I’d been a musician for 10 years, but didn’t want to play professionally (until I fell into it by chance). I was very interested in architecture and had followed a mathematics track in High School. When I first declared a major in college, it was Math, but later changed to Philosophy, which prepared me for nothing, except critical thinking. In retrospect, I’ve often felt that I’d be much better equipped for my career path had I studied engineering in college, though at the time, I had no clue what career path I wanted to follow. After spending a number of years in the music business doing various things, including working at Broadcast Music, Inc. (BMI), an opportunity in the commercial real estate industry presented itself. Within three years of starting my training as a tenant representative in the Los Angeles area, I started working on my first deal that involved a data center component. I was fascinated with the technology and details of the deal. I realized by how much I was learning that I knew nothing about this burgeoning sector and started my quest to learn more. However, that leads me to my disclaimer that even in light of my experience, I’m not an engineer and the following discussion of Data Center models is more about business case than design, except where the two intersect.

It seems obvious now that “purpose” is one of the key drivers for design, since design shouldn’t be done in a vacuum. Regardless of what we do, whether data center related, business related, or otherwise, we need to start with “WHY.”1 Of course, this points to and begs the question, “what is the purpose of the data center as well as what goals need to be satisfied by its design, construction and operation?” Who will occupy the data center and will that same entity be the owner and/or developer?” The answer to these questions will play a formative role in determining the data center design as well as the degree of redundancy and geographic diversity. For example, is the owner/developer a provider of wholesale or retail data center space or services? If so, then in order to satisfy its own revenue expectations and objectives, the design must be able to satisfy the needs of its numerous customers (tenants). If the facility is occupied by a single enterprise, then the vertical business of that enterprise will largely dictate the design. If the company is an Internet or Application provider, then this will have consequences as well.

Business model and applications will also dictate IT configuration and equipment. Companies offering web services, or those with scaled out applications and data will currently be able to take advantage of servers requiring low power that emit less heat. Reduced heat and power loads will prompt design that is more efficient and less power-hungry. Not all businesses will be able to deploy these servers and many may not want to pay for solid-state storage devices that may currently cost more than other alternatives. As I postulated in a prior post, “It All Starts with the Server,” so data center purpose and the IT landscape configuration are building blocks one and two of the structure.

Anyone that preaches that there’s only one way to design and build a data center that works for everyone is just plain wrong. I don’t care whether that means container or ‘sticks-‘n-bricks.’ That said there are certainly some best practices that can be employed to reduce costs and increase efficiency.

Modularity and Industrialization are probably two of the most important factors that have had a tremendous impact of design and delivery over the past several years and will become even more important in the coming years. Designing for the future, but delivering for the present can save significant dollars over the life of the data center. By designing for current IT load (including power draw), but bearing in mind that expansion may be necessary, the components for the future build can be designed and built in advance to mitigate the impact of future construction on data center operations.

Air and water economizing designs have also made a substantial contribution to overall data center design and efficiency models. As the industry continues to mature and with the sustained improvements in IT equipment and processors, economizing will play an even more impactful role in design and operations.

Design and operational redundancy have historically been the most important data center factors. One need not dig too deep to find evidence that this is the oldest of data center metrics. Just visit the Uptime Institute web site (http://www.uptimeinstitute.com) and click on “Tier Certification” which was created by Ken Brill and the Uptime team to classify design characteristics that imply reliability and availability. Some have begun to shed the need for high availability levels in favor of geographic redundancy and software, such as VMware’s VMotion, based on promised live migration of running virtual machines from one physical server to another with zero downtime, continuous service availability and transaction integrity. The only problem being that in a number of recent situations involving public cloud providers, either poor software application design, or poor network design redundancy have undermined and sabotaged the goal of substituting geographic diversity for data center design redundancy. Therefore, many enterprise end-users as well as owner/operators are wondering out loud whether or not the risk of failure is worth the reward of lower construction costs. For those operating multi-tenant data centers and guaranteeing meaningful service level agreements, geographic diversity alone cannot address the requirement for continuous operation. Guaranteeing uptime will prescribe the reassurance provided by 2N electrical and N+1 mechanical design.

In conclusion, best practices, business models, business goals and objective, IT equipment and design innovations are all playing a role in assisting data center designers, owners, developers, operators and end-users in envisioning the data center of the present and the future.

Footnotes:
1) Reference to Simon Sinek’s fantastic book on marketing, business and product development entitled, “Start with Why: How Great Leaders Inspire Everyone to Take Action.”
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

On the Road with Steve Felix - Peter Lewis
Monday, March 11 2013 | 09:49 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Peter Lewis

Peter Lewis passed away on March 1, 2013 and the institutional real estate industry has unexpectedly lost a colleague and friend.

The majority of Peter’s career was spent on the pension fund side with Massachusetts Institute of Technology and Liberty Mutual Group. Since September 2011 Peter was Head of U.S. Real Estate Investment Manager Research at Towers Watson in New York, a job which required him to commute each week from Boston (a bit too far even for an avid cyclist like Peter!).

“He was like a kid about being in New York. He loved being back here. He was a passionate person.” Email from an industry colleague.

Peter was a sought-after panelist who willingly shared his knowledge and opinions on institutional real estate investing.

“Yes, Peter was one of THE PEOPLE in the industry. I will miss him: his wit, his sincerity and his poetry sorely missed.” Email from another industry colleague.

Poetry? Yes, for those that didn’t know, Peter was a poet. I can remember standing with him several times over the years listening to him recite a recently completed work. At one industry event in 2010 Peter sang a song he had written to Don McLean’s tune, “American Pie.” You can access the lyrics here.

Peter Lewis was a gentle soul. His presence and personality will be a loss to the industry he served well. Most of all I’m sure Peter will missed by his family to whom I send my deepest condolences.

Donations can be made in his name to the Pan-Mass Challenge, an annual cycling event benefiting the Dana-Farber Cancer Institute that Peter loved, either here (Click "Donate," then "Donate to Riders" and enter "Peter Lewis" in the box) or by mail at: Pan-Mass Challenge, 77 Fourth Avenue, Needham, MA 02494.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Crazy Money / The Yin and Yang of Texting / Velkommen Norway
Monday, March 04 2013 | 08:45 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Crazy Money

For months I’ve been hearing the term ‘Crazy Money’ uttered by commercial real estate folks. So what exactly do they mean? A New York City-based commercial real estate broker shared his answer as “People who are simply paying too much for a building.”

Maybe this particular group knows something others don’t. Notwithstanding commercial real estate’s popularity with global investors, I wonder if we’re on the verge of another real estate bubble like the early / mid-2000’s?

The Yin and Yang of Texting

Texting is a key component to the age of brevity in communicating with one another. We have become a society of instant gratification that causes potential negative consequences. Consider the possible impact of a typo, a message not understood or just taken the wrong way. Yes, technology has presented us with some cool tools; we just need to be smart in how we apply them. My thought on this: Reread any text message before you ‘Send.’ Think about whether a reply is even warranted before you respond (something I’m working on myself :). Be mindful of brief and hastily sent messages - it’s very easy for someone to misinterpret the intent and then a lot more time is spent setting things straight. Remember: Haste makes waste.

Recently I was with a group of middle-aged people who were voicing concern that young people, by relying mainly on texting, will not develop necessary social skills. However, I thought, might this sort of communication actually improve interaction? I realize given the paragraph above it may seem like I’m talking out of both sides of my mouth. Isn’t it possible that older people have misplaced concerns about younger people who may have actually discovered a new way of communicating - one that results in more frequent, positive and efficient interactions - thus improving interpersonal relationships?

Velkommen Norway!

On February 27, 2013 Real Capital Analytics subscribers received their January 2013 U.S. Real Estate Capital Trends Report which mentioned Norway’s sovereign wealth fund making its first venture into U.S. real estate.

One by one, offshore sovereign wealth funds are discovering real estate investment opportunities in America. It’s possible, perhaps even likely, that there will be more of these entities appearing in the headlines of publications like PERE (Private Equity Real Estate) Magazine for investing in U.S. real estate. Who do you think will be the next sovereign wealth fund to make their presence known?
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

RCA Global Capital Trends 2012 / PREA-IPD Index Launch / Contagious Happiness / The Journal of Sustainable Real Estate / The Way Things Work
Monday, February 25 2013 | 09:28 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Real Capital Analytics (RCA) Global Capital Trends: 2012 Year in Review

On February 19, 2013, RCA published their Global Capital Trends: 2012 Year in Review. With RCA’s kind permission I offer the following excerpts taken directly from the report:
- The apartment sector was a standout amongst property types, particularly in the U.S. and Europe.
- Cross-border capital remains keenly focused on the largest, most liquid markets where pricing for trophy properties has diverted from the ordinary.
- Office properties in London are far and away the most actively traded and most favored targets of property investors.
- New York City, London and Tokyo remained at the top of the most active list. However, Paris dropped from 4th place in 2011 to 6th place in 2012 as Los Angeles advanced up a notch and San Francisco moved into the top 5.
- Office markets across Europe accounted for 44% of all transaction volume in 2012. 60% of office transactions took place in just six cities – London, Paris, Berlin, Frankfurt, Munich and Stockholm.

This report reinforces the theme that many investors are simply looking for the safety of reliable cash flow. Maybe the analysis of investment opportunities today is as fundamental as “a bird in the hand is worth two in the bush.” What are your thoughts on this? Send me a note and I’ll post the feedback (without attribution) next week to get a better sense of the investment climate.

PREA / IPD Index Launch

A star-studded audience of 200+ commercial real estate professionals filled a meeting room in New York City on February 21, 2013 for the IPD (Investment Property Databank) U.S. Real Estate Investment Forum. The celebrity of the day however was not a person, but rather an index. The launch of the Pension Real Estate Association (PREA) / IPD U.S. Property Fund Index is notable with some very large funds already participating. Adoption will be the key. The industry will be watching to see which institutional investors begin to benchmark to this new index vs. indices they have historically used. I salute the birth of this new index as it gives pension funds an additional tool to make better- informed investment decisions.

Contagious Happiness

The other day I had lunch with a long-time industry friend. Not having seen each other for some time we were eager to catch up over our Soba noodles. Later that day I got an email from her. “I can't tell you how happy it made me feel to see you so happy - it is contagious.” The reason I chose to mention this is not to brag about how happy I am (which I am J). Rather to bring up the point that energy is contagious. If we surround ourselves with positive thinking and acting people great things can happen. Believe me, I know the difference.

The Journal of Sustainable Real Estate

The website for this publication has recently been updated. Edited by University of San Diego professor, Norm Miller, the Journal seeks to become the definitive resource for information and dialogue on the important subject of real estate sustainability. After all, what matters more than the future of the earth? Norm is looking forward to hearing from potential contributors. You can reach him here.

The Way Things Work

There’s a wonderful little book that contains some big messages. In The Tao of Pooh the author, Benjamin Hoff, explains the principles of Taoism through Winnie the Pooh - the main character in A.A. Milne’s classic of the same name.

While not a practicing Taoist, I subscribe to quite a bit of what Mr. Hoff has written. Early in the book he describes a phenomenon called The Way Things Work, aka The Pooh Way. Later in the book, he offers this:

“Those who do things by The Pooh Way find this sort of thing happening to them all the time. It’s hard to explain, except by example, but it works. Things just happen in the right way, at the right time. At least they do when you let them, when you work with circumstances instead of saying, ‘This isn’t supposed to be happening this way,’ and trying hard to make it happen some other way. If you’re in tune with The Way Things Work then they work the way they need to, no matter what you may think about it at the time. Later on, you can look back and say, ‘Oh, now I understand. That had to happen so that those things could happen, and those had to happen in order for this to happen…’ Then you realize that even if you’d tried to make it all turn out perfectly, you couldn’t have done better, and if you’d really tried, you would have made a mess of the whole thing.”

It’s not easy to just let things be…But, when given a chance, I find that it works. Does it work in business too? In my career the times when I let things play out, without trying to force them, they simply worked out. It takes courage. It takes faith in the power of the universe and in mankind. Maybe it’s worth a try?

Restaurant of the week

the shop (yes, that’s the actual name of the restaurant)
485 5thAvenue (at 41st Street)
New York, NY

Discreetly part of the Andaz Hotel, this is a place you could walk by many times and never realize it is there (trust me, I did).

On The Road…

Mar. 14-15: PREA (Pension Real Estate Association) Spring Conference, Washington, DC
Mar. 17 -19: NAREIM (National Association of Real Estate Investment Managers) Spring CEO Meeting, Santa Monica, CA
Apr. 9 -10: PERE (Private Equity Real Estate Magazine) Global Investor Forum, Los Angeles, CA
Apr. 28 – May 1: CRE (Counselors of Real Estate) Mid-Year Meetings, New York, NY (To include a jam session with the CRE Rock ‘n Roll band, Sound Counsel).
May 29 – 30: IMN (Information Management Network) U.S. Real Estate Opportunity Fund and Private Fund Investing Forum, New York, NY.
June 4 – 5: PERE Summit (Private Equity Real Estate Magazine), London, UK
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Relax! You'll be more productive / Valentine's Day Special Delivery / We can learn from everyone
Tuesday, February 19 2013 | 08:59 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

My son Brian forwarded me an opinion piece that appeared in the February 10th, 2013 edition of the Sunday New York Times. Written by Tony Schwartz it’s titled “Relax! You’ll Be More Productive.” The following conclusions, supported by research statistics, are taken directly from the article.
• “The best way to get more done may be to spend more time doing less."
• “Strategic renewal — including daytime workouts, short afternoon naps, longer sleep hours, more time away from the office and longer, more frequent vacations — boosts productivity, job performance and, of course, health."
• “Time is finite, and many of us feel we’re running out, that we’re investing as many hours as we can while trying to retain some semblance of a life outside work.”
More than just a fascinating concept it’s an approach that is game-changing. This article may get you to think differently.

Valentine’s Day Special Delivery

On February 14th the world celebrates Valentine’s Day. An idea came to me this week that I want to bounce off you. What if we started thinking about Valentine’s Day as simply a day to love and appreciate our fellow man and woman? What do you think of this simple conceptual shift?

On this topic, NBC’s Today Show on February 14th featured a segment about a growing movement across America: children are making hand-made Valentine’s Day cards for senior citizens.

From the Foxborough, Massachusetts PatchNetwork website, “This project was special. Usually, the children’s art creations are displayed proudly on their family’s refrigerator. Our hope was that these cards would bring a smile to someone’s day who normally wouldn’t receive a young child’s artwork. It shows that little hands can make a big difference,” said Laura Feeney, Owner of Butterfly Landing Family Child Care in Foxborough.

How thoughtful! How special!
To all my cherished readers, consider yourself loved this Valentine’s Day!

"We Can Learn From Everyone"

“We can learn from everyone – we just need to put our egos aside and listen.” Said to me by Fabrizio Bona, a New York City-based real estate investor / broker with MNS Real Estate.

This quote reminds me of something I have been saying for years: When two real estate people get together they’re doing one of two things - talking or waiting to talk. Of course, commercial real estate people don’t have an exclusive on this; it’s endemic of our society today: Too much talking; not enough listening. My storytelling-self sometimes slips into this mode. But with a newly discovered awareness, and reflection on Fabrizio’s comment, I continue be more mindful of the role I play in conversations.



Two feet of snow in New York!

Hidden Gem of the Week

Plant House, 249B West 29th Street, New York (212.244.1333).
A wonderful experience. Plant House supplies greenery for the television industry, runway shows, hotels, you name it. If you love to be surrounded by beautiful flora you owe it to yourself to stop by and talk with the owner, Michael.

Congratulations!
• Jon Thompson joined MCR Development as Managing Director
• Andrew C. Holmberg now Senior Associate – Investor Relations at The Davis Companies
• Roberta Waxman-Lenz started as Investment Officer at The United Nations Joint Staff Pension Fund.
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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

Facebooks True & Lasting Legacy
Tuesday, February 19 2013 | 08:59 AM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

I’m not much of a Facebook user. Maybe that’s a reflection of the generation of which I’m a part, though I’m fairly tech-savvy. It’s probably more the fact that I just don’t have the time or inclination to visit the site constantly looking at pictures of what my friends are doing and photos that they’re posting. With regard to my friends, those with whom I’m close, I speak with, email or text on a regular basis. To me, that makes Facebook seem pretty irrelevant to my everyday life. That’s not to say that I don’t understand, respect and utilize the power of social media. I regularly post comments on Twitter and am a daily user of LinkedIn. The power of the latter with regard to business interaction is undeniable. Furthermore, without the power of social media, many recent political revolutions probably wouldn’t have occurred when they did and change would have taken place at a much slower pace. However, over the past few years, Facebook has been making an impact on the world of technology and, specifically, on data centers in a way that most are unaware.

My first experience with this was when I attended a Silicon Valley Leadership Group Data Center Efficiency Summit on October 14, 2010. A big part of the Summit was a presentation by a number of folks at Facebook including Tom Furlong, Jay Park, and Veerendra Mulay. The presentation focused on Facebook’s Open Compute Data Center design, which incorporated DC, rather and AC powered, equipment. There are many others involved in the project including Frank Frankovsky, and many outside of Facebook such as Tim Chadwick (AlfaTech), KC Mares and others of whom I’m unaware that have made significant contributions to the design and direction of the model. As initially introduced, the cooling and (DC) electrical design was very different and the resulting efficiencies yielded a significant power and cost savings. Since that time, Facebook has created a non-profit foundation offered and made its design available online at no charge as well as presenting it at other conferences (joint meeting organized by the 7x24 Exchange Northern California Chapter and Critical Facilities Roundtable, 7x24 Exchange International Conferences) including its own Open Compute Summits. I attended the Fourth Open Compute Summit on January 16, 2013 and was more than amazed and impressed, not just by the number of attendees (over 1,900), but by the luminaries who participated as keynote speakers and also the technology manufacturers that have joined with Facebook to offer new devices that support the Open Compute model.

In addition to Frank Frankovsky, who acted as MC, there were leaders from Goldman Sachs, Rackspace, Jason Waxman from Intel and Andy Bechtolsheim of Arista Networks. The exhibit hall was filled with companies that have enabled the model and are embellishing the technology growing out of it. Those companies include: EMC; Fusion-io; Hitachi; SanDisk; Applied Micro; ARM; Calxeda and Tilera. Even telcos like NTT are getting involved in this exciting project.

The cornerstone of the Summit was the term, “Disaggregation.” The meaning of this is that by detaching the core elements of the systems, designs and components of the hardware, they can be upgraded sequentially to create greater efficiencies and improved overall design and functionality. This Disaggregation is what’s driving the constant data center design changes. Furthermore, Intel’s Silicon Photonics technology that links components at the motherboard and rack layers promise increased networking communications speeds and efficiency.

Although adoption of the Open Compute Data Center design and technology may be delayed within the ranks of wholesale data center developers, I believe that the appetite for “Open Compute” hardware design of servers and storage will steadily increase based on promised and proven efficiencies. This proliferation of the hardware will further new design innovation eventually leading to greater efficiencies within the data center world.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

On the Road with Steve Felix - RCA Europe Capital Trends 2012 / So Long New York City Mayor Ed Koch / Patience Required
Monday, February 11 2013 | 10:21 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

RCA's Europe Capital Trends: 2012 Year in Review

A few takeaways from this report published on February 5, 2013 by RCA (Real Capital Analytics):
- European transaction volumes and yields were largely flat in 2012 compared with 2011
- Cross-border investors increased their activity while domestic investors decreased activity
- Opportunistic buyers are beginning to feast on assets being unloaded by European banks
- ‘Office’ accounted for 42% of all transaction volume in 2012
- Investment capital from the Middle East and Asia (excluding-Japan) gathered further momentum
- The top five investment markets, unchanged in the last three years, are London, Paris, Berlin, Stockholm and Moscow in that order

I've always been intrigued by which cities are the 'hottest' for real estate investing. Many of us remember the Japanese investors making their move in the U.S. (particularly in New York) during the 1980's, buying trophy assets for what amounted to zero current return while looking 50 years down the road to make money. When German institutional money first started investing in the U.S., some said that they invested in cities where high-end retail was in abundance. Now, with real estate capital seamlessly flying around the world, it's interesting to see who invests where. There is a lot of Israeli money being invested in New York and London commercial real estate these days. Safe havens? Only time will tell. It's not just the institutional real estate investors that move like a herd; individual investors talk with each other, watch each other's deals and say, "Hey, do they know something we don't know?" Fascinating!

So long to former New York City Mayor Ed Koch

In the book "Type A Behavior and Your Heart," authors Drs. Meyer Friedman and Ray Rosenman suggest that to objectively view oneself, every few years, you should write your own obituary. For as much work as I have done rehabilitating the Type A behavior in me, I have yet to tackle this assignment. It's not so easy…But what brought that to mind was reading the eulogy New York City Mayor, Michael Bloomberg, gave to former New York City Mayor, Ed Koch. Even if you knew nothing of Mayor Koch you might appreciate reading the eulogy.
Here it is.

Patience Required

As a fund manager I would think it's not easy to have reached the stage where an investor is prepared to invest with you and then keeps putting you off, month after month. You are told that everything will be finalized next week or next month; but then it’s not.

Thomas Paine said in 1776, "These are the times that try men's souls." In one way or another, we are living through a period where our patience is being tested. And, no matter what type of situation, it's really all the same. We want to make things happen and truly believe we can when we want to.

One of the biggest lessons I’ve learned (although sometimes I need to remind myself) is that if you push, the other side will push back. If you lay back, there's an excellent chance they will come to you. It takes courage and faith to handle things that way, as it's often contrary to our basic nature. But when I think of some of the best things that have ever happened to me, it's when I waited… and then waited some more. Patience truly is a virtue.

Mick Jagger and Keith Richards (need I identify them as the principal song writers in The Rolling Stones?) wrote, "You can't always get what you want but if you try sometimes, you'll get what you need." We don't know for sure what they were thinking about when they wrote those lines and that's the beauty of poetry and music lyrics - we can interpret them ourselves. But what's important for me in that famous line is that if, more often than not, you get what you need, you are way ahead of the game. Appreciate what you have and try not to be disappointed about what you’re still looking for. Life is not about all or nothing. It's about all the places in-between. Enjoy the journey!

On The Road Feedback

Last week’s piece about my brother Gregg elicited a number of responses. Some of them left me teary. Thank you for taking the time to share something of yourself with me. The community that exists around this weekly column is extremely special to me. As you would expect, different subjects resonate with people. And, as I've learned over the years, there is a robust pass-along of certain columns - to a spouse, son or daughter, a friend or industry colleague. It's an incredible feeling when someone whom I've never met comes up to me and says, "Steve, your column was passed along to me and I really liked it." If nothing else, sharing something of ourselves with our fellow travelers through life helps to connect us.

Fred “Mister” Rogers shared wonderful life experiences and observations with his TV audience. While unpacking the remaining boxes from my move to New York, I found a cherished book called, "The World According to Mister Rogers: Important Things to Remember." Please allow me to share a few of my very favorite quotes from this kind and gentle soul:

- "The gifts we treasure most over the years are often small and simple. In easy times and in tough times, what seems to matter most is the way we show those nearest to us that we've been listening to their needs, to their joys, and to their challenges."
- "What makes the difference between wishing and realizing our wishes? Lots of things, and it may take months or years for a wish to come true, but it's far more likely to happen when you care so much about a wish that you'll do all you can to make it happen."
- "Some days, doing "the best we can" may still fall short of what we would like to be able to do, but life isn't perfect - on any front - and doing what we can with what we have is the most we should expect of ourselves or anyone else."

Mister Roger’s Neighborhood was a TV show for children…or was it? Fred encouraged children to believe in themselves, to always try their best and to listen to their heart. To be exposed to that philosophy at a young age provides solid building blocks for life. His message, justifiably so, is something that will be passed down from generation to generation.

Congratulations!

James Gibson who has accepted a summer internship with the J.P. Morgan Real Estate Banking Group.

C.H. Meili promoted to head the Real Estate Department at Colorado Public Employees Retirement Association.

David Gillan is now Head of Real Estate at New York State Teachers Retirement System.

On The Road…

Feb. 20 – 21: IPD (Investment Property Databank) U.S. Real Estate Investment Forum (Launch of PREA / IPD U.S. Property Fund Index), New York, NY
Mar. 14 – 15: IMN (Information Management Network) Bank and Special
Asset Executive Conference on Real Estate Workouts, New York, NY
Mar. 17-19: NAREIM (National Association of Real Estate Investment Managers)
Spring CEO Meeting, Santa Monica, CA
Apr. 1 – 5: Meetings in Chicago, IL
Apr. 9 -10: PERE (Private Equity Real Estate Magazine) Global Investor Forum, Los Angeles, CA
Apr. 28 – May 1: CRE (Counselors of Real Estate) Mid-Year Meetings, New York, NY (To include jamming with the CRE Rock ‘n Roll band, Sound Counsel).
June 4 – 5: PERE Summit (Private Equity Real Estate Magazine), London, UK
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Davos – The World Economic Forum
Monday, February 04 2013 | 09:29 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

This annual meeting in Switzerland took place on January 25-27, 2013. As described on their website, “The World Economic Forum is an independent international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas.”

Although not in attendance, I poked around their web site to see what was being discussed. I pulled a few quotes from the “Blog” section that got me pondering subjects I normally don’t think about:
- “Real opportunity exists for organizations to step up and create the conditions and commitment needed to encourage and foster innovation in their work environments. And there’s a tremendous upside if we get this right: we can better retain talent, remain more competitive into the future, and more positively affect society.” Barry Salzberg, Global CEO of Deloitte Touche Tohmatsu Limited
- “We can only be resilient as a society if the building blocks of that society – individuals and families – are resilient. The consumer and technology industries have an important role to play in developing the innovations that will help people bridge the gap between aspiration and reality to achieve a healthier and better lifestyle. If we can tip the scales in favor of the healthy choice, we can make a meaningful difference to society as a whole.” Pieter Nota is CEO Philips Consumer Lifestyle
- “Imagine if we created a method where a candidate could learn, benefit and improve on their existing skill set, whether they got the job or not. What if we created a process that removes the innate structure of rejection as seen in traditional recruitment and instead gives every applicant powerful development opportunities, regardless of whether they get the job? In a world with 75 million unemployed young people, it’s time to break the cycle of recruitment, to change the employment game to one where the rules are actually fair. Together, we can create systems of training, insight and feedback that ensure every candidate that applies for a position gains value from it, and that every employer has access to brilliant, ever-improving talent.” Rajeeb Dey, founder of Eternships.


This is big stuff. It made me reflect on how important it is to take time away from our daily routines, go to our quiet place and just think. It’s so easy going day-to-day doing what we need to do, what we have to do. But, being busy sometimes is a way to avoid thinking – I did this for many years. A long-time industry friend told me at breakfast this past week that he doesn’t mind his 40-minute drive to work because he uses it as private time - no radio, no phone calls. Where do you do your best thinking? Where do your best ideas come from? And, what do you do with these ideas?

Brazil Night Club Fire

When I read about the fire in the Brazilian nightclub that killed 235 people last weekend I remembered all the nights I spent in nightclubs and bars while playing in a rock and roll band. We never gave one moment of thought to things like, "Where are the exit doors?" or "What happens if a fire breaks out?" We simply did not think about those things back then as we were too caught up in playing music and hanging out with our friends.

It’s human nature that after a tragedy like this, people pay more attention to their surroundings. There are a number of unanswered questions in this case. For example, was the occupancy limit exceeded? Were there enough clearly marked exits? Did the club manager understand the band’s plan to use pyrotechnics? Having said that, we, need to take responsibility for ourselves and not rely solely on others to protect us. Be aware of the situation. Be proactive. If something doesn’t feel right or smell right then it’s usually not. Trust your instincts. Take a minute to look for the exits remembering that, like on airplanes, they may be behind you. Perhaps we need more emergency training provided to employees of venues that attract crowds like theatres, supermarkets, schools, hospitals, shopping malls and night clubs.

Tragic incidents like this will have long-lasting impact and the lessons learned may result in steps taken to save lives. It’s not healthy to live your life in fear of an impending disaster. Being aware and living with eyes-wide-open is a good rule for all to remember and share with others.

Gregg Felix

On Sunday, January 27, 2013 I watched my youngest brother, Gregg, and 149 fellow "intellectually challenged" individuals bowl in the Over-30 Special Olympics Bowling Tournament in Southern New Jersey.

When Gregg was born the phrase the doctors used was “brain-damaged.” "Mentally retarded" was commonly used. Last week I learned that people in Gregg's community are now referred to as "intellectually challenged," certainly a more politically correct sounding definition.

Many of the bowlers, including Gregg, stood at the foul line with balls thrown or pushed down the alley. It doesn’t matter how you get the ball down the lane; if you roll it in the right direction, and it doesn’t fall in the gutter, the pins drop. All participants got an award; the score didn’t matter. Gregg bowled 90, 108 and 87. Everyone received a ribbon and the first, second and third place teams got a medal. There was celebration with abandon. The enthusiasm, evidenced by many high-fives combined with people rooting for one another (even those on different teams), was totally refreshing.

My brother is a happy person and has a job at an Occupational Therapy Center. Gregg has been living in a group home for many years as he cannot live on his own. He was institutionalized when he was very young; a decision made by my mother, which my father begrudgingly agreed to. It was difficult for me as a child to understand why Gregg didn't live at home with us. He has the music in him like his two brothers and sings in a choir. He's also very social and introduced me to people he's known for years in this program, either as employees or volunteers. I guess networking is in our genes!

I have thought to myself many times how it could have been me that was born with a disability. It’s all so random. And, once again, as I spent quality time with my brother, I closed my eyes and remembered how easy it is to take things for granted. It’s powerful to see things from a different perspective and appreciate what we have.

Congratulations!

- David Lynn joined Cole Capital Management as Chief Investment Strategist.
- Marcus Segui is now Vice President with Grupo Acero in Bogotá, Colombia.
- Carl Esser joined CBRE as Real Estate Manager for The Shops at Houston Center.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Real Real Estate / China Real Estate / Friendships, Networking, Relationships / It's More Than Customer Service
Monday, January 28 2013 | 09:28 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Real Real Estate

Asset management of commercial real estate continues to be more and more important. Great asset managers are able to generate ‘opportunity income’ from their properties. It may originate from discovering that a space was measured incorrectly and the tenant should be paying more rent; or realizing that a space that had been used as storage can actually be rented. Regardless, there are only two ways to increase profit: increase revenue or decrease expenses and the asset manager, working with the property manager, is on the line for this.

How are you going about discovering and reaping as much revenue as you can from your properties? What are you doing to increase rental and ancillary income? Are you finding new ways to reduce operating expenses without jeopardizing the integrity of the property and the service to your tenants? And how is what you’re doing today increasing the value of the property so that you can achieve or exceed your expected return upon sale?




Overheard This Week

The other day I overheard two real estate people talking and just had to share this with you:
Q. “So what are you doing now”?
A. “Anything to make a lot of money!”


China Real Estate: What’s Going On?

Real Estate Foresight Ltd. is the company started last year by Robert Ciemniak. They’ve just published another interesting Scenarios research white paper titled “Conditions for Real Estate Markets in China 2013-2018.”
One section of the report particularly intrigued me. It’s called “Wildcards.” Here’s a portion of that:

“WILDCARDS are not our focus here, though history suggests these happen more often than expected. The following deserve a mention:
• Environmental disaster
• Natural catastrophes like earthquakes
• Tibet or tensions with North Korea; social unrest
• Economic crisis wildcards – what if Europe disassembles in disorderly way, while the US defaults on debt?”

Intrigued? Robert gave me permission to share the link. Have a look.


Friendships, Networking, Relationships

Years ago someone told me, “To have a friend, you have to be a friend.” I’ve always remembered the simple power in that statement. But I also remember another definition of a friend: it’s the person you call at 4:00a.m. when you need help of some sort and they are there for you, no questions asked. How many people do any of us have in our lives that would do that? Which is what I’m getting at. It’s not the number of friends you have; it’s having a friend who is always there for you, no matter what is going on in your life. And you are there for your friend. The underlying theme here, I think, is one of quality vs. quantity. What’s more important to you? The number of friends you have (or think you have) or the quality of those friendships?

We talk about networking and relationships in business and, yes, at times some real friendships do develop from that (I’m fortunate to have that experience). But perhaps more of those business connections are acquaintances, which are also important as they become part of our network. All of these different types of relationships require attention and nurturing. With a long time personal friend, we can allow some years to slip by due to, well, who knows what. With our network of industry acquaintances, however, we need to stay in touch on a more regular basis to maintain and develop the connectivity that benefits both parties.

As the author of this blog, it’s always great to hear from you – my own network. Last week’s column brought a number of emails to my mailbox focused mainly on the ‘leadership’ and ‘first impression’ sections. That makes me happy as it shows we’re on the same wavelength. We’re connecting.


It’s More Than Customer Service

A friend took me to the Metropolitan Room this week, an ‘intimate concert venue’ as described on its website. We saw a show called “Boys Night Out” which celebrates the music of The Rat Pack (Frank Sinatra, Dean Martin, Sammy Davis Jr.). It was the first time to this Chelsea location for either of us. Even so, the hostess treated us as if we were loyal customers and made us feel immediately welcome.

When we were shown to our seats we asked if we could possibly sit in one of the booths instead of the table she showed us. The hostess, without a minute hesitation, said, “Yes. There is normally an extra charge but we’ll wave that because it’s your first time here.” Wow! And the booth was in my favorite location – back corner against the wall, able to see everything.

After the show ended, the performers were hanging out at the bar and we were chatting them up. We learned that the hostess is also a performer; that the ‘star’ of the show often works in the coat check; and one of the other performers works for the club as well. “If it weren’t for performers, the New York City restaurant / club business couldn’t exist,” said the hostess referring to the number of performers who make a living working in the industry while they work at “making it.” There’s something to be said when the actual performers are the people welcoming you at the door. The entertainers have a vested interest in your enjoyment. We will be back to the Metropolitan Room, and can recommend it highly.


Congratulations!

Bill Krauch joined Bentall Kennedy as Senior Advisor.

Peter Slatin launched The Slatin Group, which is focused on the hospitality industry and provides a flexible, modular training program for businesses and organizations seeking to improve their interactions and communication with special-needs clients.

Ned Thomas launched his own real estate recruiting business in Chicago called Pearson Street Advisors.
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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

Evaluating the Enterprise Data Center & Colocation Cost Models
Friday, January 25 2013 | 01:30 PM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

The last quarter of 2011 was very busy for me, so I apologize to you (and to myself) for not being able to hit my personal goal of posting 24 blogs within the one year period from November 2011 to November 2012. It wasn't for lack of trying, but just based on being totally overloaded, with work, conferences, professional and personal obligations and a job search, which, happily, resulted in a new position for me with Digital Realty, the premier and largest data center developer/owner in the known universe. For quite some time, I've wanted to explore the topic of the real value and cost equation relationship in the contemporary data center. The way this blog started was totally different than how it ended, but here goes...

This is a high-level, conceptual exploration of the topic looking at value instead of operational issues or an accounting/audit review of the costs involved and metrics used to evaluate and calculate the relative value and cost of operating a data center.

Certainly, the equation will vary based on the type of data center being considered. Is the facility a "lights out” operation? Is it a Colocation/Managed Services facility"? Is it a Cloud-operation? Is it owned by an "Enterprise”? Each one of these will prompt a different model entailing different costs. All of these facilities and others will have certain features and factors in common, but the operational goal or mission statement of the facility will have implications related to availability, resiliency and the resulting cost.

All data centers use electricity (though that electricity may be created on-site through an unconventional source [think Bloom Box, or micro-turbines]), water (at least to some degree), are located on and in some form of real estate, employ a certain number of professionals (depending on facility type), and have other development and operational costs associated.

Data centers are far from inexpensive to build. Even if one is able to take advantage of existing infrastructure, acquisition and (re)development, capital costs can range from $4,000 to $22,000 per kilowatt, depending on the mechanical and electrical design as well as other structural features. You might be calling "B*[[$+£¥" based on the wide range, so let's accept that the mean cost is about $8,000 per kilowatt, not including acquisition cost. The range fluctuation can definitely be associated with the Tier Level rating created by the Uptime Institute (www.uptimeinstitute.com), or specifically as mentioned above based on mechanical and electrical design redundancy.

Let's assume that to maximize the investment, the facility must contain at least 150,000 square feet and be located on at least 6 acres of land. Let's also assume that we don't want to deal with any existing field or legacy conditions in a building, so we'll be acquiring raw land, or if a building does exist, we'll demolish it. Since we are "server-huggers" we need to be in a major metropolitan area, so our land cost will be higher than if located in a rural area. I'm estimating about $80 per land square foot. So, let's gather this information for our initial pricing model:

Land acquisition cost - $21,000,000

Building shell cost - $11,250,000

Office space cost - $900,000

Soft costs (including cost of capital) - $38,620,360

We usually estimate that about 70% of a facility will be used as "white" space (where the computers are located). Therefore, of the 150ksf, we will have about 105ksf of compute space. In this amount of space, we'll need about 10 - 15 Megawatts of Critical power, that is, power that only supports the IT gear. Development of the white space will likely take place in phases as forecast demand begins to exceed capacity. Based on the above assumptions, the white space or data hall cost of development would be about $120,000,000.

Therefore, the total cost of construction will be approximately $192,000,000. As mentioned above, it’s unlikely that the entire facility would be built initially. Therefore, this is provided as an understanding of the enormity of the overall cost model and for purposes of comparison. Additionally, data center design technology is changing, improving and becoming more efficient, so let’s also assume that we can only amortize this amount over a 10-year period. Based on the current lending environment, it’s pretty safe to assume that the cost of money is about 6%. Finally, we can render a back-of-the-napkin monthly cost of the bricks-and-mortar plus the equipment infrastructure (back-of-house) of about $2,132,000 per month, which is $14.21 per square foot, or $142 per kW.

The recurring monthly costs of operation will include a variety of different line items including power, maintenance, labor and other operating costs. With reference to the phased development and deployment of the data center and IT landscape, the costs associated with the aforementioned line items would also reflect a pro rata incremental adjustments resulting from increased deployment. However, for this discussion, let’s again assume a static load from day one. Therefore, the following costs would apply:

Power (assuming $0.10 per kW) - $1,080,000;

Labor (assuming 20 IT professionals) - $166,667 (salary only);

Operating Expenses (including maintenance) - $300,000;

Approximate Total - $1,546,667;

Cost per square foot - $10.31;

Cost per kW - $103.11.

Some of these costs may or may not be imputed based on the type and operational model of the data center. For example, if the enterprise is operating within a colocation facility, it’s unlikely that there would be a need for all 20 professionals. There may also be some cost savings related to operating expenses due to the scale of the facility and certain economies that can be actualized by the same. Also, design efficiencies will greatly affect the operating costs, including power and water consumption.

If there’s a standard price for colocation per kW that could be benchmarked throughout the US today, it’s probably about $150per kW, gross (net of electricity) and this is for a retail transaction where the power requirement is less than 240 kW. On a wholesale basis, where the requirement exceeds 1 MW, pricing fluctuates, but could be pegged at $120 per kW for quality space, though the market is very competitive and is being constantly commoditized.

Stepping back for a moment to evaluate the above, does it make sense to deploy this kind of capital if data center operations are not core to the business that is operating the facility? The loss of use of capital in and of itself is one primary reason for not building one’s own data center and taking into account all of the other costs involved, it really doesn’t make sense. Factoring in changing technologies that promise to reduce server power consumption and heat production, increased virtualization, and improved cooling technologies will it be long before IT footprints will invert the pricing model and make obsolete the notion of a stand-alone enterprise data center in favor of a hybrid cloud-colocation-managed service model? I don’t have any answers to this question, but based on the new technologies that I’ve seen over the past 6 months, I do know that the data center model is being transformed by a variety of different factors. Stay tuned for my next blog about Facebook’s true and lasting legacy. No, this has nothing to do with how you normally think about Facebook.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

On the Road with Steve Felix - Ice Skating at Rockefeller Center / NAIOP Breakfast / Company Branding and the Elevator Pitch / MCF Academy (Liberia) News / Shannon Corey in Nepal
Friday, January 18 2013 | 04:37 PM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Ice Skating at Rockefeller Center
Early last Sunday morning a friend and I went to Rockefeller Center. It was the first time either of us had skated under the tree. As we rediscovered our 'skating legs' we noticed the people standing at the top of the rink looking down and taking photos of, well, skaters like us. We each had the same thought… ‘All these years that was me watching from the top, looking down and thinking, “Gee, wouldn't that be fun!”’ Neither of us had every actually done it – until now.

Doing new things is one of my 2013 resolutions and I’m off to a good start. While I hadn't been on ice skates in a very long time, on this day I skated for almost two hours and didn't fall once. Yeah! Rockefeller Center during the holidays is really a special place and we were fortunate to be skating when we did as the beautiful Christmas tree was coming down the very next day. So, all you native New Yorkers and other honored guests and tourists, if you've ever imagined yourself skating under the tree - then just do it! I think you will have a great time and a memory for life.


Company Branding and the Elevator Pitch

Over the years, I have done an exercise with real estate firms to help them create a simple elevator pitch to be used by all employees when asked the basic question, "So, what does your company do?" This week, the exercise once again had fabulous results. With this particular client, part of the success was the truly collegial environment amongst the team. Even though the 'big boss' was participating in the session, no one (NO ONE) seemed to feel intimidated or reluctant to give his or her opinion or suggestion.

That's what makes an organization stand out and that attitude starts at the very top. Conversely, I have been in meetings where team members seem so worried that they are going to say the wrong thing or that the boss won't like what they say. This is so disappointing to watch - knowing that management is not getting the most out of their people and, at the same time, the employee loses (or has already lost) their enthusiasm.
Take a moment to think about which of these scenarios most closely resembles your firm and decide if something could be done differently on your team to increase openness and communication.

MCF Academy (Liberia) News
I received a note from an OTR reader who said, “I have enjoyed reading your updates on the MCF Academy. You have inspired me to sponsor a child." This message warmed my heart. It was incredible to me that this very column helped to make a difference in a child’s life.

Shannon Corey in Nepal
Shannon Corey is my musician friend who just arrived in Nepal on a mission to work with orphans. In her first email to everyone who donated money to pay for her plane ticket, I noticed the names of four members of the OTR community who quietly made donations to Shannon's project. I must tell you that my eyes welled up when I saw those familiar names. On behalf of Shannon, please accept my own sincere "Thank you."

Susan Hudson-Wilson Memorial Music Section
Lyrics of the Week
From Procol Harum's "Learn to Fly"
Learn to fly
Where eagles only dare to try
We're on the wing
We dare to win
We see the future
And we're gonna make it
Learn to live
You know you got so much to give
It's in the air
It's everywhere
We got a vision and we're gonna claim it

Congratulations!
Christopher Turner - joined Colliers International as Senior Director in the Financial Services Team.

Simon Mallinson - joined RCA (Real Capital Analytics) as Executive Managing Director - EMEA (Europe, Middle East, Asia)

On the road….
Jan. 15: DTZ's First Annual Forecast Briefing, New York, NY
Jan. 23 - 25: IMN Winter Forum on Opportunity and Private Real Estate Investing, Laguna Beach, CA
Jan. 30 – 31: NAREIM (National Association of Real Estate Investment Managers) Asset Management and Acquisitions Winter Meeting, Dallas, TX
Feb. 20 - 21: IPD (Investment Property Database) U.S. Investment Forum, New York, NY
Feb. 27 - Mar.1: NCREIF (National Association of Real Estate Investment Fiduciaries) Winter Conference, Phoenix, AZ
Mar. 12 - 15: MIPIM, Cannes, France
Apr. 28 - May 1: CRE (Counselors of Real Estate) Mid-Year Meetings and a studio jam session with the CRE Band, Sound Counsel, New York, NY
June 4 - 5: PERE Summit-Europe, London, UK

Disclaimer
All content represented on this blog is created for informational purposes only. Steve Felix is not to be held liable for what is written or displayed. Content, which includes all text, photos, videos and graphics, is not intended to malign any religion, ethnic group, club, organization, company or individual. Steve Felix is responsible for the content of the blog and this content is independent of groups, organizations, or other companies he may be seen to represent.
Steve Felix makes no representations as to the accuracy or completeness of any information on this site or other information as a result of following any featured link to or from this site. The intention of this blog is to do no harm in regards to injury, defamation, or libel. What is written or shown is not to be taken as fact or absolute. Steve Felix will hold himself harmless for any errors or omissions in this blog’s information; including but not limited to external link information, translation or interpretation of content, or incorrect grammar and punctuation.


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Gary London, President, LONDON GROUP REALTY ADVISORS

It's Time to Buy in the Residential Market
Wednesday, January 16 2013 | 02:15 PM
Gary H. London
President, LONDON GROUP REALTY ADVISORS

As Published in the San Diego Business Journal, January 7, 2013
It is now time to buy a home. I have been saying this for the past several years, but now the market statistics back up the recommendation. The purchase “window” is still open, as prices are well below their last peak and interest rates are low.

But buyers beware: This is already changing, and the window is closing. Prices are up about 25 percent from the bottom, and climbing. There seems to be a chronic dearth in homes to purchase, and with limited supply forecasted over the next several years, that situation may only get worse.

Home prices are still about 40 percent below what they were in 2005 and interest rates are 30 percent less. This means that a savvy San Diego homebuyer can acquire a home with substantially lower payments.

Still, you have to qualify, and lenders remain reluctant to lend, except to the most qualified buyer — the kind of buyer that weathered the national economic crisis intact. If that is not you, expect a grinding mill of “prove up” that you are their kind of borrower. If you have the stomach for that, you are rewarded with the lowest interest rates of a lifetime.

Here is a primer of the residential market over the past 7 years:

It peaked in 2006 (median detached price in San Diego county was $622,000 in May 2006);

It troughed in 2009 (median price in March 2009 was $326,000);

It wallowed at the bottom — in terms of value and sales activity — for two years thereafter.

‘Clear’ the Market

Over the past two years, the market has struggled for traction. I call this market “clearing” because the distressed sales had to “clear” the market before viable transaction activity could begin. The median price today is $408,000.

That period is over and the market has evolved to predominantly nondistressed sales.

Now consumers face a different problem: shortages. Sales volume is up 12 percent this past year, according to the San Diego Association of Realtors, SDAR. This includes listing shortages — most homeowners are reluctant to list too early in the cycle recovery — as well as shortages caused by failure to replenish. There have been record low building permits sought since 2006.

Expect this year to be characterized by a continuation of supply shortage, both on the resale side and in the delivery of new homes. Prices have already escalated 9 percent during 2012 (SDAR figures). They will continue to rise.

At the same time long-term interest rates are at historical lows, hovering around 3 percent.

Availability Crisis

Over the next few years the home market will see continued price escalation, coupled with an availability crisis. This is a crisis that will go essentially unabated as a region that has mostly run out of developable land can no longer deliver single family homes in sufficient quantity. This will eventually be made up by the delivery of condominiums — but not for several more years.

The best current real property investment is rental. Rental rates have been on a strong upward run, partly stemming from the dearth of inventory (reflected in 95 percent plus occupancy rates), partly a result of so many “Gen Y” persons (now aged 20-32) now forming households, unwilling or unable to purchase a home. Expect rental rates to continue to be bid up.

Eventually expect a “re-peak” of price levels that peaked previously in 2006. I don’t know when, but perhaps sooner than you might think. It is inevitable unless our economy collapses, interest rates spike out of control or the homeowner interest deductible is dealt a fatal blow.

The latter concerns me.

One last cautionary note: Remember that all real estate is local. While some indices go beyond our region such as interest rates and tax issues, the real dynamics of the market — supply and demand — are defined locally. I would write a different forecast for noncoastal California markets that are not short on land, or the path to entitlement is easier or price base is substantially lower. That is a lot of places. Expect their recovery to take longer.
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Gary London, President, LONDON GROUP REALTY ADVISORS

Giving the New Mayor a Land-Use To-Do List
Wednesday, January 16 2013 | 02:15 PM
Gary H. London
President, LONDON GROUP REALTY ADVISORS

As Published in the San Diego Business Journal, December 31, 2012

Our new mayor is just now settling into his new office. So I offer up a few suggestions on issues in the planning, land-use and real estate arena that are in critical need of attention.

The key to all of the suggestions is the recognition that as our economy improves, land-use and growth will forge back to the policy forefront. For businesses and entrepreneurs to be comfortable to grow and operate in San Diego, they need an environment where they can expect cooperation in a reasonable time frame to build the structures that they will need. Moreover, they must have some assurance that there will be sufficient housing at decent rents and pricing to accommodate and attract the best employees.

Here is my partial list — mostly “meat and potato” things, not really lofty goals — that represent my top priority “to do” list for Mayor Filner’s administration:

The city planning/building departments need a top-down remodel to create more efficiency in the planning process. Even quality projects with popular support manage to get held up by the current system. This is not the fault of current management or personnel. It is just that most of the system is dumb because it is not purposeful.

Tear up and redo the city’s zoning codes. The problem is that we have piled on rules on top of rules to regulate a land-use pattern that is obsolete. In our new era of building up and not out, of mixed-use development and of reuse or repurposing of old buildings, the existing rules actually get in the way. We should simply have one set of rules strictly aimed at health and safety; and another set of general guidelines aimed at public policy. But we should work toward the end of zoning as we know it. Our current system has become so obsolescent as to be virtually unworkable by any of the constituencies, be they planning groups or developers.

While we have a general plan, we are far behind schedule in updating community plans. This means that most communities — and thus their representatives and citizen groups — have no contemporary guidelines or standards from which to judge. If we want good production at the community and grass-roots level, we have to offer up the right policy tools.

Encourage higher-density mixed-use solutions. This can be achieved through bonus and incentives involving reductions of parking requirements, or allowance of density or other gifts to achieve transient adjacent projects and other types of agreeable mixed-use.

Create a Master EIR (environmental impact report) and an infrastructure financing mechanism for redevelopment zones. The state eliminated redevelopment. But that doesn’t have any relation to the need for redevelopment. We must encourage redevelopment by cutting the long, laborious EIR process from projects that can’t afford it and will otherwise not be built. We need them to get built.

Approve a new City Hall. The current City Hall, at 202 C St., is probably the most unsafe working environment downtown. If our city wants to attract and maintain top-notch people, we have to improve the working environment.

Continue to push convention center expansion. It’s a no-brainer. It creates jobs.

There is a bigger list. Certainly others in the community have their own suggestions. We are at a community crossroads. What matters is that these issues are now more critical than ever: We are running out of land, which requires new forms of development; California has become a very challenging place to do business because of costs, taxes and our overall fiscal mess; the construction industry really must recover for the economy to achieve full recovery.

Our last mayor did a good job of stewarding the city onto the path to fiscal health. This mayor is gifted with the job of stewarding our city into a new era of responsible planning and economic growth.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Celebrations / Sponsor a Liberian Child / Ice Skating in Rock Center / The Alchemist / Unclutter Your Life
Monday, January 07 2013 | 09:42 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Celebrations
There is always something to celebrate. Most of the time, I find myself celebrating the small things. For example, this evening, after Interviewing Skills Improvement coaching session with a client, I'm going to celebrate the fact that yesterday I got a New York City cell phone number. Why? What's the big deal? Well, changing that number severed my final tie to my years living in California. Yes, it's strictly symbolic but it has meaning for me. It's another step down the yellow brick road.

While it's always more fun to celebrate with others, I've had a good time toasting when I'm alone. Many times, before I take the first sip of a Kettle One, straight up with a twist, thank you very much, I'll close my eyes and think about my mother or my father. Sometimes I'll close my eyes and just think about how lucky I am. But, regardless, there are some places, particularly in Manhattan where they know me (no, it's not Cheers!). In one place, sometimes the manager will let me sit and play the piano. To me that's always a celebration. And, while I am aware that there is an audience there it's really special when a friend is there with you to share your joy. I don't know about you but I think the world needs more celebrating of little things and what's great is that you can just do it, anytime, anywhere because celebrating comes from your heart.

Sponsor a Liberian Child
The fascinating thing about traveling by air is that you get in a plane in, say, Monrovia, Liberia and then after flying for a while, you're back in New York. But life in Liberia is just the same as when you were there. It's your life that took a side trip to experience another place, another culture and another people. There is no substitute for first-hand experiences. But, even if you can't go visit the children at The MCF Academy, you can make a difference. I am going to sponsor a young man named George Beyan. It costs $300 a year. I'm not going to get on my high horse here and tell you that you should do it too. That's totally up to you. What I can tell you is that if you do choose to sponsor a child at the MCF Academy, you will feel good. I guarantee it and, as we all know, there are very few (any?) things in life that are guaranteed. So, really, just do it. Go to this website (http://mcfacademy.org/live/sponsorachild.php) and sponsor a child in Liberia for just $300 per year. It's a wonderful way to begin a new year.

New York Real Estate Breakfast
In our industry, perhaps especially in New York, there are a few places that, if you go for breakfast, you are almost guaranteed to run into someone you know. Yesterday, for example, I met someone at Cucina in the Met Life Building on the 45th Street side and while sitting there, sure enough, my good and great friend, Ed LaGrassa of Chilton Realty walked in. That spot, along with Naples 45 in the same building are two popular commercial real estate breakfast haunts. One more, right across 42nd Street from Grand Central Terminal, under Park Avenue, is Pershing Square. Make a reservation there for breakfast (they don't take lunch reservations and it's sometimes a madhouse). Of course, if you're looking to see really, really big shot real estate people you can have breakfast at the The Loews Regency Hotel at Park Avenue and 61st Street. So, remember, networking opportunities exist all the time, not just at industry events or networking events.


The Alchemist
Have you ever started a book, perhaps one that someone recommended to you, and weren't able to get into it? Or even if you finished reading it you didn't really find that it resonated with you? About 10 years ago I first read "The Alchemist" by Paul Coelho. I thought it was a cute story but that was about it. Then, the other day, while looking for the next book I'd buy on my Kindle, I came upon that book and decided to buy it. It's a quick read. But this time, something was different. It was me. Here are a few sentences that struck a nerve with me:

-It is the possibility of having a dream come true that makes life interesting.
-It is the simple things in life that are the most extraordinary.
-People are capable, at any time in their lives, of doing what they dream of.
-We have to take advantage when luck is on our side, and do as much to help it as it's doing to help us.
-You must always know what it is that you want.
-When a person really desires something, all the universe conspires to help that person to realize his dream
-Remember that wherever your heart is, there you will find your treasure.


"What's Still on Your Back Burner?"
On New Year's Day a friend took me along to a seminar at the JCC on the Upper West Side called, "What's Still on Your Back Burner? Unclutter, Get Clear, Get it Done." The program was led by Jennifer Zwiebel and it was fascinating. Jennifer offers one-on-one coaching and, based on the number of people hovering around her at the end of the session, she found some new clients. Here are a few things that Jennifer turned me on to:
-Three kinds of clutter: Space, Time, Mind
-Anything you want to do is achievable. It won't be easy. You have to want the results more than you want it to be comfortable
-Jennifer's Favorite Quote (from her website): "We must be willing to get rid of the life we've planned, so as to have the life that is waiting for us." Joseph Campbell

On the road…

Jan. 7-9: Dallas to conduct my one-day "How to…" Workshops for a client.
These workshops include:
-How To Network
-How To Get The Most Out Of Attending An Industry Event
-How To Leverage Your Trade Association Membership
-How To Build Your Personal Brand
-How To Be A Memorable Panelist
-How To Be An Effective Moderator
-How To Get Meetings With People Who Don't Know You.
Basically, I am teaching people what I know how to do and what works!

Jan. 21-26: Los Angeles and Laguna Beach, CA for client meetings and to attend the IMN Winter Forum on Opportunity and Private Fund Investing at The Montage in Laguna Beach.

Feb. 27-Mar. 1: Phoenix, AZ to attend the NCREIF (National Association of Real Estate Investment Fiduciaries) Winter Conference.

Mar. 12-15: Cannes, France to attend MIPIM (Tentative).

Apr. 28-May 1: New York to attend the CRE (Counselors of Real Estate) Mid-Year Meetings and possibly have a jam session with the CRE Band, Sound Counsel.

June 4-5: London to attend the PERE Summit-Europe.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Long Beach, NY Rebuilds / Don't like it? Change it! / RCA Holiday Party / Seize the Opportunity / LGT Clerestory
Friday, December 14 2012 | 11:31 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Dateline: Long Beach, New York: Hurricane Sandy
Hurricane Sandy is no longer news as far as the media goes. But it is very much with the people of Long Beach, NY. Wednesday I was allowed back in the building where I had been staying and retrieved my last few remaining belongings including my digital piano (Thanks Hal, for offering me the loan of yours). The main commercial drag looked sort of normal. That is until I took a closer look saw that many of the businesses and restaurants are still shut, some looking like they will never reopen.

As I made my way to the beachfront where I had been living, the damage became more visible. The boardwalk itself is devastated. A number of buildings, including one for old, infirm people, have been condemned. The facing of an apartment building had been torn off. Piles of ripped out walls, floors, carpeting still dotted the sidewalks. The encouraging image is of people rebuilding, their residences and their lives. Piles of fresh plywood, new carpeting, new energy. Yet, through all this tumult, I passed by the schoolyard of a grammar school and saw dozens of children, at recess, playing. Isn't the sound of children playing special? In this case, it was a reminder of when things were normal.

If You Don't Like Something, Change It.
This week, 23 boxes of stuff from the house in California that had I lived in for the past 13 years were dropped off at a building in New Jersey. My sincerest thanks to John Muscarelle of Jos. A. Muscarelle, Inc., who have been developing commercial buildings since 1926, for allowing me to use part of one of their buildings for my boxes and bicycle. Psychologists point to certain events that can cause stress in one's life: starting a new business: check; relocating: check; selling your home: check; getting divorced: check. Hey, why not do them all at one time? However, it did start to take it's toll. Maybe you know the feeling. But, as Taj Mahal sings in his classic, "Take A Giant Step," "Come with me. Leave your yesterday behind and take a giant step outside your mind." Thankfully, I have some terrific friends who have provided much-needed support and guidance during this time. I love you guys ("Hoosiers.)" In the waning days of 2012, I have this feeling that 2013 is going to be a great year...for all of us!

RCA Holiday Party
The Meatpacking District of Manhattan has become 'the' neighborhood of choice for commercial real estate parties. There is so much energy on the cobblestone streets and in the bars, restaurants and clubs. How did that area become so cool? Well, cool people started hanging out there. Of course, once that happens and everybody and their brother and the tourists find it, the cool people need to find the next cool place, which they keep to themselves for as look as a great secret can be kept! RCA knows how to throw a party. They were also celebrating the launch of their new CPPI (Commercial Property Price Indices). I was on their launch webinar the other day and was blown away by what they have created. These indices are incredible tools. They allow you to slice and dice recurring sales data in a gazillion ways. Hanging and dancing with a bunch of the RCAers and chatting with some people I hadn't seen in a while was very fun. Everybody was smiling. Isn't that what this time of year is all about?

Many years ago, perhaps 12, a real estate broker named Larry Ross leased RCA their first space. It was big enough for three people as that was all RCA needed. I had become an advisor to Larry's internet start-up Propertyrover. He introduced me to Bob White, founder of RCA. When Bob told me what they were doing I (a) knew the industry needed it and (b) had a good feeling about Bob. The rest, as they say, is history. I saw Larry last night for the first time in a number of years. He and his partner, Christen Portelli run a commercial real estate investment sales firm called Highcap Group. Larry is also into music and mentioned that he continues to listen to my son Brian's band, OM Trio's, first CD, "Clarified Butter". Larry connecting Bob and I has made a huge difference in both our lives.

Susan Hudson-Wilson Memorial Music Section
In a Youtube connecting the dots session early Wednesday morning led me to Richard Manuel, the late pianist and vocalist for The Band, singing "Georgia on My Mind." This haunting and beautiful version is here

Some Opportunities Come Only Once, Seize Them
Joanne Douvas and Tommy Brown launched Clerestory Capital Partners in 2007. They've raised money and have invested in other underlying funds. When people try to figure out why a first time fund is able to raise money, Clerestory is an excellent example. Both Joanne and Tommy had good track records and reputations. Over the years, they had built trusted relationships with a number of the leading U.S. public pension funds. A few years back, meeting with one of those pension funds that had invested in Clerestory's first fund I asked, "So, why did you choose to go with them?" "I like them. I trust them and I wanted to give them a chance to see what they could do." So, there you have it. It's that simple, although it's not really. There was a press release the other day that Clerestory had been acquired by LGT Capital Partners, a Swiss based alternative investment manager. Without knowing all the details, it's likely that this will give them a bigger platform on which to grow their business. I say, "Good for them." They've worked hard at it and, in this case, an opportunity presented itself and they seized the moment.

Career Coaching Tip of the Week
Last week, a friend wrote telling me he had received a job offer. "What should I do?", he asked. I wrote back, "Ask them if they can do any better." The next day he wrote again. "They did a little better. They're sending me the contract." Even with all the negotiating I've done in my career, many years ago I adopted this simple strategy and more often than not, it works. Just a parting thought for today.

Congratulations
„X George Manthous who has joined Real Capital Analytics (RCA)
„X David Lynn on the launch of Lynn Capital Management
„X Joanne Douvas and Tommy Brown on the sale of their company, Clerestory to LGT Capital Partners. The firm is now known as LGT Clerestory

On the road¡K.
Dec. 15-Jan. 3, 2013: Monrovia, Liberia (West Africa) to work with the students at the MacDella Cooper Foundation Academy and enjoy a special Christmas and New Year.
Jan. 7-9: Dallas to provide a client with my one day self-improvement workshop series.
Jan. 21-26: Southern California / LA for client meetings and to attend the IMN Forum on Opportunity and Private Real Estate Investing in Laguna Beach.
Apr. 28-May 1: New York to attend the CRE (Counselors of Real Estate) mid-year meetings and possibly jam with the CRE band, "Sound Counsel."
June 4-5: London to attend the PERE Summit-Europe
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Hurricane Sandy Zydeco Fundraiser / Tishman Speyer Tree-Lighting Party / RCA U.S. Capital Trends / Million Dollar Quartet / Fortune Cookie Fortune
Monday, December 03 2012 | 09:59 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Hurricane Sandy Fundraiser...Tonight
A fundraiser is being held tonight to benefit the victims of Hurricane Sandy. I've heard that the feature artist, Rosie Ledet and The Zydeco Playboys are amazing! Opening act: Actor Michael Cerveris' and his band, Loose Cattle.

What: Hurricane Sandy Victims Benefit
When: November 30, 2012 (That's tonight!)
Where: Connolly's, 121 West 45th Street (Between 6th and Broadway, 3rd Floor), New York
Doors: 6:30pm for dinner, drinks or socializing and at 7:15pm a Zydeco dance lesson!
Show: 8:00-Midnight
Admission: $25
Come on out...I'll buy you a drink!

Tishman Speyer Tree-Lighting Party
One highlight of the week was the Tishman Speyer party at Rockefeller Center for the lighting of the Rockefeller Center Christmas tree. I ran into a bunch of former colleagues and industry friends. The tree is big, bold, bright and beautiful. Try to see it, even if it's just a drive-by.

Following that party, a friend and I were hungry and walked over to the Russian Vodka Room for some of their excellent food. The pianist, who I have gotten to know over the years, wrapped up his evening and I went over to the manager and asked if I could play a little. It's a big old grand piano with a lot of character. I can't imagine my life without music in it. Playing the piano has been an outlet for me forever and the times in-between having a piano or keyboard to play have not been easy ones. Having spent so much time alone, on the road, looking for a random piano in some unused hotel ballroom, it's special to be in a situation like the other night, playing and being able to see a friend, who had never heard me before, across a modestly crowded bar, listening and smiling. It's really those small moments in life that are the essence.

RCA U.S. Capital Trends-October 2012
Highlight about each property type pulled from this report which was delivered to RCA subscribers the other day:

Hotels: Nationwide, cap rates for hotels have remained relatively flat in 2012 at an average of 7.7%.

Apartments: The capital shift to higher yielding markets has caused national cap rates to rise in the mid/high-rise sector, although average yields for garden properties have held firm and changed little over the past six months.

Retail: While average cap rates on strip centers have fallen to 7.6% nationally, properties with the right anchor and location can command well below that.

Industrial: Nationally cap rates continue to witness compression and, at an average of 7.6%, have reached lows not seen since late 2008.

Office: Average cap rates nationally, on CBD (Central Business District) acquisitions, have risen since Q1'12 with fewer trophy sales to pull down the average and more secondary market sales that push the average up.

Fun
A long time ago, I figured out how to have fun doing almost anything. It continues to be something that I am able to do. Yes, there are some things in life that are simply not fun to do but you have to do them anyway. But those things are in the minority when you look at each day, each week, each month and say, "Did I have fun or what?" Try it. It's all in our heads.

Million Dollar Quartet
This Broadway show produced by my friend, Jerry Kattell, is opening at Harrah's in Las Vegas on February 4th for an unlimited run. I saw it a couple of years ago. Not only is the music great but it's….fun! I encourage you to check it out.

Speed Kills
That has been a slogan referring to the use of amphetamines for many years. But I'm beginning to wonder: are we simply moving too fast for our own good? My drive to and from New York and Fort Lauderdale last week reminded me of the speed on our highways, regardless of the posted speed limit (I won't even start on the horrible, rude and unsafe and crazy driving I observed so many times). But I fear that we are moving at warp speed with everything and it just seems like it causes too many mistakes, too many typos, too many acts that require apologies. As Paul Simon wrote in "Feelin' Groovy."

Slow down, you move too fast
You got to make the morning last
Just kicking down the cobblestones
Looking for fun and feelin' groovy.

Hello lamp-post
Whatcha knowin'?
I've come to watch your flowers growin'
Ain't cha got no rhymes for me?
Doot-in doo-doo
Feelin' groovy

I've got no deeds to do
No promises to keep
I'm dappled and drowsy
And ready to sleep
Let the morning time drop all it's petals on me
Life I love you
All is groovy.

Lyrics provided compliments of the Susan Hudson-Wilson Memorial Music Spot

Saying of the Week
"I'm on the back-side of responsibility." When my friend Gary said these words to me the other night I said, "I have to write that down". He was referring to a stage that he's gotten to in his life where his children are grown, he's got a good job and he is taking more time to do things that he (and his wife) care about including giving back and paying it forward. Gary and I have known each other through the industry for a good number of years; more than 10 but not quite 20. He and I have talked about both business and life. As with any friendship, the longer you know someone and the more time you spend together, the more you get to know that person's values, passions and dreams. And, as we've developed our friendship, I've said to myself, "Gee, why didn't we get to know each other better, sooner." But, as things go in life, they happen when they are supposed to, or at least that's what I believe. It's never too late for something wonderful to happen.

Fortune Cookie Fortune of the Week
"If it is meant to be, who are you to change that. Time to believe it."

Asset Management Roundtable
Yesterday, my good and great friend, Ed LaGrassa, held his monthly Asset Management Roundtable. Here are some of the more memorable comments made around that table:

-"My job is not to create disasters, it's to revel in disasters." Real Estate Attorney
-"The concept of distress is already antiquated." Broker
-"There are virtually no portfolio loans left to sell in New York." Broker
-"We're scared of the world." A broker stating what a wealthy foreign real estate investor said to him talking about why they're investing so much money in NY and London real estate.
-"With all the tumult in the world, New York is seen as a safe haven for real estate investing."
-"Lenders are not scared anymore. We're not kicking the can down the road anymore and are willing to foreclose, put the property on the market because we're certain we'll do better." Commercial real estate banker.

Congratulations
Tom Klugerz who joined UBS as Executive Director, Portfolio and Client Services, Global Real Estate-U.S.

Restaurant of the week
Cassa Nonna, 310 W. 38th St. (Bet. 8th and 9th Avenues), New York. A very nice room with good food and not too pricey.


On the road....

Dec. 3-4: Chicago to attend the NAREIM Capital Raising and Investor Relations Council Meeting

Dec. 5: Global Women's Partnership (GWP) Holiday Cocktail Party in New York. GWD seeks to empower women in the developing world with limited to no access to basic life-saving resources.

Dec. 13: Real Capital Analytics Holiday Party, New York (Invitation only).

Dec. 15-Jan.3: Liberia, West Africa. Return trip to see the progress made by The MacDella Cooper Foundation and the country in general since my first visit there in 2006.

Jan. 23-25: Laguna Beach, CA to attend IMN's Tenth Annual Winter Forum on Real Estate Opportunity and Private Fund Investing.

Feb. 27-Mar. 1: Phoenix, AZ to attend the NCRIEF Winter Conference

Mar. 12-15: Cannes, France to attend MIPIM.

Apr. 28-May 1: New York for the CRE (Counselors of Real Estate) Mid-Year Meetings

June 4-5: London to attend the PERE Summit: Europe
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Reinventing Yourself & Your Company / Franny's Pizza / Moody's RCA CPPI / Bice Ristorante / Rate Your Boss
Monday, November 26 2012 | 10:07 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

I’ve reinvented myself many times in my real estate career and lately I’ve been having conversations with a number of people and companies who are thinking about how they can reinvent themselves.

On the individual side, it’s about both finding job opportunities and finding something you really like doing. Some go back to school to get a new degree, let’s say Masters in Real Estate or M.B.A. It’s reasonable to assume that these folks were in the real estate industry in one, way, shape or form and wanted something different. So they invest the time and money to get this next degree, one of the steps on the stairway to re-invention heaven. Then they’re ready to come back into the workforce and, oh no, they can’t find a job. Why? Employers want to and are able to find people who fit nicely into their job box. Someone who has done exactly what they’re looking for someone to do and they’ve done it before. Many employers consider that a much ‘safer’ hire.

But there’s a lot more to think about when adding a person to your team and I challenge you to look holistically at the person who has taken the time to reinvent themselves and consider whether they bring something to the table far beyond that of simply done that particular job before.

When companies want to reinvent themselves it’s equally challenging. The industry sees them a certain way. But they want to be seen differently. Well, we’ve all seen cases where companies, both in our industry and outside, have reinvented themselves. And it takes a good idea, a plan, the team to execute it, the investment of some money and, what I believe is most important, patience. When a supermarket company has a successful store they use the analogue process: finding something that is similar to something else. So, one piece of advice that I give to firms looking to reinvent themselves is to look around and see who has done it before and learn from them. Decide what you want your firm to look like and then start behaving like that. And, while it's not that simple, perception is reality. But, you’ll still need to be very patient.


When an internationally famous restaurant consultant suggests you go out for some pretty good pizza, the immediate answer is, "Yes." Last week, my good friend (and international restaurant consultant), Michael Whiteman took me to Franny's on Flatbush Avenue in Brooklyn. I have always loved pizza and could probably eat it every day. When we got there it was crowded but we managed to get a table even without a reservation. Michael told me that Franny's is considered one of the top-10 pizza places in the U.S. Without rambling on let me say this: it is!


The Felix Consulting Group: Someone once told me that if you don't toot your own horn once in a while there's no music. So, I got an email from someone I met at the ULI Capital Markets Conference a couple of weeks ago. He said, "On the elevator down, after the final ULI Panel (the one I moderated), someone remarked: "If only all the other sessions had a moderator like the last one. It was great...he involved the audience, he asked intelligent questions and everyone was engaged." Five other heads nodded in agreement." Moderating panels is something I love doing and I get good reviews. If you're firm is running an event and you're interested in considering the value to the audience of having a knowledgeable, independent, third-party as moderator, host or facilitator, let's talk.

The Moody's/RCA Commercial Property Price Indices (CPPI) report was published this week. These measure price changes in U.S. commercial real estate, based on completed sales of the same commercial properties over time, known as the “repeat-sales methodology.

Notable Observations and Themes
- Apartment prices were down 1.2% in April after increasing by 37.4% from their January 2010 trough.
- Industrial saw the only gain among the property sectors in April at 1.1% and was the biggest gainer over the last quarter at 3.9%.
- CBD office in non-major markets was the first sub-sector to bottom, 31 months ago, but it has yet to gain traction, retracing only 7.5% of its peak-to-trough decline.
- Suburban office in major markets has seen a significant setback to its nascent recovery, falling by 14.4% over the last 5 months.
- Prices of non-distressed properties in major markets have recovered to 90.9% of peak levels in nominal terms. Distressed transactions are showing price recovery in major markets, up 27.8% from the trough 19 months ago, while distressed transaction prices in non-major markets continue to languish, essentially flat since Q4 2009.

What and where are you buying today?

I got an interesting survey in the ‘mail’ this week: It's called “How do you rate your boss' performance?”

1. Behaves professionally towards employees.
2. Encourages employees to excel.
3. Communicates a clear vision of success.
4. Is willing to undertake the hard jobs.
5. Expresses values and personal beliefs in work.
6. Sets a good example for employees.
7. Earns the trust of employees.
8. Deals capably with workplace conflicts.
9. Is open about own strengths and weaknesses.
10. Delivers on promises made.
11. Acts in an ethical manner.
12. Performs well under pressure.
13. Does not let emotions get in the way of decisions.
14. Motivates employees during adversity.
15. Listens to employees work concerns.
16. Is even-handed in dealing with employees.
17. Is open to suggestions and new ideas.
18. Finds a way to show appreciation for a job well done.
19. Is collaborative and works well with others.
20. Looks for ways to improve leadership skills.

Maybe at least or more important than the way the employee rates the boss is the boss looking at this list and thinking....how would I rate myself?

In 2006 I spent a month in Monrovia, Liberia working with The MacDella Cooper Foundation, which helps needy children. Since then the foundation has made great strides including building and opening The MacDella Cooper Academy: Free boarding school for orphaned and abandoned children. They're having another one of their very cool events and I thought some of you that will be in the Hamptons might like to go. The DJ Universe & All White Party/July 14/15 Prospect Avenue/Southampton. If you’re interested let me know and I’ll forward the invitation to you.

Congratulations:
- Mike Everett, CIO at Sage Hospitality Resources
- Byron Carlock, global real estate leader focused on the U.S. at PwC
- Tom Calahan, investment associate at Aviva Investors

Restaurant of last week: Bice Ristorante: 7 E 54th Street, New York (212.688.1999). My review of this place is simple: Things Done Right. It's amazing how few restaurants really get it. This place, where I've been to about six times, is always on top of their game. The staff is friendly and professional, the room (and sidewalk dining) is welcoming and the food is very, very good. Perfect for a business lunch or dinner and a hangout for commercial real estate people. You never know who you may run into.

Please check out our new CD of original tunes which is now available on iTunes (search 'felix wait for me'). And, yes, the cover photo is from the Summer of 1982. With the guitar is my son Brian, formerly co-leader of the touring jam band, OM Trio, who produced the album and played keyboards and now is an assistant professor of music at UNC-Asheville. On drums is my son Kevin, formerly a member of the band, "Fear of Sheep," who wrote the words to "Me Who Sticks Around" and "Robot Mannequin" and is a producer of TV reality shows. More photos here. Thanks.

On the road....

June 18-20: Chicago
June 21: New York for client consulting/coaching sessions
June 28: New York to attend the invitation-only Asset Management Roundtable
July 11-13: Lansdowne, VA to attend the NCREIF Summer Conference
Sept. 10-12: Paris to attend the GRI Europe Summit
Oct. 14-16: Houston to conduct presentation training classes for one of my clients
Oct. 22-24: Los Angeles to attend the PREA Fall Conference
Nov. 5-10: New York for client meetings & other stuff
Nov. 7: Washington, DC to speak with real estate students at Johns Hopkins University about careers in real estate
Nov. 8 & 9: New York to attend the PERE Forum
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Thanksgiving / Generosity / Largest Cigar Store in the World / Rosie Ledet / Beatnik Terms
Monday, November 26 2012 | 10:04 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Thanksgiving Day has clearly become the true friends and family holiday of the year in America. This was confirmed by a survey I conducted. It's sort of perfect. Nothing really to dispute (well almost :-). No agenda. No religion. Just getting together eating, drinking, watching a football game, playing touch football or tennis or golf or ping pong and celebrating life. As a holiday, it's really a celebration of the harvest. And isn't harvest a wonderful word? It's even used in the real estate investment world!

This Thanksgiving was spent with my cousin Jeffrey Felix and his significant other Nadine in their lovely home on a canal in Fort Lauderdale, FL where I've been chillin' this week. Amongst their guests were two brothers who create Electronic Dance Music (EDM) and I got an education about that industry. Funny how similar it sounds to the early days of rock and roll from a business standpoint. Another guest owns a Swedish advertising agency and is really into rock and roll (his sons are the EDM guys) and we shared some good conversation about biographies (One well written: Steve Jobs. One too long: Keith Richards). One woman used to be in TV show production and worked on some legendary sitcoms. Another works for Corum, the Swiss luxury watch maker. My final conversation of the evening was with a woman who for many years was a flight attendant with TWA airlines who described how things changed there when a corporate raider appeared. Her pension is being paid by the Pension Guarantee Trust Corporation (which uses our tax dollars). What's wrong with that picture?

Early Sunday morning I'll be on the road heading back to New York with a stop in the Daytona Beach area to break bread with my late Dad's wife and visit his grave for the first time since he died in November, 2009. Waiting for me in New York is a search for an apartment to rent starting December 1. My searching on Craigslist suggests excellent opportunities within my budget. Another exciting new start amongst other new starts this year.

You Guys Are Awesome Section
I have only one word for you: Thank you...to those of you who donated to Shannon Corey's volunteer mission to help children in two orphanages in Nepal. She reached her goal! You are one special bunch!

New York-Florida Stopover
Lumberton, North Carolina is a popular stop-over for people driving between South Florida and New York. The term "Snow Birds" is used for this flock as they leave the "snow" up North in October or November and "fly" (or in this case drive) to Florida for the winter.

On my drive last weekend I pulled off the highway and stayed overnight in Lumberton as (a) I was getting tired (b) there were many signs on the highway touting hotels, motels and restaurants at Exit 22. So I did...exit that is. I got a good last minute deal on a room (by making a reservation online in their lobby!) and then walked next door to eat at an Outback Steakhouse where, taking the last available seat at the bar, I not only had a terrific conversation with an 81 year-old woman and her husband (who have been married 56 years!) but also experienced some excellent customer service. You never know.

The Largest Cigar Store in the World
Also on the drive down, I was lured off the highway by billboards announcing J-R, The World's Largest Cigar Store which is in Salem, North Carolina. I wanted to surprise my cigar-smoking cousin and walked into an incredible scene which offered discounts on a huge assortment of items and, yes, what I now believe is the largest cigar store in creation. The power of billboard advertising has always intrigued me. In this case, as Dubai has learned, the use of the word "Largest" is something that attracts certain people (although I guess "cigar" probably contributes to the appeal).

Music Turn-On
Rosie Ledet...Zydeco Squeezebox player and performer extraordinaire (http://www.youtube.com/watch?v=YhhHJgciKrk)

Word of the Week
"End or The End." Cousin Jeffrey said that this "Beatnik" term was used by Maynard G. Krebs, the legendary TV sidekick of Dobie Gillis. It means, like, the most wonderful / the ultimate. "That's End man." My search of other Beatnik terms resulted in these: Cool, Dullsville, Freebee, Groovy, Like Wow, Kookie, Tuned in.
Btw, "Beatnik" grew out of Jack Kerouac's (Author of my favorite book of all time, "On the Road," referring to The Beat Generation). Also, some of these terms originated in jazz circles. End, man!

On the road....
Nov. 27: Deloitte 2012 Real Estate Update at 30 Rockefeller Center, New York
Nov. 28: 80th annual Christmas tree lighting party at Rockefeller Center (Thanks to my good friends at Tishman Speyer for the invite).
Dec. 3-4: Chicago to attend and moderate a workshop at the NAREIM Capital Raising and Investor Relations Council Meeting.
Dec. 5: Holiday Cocktail Party for the Global Women's Partnership (GWP) at the Park Lane Hotel, New York. GWP seeks to empower women in the developing world with limited to no access to basic life-saving resources.
Dec. 13: Real Capital Analytics Holiday Party (Invitation only)
Dec. 15-Jan. 2, 2013: Liberia, West Africa. Return to see the progress made since my first visit in 2006 with The MacDella Cooper Foundation.
Jan. 23-25: Laguna Beach, CA to attend IMN's 10th Annual Winter Forum on Real Estate Opportunity and Private Fund Investing.
Feb. 27-Mar.1: Phoenix, Arizona to attend the NAREIM Winter Conference
Mar. 12-15: Cannes, France to attend MIPIM.
Apr. 28-May 1: CRE (Counselors of Real Estate) Midyear Meetings in New York.
June 4-5: London to attend the PERE Summit: Europe
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Hurricane Sandy-New York
Monday, November 05 2012 | 12:25 PM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

The construction crane, 75 stories up, on top of the building at 57 Street and 7th Avenue, that has been flapping in the winds like a badly broken wrist, is still there and perhaps has become the premier tourist attraction in New York this week and the early image that spread around the world.

This week took on new meaning for millions of us New Yorkers. Hurricane Sandy visited the neighborhood and left a swath of destruction and death, some of it still to be discovered. The deaths related to Hurricane Sandy keep mounting. Some of the stories are just too sad to write about. This is serious stuff.

All of you, no matter where you are in the world, have seen the images of the disaster, the flooding, the fires, the faces of the anguished who have lost everything they have, which, in many cases, includes the loss of love ones. But the story that didn't get told, because good news doesn't sell papers, is how New Yorkers banded together to help each other make it through. People offering rooms or beds, for free, to those stranded by the closing of all bridges and tunnel access to Manhattan for only the second time in history (the first being around the September 11 events). This is truly a special metropolitan area whose residents, unlike the opinion of some who don't live here, are not cold, aloof or arrogant, but are a thoughtful, caring and supportive lot that always rise to the occasion.

On Wednesday, limited public transportation became available again, although many subway stations are still flooded and closed. People, needing to get to their jobs, used whatever means they could, many walking across the bridges that connect Manhattan with outer boroughs Queens and Brooklyn, others sharing rides with those driving in to meet the three-person per vehicle minimum. Last night at about 6:30pm I saw lines of hundreds and hundreds of New Yorkers, waiting patiently for their turn to get on a bus to take them home or at least somewhere closer to home than work. At 9pm I saw people still lined up and waiting who, would probably not get home until 11 pm or midnight and then will be getting up, about now (5:10am), to go back to the city to their jobs.

This Sandy was not the same girl that Bruce Springsteen sang about. The one who 'worked that joint under the boardwalk, she was always the girl you saw boppin' down the beach with the radio." This Sandy destroyed the beach, the boardwalk, houses, boats, and lives. "The Boss" asks Sandy to "love me tonight for I may never see you again." But the only love that Hurricane Sandy brought was the love that was shared between those who needed help and those who could help.

When someone needs help, it usually doesn't take much. Maybe a disaster like this will wake up those feelings in us that will carry forward, when things return to normal, that a good day is one when we can help someone, just that little bit, that will make a difference in their lives. It's not about giving money, it's about giving time, the most precious thing we have.


Thanks to many of you who wrote me asking if I was okay. My apartment, in Long Beach, NY, is right on the beach. I left on Sunday, just before a mandatory evacuation was ordered and stayed at my go-to hotel, the DaVinci in the city until yesterday. I thought I'd be able to go home by now. Last night I crashed on the couch of my son Kevin's Brooklyn pad and, today/tonight, well, who knows, as Long Beach still appears to be without electricity and other services.


The Grove-Los Angeles
When I was in Los Angeles for the PREA conference, I had a chance to go to lunch with a good friend, real estate development expert Mike Russell at The Grove. It was my first time. Mike, btw, serves as an expert witness, mediator, arbitrator and development advisor. The Grove was created and developed by Rick Caruso. It is very cool. His idea: "We wanted to design something where people could come hang out just to meet a friend. The minute they do that, when they want to buy something, I guarantee they'll come back.'" Amazing stat: The Grove attracted 18 million visitors in its first year of operation. In the same year, Disneyland drew 19 million visitors! I don't know Caruso but he sounds like a guy I'd like to.

Susan Hudson-Wilson Memorial Music Spot
11-17-70: Elton John and his original band (Dee Murray, bass and Nigel Olsson, drums) performed live at a recording studio in New York. The result was Elton's first live album called 11-17-70 which Elton has often called his best live performance...ever! Included is an exceptional 18-minute medley which starts with Burn Down the Mission. YouTube has some exceptional versions of that tune from later years with this one being particularly special (https://www.youtube.com/watch?v=7IHT5Kr7b4s).

Real Estate Foresight published a pilot report on China housing prices this week here are a few highlights (you can access the report and become a registered member here [http://www.realestateforesight.com/_pdf/REF_China_12Nov2_v1.pdf]:
„X Overall macro-sentiment points at stabilization in the markets.
„X House prices continue mild rebound month-on-month, up 0.17% but down 1% year-on-year.
„X Sentiment stays stable for property equities and bonds through October

The Felix Consulting Group: Update
„X Thanks to the 15 firms who have become clients so far in this first year of operation
„X Clients are investment management firms, commercial real estate service providers, trade associations, conference companies and one technology start-up
„X All are happy with the services they received (Yippee!) and have offered to be references
„X The services delivered has across the offering spectrum and provides case-study examples for future clients
„X Please contact me if you'd like to talk about how one of these services could be helpful to your firm:
„X Presentation Coaching
„X Corporate Strategy Coaching
„X Event Enhancement Services
„X "How to raise institutional capital, 'Soup to Nuts' in one day."
„X "How to..." Workshops: Eight 45-minute workshops conducted in one day in your office to aide in the personal development of your team members:
„X How to network
„X How to get the most out of attending an industry event
„X How to build your personal brand
„X How to leverage your trade association membership
„X How to be a memorable panelist
„X How to be an effective moderator
„X How to raise your visibility
„X How to get meetings with people who don't know you
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Jack Mullen, Founder and Managing Director, SUMMER STREET ADVISORS

Construction debt casts long shadow over Banks' CRE portfolios
Friday, October 26 2012 | 03:13 PM
Jack Mullen
Founder and Managing Director, SUMMER STREET ADVISORS

As 2012 comes to a close, the complexity of America's real estate crash in the banking sector continues to unfold. Looking at the big picture, FDIC data for the nation's 7,246 banks and federally chartered thrifts showed commercial real estate (CRE) asset quality indicators continued to improve in the first half of 2012. One important milestone was reached as total delinquent CRE loans and foreclosed properties fell below $100 billion, down almost 28% from a year ago.

Despite slow but positive progress, closer scrutiny on underlying asset classes in banks' loan portfolios reveals the rocky road to recovery continues, particularly for smaller banks. The nation's community banks, defined as having assets less than $1 billion, and mid-sized banks with assets of $1-$10 billion, continue to be vulnerable to disproportionate CRE exposure. While CRE loans comprise 14% of the $700 billion in banks' aggregate portfolios, mid-sized banks have 29% and community banks 30% exposure, compared to 9% for banks with assets over $10 billion.

Even more challenging for the sector is the concentration of construction and development (C&D) loans: $51.9 billion (6%) at mid-sized banks and another $55.1 billion (6%) at community banks. At mid-year, the combined $107 billion in C&D loans is almost equal to the $110.3 billion (2%) on the books of large banks with assets over $10 billion.

Construction loans produce shaky foundation

Across the board, the delinquency rate at the end of June was highest for construction loans. Noncurrent C&D loans exceeded 11% for mid-size and large banks, running 9.6% for community banks.

Mid-year REO statistics also tell a sobering story. The FDIC reported a total $41.8 billion in REO at the end of June, of which $14.3 billion (34.2%) falls in the C&D category. Community and mid-sized banks hold the lion's share, $5.8 billion and $4.7 billion, respectively, $10.5 billion combined – 74% of all construction and development REO.

"Acquisition, construction and development loans (ADC) can be relatively high-risk, even in a boom economy. Many of the 407 banks that failed since 2007, and those that remain in serious trouble today, did not fully appreciate the concentration risk of construction and land development exposures in a down market," says Jack Mullen, Founder and Managing Director of Summer Street Advisors, LLC (SSA).

Portfolios of small and regional banks are more heavily weighted to secondary and tertiary markets, where pricing has been slow to recover. Refinancing in these markets remains difficult, even for properties with stable cash flow.

Even before the sector crash, mid-sized banks had significantly higher concentrations of ADC loans than community banks and large banks. At the end of June 2012, mid-sized banks still held almost 40% of risk-based capital in construction and development loans, more than double the exposure of small and large lenders. This situation highlights the severe risk of CRE losses that many banks still face.

Chart 1: Median Construction and Development Loan Concentrations
by Lender Asset Size: 2003 - 2012

Sobering, but enlightening, statistics
Mullen believes banks that hunker down to conduct detailed analyses of their CRE loan transactions may find some surprises.

"Based on our experience at SSA, a significant portion of commercial real estate loans is secured by owner-occupied properties. If so, these loans are essentially commercial or business loans and ADC exposure is likely understated, particularly for smaller banks," says Mullen.

Portfolio analyses undertaken by SSA for banking and CRE investor clients have turned up "misclassified" loans for residential lots, spec homes, built-to-suit industrial space for builders and building companies.

"Many times, loans are written where primary or secondary residences of business owner-borrowers serve as additional collateral to CRE loans. We also see single-tenant office/industrial with little marketable value," Mullen continues.

Loan classification distinctions are important for accurate structuring, as well as reporting. A loan backed by an income-producing property relies on the performance of that property for the repayment of the loan. The loan is underwritten based on the ability of future property revenues (in the form of rent and lease payments) to cover both future property expenses and the debt service of the loan. On the other hand, a loan backed by an owner-occupied property is essentially a business loan with additional collateral (the property) pledged as credit support. In this case, the loan is underwritten based on the ability of future business revenues to cover both business expenses and the debt service on the loan.

"Five years after the crash, many banks still haven't come to grips with how to deal with distressed construction projects. The reasons banks are having difficulty revolving around three issues: First, there may be no expertise to complete the project, especially if the owner has walked away; Second, there's no capital available because the money has run out; Third, in many cases, market conditions do not support the real estate as underwritten. All three conditions create a perfect storm for banks stuck with these loans," says Mullen.

Slow-growth economic recovery extends banks' pain
Although fundamental economic health is necessary for real CRE sector recovery, most economic growth measures are only weakly positive. Still, as 2012 closes, traditional drivers of CRE rent growth and demand have begun to track stronger than the broad market (and magnitude of CRE distressed debt) would suggest. Also, corporate balance sheets are showing increased strength.

Another bright spot, U.S. home prices climbed 1.6% in July from a year earlier, the fifth consecutive increase, as reported by S&P Case Shiller Index. Improvement in the residential market may also boost commercial property, as a strong housing market helps increase consumer spending.

"Once residential prices improve, pricing clarity will provide much more certainty for investors looking to purchase distressed loans, or banks attempting to work them out," says Mullen.

Ultimately, community and mid-sized banks likely will face more difficulty than their large counterparts, as the entire banking system deals with unprecedented pressure.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Is Your Company Cool? / Eye Contact / The Rainbow Room / Return to Liberia
Friday, October 19 2012 | 11:26 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Gunnar Branson, CEO of NAREIM (National Association of Real Estate Investment Managers) is one very creative-thinking dude who happens to head an industry trade association. At their Executive Officer Meeting in Chicago this week (where I moderated a panel of Canadian institutional investors and played a YouTube of The McKenzie Brothers "Take Off To The Great White North" (Featuring Geddy Lee of Rush) while the panelists were getting situated on stage), he used the example of how the music industry has changed and challenged us to think about the future of real estate that way. In the breakout brainstorming session that followed, I was the discussion leader / facilitator for one of the groups. We decided to focus on office. These are a few concepts that we all agreed are important for us to keep in mind:
„X "Cool" space
„X People want to work for a company seen as "cool" (this isn't about what the company does but more how it exists).
„X People want to have the ability to work together, to be part of the flow.
„X More common / group / team space will be needed
„X "Group space vs. a space for a collection of individuals."
„X Provide amenities: gym / free food and coffee / child care
The discussion was very lively. Phrases like "Future Proofing" and "Density Collaboration" were offered into the mix by other tables, not as cool as ours of course, but cool in their own right! Also, these are things that will help you attract and retain people.

Eye Contact
So I'm sitting by myself in a restaurant the other night thinking I'd be watching the Yankee/Tiger game but it was rained out and the bartender couldn't figure out how to find anything other than some QVC show. But right in my line of sight is a woman talking with a man. I can see her but I can only see his back. Without seeming like it (I think anyway) I watched. This woman made such wonderful eye contact with this guy.

This week when I spoke with students at DePaul University and The University of Chicago on Careers in Real Estate-Connecting the Dots I asked them how long a first impression took. Based on my belief, they were right-on: Four seconds. It's the time it takes to shake someone's hand and look into their eyes. It's really important, both the handshake and the eye contact. And, while I'm at it, about the handshake: wimpy ones are unacceptable but those of you who feel the need to crush my hand, please, save it for the gym!

"The Rainbow Room Is Now A City Landmark"
So said the headline in the NY Times this week. The Rainbow Room is the "65th floor space with the see-forever views at 30 Rockefeller Plaza in Manhattan". I've been there over the years for drinks and for a couple of industry events. It's been vacant since 2009. But I have a personal story to relate....Baum + Whiteman Group (see below) were retained to reinvent The Rainbow Room. In December 1987 it reopened with a new twist: Evergreen, a healthy restaurant. Baum + Whiteman Partner, Michael Whiteman, invited me to eat there with him shortly after the opening. At that point, I was being particularly careful about what I ate. The attraction/gimmick was that you got a printout of the caloric, etc. components of your meal. Sadly, the concept was way too far ahead of it's time and didn't last long. Whiteman and I remain good friends, ever since a trip we took to Louisiana together in, 1985/6 to scout out possible local tenants for a food court to be part of a new mall that the company I worked for was going to build at I-10 and Siegan Lane in Baton Rouge. The mall was never built but the trip was legendary and launched our friendship. Michael, no blushing now, is one of the smartest most forward thinking restaurant/food people in the world and his credentials are there to prove it. Oh, one other food thing: Michael's wife is Chef/Author Rozanne Gold. Check her out!

The Eight of Them
First ever photo of my sons, Brian (top) and Kevin with their wives, Bridget (Brian) on left and Marissa (Kevin) on right and the kids: Top (Sean). Bottom l-r: Gavin (Sean's bro) and Benjamin and Edie (the twins). Wow!



Help Shannon Corey Help Kids
I met Shannon in 2006 when I bought a Yamaha digital piano from her via Craigslist. I didn't know it at the time but she is a very talented professional singer/songwriter. I got to see her perform recently at the legendary Bitter End in NY. While there she told me about her trip to Nepal in January 2013 to bring music to orphans. She needs some financial help. Here's the link to donate (btw, she only needs $2500 and has already raised $650). On behalf of Shannon (who has no idea that this is being mentioned her)...Thank you!

"There is no try. There is do or do not." Yoda

Congratulations:
„X Anatole Pevnev who has joined ORG Real Property as Director of Research
„X David Schaefer who has joined AEW as head of their Asia business
„X Phil Greenberg who is now Senior Managing Director at C-III Capital Partners
„X Howard Fields who has joined Inland Institutional Capital Partners as Senior Vice President

Special: 17 Hottest Food and Dining Trends for Restaurants and Hotels, 2013
It's that time of year when Baum+Whiteman International Food+Restaurant Consultants give us a peek through the drive-up window of what will be cool and happening next year. The whole report is here. And, here's, you'll excuse the expression, is a 'taste to whet your appetite!"
„X Menu shuffling aimed at flexitarians
„X Donuts getting bizarre upscaling
„X Weider and weider desserts
„X Too many tasting menus

Susan Hudson-Wilson Memorial Music Spot:
One of my all-time favorite songs, When You Wish Upon A Star. Have loved it since I first saw Pinocchio as a kid. Play this version for your children. They will love it too!

When you wish upon a star
Makes no difference who you are
Anything your heart desires
Will come to you

If your heart is in your dreams
No request is too extreme
When you wish upon a star
As dreamers do

Fate is kind
She brings to those who love
The sweet fulfillment of
Their secret longing

Like a bolt out of the blue
Fate steps in and sees you through
When you wish upon a star
Your dreams come true

1940 Academy Award for "Best Original Song." Writeen by Leigh Harline and Ned Washington. Performed by Cliff Edwards in character as Jiminy Cricket.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Special OTR: The Industry Remembers Susan Hudson-Wilson
Tuesday, October 16 2012 | 10:10 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Thank you to everyone for sharing your thoughts, feelings and stories about Susan Hudson-Wilson who died suddenly on October 5, 2012. She was 60. I just wanted to share these with you. The loss to Susan's family is unimaginable. And we have lost one of our our own.
(Note: The original column is at the end )



 "I had the great benefit to having worked with SWH "I had the great benefit to having worked with SHW on a number of occasions, and she was an inspiration." Jon Lekander,Global Head-Property Multi-Manager, Aberdeen Asset Management

 "I was among those who was more the beneficiary of her research and thought-leadership. I met her a number of times informally and knew several of her professional prodigy who have also given much to our industry. One of my recollections is her chairing an inter-active session, I think at PREA, some years ago. The topic was something about the role of real estate in an institutional investment portfolio and I believe it was the last session of the last day. The presentation was disappointingly flat, and I knew at the time it was because almost no one in the room knew enough about the other asset classes to contribute meaningfully to the topic. She was always just so far ahead of the rest of us." Jon Willis, Principal, Global Property Strategies

 "As a former client and ULI colleague of hers you paid a touching tribute. Shared it with a friend, Joanna Stimson, who was her fourth hire at PPR and she too thought it was quite fitting." Ken Munkacy, Senior Managing Director-International Group, GID Investment Advisers

 "When Tom Klugherz and I were at GE Capital Investment Advisors in the mid-1990s, the firm hired PPR (they had to have been brand-new) as a research consultant. We would hold big market-review discussions with Susan, Steve Coyle, Bret Wilkerson, Josh Scoville and a few others. One of the fellows would go into great detail on a given metro, delving into employment stats, absorption and whatnot. He’d wrap up just when we were getting close to information overload. Then Susan, who had been standing by silently, would say, “We think San Jose is a yummy market.” And that was that! Doug Holm

 "I almost fainted when I read your blog; it is so hard to believe that we will never hear another one of her well thought out, timed, and pointed statements about issues in the real estate investment world. I always admired Susan and wished I could have known her better. As one of the leading voices in the institutional investment industry representing our “asset class”, she helped push real estate into its legitimate role as a significant part of a well diversified portfolio. As a fellow CFA, I was thrilled with her work to add real estate to the list of topics that are studied in the CFA curriculum. Unfortunately, there seems to have been no voice to replace hers. She was an icon."
Leanne Tobias, Managing Principal, Malachite LLC

 "I was deeply touched by your superb piece on my wife Susan, as well as by the wonderful comments from people I knew well personally or by constant reference in conversation with Susan. I appreciate the humor and candor and attention to detail, as would Susan herself! She is missed horribly, but always present." John Wilson, Susan's Husband
 " A wonderful lady who also served as a sterling example for women in the industry. So very sad." Lynn Cherney, Global Real Estate Practice Leader, Spencer Stuart

 " To say that she was a mentor would be an understatement not to mention what she did for women, our industry and everyone she touched. And always with a sense of dignity and humor." Mary Hull, Managing Principal, Westbrook Partners

 "We have lost a great person. I met her first when she was at AEW – early 90s I think – and remained a huge fan ever since. She certainly inspired me through my career. Jeannette Rice, Rice Consulting Inc

 "Wonderful tribute. She will be “wicked” missed." Nori Gerardo-Leitz, President, Areté Capital

 "Steve – I never had the opportunity to personally meet Susan, but know her contributions to our industry are immeasurable. I feel like I know her much better after reading your fantastic tribute!" Grant Walker, Teacher Retirement System of Texas

 "She was the one that reminded us that when talking about public, private, debt and equity the term "4 quadrants" was redundant!" Catherine Schuster, Head of Communications and Client Services, Real Estate, UBS Global Asset Management.

 "Dear Steve, I hope that this e-mail finds its way to you. I read your tribute to my sister-in-law this morning and wanted to thank you for such a beautifully written item. Susan married my brother more than 40 years ago. She has been my best friend, source of inspiration and greatest cheerleader for all those years. I can't thank you enough for sharing your thoughts and feelings." Amy Wilson Demers

 "Nice column. I was at PPR after she sold the company to DMGI, but she never really left." Jeff Havsy, Director of Research, NCREIF

 "In the early 90's I was head of research at the Property Council of Australia (NAREIT, NCREIF, NAREIM, BOMA all under one roof). I instigated a series of seminars where we brought the best real estate research minds to Australia - Michael Giliberto, Jacques Gordon, Blake Eagle, Charles Wurtzebach, Will McIntosh to name a few. And of course Susan. Susan returned a few times. I remember clearly her first presentation on four quadrant investing which really challenged the way Australians could look at real estate investing. Susan's research was well circulated in Australia as unfortunately we didn't, and still don't have a strong research community and very few people were writing and challenging our thinking the way Susan did. You describe her to a tee in your email but I would add her legacy goes well beyond just the US real estate industry."
Adrian Harrington, Head of Funds Management, Folkestone Limited


The Original Column:
On the Road with Steve Felix
October 12, 2012


Susan Hudson-Wilson


The news about the death of Susan Hudson-Wilson (aka Susan H-W) this week was shocking in it's abruptness. Last Friday, she died from a severe cerebral aneurysm. The medical team who investigated her death said that this could have occurred at any time or place and only coincidentally happened at the end of a joyous and successful safari in Africa.

Many of you know Susan. Many more of you have heard of her. Still more have been the beneficiaries of the output of her research and strategy work.


She was generous with her time and helped younger people grow. When you were being considered for employment at PPR it was more of an audition for a Broadway show than an interview as everyone, no matter what job they were applying for, had to make a presentation in front of the whole team. Theme picked by the candidate – you present on a subject you know, you have command of, therefore are more comfortable with. That way you’re not making stuff up and they got a better view of how you think on your feet. Plus – the whole process helped those already on the team learn and hone their question asking skills – a “two-fer” as I learned Susan would call it.
Susan and I knew each other for a good number of years. She was a regular reader of this column. Probably six or seven years ago now, I went to the rooftop gym of a hotel in, gee I wish I could remember, some European city where we were both attending an industry event. She was on the rowing machine and I walked in. We said hello and she said, "Enough with the music stuff in OTR. Get back to real estate!" Of course, she was right and I listened. She was like that. She took an interest and had a passion for everything she did.
Life is just too mysterious to try to figure things out. We don't know why someone so vital, so alive, dies so young. Even if there's a medical reason it doesn't stop us from asking, "Why her or him." There is no rhyme or reason to so many things in life. Why, why, why. The answer is: we have no friggin' clue.
Susan H-W gave a lot to the industry. She gave of herself, tirelessly, generously, caringly. Not everyone does. That's what makes her special in my mind and she took a lot of time to do things she was passionate about.
Another memory I have of Susan is sitting at a table during the cocktail time at an AFIRE meeting with Susan, John Streiker of Sentinel and Ted Leary of Crosswater. If you think I got a word in edgewise, you are sadly mistaken! We talked a lot. We had a couple of glasses of wine. We laughed a lot. We debated. I don't know how much actual listening was going on but it was a scene that I've always remembered fondly and will cherish even more now.


Remembrances from others about Susan H-W:
 "She told us off on a regular basis and made us pay for it." A former client.

 "I'm still stunned. Susan had a huge impact on moving our industry forward at a critical time in it's evolution. She leaves a big gap in the real estate research ranks." Wylie Greig, former Head of Global Real Estate Research, RREEF

 "Susan was one of our best speakers and moderators. She spearheaded many Trustee panels and many segments at Spring and Fall meetings. She asked the tough questions and challenged us all to think deeper and smarter." ULI Obituary

 "I will miss Susan. She was always a lot of fun to be around. Having co-authored four articles with her, I can tell you that SHW (her track-changes initials) was absolutely never shy about offering up a provocative thought, a catchy phrase or a creative approach to data analysis. Funny how our industry can feel like a "family" at times like this!" Jacques Gordon, Global Investment Strategist, LaSalle Investment Management

 "Susan was an incredible thought leader for this industry who will be sadly missed by so many of us. I am struggling to get my mind to accept this bright, inspiring, energetic woman, who has always made me think harder about my views on every subject, is no longer with us." Lynn Thurber, Chairman, LaSalle Investment Management.

 "She touched so many people, each one in a very personal way. Always looking to elicit something more thoughtful, more effective, ultimately to induce a better outcome. We are fortunate to have had her in our lives and our careers.” Bret Wilkerson, Managing Director, Hawkeye Partners and former CEO of PPR.

 "I still have one of the “Free the Damn Data” buttons she had made up and handed out at a NCREIF meeting back in the “old days” which was certainly one of the catalysts to us now having a lot more disaggregated data for research on the real estate asset class. And as one of the founders of RERI she helped make sure the data flowed to academics who could use it to help us better understand the asset class. She was one of the first “Road Warriors” that helped pave the way for real estate to be included in institutional real estate portfolios. And she continued her contributions to the asset class with her work on the REIS board. We certainly all benefited from having Susan as a advocate for the real estate asset class even if it meant being scolded by her from time to time! I will be the first to toast her at PREA or wherever we all find ourselves having a drink." Jeff Fisher, President of The Homer Hoyt Institute.
 "We will miss her brilliant mind, her unwavering resolve and her "wicked" sense of humor." Claudia Faust, Co-Founder / Managing Partner, Hawkeye Partners
 "I am beyond devastated about Susan. She not only was a great mentor to me, she was a life force that no one in her grip could quite escape (and I say that with all respect). Susan was an iconoclast. She had her moral sensibilities and her sense of code, but it never wavered and one never had to guess on what side of it they stood. Susan was black and white. For this, and for so much else, I adored her. My only regret is that she never fully forgave me for leaving her/PPR. In reality, I never left Susan (I never will). I only decided to take another job (which Susan had prepared and prepped me for in spades), because it was the next step in the evolution of my career. I will remain forever indebted to Susan and all that she did for me. I will miss her until my days on this earth are through. My parting thoughts are....Susan, may you fly with the angels. As Frank Sinatra sand (lyric by Paul Anka), you did it "your way." I love and miss you." Steve Coyle, Chief Investment Officer, Cohen & Steers Global Private Real Estate Multimanager Strategy
Surely, Susan is now challenging the status quo in the great beyond. We need her to do that for us. Speaking on behalf of myself and those readers of OTR who know Susan, our sincerest condolences to Susan's family. It seems so little to say but maybe, out of this, we can take away another reminder that life is short and we just don't know what tomorrow will bring.

At the upcoming PREA event you know there will be Susan H-W stories exchanged, glasses clinked in toasts and teary eyes (nice timing Susan, deciding to take this trip just before PREA!).

As Jacques said, we are a family. We are a high stakes industry, dealing in trillions of dollars of real estate investments but when you come down to it, we are simply a group of people, working to make a living, doing something we love and enjoying and respecting the people we do it with. In that way, we are among the luckiest people in the world.

I can't know for sure what Susan would write me after she read this column today but I have a feeling: she would say, "I liked it. You focused on the industry." And, for this column, in dedication to Susan, I deleted all the other OTR stuff that I had written to publish today. It can surely wait for another day. But what can't wait is for us to remember Susan. To talk about her. To heal ourselves. To hug each other. To let ourselves feel. To appreciate what she meant to the industry as a whole and to those of us fortunate enough to know her personally. And then, we will move forward, hopefully, really and truly remembering how precious each day we have on earth is; not taking anything or anybody for granted; being kind to each other; laughing; enjoying life; taking chances and loving ourselves and each other.

As I wrote in my song (listen free here), "Live Your Life" (Note: The brilliant and emotional guitar work is by my friend, Ernie Hendrickson)

They say it's long but it's really short and you say you don't have time
You can spend your days, dreaming of the way to live it
But you say that you've got things to do before your time will come
You're the only one who can really make a difference.
You just make that call, keep your eye on the ball, and don't let anyone say no
You just live your life, love your life and when go you go you'll never have regrets
Live your live, love your life, don't think twice do it right
Live your life, love your life, don't think twice it's all right!Okay Susan, I threw something about music in. I couldn't help myself. This one is for you!




Susan Hudson-Wilson
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Susan Hudson-Wilson
Friday, October 12 2012 | 01:02 PM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

The news about the death of Susan Hudson-Wilson (aka Susan H-W) this week was shocking in it's abruptness. Last Friday, she died from a severe cerebral aneurysm. The medical team who investigated her death said that this could have occurred at any time or place and only coincidentally happened at the end of a joyous and successful safari in Africa.

Many of you know Susan. Many more of you have heard of her. Still more have been the beneficiaries of the output of her research and strategy work.

She was generous with her time and helped younger people grow. When you were being considered for employment at PPR it was more of an audition for a Broadway show than an interview as everyone, no matter what job they were applying for, had to make a presentation in front of the whole team. Theme picked by the candidate ¡V you present on a subject you know, you have command of, therefore are more comfortable with. That way you¡¦re not making stuff up and they got a better view of how you think on your feet. Plus ¡V the whole process helped those already on the team learn and hone their question asking skills ¡V a ¡§two-fer¡¨ as I learned Susan would call it.

Susan and I knew each other for a good number of years. She was a regular reader of this column. Probably six or seven years ago now, I went to the rooftop gym of a hotel in, gee I wish I could remember, some European city where we were both attending an industry event. She was on the rowing machine and I walked in. We said hello and she said, "Enough with the music stuff in OTR. Get back to real estate!" Of course, she was right and I listened. She was like that. She took an interest and had a passion for everything she did.

Life is just too mysterious to try to figure things out. We don't know why someone so vital, so alive, dies so young. Even if there's a medical reason it doesn't stop us from asking, "Why her or him." There is no rhyme or reason to so many things in life. Why, why, why. The answer is: we have no friggin' clue.

Susan H-W gave a lot to the industry. She gave of herself, tirelessly, generously, caringly. Not everyone does. That's what makes her special in my mind and she took a lot of time to do things she was passionate about.

Another memory I have of Susan is sitting at a table during the cocktail time at an AFIRE meeting with Susan, John Streiker of Sentinel and Ted Leary of Crosswater. If you think I got a word in edgewise, you are sadly mistaken! We talked a lot. We had a couple of glasses of wine. We laughed a lot. We debated. I don't know how much actual listening was going on but it was a scene that I've always remembered fondly and will cherish even more now.

Remembrances from others about Susan H-W:
„X "She told us off on a regular basis and made us pay for it." A former client.
„X "I'm still stunned. Susan had a huge impact on moving our industry forward at a critical time in it's evolution. She leaves a big gap in the real estate research ranks." Wylie Greig, former Head of Global Real Estate Research, RREEF
„X "Susan was one of our best speakers and moderators. She spearheaded many Trustee panels and many segments at Spring and Fall meetings. She asked the tough questions and challenged us all to think deeper and smarter." ULI Obituary
„X "I will miss Susan. She was always a lot of fun to be around. Having co-authored four articles with her, I can tell you that SHW (her track-changes initials) was absolutely never shy about offering up a provocative thought, a catchy phrase or a creative approach to data analysis. Funny how our industry can feel like a "family" at times like this!" Jacques Gordon, Global Investment Strategist, LaSalle Investment Management
„X "Susan was an incredible thought leader for this industry who will be sadly missed by so many of us. I am struggling to get my mind to accept this bright, inspiring, energetic woman, who has always made me think harder about my views on every subject, is no longer with us." Lynn Thurber, Chairman, LaSalle Investment Management.
„X "She touched so many people, each one in a very personal way. Always looking to elicit something more thoughtful, more effective, ultimately to induce a better outcome. We are fortunate to have had her in our lives and our careers.¡¨ Bret Wilkerson, Managing Director, Hawkeye Partners and former CEO of PPR.
„X "I still have one of the ¡§Free the Damn Data¡¨ buttons she had made up and handed out at a NCREIF meeting back in the ¡§old days¡¨ which was certainly one of the catalysts to us now having a lot more disaggregated data for research on the real estate asset class. And as one of the founders of RERI she helped make sure the data flowed to academics who could use it to help us better understand the asset class. She was one of the first ¡§Road Warriors¡¨ that helped pave the way for real estate to be included in institutional real estate portfolios. And she continued her contributions to the asset class with her work on the REIS board. We certainly all benefited from having Susan as a advocate for the real estate asset class even if it meant being scolded by her from time to time! I will be the first to toast her at PREA or wherever we all find ourselves having a drink." Jeff Fisher, President of The Homer Hoyt Institute.
„X "We will miss her brilliant mind, her unwavering resolve and her "wicked" sense of humor." Claudia Faust, Co-Founder / Managing Partner, Hawkeye Partners

„X "I am beyond devastated about Susan. She not only was a great mentor to me, she was a life force that no one in her grip could quite escape (and I say that with all respect). Susan was an iconoclast. She had her moral sensibilities and her sense of code, but it never wavered and one never had to guess on what side of it they stood. Susan was black and white. For this, and for so much else, I adored her. My only regret is that she never fully forgave me for leaving her/PPR. In reality, I never left Susan (I never will). I only decided to take another job (which Susan had prepared and prepped me for in spades), because it was the next step in the evolution of my career. I will remain forever indebted to Susan and all that she did for me. I will miss her until my days on this earth are through. My parting thoughts are....Susan, may you fly with the angels. As Frank Sinatra sand (lyric by Paul Anka), you did it "your way." I love and miss you." Steve Coyle, Chief Investment Officer, Cohen & Steers Global Private Real Estate Multimanager Strategy.

Surely, Susan is now challenging the status quo in the great beyond. We need her to do that for us. Speaking on behalf of myself and those readers of OTR who know Susan, our sincerest condolences to Susan's family. It seems so little to say but maybe, out of this, we can take away another reminder that life is short and we just don't know what tomorrow will bring.

At the upcoming PREA event you know there will
be Susan H-W stories exchanged, glasses clinked in toasts and teary eyes (nice timing Susan, deciding to take this trip just before PREA!).

As Jacques said, we are a family. We are a high stakes industry, dealing in trillions of dollars of real estate investments but when you come down to it, we are simply a group of people, working to make a living, doing something we love and enjoying and respecting the people we do it with. In that way, we are among the luckiest people in the world.

I can't know for sure what Susan would write me after she read this column today but I have a feeling: she would say, "I liked it. You focused on the industry." And, for this column, in dedication to Susan, I deleted all the other OTR stuff that I had written to publish today. It can surely wait for another day. But what can't wait is for us to remember Susan. To talk about her. To heal ourselves. To hug each other. To let ourselves feel. To appreciate what she meant to the industry as a whole and to those of us fortunate enough to know her personally. And then, we will move forward, hopefully, really and truly remembering how precious each day we have on earth is; not taking anything or anybody for granted; being kind to each other; laughing; enjoying life; taking chances and loving ourselves and each other.

As I wrote in my song (listen free here), "Live Your Life" (Note: The brilliant and emotional guitar work is by my friend, Ernie Hendrickson).
They say it's long but it's really short and you say you don't have time
You can spend your days, dreaming of the way to live it
But you say that you've got things to do before your time will come
You're the only one who can really make a difference.
You just make that call, keep your eye on the ball, and don't let anyone say no
You just live your life, love your life and when go you go you'll never have regrets.
Live your live, love your life, don't think twice do it right
Live your life, love your life, don't think twice it's all right!

Okay Susan, I threw something about music in. I couldn't help myself. This one is for you!
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

PREA Conference / Special NY Event/ Mentorship Interview Series
Monday, October 08 2012 | 08:44 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

"Business has always suffered from the problem of the urgent driving out the important."
The Korn Ferry Institute Briefings



Some things I heard this week:
„X "Be nimble.' Getting deals done is more complicated than ever."
„X "Acceptance that things aren't going to change or get better is one of the things driving commercial real estate transactions".
„X "Development is back."
„X "There is a good opportunity to buy assets at deep discount to replacement cost."
„X "Some institutional investors are willing to give up return to cap leverage."
„X Co-investment: "It's funny. We have investors that negotiate co-investment rights in their fund documents and then when we bring them a deal they say 'We're not set up for that.'
„X Club deals: "We have to worry about creating 'Kumbaya' amongst the members of the club.
„X "Social unrest is a huge risk in the world today. It's not about keeping it down it's about understanding why they are angry."

Mentorship: I've started lining up the first interviewees for my Commercial Real Estate Mentorship Interview and will begin publishing those interviews before the end of the year. Yesterday, I had lunch with the guy that was my first mentor in the real estate industry, Dick Steinberg. I worked for Dick at Mall Properties which is the diversified real estate developer/owner/operator owned by Mort Olshan. Dick taught me a lot; about dealing fairly with tenants, about negotiating deals and about how to evaluate a deal that seemed 'too good to be true." He has also been a friend and confident for many years. My mentorship program is designed to help people connect and perhaps begin a mentor/mentee relationship like the one Dick and I have enjoyed for a long, long time. Also, in the coming months I'll be announcing the launch of a series of special events built around this passion of mine. Stay tuned!

Special Event: New York Drink Thing/Nov. 8 (the night in-between the two days of the PERE Forum in NY). A bunch of industry friends will gather together for a drink (buy your own but I supply the famous Joe G pizza!). Hope to see you there. Bring an friend!

When: November 8, 2012
Time: Starting from 6:30pm
Where: Joe G Restaurant
244 W. 56th (bet. B'way and 8th/ downstairs at the DaVinci Hotel).


Passion and enthusiasm is what differentiates people who make presentations, give speeches, etc. The other night, I had a chance to hear Professor Bill Wheaton, MIT Department of Economics and Urban Studies and Planning and, who along with Ray Torto, founded what is now called CBRE Econometrics. Bill is so darn passionate about what he talks about, it's contagious.

Jobs.
„X Met Life is looking for a senior person to assist with Research responsibilities as well as oversee Valuations. Here's the link.
„X British Columbia Investment Management Corporation is looking for a Director of Real Estate Strategy and Research to build in-house capabilities. Here's the link.

Thanks to all of you who have wished-me-well and those who have welcomed me to New York. Having grown up here, it feels like home. I'm comfortable with the city and the people. Having friends who care about me is a special thing. I printed out this 'poster' called The Holstee Manifesto" and read it every morning before I leave the apartment. It's such a great thing that, even though I may have already shared it with you, please indulge me:

This is your LIFE. Do what you love and do it often. If you don't like something, change it. If you don't like your job, quit. If you don't have enough time, stop watching TV. If you are looking for the love of your life, stop; they will be waiting for you when you start doing things you love. Stop over-analyzing. Life is simple. All emotions are beautiful. When you eat, appreciate every last bite. Open your mind, arms and heart to new things and people, we are united in our differences. Ask the next person you see what their passion is, and share your inspiring dream with them. Travel often; getting lost will help you find yourself. Some opportunities only come once, seize them. Life is about the people you meet and the things you create with them. So go out and start creating. Life is short. Live your dream and wear your passion.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

On Being Considerate / How to Raise Institutional Capital / The Lenox Hotel / Wear Your Music
Friday, September 21 2012 | 10:31 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Some friends of mine are seriously under consideration for new jobs. And while each situation is unique the common thread seems to be how long it's taking for the employer to make a decision.

When it comes to someone waiting to hear from a prospective employer (or recruiter), where there seems to be sincere interest (i.e. multiple interviews, asking someone to do a case study, etc.) I emplore you to put yourself in the shoes of the candidate and show consideration-keep them in the loop and, if it's decided that they are not the chosen one, tell them as soon as possible. What if it was you?

"Why is it taking so long to get commitments? When can we expect to have our first closing? Isn't so-and-so having more success than us? What's the problem?" To my fellow capital raisers out there-I bet you've never heard that from your boss, right?

Don't take it personally; it's not about you. It's about what is going on in the meeting rooms at the pension funds, endowments, foundations, consultants, rich people, very rich people, family offices, wealth management businesses, fund of funds and sovereign wealth funds (did I forget anyone?). It's about them needing to be really, really sure that investing with you is better than, say, their money market account. And, they're concerned about both the "now" and the "then." (I can't help inserting this piece of script from the movie Spaceballs):

Dark Helmet: What the Hell am I looking at?! When does this happen in the movie?!

Col. Sandurz: Now! You're looking at "now," sir. Everything that happens now is happening "now."

Dark Helmet: What happened to "then?"

Col. Sandurz: We passed it.

Dark Helmet: When?

Col. Sandurz: Just now. We're at now "now."

Dark Helmet: Go back to "then."

Col. Sandurz: When?

Dark Helmet: Now.

Col. Sandurz: Now?!

Dark Helmet: Now!

Col. Sandurz: I can't.

Dark Helmet: Why?

Col. Sandurz: We missed it.

Dark Helmet: When?

Col. Sandurz: Just now.

Dark Helmet: When will "then" be "now?"

Col. Sandurz: Soon.


The "now" for your investors is current cash flow and the "then" is the 'pop' they will get when the property is sold.

I coach my clients to never forget to put yourself in the shoes of the person across the table from them. In addition to the other interpersonal skills necessary to be a good capital "closer" you need understanding, empathy and compassion and these traits may be needed now now than ever before.

Are there certain techniques that can be employed to hustle the process along? Not any more. But, if you are patient and asuming you have:
„X A good reputation
„X The right team
„X A good demonstratable track record
„X A smart strategy
„X Ability to execute
„X Some other investors committed
„X Willingness to commit a meaningful amount of capital yourselves
„X Endorsement from one or more key consulting firms
„X Belong to the right 'club'
then, you have a fighting chance.

Advertisement: "How To Raise Institutional Capital: Soup to Nuts in One-Day" is a service offered by The Felix Consulting Group to (a) prepare you to raise institutional capital for the first time and (b) re-educate experienced investment managers that the world has changed and they need to change as well.
Call me. +1 707.260.4233. Let's spend some time on the phone. Tell me your story and together we'll be able to determine how you can benefit from us working together.


Cyndi Lauper story: Musician/Actress/Professional Wrestler Cyndi Lauper just had her memoirs published. I went to her book signing event the other night; but I went with an ulterior motive. One of my songs, "I'm Just A New York City Girl" is perfect for Cyndi to record and I couldn't figure out how to get it into her hands. Well, the other night, I asked her and she said, "Give your CD to my manager" (who was standing over her right shoulder). I did. Hey, you never know. I'll let you know if I hear from her.

Word of the week: Spasibo (Russian for "Thank You.")

One of my favorite movie lines from "Let It Ride:" You may be walking around lucky and not even know it!

"Wear Your Music" turns old guitar strings into handcrafted charity bracelets. 100% of the net profit goes to the charity of the artist's choice. Launched in 2006, some of the artists who have contributed guitar strings are Carlos Santana, Bonnie Raitt, Metallica and John Mayer. Last year the company donated $60,000 to such charities as Rock Camp for Girls-LA and the Rhythm and Blues Foundation-Doc Pomus (If you're not familiar with Doc please look him up!). Bracelet prices range from $100-250. Very cool don't you think?

Most excellent customer service experience in quite a while: Lenox Hotel, Boston. Yesterday, I asked if they had a piano tucked away somewhere (I don't have a piano yet where I'm living). They said, "Yes, we can bring it out to you!" So, in a few minutes, from some back room, came a nice Kawai upright into the meeting room where we're holding the RCA Breakfast Briefing this morning. I played for several hours, going through my 'piano bar' set but also came up with a second verse to a song called "I Just Wanted to Get You to Love Me Again," which I've been working on for a few years. This is my first stay at The Lenox. The staff here is sincerely friendly. I will be back.
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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

It All Starts With the Server
Thursday, September 20 2012 | 03:13 PM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

For the past several years, as if in a recurring nightmare, it has occurred to me that the real root cause of data center inefficiency and the solution to that problem lies in creating and utilizing computer servers with the lowest power consumption, the lowest possible heat output and highest performance. About 11 months ago, 7x24 Exchange International Southern California Chapter, which I co-founded and currently act as President, convened a Chapter meeting and hosted a panel of executives from three prominent server manufacturers, SeaMicro, HP and SuperMicro, which was facilitated by Steve Miano, President of PlanNet Consulting.
Though the timbre of the discussion was cordial, the undercurrent was somewhat tense as the various panelists tiptoed around the real question of whose server was the most efficient. SeaMicro admitted that their device is really meant to be a web server and can’t accomplish all of the tasks that HP Blades, nor SuperMicro’s servers can produce. On the other hand, both HP and SuperMicro agreed that their servers are nowhere near as efficient from a power utilization perspective as Sea Micro. The question is, “What’s really behind the curtain?” How does one really analyze and understand, from an objective perspective, which is the most efficient server?
As I’ve qualified myself in prior blog postings, I am not by any means an engineer, chip designer, or specialist in the technical aspects of servers. In this instance, as in other cases, I’m relying on research (noted in the following bibliography) to provide insight to those of you that have an interest in this topic, who are similarly aligned, and creating a dialogue as well as gathering more information.
In addition to collecting a number of articles, I was fortunate enough to have spoken with Karl Freund, Vice President of Marketing for Calxeda, one of the leading manufacturers of microservers, who provided a treasure trove of information and additional research on the microserver market.
I was amazed to hear from Karl that only about 30% of the entire power budget of a server is consumed by the processor. So, the rest of the power is utilized by the other chips in the set (i/o, memory, networking) and everything else (i.e. fans) except for the storage drives. This begs the question, which Calxeda, SeaMicro, NVidia, Huawei and Tilera, among others, have started to answer, is how do we re-design the integrated circuit to mitigate this power loss and improve computing efficiencies?
To be sure, there are several divergent schools of thought and action on this topic and supporters of each are equally zealous. The goal of creating more effective methods of reducing power and increasing computing are the same, but the path to get there highlights the struggle between System-on-a-Chip (SoC) versus VLSI (Very-large-scale-Integration). It would be great to be able to simplify an equation that would compare traditional server technology to microserver technology in an apples-to-apples method and arrive at a single unit of efficiency in the same way that we do for data centers (PUE, CUE, WUE). According to Evercore Partners in its May 9, 2012 white paper entitled, The Core Guide to Low Power Servers, there is good reason to believe that “CPUs are in their third technology phase with the focus shifted to power consumption and dollar efficient performance – MIPS/$/Watt.” This is useful when comparing blade to blade or microserver to microserver, but not when comparing blade to microserver because these two different types of server are designed with different tasks in mind.
Until the technology behind microservers changes, the best utilization of these devices is for scaled-out workloads. That would include work as web servers, media serving, or even serving up applications like Hadoop or non-SQL data bases like Cassandra. For the most part, this limitation is the result of the ARM 32bit architecture, but eventually, as 64bit architecture is integrated into ARM design, things may change drastically. Part of the problem is that in order to allow ARM architecture to handle the computing power required to run a relational database like IBM or Oracle, significant changes need to be made that may not be cost effective or required by end-users, who will ultimately create the market. However, as Mr. Freund, so eloquently expressed it, there are really two aspects to this equation: enablement; and technological adoption.
The interesting thing that I’ve learned about Calxeda that differentiates its product from the rest is the concept of creating a hyper-efficient SoC that reduces power utilizing and increases network speed by eliminating the need for additional external networking gear. Calxeda has integrated the network and i/o fabric on the chip along with the memory with DIMW in the nodes. The nodes within the servers sitting in the racks then connect to other racks.
According to Oppenheimer in its recent white paper, Cloudy With a Chance of ARM, adoption of microservers is being affected by a number of key factors including:
1) Changing workload goals based on maximizing how quickly data can be accessed rather than how quickly data can be computed;
2) The changing nature of workloads, which is becoming more dynamic as exemplified by Web 2.0 companies where high-volume transactions are business drivers. These companies are being forced to design and build internal data centers that can quickly and efficiently scale capacity;
3) Despite the fact that today’s microservers are inherently less powerful relative to traditional servers, they are also much more efficient delivering a 60-70% savings in total cost of ownership;
4) Based on the adoption of Cloud, the microserver market will grow from less than 1% of the x86 market today to 21% in 2016.
Clearly, with the advent and growth of the Cloud to support mobile devices, including smartphones and tablets, which applications and content is being stored or distributed through a microserver mesh, the adoption trend will increase quickly, especially when considering that, based on Intel estimates, a new server is required to support every 600 new smartphones, or 122 tablets. Quantifying this market means that by 2015, the market size will range between $2B and $3B. But more exciting than the statistics is the amount of innovation that is happening as expressed in different designs and architecture, which may solve the limitations currently inherent in the componentry of microservers.
Bibliographic References:
Evercore Partners, The Core Guide to Low Power Servers, published May 9, 2012
Oppenheimer & Co., Cloudy With a Chance of ARM, publishes March 30, 2012
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Sept 11 / R.E. Job Scene / The Dave Matthews Band
Tuesday, September 18 2012 | 08:49 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

On September 11, 2001 I was driving to my office in California when the phone rang. It was my wife. "Your father called. He wanted to know where you were." I asked why and she said he had heard there had been some type of plane crash in New York. I turned on the radio and heard a reporter say that a plane had flown into the, "World Trade Center tower." I believe most New Yorkers would assume what I did: that the plane had hit the radio tower that extended high above the roof of the buildings. But when I got to the office, I learned quickly that I was very wrong.

Very early Wednesday morning. It's my first airplane trip since moving to New York and I got up especially early as I was driving to the airport and parking in a lot that I had never used before. On the way, the drawbridge was up and sitting there, with my sunroof open, I looked up at the pitch-black sky with a relatively new moon and it's North Star companion (how many miles separate them?) proudly announcing their presence. Out my window, looking at the far off City of New York I saw a single beacon of light emminating from what I believe must have been the site of the former World Trade Center, reaching up to the sky, seemingly to touch the hands of those who were taken away so abruptly 11 years ago and letting them know they had not been forgotten.


Yesterday I hosted the first of three Breakfast Briefings for Real Capital Analytics (RCA) in Los Angeles (in a few hours the event in San Francisco will begin). It was very-well attended by a cross-section of LA area real estate executives and research professionals. Special guest Lee Menifee, Head of Research at American Realty Advisors, provided some terrific insight into how they use various data tools in determining investment strategy and underwriting individual and/or portfolio deals. A lively collaboration amongst Lee and members of the audience offered a window into current thinking and philosophy of real estate investing. There is nothing better than people getting together, in a nurturing environment, and talking openly with each other about, well, things.

It's intriguing. So many people changing jobs or starting their own firms? One very good thing I heard from a leading industry executive recruiter is activity in the hiring to fill junior positions. But we also agreed that there doesn't seem to be any real pattern in what's going on. Some of the moves may represent 'the time' decisions when someone says to themselves, "This is the time for me to do something entrepreneurial or different in my life" or "This is the time for me to make a big change." Perhaps the latter is a change from a company the person has been with for many years and wants to see 'what's out there.' We've all seen people leave companies, only to return a short time later. And, while there's a theory that sometimes you have to leave a company and then return to be able to significantly elevate your position, any job/career move contains some degree of uncertainty. If we only had some of the same analytical tools in making real estate investment decisions available to us when we're making life decisions. Or maybe that really is what the "Magic 8 Ball" is for!

The Felix Consulting Group (FCG)update:
After spending most of August being rather than doing I have come up with a very clear, simple and focused menu of service offerings. FCG's "Collective of Experts in Real Estate" is growing giving us the ability to match up our serious experience with your needs. I have been getting wonderful feedback from my clients and terrific encouragement from everyone. Please check out the website.

Great store of the week: The Ink Pad, 37 Seventh Avenue @ 13th Street, New York. A truly unique store especially if you're looking for a thoughtful, fun and different gift for someone.


I've been listening to Jackson Browne's "Late for the Sky" for a long time but just recently his lyrics have struck a personal nerve.

The words had all been spoken
And somehow the feeling still wasn't right
And still we continued on through the night
Tracing our steps from the beginning
Until they vanished into the air
Trying to understand how our lives had led us there

Looking hard into your eyes
The was nobody I'd ever known
Such an empty surprise
To feel so alone

Now for me some words come easy
But I know that they don't mean that much
Compared with the things that are said when lovers touch
You never knew what I loved in you
I don't know what you loved in me
Maybe the picture of somebody you were hoping I might be

Awake again, I can't pretend, and I know I'm alone and close to the end of the feeling we've known
How long have I been sleeping
How long have I been drifting alone through the night
How long have I been dreaming I could make it right
If I closed my eyes and tried with all my might
To be the one you need

Awake again, I can't pretend, and I know I'm alone and close to the end of the feeling we've known
How long have I been sleeping
How long have I been drifting alone through the night
How long have I been running for that morning flight
Through the whispered promises and the changing light
Of the bed where we both lie
Late for the sky

Marvelous exhibition: Who Shot Rock & Roll: A Photographic History, 1955 to the Present. Annenberg Space for Photography, 2000 Avenue of the Stars, Los Angeles, CA (Make sure to catch the film while you're there). Open through October 21, 2012.

Concert of the week: Well, it's not like I get to one every week or anything like that but via a confluence of serendipitousness on Wednesday night I got to see The Dave Matthews Band at the legendary (The Beatles performed there) Hollywood Bowl. They are a really good band. The "Bowl" is a unique venue and, thanks to my good friend, real estate dude and Renaissance man, Jerry Katell, I was sitting in some very splendid seats. Dave Matthews and his band, which is really what it is, are a tight unit. Dave is a great singer and songwriter but what I saw that impressed me most was his leadership and encouragement of his bandmates. Most importantly, they were all having fun; so important in all our lives, perhaps more than ever. Thanks Jerry.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

When Life Serves You Lemons / Connecting the Dots at Cornell University
Friday, September 07 2012 | 09:49 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Here's a terrific piece that somebody sent me recently and I want to share it with you:

When Life Serves You Lemons...

Exactly a year ago, one of my best friends received an offer from a company he has worked at for 13 years. Take a drastic cut in pay or be let go. He chose the former. After a year, we talked about the changes this decision has made in his life, and surprisingly, most have been good.

Instead of spending money at fine restaurants, he and his wife cook special meals together and eat by candlelight at home. Instead of his kids spending time in their rooms watching TV or on the computer, they spend the majority of the time in the living room, watching the one tv he now owns, as a family. Every Friday night is either game night or movie night. He rides his bike to work more often than not, and as a result, he has lost 22 pounds. He packs his lunch, which is almost always more nutritious than what he was eating before and certainly less expensive. His family spends time hiking, camping and going to parks rather than the cineplex or the arcade.

The whole family has been reading more and they were very surprised to find out that their local library also has quite the selection of DVDs.
Instead of going out to bars with friends, he invites them over for wine and dinner. He said that they actually had better conversations since they didn't have to scream over loud music. They grow their own vegetables, and I can attest, they are more delicious than anything I can get at the market.

I asked him if it's all good, he said no. He worries about the mortgage payments and college tuition for his sons. However, he said the monthly bills are more manageable now that they have changed their lifestyle.

So when I asked him what the biggest difference was since his salary got reduced, he said he was happier.


Alzheimer's Walk: Lynn Kehoe, of ORG Portfolio Management, is a long-time good friend and industry professional. Her sister, Nancy, is participating in a fund-raising walk to help find a cure for Alzheimer's Disease. If you can, please donate something. Every little bit helps. Here's the page. Thanks.


An amazing story and wonderful movie. "Searching for Sugar Man." It is a tastefully done documentary about an almost unbelievable story. I will say no more. Please try to find it. If it's not at or coming to a theatre near you, at least go to this website and read the story about the musician, Rodriguez.

Contratulations
„X Dietrich Heidtmann (The D-Man) who joined AXA Real Estate Investment Managers as Global Head of Investor Relations & Capital Markets based in Paris.
„X Bob Shau who is now with Aramco, the Saudi Arabian Oil Company
„X Kiran Patel has joined Cordea Savills as Chief Investment Officer
„X Scott Dwyer sho has joined Heitman as their head of European Portfolio Management
„X Douglas Kinney who has joined The Carlyle Group's fund-raising team.


Yesterday, I delivered a keynote presentation to the students at Cornell University's Baker Program in Real Estate. The talk, which I call, "Careers in Real Estate: Connecting the Dots" was the first one in this seasons' tour. The global diversity of the make-up of the class of first and second year graduate students fascinating and wonderful. I love it because the only way that we're going to understand each other better is to interact one-on-one. We are all the same. We may look different. We may sound different. But we are all human beings. That this program is not only providing a great launching pad for people's careers in real estate but also for helping bring the world closer together, one person at a time, is something to salute.

Okay, what were the students most interested in? Well, as you would imagine, they asked me what the job market in the commercial real estate industry was like today. I emphasized how important it was to do something to differentiate themselves from other job candidates as it's very competitive. But I also spent time talking about getting to know yourself as each type of job in our broad and wide commercial real estate industry is more suited to certain people more than to others. They asked me some excellent questions that gave me insight into the mind of someone who has gone back to school, in most cases, after working a few years, to get an advanced degree which they expect will enhance their career opportunities. These are all hard-working and deep thinking young people. I have had the privilege of meeting many bright, focused and very enthusiastic young real estate professionals who will hopefully get the break they're looking for. In that regard, please let me know if your company has a summer internship program so I can pass post it in this space for the benefit of all the students who read this column.




A nice welcome at Cornell University
Last Friday, after publishing OTR, I had a great day at the U.S. Open tennis tournament. I hadn't been to that event in a gazillion years. What a spectacle! Amazing. But what was really cool was that the friend who invited me to join him and his wife had some very, very good seats. Maybe you saw me on TV :-) I had no idea that Novak Djokovic was so tall (he's 6'2") and such a great showman. I had planned to start playing again after a bit of a layoff but watching those matches (we also got to see Maria Sharapova) I am pumped-up to find people to play with (and, lucky for me, have my first such opportunity on Sunday!).

Dutch/U.S. Real Estate Trade Mission Update: My Dutch partners and I have decided to delay the launch of this event. While we have gotten some excellent interest from U.S. firms who want to meet Dutch capital sources we realized this past week that we needed more time to make sure that the first one of these is a huge success. I'll be announcing the new dates shortly. Thanks to all of you who reached out wanting to know more about it.

Mentorship Thing: I am 'this close' to announcing the launch of my Mentorship Breakfast series. Mentorship is something close to my heart and these events are designed to bring together mentor level people together with mentee (that's a funny word isn't it?) candidates. I have lined up sponsors in New York and Chicago to host the breakfasts. They will be invitation-only, 10 mentors and 10 mentees. I will be "interviewing" a prominent industry person but because it'll be a small group it'll really be more like a facilitated discussion, sharing ideas. This is very exciting for me as bringing people together is one of my passions and no matter how many or how few years anyone has been in the industry, we can all learn from each other. Stay tuned!

Quote of the week: "Life is service. The one who progresses is the one who gives his fellow man a little more, a little better service." E.M. Statler, Hotelier.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Back to School / The House Where Nobody Lives / Job Travails
Friday, August 31 2012 | 10:36 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

On Tuesday I was in New Jersey (the state just west of New York) visiting with some long-time real estate industry friends. We talked about a lot of stuff; what's changing; what opportunities are there for regional experts, either in an asset class or in a service. We talked about the consolidation that is still to occur across our broad industry and what opportunities that might offer. Quite possibly, the word, other than uncertainty, that I've been hearing uttered most is consolidation. We're living through very interesting and exciting times.


Real estate song? Tom Waits poignant classic, "The House Where Nobody Lives" came into my mind this week.

There's a house on my block
That's abandoned and cold
Folks moved out of it a long time ago
And they took all their things
And they never came back
Looks like it's haunted
With the windows all cracked
Everyone calls it the house,
the house where nobody lives.

Once it held laughter
Once it held dreams
Did they throw it away
Did they know what it means
Did someone's heart break
Did someone do somebody wrong?

Well the paint was all cracked
It was peeled off of the wood
The papers were stacked
On the porch where I stood
And the weeds had grown up
Just as high as the door
There were birds in the chimneys
And an old chest of drawers
Looks like no one will ever come back
To the house where nobody lives

So if you find someone
Someone to have, someone to hold
Don't trade it for silver
Don't trade it for gold
'Cause I have all of life's treasures
And they're find and they're good
They remind me that houses are just made of wood
What makes a house grand ain't the roof or the doors
If there's love in a house it's a palace for sure
Without love it ain't nothing but a house
A house where nobody lives


One of my favorite songs is (Somewhere) Over the Rainbow, music by Harold Arlen and lyrics by E.Y. (Yip) Harburg. It was written for the 1939 movie, The Wizard of Oz, and was sung by Judy Garland in her starring role as Dorothy Gale (Who ever knew her last name anyway?) This song has been sung and recorded by a gazilion people but the one that really gives me the chills is by Eva Cassidy. Imagine what it feels like to be able to sing like that? (There's a very special moment at 3:50).

Holstee Manifesto
Thanks to one of our OTR community for sharing this with me. I hadn't heard about it before and now have the poster sitting on my desktop ("This is your Life...."). Sort of reminds me of the song off my first CD, "Live Your Life."


Very cool restaurant of the week: Mari Vanna, 41 East 20th Street, Between Park Ave and Broadway, New York. Thanks Alan.

Congratulations:
1. Larissa Belova who has joined Jonathan Rose Companies.
2. Michael Carp who has joined DivcoWest
3. Jerry Rappaport has joined Chestnut Hill as managing director on a new venture that will focus on apartment real estate investment.

Back to School: Here we go boys and girls. The U.S. has always viewed this Labor Day weekend as the symbol of the end of the summer 'Back to School/Work After Summer Vacation" wake-up call. We're taking a look at our calendars and finalizing our plans to attend industry events, visit with clients and prospective clients and look at our business plans to make sure we do what we need to do to "hit our numbers" for the third quarter and the year. I look forward to seeing you somewhere 'on the road' this fall.

My friends who are looking for jobs are gearing up for the continuation of that search. Some have been in serious conversations regarding changing jobs but it sounds like people are just really dragging their feet when it comes to pulling the trigger (Sound familiar to those who are out raising capital too, eh?) I wonder: do the decision-makers, those who can say, "Yes, we want you to join us" remember what it's like to be on the other side of the desk in conversations like this? What it feels like to be kept 'hanging?'

Let me know if you have any openings at your firm where you're not using a recruiting firm. I'd be happy to do my best to connect you with good candidates.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

RCA's July Report / Choose Wisely / Letting People Help You
Monday, August 27 2012 | 08:48 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

RCA (Real Capital Analytics) released their July 2012 U.S. Capital Trends reports the other day. In reading through the property specific reports here's the commentary that jumped out at me:

Hotels: "The private sector is the sole capital group that has increased acquisitions in 2012 and the average price paid by them is up as well."

Apartments: Sales of significant properties slowed to their lowest level in almost 18 months.

Retail: July transaction volume barely topped $2.0Bn in July, less than half of June's total and 20% lower than a year earlier.

Industrial: Like retail, July transaction volume was $1.8Bn; less than half of June's total and 15% lower than last year.

Office: July volume of $5.4Bn down 10% from last year and the third consecutive month of decline.

So, we're still in a funk and in an effort to not use the word "uncertain" as the cause again I consulted my trusty Thesaurus. "unsure, vague, doubtful, hesitant, undecided." In the conversations I continue to have with the institutional investors themselves and the investment managers this is a constant over-riding theme. And yet, there are those who have been able to raise money, considerable amounts, usually from investors that have had good experience with them before. So, things are not bad, it's just that, like any situation, they could be better. The problem is that things are different and we all need to decide what we're going to do differently that will allow us to achieve the goals we've established for ourselves and our firms.

We are at a huge inflection point in many ways and I keep harkening back to the line near the end of Indiana Jones and the Last Crusade when the knight says, "you must choose, but choose wisely, for as the real grail brings eternal life, the false grail brings death." Well, maybe death is a bit severe but you know what I mean.

This paragraph caught my attention in an article called "Bankers Gone Wild" about the LIBOR scandal and what can be done to 'rein them in.' ".....we need to admit that fraud is a crime and throw some people in jail. That shouldn't be so hard in the case of LIBOR, which involves no complicated debates about who knew what when. Bankers were asked a simple question, and they lied in response. Most important, though, we need an attitudinal shift on the part of regulators, who need to recognize that their gentleman's-club ethos is ill-suited to today's financial world and who need to be aggressive not just in punishing malfeasance but in preventing it from happening. (For some tips on how to do this, they might look to the way that American police forces have dramatically lowered big-city crime rates). This new approach would be intrusive and overbearing, and would make it harder for bankers to do what they want. In other words, it's exactly what the financial industry needs."

I've always liked helping people. A good day is when I'm able to help someone. For most of my life I was not able to accept or seek help. Then, a few years ago, I read a book that said that if you don't allow other people to help you they don't get the chance to feel the joy of helping someone that you feel when you help someone (That's a terrible sentence isn' it?). So, I broke through my barrier and, as you probably know already, it's a wonderful feeling when someone really wants to help you; no strings attached; just help. You guys are included in that group of people whether you know it or not. Being out there every week, reading or at least glancing at what I write and sometimes writing back to me. That's huge! And for those that have gone above and beyond to reach out to help me....my most heartfelt thanks.


Phrase of the week: "Wake up every morning with the thought that something wonderful is about to happen."


Daffy Dan's is a discount clothing store that bills itself as "Clothing Bargains for Millionaires." Well, I should say "billed" as the entire chain is closing. There wasn't much media fanfare considering that Daffy's founder, was a pioneer in 'off-price' retailing. I thought you'd find this excerpt from Mr. Shulman's obituary interesting. He died in 2011 and the chain lasted just a little more than a year after that.

"Irving J. Shulman, who founded the Daffy¡¦s clothing store chain and brought discount fashion to Fifth Avenue through quirky marketing and a promise of ¡§clothing bargains for millionaires,¡¨ died on Friday in Houston. He was 96 and lived in Manhattan. Mr. Shulman died just short of the 50th anniversary of the founding of the original store, Daffy Dan¡¦s Bargain Town in Elizabeth, N.J. When Daffy¡¦s opened its first New York City location in 1986 on 18th Street and Fifth Avenue in Manhattan, it was seen as the ¡§coming of age of the off-price apparel industry.¡¨ Mr. Shulman used personal charm and eye-catching marketing to build his business. Dressed in a suit with a handkerchief tucked into a breast pocket, he was a familiar sight helping customers on the sales floors, mostly at the 57th Street store in Manhattan. At one store he posted a mannequin on the roof to attract passers-by, who would rush in warning that a woman was about to jump. At another outlet he parked a Rolls-Royce outside to underscore the ¡§bargains for millionaires¡¨ slogan. In 2009, Daffy¡¦s, which also sells household goods, held a promotional contest offering a $700 monthly lease for a year on a furnished West Village apartment that normally rented for $7,000."

I met Irving many years ago in my early days in the outlet/off-price shopping center industry. His original store in Elizabeth, NJ was not far from one of the great record (as in LP) stores ever, Vogel's, where my brother and I used to be regulars. What can we learn from Mr. Shulman's marketing style? Can some of his ideas be used in our staid investment world? Well, maybe his stuff would be considered over-the-top (actually no maybe about it!) but it does remind us that we need to differentiate ourselves. If you put yourself in the seat of an active pension fund, endowment, foundation or consulting firm person who meets with who knows how many investment managers and gets information from how many more, it's clear that if you're looking to get the time of day from them, you need to be memorable.

In the process of building lasting relationships, what you'd like to be known for are the basics: (1) You did what you said you were going to do with their money and (2) You were open and honest about everything. I don't think it's all that more complicated although, as a someone recently said to me , "When they look under the hood, we want them to see a clean engine." What is required, to build a business, any business, is the patience and wear-with-all to see it through. There have been very few, if any, overnight sensations in the institutional real estate world. You will be rewarded if you take the time to listen to what people want and then work hard and do your very best to deliver it. Capisci?



Simply Too Cute!

The Felix Consulting Group: Update
Listening to the kind of help people have been telling me they need has helped me refine and clarify the coaching and other services that we're offering.

Coaching
„X Presentation: Improve your delivery & materials
„X Company Strategy: What highway should your firm take?
„X Personal/Career: Which road should you travel?
„X Raising Institutional Capital: How to do it
„X Events: Increasing the audience experience

"Workshop Day"- A unique educational/training experience held in your office

„X How to network
„X How to build lasting relationships
„X How to get the most out of attending an industry event
„X How to leverage your trade association membership
„X How to be a good panelist
„X How to be an effective moderator
„X How to get meetings with people who don't know you

Please reply to this email or call me at 707.260.4233 to talk about what would be valuable to you and your team. Thanks.

Steve
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Reinventing Your Life / Raising Institutional Capital / Dutch-U.S. Real Estate Trade Mission
Monday, August 20 2012 | 09:15 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

"We've got a number of investors who are not only interested in our fund but tell us they've "recommended" us to their investment committee. Then why is it taking so darn long for them to sign the subscription agreement?" Something similar has come up in multiple conversations I've had recently. "To us, they're either in or out." This pragmatic statement came from another fund manager that I had breakfast with only this morning.

"We seem to be at a natural pause," a good friend said over coffee the other day. "We're always looking forward to this or that landmark event, hoping that things will change dramatically after, for example, an election. But I believe we have been disappointed that this has not happened in recent history."

Even though this week's industry news mentions a number of fund closings, the talk is more and more about institutional investors thinking that a commingled fund is not their first choice anymore. If that is true, and I believe it is, there may be more opportunities for solid, regional real estate operators to tap into institutional capital in more ways than they have before, which has typically been on a deal by deal basis. Some of these regional operators have spoken with me about "How do we get some of that there pension fund money?" The help I offer them is in the form of my one-day, soup-to-nuts session on "How to Raise Institutional Capital." It's really to get people to understand what it takes to be seen as an institutional real estate fiduciary and also what to expect when going out to market your first fund.

But what about the more well-established investment advisers? "It's not easy but we are raising money. Although, as a large firm, with a lot of mouths to feed, we need to have multiple products in the market at the same time." We, as an industry, are clearly at an inflection point and, in the end, we should probably give up on things returning, at least in our lifetimes, to what they were during the last go-go cycle (even though CMBS is coming back it is not the savior). But, as I have planned, and fully expect to be around until 2068, it'll be interesting to see if I'm right.

Reinventing Your Life is the title of a great book that I'm pretty sure has been mentioned on this page before. Having read it a couple of times, I've learned a lot and been successful, to some degree, in making some changes to myself that have benefited both myself and those close to me. There are other things, deeply ingrained things, that are much more difficult to change. When you read this book you'll get what I'm talking about.

As some of you know, and others have read between the lines, my life is changing...again...as I've moved from Napa Valley to New York to start the next chapter. There are multiple reasons behind the move, not the least of which is that New York is the capital of the commercial real estate industry. Also, a number of my existing (11) clients are based there and because of my deep roots in the New York area, the potential for new business is considerable.

New York is also closer to Europe than California (Duh!) and I will be spending more time across the pond, something I'm looking forward to.

My first Europe trip this fall will be for my own Dutch-U.S. Real Estate Trade Mission in Amsterdam on Oct. 3-5. Announced here last week it seems to have struck a nerve as we've had some sincere interest in attending this invitation-only event. Stay tuned.

Later in October, I'll be back in Amsterdam again to attend and moderate a cool panel at PERE's Global Investor Forum.

What else is new? Early this week I shook hands (where I'm headed I don't need contracts!) on a brand new, broadcast-quality and digitally-delivered monthly interview series that I've wanted to do for a long time. It's part of my personal commitment to advancing mentorship in the industry and providing events, tools and content to help younger people learn, grow and connect. More details on this next week.

So, like you guys, this summer has been a busy time for me, although I'm starting to sense that people are checking out for the end of the summer holidays. Yes, my personal life is changing but it is fairly clear that it's for the good of all involved. That doesn't mean it's easy but at least I'm not second-guessing myself.

Song of the week: Make A Plan To Love Me

Best donuts in a long time: Mission Donuts, Laguna Niguel, CA (go very early).

Congratulations: Skip Miller on joining New York Common Fund as Director of Real Estate Investing.

Quote of the week: When one door of happiness closes, another opens but often we look so long at the closed door that we do not see the one which has opened for us.
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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

Carbon Conscious Computing
Monday, August 13 2012 | 08:45 AM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

It seems now that almost every week there’s a story about sustainability, or Greenpeace criticizing one of a dozen data center operators for their intransigence with regard to reducing their carbon footprint. Though it’s a little less than timely (being a few weeks after Greenpeace’s latest harangue about Apple’s Maiden, North Carolina Data Center, it’s still worth discussing and questioning Greenpeace’s logic and intent related to energy usage in data centers. Of course, Apple, Facebook and Google are easy targets for Greenpeace just because they’re marquis technology companies that operate large scale internal- and external-facing IT infrastructures. However, in this case, the problem with Greenpeace’s grading system is really two-fold: 1) it’s not based on confirmed design facts provided by Apple, but rather deduction from specious assumptions; and, 2) Greenpeace isn’t all that green itself.

Upon reading the Greenpeace report, it becomes abundantly clear that it likely wasn’t written or reviewed by anyone with a shred of IT experience. The fact that two of the demands made in the report are myopic prove this (“Choose a renewable-powered local utility for its Oregon data centre, not buy renewable energy credits from coal-powered Pacific Power” and “Adopt a data centre siting policy that prioritises access to renewable energy for any future iCloud data centres.”). Data center site selection considers well over 75 different factors. This is very standard whether the developer is Apple, Facebook, Google, Digital Realty Trust, etc. Most technology companies employ sustainability officers that are integral to the site selection and construction process, but the business drivers play a substantial and, sometimes, controlling role as to where the data center will be located. Latency (or signal delay) is a primary factor that cannot be tolerated in serving one’s client base. Furthermore, there are very few locations in the US where 100% renewable power is available. In those areas, it may or may not be feasible to construct a data center. But back to the Greenpeace report for another minute…

The primary conclusion to which Greenpeace arrived is based not on fact, but the incorrect assumption that Apple will be using 81MW of power of which 62.1MW would be purchased from Coal-Heavy Duke Energy (this includes the 5MW of on-site generated power from the fuel-cell source). Furthermore, Greenpeace is questioning Apple’s fuel source for the fuel-cells as being renewable as the combination is of natural and directed biogas. Additionally, Greenpeace is critical of Apple’s potential arrangement to sell energy generated from the on-site solar panels and fuel-cells to Duke Energy. This strikes me as incredibly narrow-minded and largely hypocritical. Isn’t the point of “greening” the environment to create less dependence on carbon-related fuels? If Apple, or any other company, chooses to generate power and sell it back to the grid in exchange for the electricity it uses, isn’t that substitution helping our efforts to create more sustainable planet?

This also begs the question of whether or not carbon taxes are considered by Greenpeace to be useful? I would assume that the concept of a carbon tax is one that would resonate with this organization; however, capping and trading energy or capping and trading carbon points should be just as interchangeable. I wonder whether Greenpeace has thought this anomaly through?

Throughout the Greenpeace report there are numerous references to iCloud and Cloud in general. However, no credit is given at all for the fact that Cloud-computing is one of the greatest influences today in reducing energy consumption. Rather than use dedicated servers for single applications, those same servers, which are becoming much more energy efficient, are broken into 50 different virtual machines. Yet, nowhere in the report is there any mention of this. And the instance of Cloud-computing is not isolated to Apple. All major enterprises and IT companies are integrating this strategy into their operations. Not only that, but most IT companies are experimenting with new low-power usage servers, more efficient blade designs, better water usage as a result of their interest in preserving the environment as well as to reduce the use of natural resources, electricity, using alternative energy sources and reduce the oval cost of operations. Facebook, Google and Amazon are all following suit by focusing on more conservation and experimentation with different design schemes aimed at achieving measureable results in this area.

So here are a few questions and challenges for Greenpeace, if there’s anyone from that organization’s reading this blog:

1) Since you’re questioning the transparency of those you choose to criticize, where is your data center located and what is the composition of energy used by your provider?

2) What are you doing to improve the energy yield from alternative fuel sources including solar panels, wind and fuel cells?

3) Despite the perceived risk associated with Nuclear power, where do you stand on this, since Nuclear is among the energy sources producing very low carbon dioxide emissions from their full life cycle?

Finally, it seems very odd to me that Greenpeace in its infinite wisdom operates a massive vessel, the Greenpeace Warrior III that isn’t environmentally friendly in the least. Its hull is constructed of steel, not sustainable timber. It is powered by huge diesel engines and sails that are completely useless. Every winch on the ship is powered hydraulically by the diesels and they have a very cool helicopter in board. What a bunch of hypocrites! When it serves their purposes, they’ll excuse themselves from being environmentally friendly.
____________________________
Bibliography

http://www.greenpeace.org/international/Global/international/publications/
climate/2012/iCoal/Apple_Clean_Energy_Road_Map.pdf
http://www.datacenterdynamics.com/blogs/ian-bitterlin/greenpeace-isn’t-all-green&u=4892
http://www.datacenterdynamics.com/focus/archive/2010/09/eye-eye-facebook-attacks-greenpeace-over-energy-use
http://wiki.answers.com/Q/What_is_the_carbon_footprint_of_solar_power
http://www.world-nuclear.org/education/comparativeco2.html
http://www.tgdaily.com/business-and-law-features/51365-facebook-tells-greenpeace-were-just-as-green-as-you
http://www.greenpeace.org/usa/en/about/contact/
http://gigaom.com/cleantech/facebook-responds-to-greenpeaces-coal-criticism/
http://www.datacenterdynamics.com/print/focus/archive/2012/08/facebook-we-want-get-coal-it-will-take-long-time
http://www.datacenterknowledge.com/archives/2012/07/13/greenpeace-apple-strange-math/?utm-source=feedburner&utm-medium=feed&utm-campaign=Feed%3A+DataCenterKnowledge+%28Data+Center+Knowledge%29
http://www.businessweek.com/printer/articles/299072?type=bloomberg
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

How to Raise Institutional Capital / Research Jobs? / 'The Mentors'
Monday, August 06 2012 | 09:27 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

"How do we get some of that there pension fund money?" This question has been posed to me many, many times. Often the source is a successful regional real estate company, with a great story and track record, but that has never raised institutional capital or at most for a one-off deal. Some of these companies have hired me to conduct a unique training session, "How to Raise Institutional Capital-A One-Day Soup-to-Nuts Introduction." When the day is over, my client's reaction sometimes resembles,"It can't possibly take that long to raise an institutional fund, could it?" or "Boy, I'm really going to have to make a considerable investment in our reporting, compliance and risk management capabilities." And, sometimes, they decide, "It's not worth it." But I remind them that all the successful real estate investment managers started in the same place, more or less, and perhaps it's only a question of patience (Warning: Serious amount of patience required, learning to accept rejection, realizing that things will not go according to your timeline and how long it takes to develop trust to the point that an institutional investor, and/or their consultant, will endorse you). However, once you are accepted 'in the club' you have to do something get yourself thrown out. So, maybe it is worth it!


This leads to another thought about what I believe we're going to see more of: managers going out of business or merging (if they can get past the money aspect of what they believe their firm and they are worth). All this basically brings us to one word: change is afoot. Lots of it. And with change comes possibilities; possibilities for our companies and for ourselves. This is not a time to be faint of heart. We are at an inflection point and we can seize the day....if we dare to.


Notice: The Association of Real Estate Research Professionals, a 1000+ member group on Linkedin.com, wants to identify real estate research positions for their members. If your firm is seeking someone with that experience (all levels) please let me know and I'll post it to the group. Thanks.
My fall tour of university real estate programs is really coming together. The title of my discussion with the students is, "Careers in Real Estate: Connecting the Dots." As I prepare, I'm going to use my own career as a starting point: The job, The connecting of the dots (how I got the job) and what I learned there. The learning part is technical learning but rather what I learned about people and about myself. And, just like on the last college tour, I know we will all be learning from each other.

People who are thinking: In Asheville, NC visiting my son and his sons this week, we went to a place called "The Tree House: A Cafe at Play." It's a very cool idea and the only one in the U.S. (for now, anyway). It's got an indoor treehouse and is chock full of educational toys. In one section are a bunch of tables (the cafe) where parents (and their children if they must) can hang out, have a snack, work on their computer (shame on them), etc. One of the very cool features is that you can order really good food that is "delivered" by a restaurant next door! There are lot of other services that they offer like art classes, music classes and yoga for kids. There's also a drop-off service (ages 12 months-8 years) for when a parent needs to leave their child for a bit and run some errands (or just needs some time for themselves!). Anyway, it's great to see people thinking differently and filling a need (for both the kids and their parents).


Driving from my home in Napa Valley to southern California yesterday the diversity of the landscape allows this conclusion: each of us plays a part in the success of others.

Just as the farmer in Modesto needs workers to provide food for our tables, the analyst just beginning their career needs someone to provide guidance so they can provide food for their "table". Each successive rung on the ladder has a similar characteristic to it.

As I continued the drive it became clearer to me that for our industry to grow there needs to be a forum for the knowledge and wisdom of a senior industry professional to be shared with younger professionals....tomorrow's industry leaders.

So it is with great pride and excitement to announce that The Felix Consulting Group is launching an on-going series of regional events called, The Mentors. This is something that has been on my 'to-launch' list for many years. Stay tuned for the details.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

RCA Mid-Year Reports / Stress / A Deluxe Apartment in the Sky
Friday, July 27 2012 | 11:31 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

RCA this week released it's U.S. Capital Trends Mid-Year Reports. Here's what RCA says about transaction volume:
„X Apartment: Second highest quarter since 2007. But year over year increases in transactions are slowing.
„X Office: Slight gain from prior quarter but off 10% compared to a year ago.
„X Hotel: Slowed for the third consecutive quarter.
„X Industrial: Excluding an outlier deal, activity in Q2 was up 17%. Flex properties have registered stronger gains than the warehouse sector.
„X Retail: Excluding entity transactions, activity increased 56% in Q2.


Standout markets across all property types include: Seattle, WA; San Jose, CA; and Austin, TX. Other markets which appear to be gaining favor are: Charlotte, Miami, Baltimore and Nashville.


14 years ago I moved from New Jersey to California to take a new job. Shortly after getting there I started to get excruciating pains in my right side. I went to a doctor who sent me for a bunch of tests (during one they forgot to strap me onto the table and when it raised, I fell, hitting my head and almost creating a real problem). But all the tests were negative. After getting the results, the doctor, a new one for me having just moved, asked, "Have you ever heard of stress?" I felt like saying, "Everybody has." But instead I courteously said, "Yes." He said that after telling me that within the past six months or so I had: gotten married, moved cross-country and started a new job, the pain on my side was likely just stress-related from all the major things that I'd experienced recently. I don't remember if the pain stopped as I left his office but it stopped shortly thereafter. As I travel around I'm both observing behavior that suggests more and more people are feeling more and more stress and from hearing from people who clearly state that 'it ain't easy out there.'

My generation grew up believing that things would get better each year. Perhaps we weren't the only ones. I believed it and in 1987-91 got myself into financial trouble regarding a house because I overextended myself believing that I would make more money each succeeding year. But that didn't happen and I learned a valuable lesson. Today, we're still a long way from recovering from many people overextending themselves. In addition, we've got a situation where lots of people are out of work, some with little or no prospects and others taking jobs well below their ability and experience, just to pay the bills. Also, I believe that the stress we're experiencing (the "we" is probably the entire developed world in one way or another) manifests itself in the growing rudeness and lack of consideration people are showing to one another. It's sad. If we lose our civility toward one another we are creating an environment that far exceeds anything the "Me" generation ever believed. Yes, we're stressed, but showing kindness to one another could be a positive that comes out of the negative. We need to find something to believe in and, right now, it just may be each other.

Comment from an OTR reader about my recent observation: "It really is sad to see people so engrossed by technology. I¡¦m amazed at how many young mothers walk around with their children while talking on the telephone. I¡¦m sure that they tell everyone that they just spent a few hours with their child. How great that would be if true."

Seems our timing is serendipitous as on Wednesday there was an article in the paper titled, "Silicon Valley Says Step Away From The Device." One Facebook exec offered a warning: log off once in a while and put them down. "In a place where technology is seen as an all-powerful answer, it is increasingly being seen as too powerful, even addicitve. The concern, voiced in conferences and in recent interviews with many top executives of technology companies, is that the lure of constant stimulation-the pervasive demand of pings, rings and updates-is creating a profound physical craving that can hurt productivity and personal interactions." OMG, and here I thought it would be years before I'd read something like this. You guys know my feelings but it'll take more than just this article to get people taking action and reducing their dependence on "constant techaction" (vs. human interaction) with each other. Now with young grand children in my family it'll be interesting to see how their parents (i.e. my sons and their wives) handle this challenge.


Congratulations:
„X Marty Reid, Executive Vice President and CFO Chambers Street Properties
„X Jason Chiang joined the investment team at Madison International Realty


RetailMLS.com has launched it's new blog called The Retail Report.

"A Deluxe Apartment In The Sky." I stayed in an incredible vacation rental apartment this past week. Walking in you're immediately struck with an absolutely insane view through the floor to ceiling windows looking south and east from midtown Manhattan. It was almost surreal. And, the 'night light' that woke me up during the middle of one night was actually the glow from...the Empire State Building! If you or someone you know is looking for a special place to stay in New York I strongly suggest you check this out.



Looking Southeast



My personal nightlight


Restaurant of the week: Degustation Wine & Tasting Bar, 239 E. 5th Street, New York (212) 979.1012. When you walk by a restaurant and don't see any customers it gives pause. But for some reason, when I peeked into the tiny window last Sunday night I thought, "Hey, this looks cool." More than cool, when my friend met me, he said that this was one of the hot new places in NYC and that he had wanted to try it too. We had a great meal; small plates; each one hand-crafted right in front of your eyes. But make a reservation. It was only empty because it was the first Sunday night that they were open for dinner.

The Felix Consulting Group: Case Study
Client: Opportunity Fund
Assignment: Presentation skills coaching
Solution: Staged a 'role play' session at the client's office (boy, was this fun for me!).
Their goal: Introduce their firm and pitch a product.
The Result: Feedback from the client was excellent. They have asked me to personally coach some of these individuals.

The Felix Consulting Group
If your company is at an inflection point contact me for a free phone consultation to determine if we should be working together.
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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

The Hollowing Out
Monday, July 16 2012 | 08:29 AM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

The concept for this blog germinated over the past weekend when I read an editorial in the New York Times entitled, The Hollowing Out written by Thomas B. Edsall (http://campaignstops.blogs.nytimes.com/2012/07/08/the-future-jobless/?emc+etal&pagewanted=print). The thrust of the piece is that in this election year, both the Democrats and Republicans spin the unemployment date on the first Friday of every month once the figures are released. Underlying this is the fact that both sides are only tip-toeing at the edge of the really important issue: that the middle class is disappearing.

The frightening thing this is that credible economists have conjectured “the possibility that a well-functioning, efficient modern market economy, driven by exponential growth rate of the technological innovation, can simultaneously produce economic growth and eliminate millions of middle-class jobs.”

Economists including Michael Spence (professor at N.Y.U’s Stern School of Business), David Autor (economist at M.I.T) and Alan Krueger (Chairman of the Council of Economic Advisors) have all proposed that this Hollowing Out process is the result of globalization, the hyper-acceleration of technological progress and the fact that in the decade before the 2008 recession, the US economy wasn’t creating enough jobs, especially in the middle-class. This is exacerbated by the loss of manufacturing jobs due to the off-shoring, which started in the 1980s, which, of course, instigated by the over-emphasis on stock price maximization to increase corporate valuations through short-term, rather than long-term profits.

In their book, “Race Against the Machine”, authors Erik Brynjolfsson and Andrew McAfee explain that equipment investment and total corporate profits have rebounded since the Great Recession officially ended in June 2009. However, the employment ratio has receded and is at its lowest level since the early 1980s when women had not yet entered the workforce in significant numbers. This led the authors to the conclusion that our current labor force problems aren’t caused by a lack of economic growth, or that companies aren’t spending money on equipment, but rather that these trends have become decoupled from hiring, or needing more human workers. I see the result of this in the data center sector as well. The demand for data center space, colocation, managed- and cloud-services are continuing to accelerate while employment statistics are stagnating; a jobless recovery for sure.

Of course, there are detractors who don’t subscribe to this opinion at all. James Hamilton, an economist at the University of California, San Diego, cited historical facts related to the amount of work that a single person is able to complete which has quadrupled since 1940. Further, he believes that this increased productivity leads to higher wages and that the unemployment since 2007 was caused by loss of demand for specific products (i.e. a plunge in the demand for new home construction).

Personally, the truth is probably closer to the middle ground on this issue. There are so many events, starting in the 1950s, that have led us to where we are today. For example:

The growth of the Military-Industrial complex;
Growing petro-chemical dependence;
The end of Breton Woods System and the elimination of the Gold Standard creating a Fiat currency;
Stagflation of the 1970s;
Inflation of the 1980s;
The Stock Market Collapse of 1987;
The Recession of the 1990s;
Deregulation, Collapse and Bail-out of the Savings & Loan Industry;
Commercial Real Estate Recession of 1989 through 1995;
The suppression of interest rates by the Federal Reserve Bank from 1994 to the present;
Lack of oversight by the Federal Reserve Bank and failure to prevent the Internet or Housing Bubbles;
Encouragement by Fannie Mae and Freddie Mac of Sub-prime Lending;
Financial Services Modernization & Commodity Futures Modernization Acts of 2000, which repealed the Glass-Steagall Act of 1933);
Internet Bust of 2000 leading to the Recession of 2001;
Wars in Iraq and Afghanistan, which have bankrupted our Treasury;
Manipulation of the SEC by the Major Investment Houses in 2004, which led to massive investment leveraging;
Expansion of Sub-Prime loans, which were packaged as Securities;
The 2008 Stock Market Crash & resulting Recession/Depression;
Geometrically scaling of debt and deficits by government;
TARP 1 & 2; and
QE1 & 2 monetary policy.

All of these events are related and, along with this new wave of automation, which is growing based on Moore’s Law, have contributed to bring us to where we are today. Previous instances of automation involved a small number of human skills and abilities. During the industrial revolution, machines capable of demonstrating brute strength disintermediated human employment to some degree. With the rise of computers, software and Big Data, the digital revolution is continuing to disintermediate more and more of our work force within the middle class. As technology advances continue to outpace human adaptation, the situation may become more severe.

All of that said there are remediative actions that we can take. Despite the fact that I know of no one that likes paying taxes, I don’t understand how anyone in possession of their faculties can believe for one minute that giving tax breaks to extremely wealthy individuals, as opposed to businesses, encourages job creation. Those people may personally employ a few individuals, but it is large, medium and small enterprises that employ people and make a difference in the overall job picture. Without job growth, there is a shallow demand trend for retail products. Without retail sales, businesses don’t grow and expand. If businesses don’t grow and expand, the economy falters. It’s all related, but it starts with more employment. Further, with regard to tax cuts, how are we to pay for our enormous defense budget and other expenditures (including the pet entitlement programs of both parties) without additional funding. But the fact remains that our fiscal woes can’t all be solved by belt-tightening.

So, how do we solve this challenge? Despite the fact that most businesses in the US today are small- or medium-sized companies, a recent editorial in the Los Angeles Times by John H. Bunzel (http://www.latimes.com/news/opinion/commentary/la-oe-bunzel-small-business-2012-710,0,4401305.story) a Harris Poll that was mentioned in the article surveyed more than 1,400 small businesses, two-thirds of which said that they would no increase hiring this year. Even so, when small businesses hire, they typically hire small numbers of people. Clearly, big business remains the primary driver of economic growth and job creation. Conversely, employment layoffs and down-sizing place a tremendous amount of pressure on the economy as well. There also seems to be some correlation, globally, between countries that have a high ratio of workers employed by small businesses and the current economic conditions. For example, Greece, Portugal, Spain and Italy having the most profound economic problems also have the highest percentage of workers employed by small businesses. On the other hand, Germany, Sweden, Denmark and the United States are some of the strongest economies in the world, though some would debate, because of our enormous debt that the US shouldn’t be on the list.

Historically, behind every economic upsurge has been innovation of some sort or another. Innovation takes different forms: new products; new processes; or new organizational structures that leverage new technologies and human skills. However, it seems logical to me that all of this starts with better education. And this means that we need to be making a bigger investment in education as well as teaching new ways to learn and research. We need to be holding teachers accountable for their performance with more than “No Child Left Behind”, which appears to be waning. We need to place more emphasis on verifiable learning outcomes and measureable performance by testing for skill and knowledge rather than rote memory tasks. This will require that students more hours in classrooms. Rather than fearing skilled immigrants, we should be encouraging them by expanding the H-1B visa program. This could also raise the bar for Americans to improve individual education levels.

I never heard about entrepreneurship until I had been in the work force for two years. We need to do a better job of teaching people how to think like entrepreneurs. That skill can and should be taught.

Although select urban areas of the US have excellent transportation and communications infrastructure, we need to invest in improving and distributing more of that infrastructure to cover all areas of the country. Rather than spending money on fruitless military-police actions, we should be putting money toward basic research, independent as well as government R&D institutions like DARPA, the National Science Foundation, the National Institutes of Health and NASA.

There are a host of other things we could be doing and that includes continuing to improve technology as long as we also focus on training to program and manipulate those new technologies.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

The Road Not Taken
Monday, July 09 2012 | 09:06 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

When I was the editor of my college newspaper I instituted some major changes. One was the actual way the weekly paper was printed, another was recruiting a cartoonist that I came upon in the cafeteria, increasing concert listings and music related stuff and opening up the opportunity to work on the paper to anyone, rather than the small clique that had run it for years. Those of us on that team put our hearts and souls into it every week just like when any of us is involved with something meaningful to us. But in walking around the campus I had the feeling that not enough of the students were reading the paper or if they were reading it then they didn't appreciate it. So, one week I made a unilateral decision to not publish. My purpose was to see if anyone missed it. Well, one person clearly did: Barry Dancy, the Dean of Students, who called me on the carpet for it. I won't bore you with the results of that inquisition but merely bring up the story to show how much times have changed.


Why didn't I just run a survey asking students all the usual survey questions? Today, everywhere you look, including sometimes in this column, people are looking for others to respond to something. Do you 'like' this photo, book, movie, pizza joint, rooftop luggage carrier? If elected, will Obama or Romney be better for your business? Do you agree with this statement or opinion? It seems we're constantly looking for validation or interaction or connection. We should: we're human. But why have we become such a needy society? Don't we trust our own opinions or what or who we like?


I can't seem to turn my brain off and always think about how things can be done differently. Just because something has always worked doesn't mean that there's not another way. But 'new' requires taking chances, setting yourself out from the crowd, being labeled 'different.' And doing things differently doesn't always mean it will work or it will be successful (whatever success means). That's why I'm excited when I can share something with you about someone who is doing something differently or something new or something that could change the status quo. And, even though the underlying business of making money from real estate is still pretty much the same as it's always been (Buy low, sell high!) there are those who have changed the way we do things and others who will change things.


But you know what I mean. It's the people who get an idea and aren't worried about failing. Their gut instinct is that they believe that what they've come up with will be something that others will find useful, even valuable. And when you have an idea, it's good to bounce it off positive-thinking people. Not 'yes' people. You know who they are. They're the folks we know who have a 'can-do' approach to life and who, when they hear your idea, will give you their honest opinion.


As always, one of my missions with this column is to be your eyes and ears at the events that I attend and share what I'm hearing with you. You, gratefully, have sent me your thoughts as well. It's a wonderfully special dialogue that has been established and flourishes through this weekly space. That's why I'm excited when I meet or am introduced to someone who is doing something new, different and exciting.


Robert Frost, great American poet, wrote The Road Less Taken. I read it when I was a kid and it made an indelible impression on me. It's not for everyone but it has worked for me. And, when I soon have the opportunity to tell you about some new things that I will be doing, it will make all the difference.


The Road Not Taken
By Robert Frost


Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;


Then took the other, as just as fair,
And having perhaps the better claim
Because it was grassy and wanted wear,
Though as for that the passing there
Had worn them really about the same.


And both that morning equally lay
In leaves no step had trodden black.
Oh, I marked the first for another day!
Yet knowing how way leads on to way
I doubted if I should ever come back.


I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I,
I took the one less traveled by,
And that has made all the difference.




On the road...
July 10-13: Lansdowne, VA to attend the NCREIF Summer Meeting
July 14-17: Boston
July 18-26: New York
Sept. 10-12: Paris to attend the GRI Europe Summit
Sept. 18-19: Chicago to attend the NAREIM Human Resources Council Meeting
Oct. 3-5: Special event in Europe...stay tuned!
Oct. 14-16: Chicago to attend the NAREIM Fall Executive Meeting
Oct. 17: Chicago, DePaul University to speak with students about Careers in Real Estate
Oct. 18: (t) Chicago/Uni of Chicago to speak with students about Careers in Real Estate
Oct. 22-24: Los Angeles to attend the PREA Plan Sponsor Conference
Nov. 7: Washington, DC/Johns Hopkins University to speak with students about Careers in Real Estate
Nov. 8-9: New York to attend the PERE Forum

Congratulations....
Kevin Norton, Director of Investment Management, Archdiocese of New York
Jeroen Verheijde, Senior Vice President-Capital Raising-Clairon Partners.
Alex Jeffrey joining PruPrim.


Thanks to all of you who have bought or checked out our new album, 'Wait for Me.' It's available on iTunes (search 'felix wait for me'). I've signed up for this interesting service that helps match up songwriters and bands with people looking for material for TV/Movies, etc.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

RCA Capital Trends / Real Estate Foresight / RetailMLS
Friday, June 29 2012 | 10:59 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

RCA's U.S. Capital Trends for May 2012 was delivered to their subscribers this week. Here are a few key stats:

Office: Sales volume $4.1Bn-down 31% vs. 2011
Industrial: Sales volume $2.5Bn-down 19% vs. 2011
Retail: Sales volume $3.3Bn-flat vs. 2011
Apartments: Sales volume $5.5Bn-up 15% over 2011
Hotel: Sales volume $1.8Bn-down 20% vs. 2011

Baseball/Softball Tip of the Week: I've been watching a friend's son play 15-year old baseball. I've also noticed this around softball fields. When the ball is on the ground, either moving very, very slowly and especially when it's standing still, pick it up with your bare throwing hand, not your glove hand. You lose valuable seconds if you pick it up with your glove and then have to transfer it to your throwing hand. It could be the difference between letting a run score.

Anyway....this is a wonderful piece from the New York Times this past week that I just had to share with you:

The Old Neighborhood
If you’ve lived for long in New York City, chances are you’ve lived in several different places. On the map of where we dwell now is also where we used to dwell, just across the park, a borough away, a few subway stops farther north or south. That is one of the peculiarities of this city — the proximity of our geographical past. Some people move from Ohio to Oregon. We move from 93rd to 13th, from Alphabet City to Carroll Gardens, all over town.

And what becomes of the old neighborhood? In one sense, nothing. You were only a minor molecule in its chemistry. Go back a week after you’ve moved, and the same dogs are pulling their owners to the park, the same stoop-sitters sitting out. Let enough time pass, and things become a little ghostly. It begins to feel as though the neighborhood has forgotten you, instead of the other way around. When you lived there, nothing changed without your noticing it. Now the changes accumulate unperceived, and you begin to realize that a part of you has vanished into the past.

New York is a grand and public city. But it is also immensely personal and private. There is really no visiting someone else’s old neighborhood. You can walk past the shops and admire the brownstones. You can hear about the bodega or diner that used to be on that corner and what happened that one night. Try as you might to be a tourist in someone else’s past, you end up seeing only the present. That’s how the new neighborhood looks at first — the one you’ve just moved to. You settle into the present, and it ages around you until one day you end up with a new old neighborhood.


One of the cool new things of the week: Recently launched, Real Estate Foresight is the brain-child of my friend, Robert Ciemniak. I met Robert a number of years ago when, while working for Thompson Reuters, he had just launched an intrepreneurial venture called Reuters Real Estate. From their website, "Real Estate Foresight has been designed primarily for international institutional investors and fund managers active in private and public real estate markets, in their management, research, risk, business development and strategy functions." Through a number of services they help real estate investors assess strategic risks and develop new opportunities through foresight development, thematic research and analytics. I encourage you to check it out.

Real Estate Foresight is just one of the next new things that I've been observing as they unfold. It's great to see people thinking about what the industry needs and then building it. Another one is RetailMLS. When I was introduced to the service last week it reminded me of the Internet start-up that I was with in the mid-90's. We were too far ahead of our time and undercapitalized. Classic dot.com symptoms. But RetailMLS has applied it's technology to a smaller niche than some of the other more generic 'listing' services. If you're involved in retail real estate, or if you are curious as to what one of the relatively new entrants into commercial real estate technology have created, you should take a look.

Nora Ephron died this week. While she was not a household name to everyone, many knew of her work: Sleepless in Seattle, You've Got Mail. But those are a couple of the more mainstream pieces of work in her portfolio. Not too many years ago (which means I can't remember exactly when), my wife and I and some good friends were in New York. We wanted to go see a show but Broadway tickets were simply too expensive. I did some checking around and got us four tickets to an off-Broadyway (perhaps off-off Broadway) show that got some great reviews: Love, Loss and What I Wore. It was a chick play written by Nora and her sister, Delia. The women in the audience loved it but it was also very entertaining for any man who has accepted his feminine side. Anyway, Nora was a very, very talented woman who left us too soon at 71.

When too much is simply too much. Recently, I've seen several violations of 'information overload' and it's made me say to myself: "What are these people thinking?" I don't understand why some firms believe that the more information they push out the better as if they expect people (i.e. existing or prospective clients and the industry in general) to say, "Gee, these are smart people; look at how much they write." I don't think so. My belief that less is more (a phrase sometimes attributed to blues guitar great B.B. King) grows stronger every day. So, please, when you think about publishing something, put yourself in the recipient's shoes. What is really important for them to know? If you are considerate of their time, they will appreciate it (and there's a better chance they'll remember you for it).

Webcasts galore! Have you noticed that there seem to be more and more webcasts being promoted around the industry? Many of them are sponsored (like advertising); others are offered by an individual company, usually with some type of research as the theme. I wonder: are you watching these things?

I was going through my own archives recently and found this piece that I wrote somewhere in the early 2000's:

Standing Out: Tips on Differentiating Your Business

Can people tell the difference between your company and your competitors? Are you sure? In the world of commercial real estate, with all due respect to data and technology, I believe the difference is people.

How do you decide which person you want cutting your hair? Is it because that person uses the Roffler Model Z-28 scissors? I don’t think so. It’s because if a particular person cuts your hair, you will look better when you leave the salon than when you got there. You trust your stylist, and you are loyal in return.

If I were looking to grow market share in the investment real estate transaction business I would:
-Hire the best people.
-Compensate them fairly.
-Invest in training on an on-going basis.
-Let my actions speak louder than words.
-Be memorable.

Here’s what you can do to differentiate your company from others:
-Take stock of your assets and your liabilities.
-Find out how the market perceives you.
-Think about the future, not just today’s deal.
-Be helpful.
-Know what you’re talking about.
-Be known as someone who is on top of what’s going on.

Then one day you’ll overhear someone talking about your company and they’ll say the magic words you’ve hoped for all along: “Those guys know the business. They did what they promised. I’ll be doing business with them again.” And all the work will have been worthwhile. Then you can go out the next day and keep working at it. Why? Because that’s what the other guys are doing.

Congratulations to Peter Steil who has been named CEO of NCREIF.

Interesting conference: IMN is having their second annual Real Estate General Counsel Forum in New York on September 10-11. There aren't too many events that I know of that bring together this practitioner group. In my mind, one of the good outcomes from the dialogue amongst in-house counsel and outside counsel could be how fees can be reduced. It looks like the kind of event where you can really get to have substantative conversations with people.

"Is Core Over-valued." I've had some question about all the money that's been and still being invested in core real estate. My thought is that, while it has been considered a 'safe' investment there will be some surprises down the road. Be that as it may, NCREIF has posted a thoughtful piece by Jeff Fisher here. But, more than 'core' the words that I am hearing people utter more than any others these days: Student Housing.

My new favorite video - http://www.youtube.com/watch?v=zlfKdbWwruY&feature=youtu.be


On the road....
July 11-13: Lansdowne, VA to attend the NCREIF Summer Meeting
July 14-17: Boston
July 18-26: New York
Sept. 11-12: Paris to attend the GRI Europe Summit
Sept. 18-19: Chicago to attend the NAREIM H.R. Council Mtg.
Oct. 14-16: Chicago to attend the NAREIM Fall Executive Mtg.
Oct. 17-19: Chicago including speaking with DePaul University students about careers in real estate.
Oct. 22-24: Los Angeles to attend the PREA Plan Sponsor Conference
Nov. 7: Washington, DC to speak with Johns Hopkins University students about careers in real estate.
Nov. 8-9: New York to attend the PERE Summit

If you are at a university or have a connection to one with a real estate program and you'd like me to visit to speak about "Careers in Real Estate" please reply to this email. Thanks.

I hope you enjoy your Independence Day holiday.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP


Friday, June 22 2012 | 10:32 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Jacqueline Geoffrion died in Montreal this week. She was my mother-in-law. I first met Jackie in 1993. She owned and operated a convenience store in the lobby of a huge apartment complex called Les Dauphins sur le Parc, across from Parc Lafontaine on The Plateau in Montreal. Jackie worked hard from when she was 16 in various businesses she owned until she sold the store about eight years ago.

In addition to being her livelihood, that store was her life as she also lived in the building for 30 years. Many of her customers became friends, coming down every morning to get their Gazette or a cup of coffee or one of those hundreds of other things that stores like that stock. They talked with her. Shared their problems. She listened. She was a very good listener. She was like the building therapist.

Jackie was also a very generous person. Over the years she helped many people out when they were down on their luck. She had a soft spot and sometimes she lent someone a few bucks even though she knew she was not going to get paid back; but she did it anyway because they needed some help.

For the past few years, sadly, she had really had no quality of life at all. It was one thing after another. I don't think she really wanted to live anymore and as I learned when I studied the stages of death when my Dad was near the end, under many circumstances, people can control when they decide to pass into the next world. I believe Jackie did this on her own agenda. She was a strong-willed woman (are there any other kind?)

Nevertheless, the loss, especially to my wife, an only child, is huge. Like many people who work hard all their lives and then 'retire' she didn't know what to do with herself after she sold the store. She never seemed to show much interest in anything after that which was sad in itself. The attending doctor told my wife that 'your mother died peacefully.' I guess that's better than checking out some other ways but it doesn't do much to pacify the terrible feeling of loss. Au revoir Jackie.


Word of the week: disfluencies. Here is an interesting piece on the subject by Lisa Marshall who is a communication coach http://publicspeaker.quickanddirtytips.com/Um-Ah-Eliminate-Disfluencies.aspx

New gigs:
- Sherry Rexroad, Chief Investment Officer of Blackrock's new global real estate securities platform
- Tim Bellman, Head of Global Research, Invesco
- Claiborne Johnston, Client Portfolio Manager, Invesco
- Noah Shlaes, Senior Managing Director/Global Corporate Services, Newmark Grubb Knight Frank
- Michelle Fang, Product Specialist, Principal Real Estate

Update: I've decided to change the name of my consulting business to The Felix Consulting Group. So, who's in the group? Well, I'll be announcing something soon but, trust me, it'll be more than just little ol' me. In the conversations I've been having with CEO's and other very senior people, I'm getting the most 'head-shaking' (yes, we could use your help) when we talk about: Presentation Coaching, Investor Conferences and "How do we get some of that there pension fund money?"

This last question is one that I've been asked for many years. The source of the question is typically a successful real estate firm that has developed or acquired income-producing real estate but usually in a one-off style, gathering money from investors on an as-needed basis ("I've found this great deal. How much would you like to come in for?") But, and especially now, when there are a lot of sweet opportunities out there, it'd be good to have money at the ready.

So, depending on the degree of experience that these firms have with raising and managing institutional capital, my coaching session may run the entire gamut of the philosophy and process involved when you are looking to get into the institutional real estate game (i.e. Patience, patience, patience and how not to take rejection personally). Also with firms who have had separate accounts with pension funds and want advice on how to launch and operate a fund (and at the same time, which is what makes today's landscape very interesting those who have historically operated in a fund format who want to get into the separate account business).

So, I've been pretty busy, both with providing value to clients and with having conversations (face2face is best) with people who already know and trust me. It's in those conversations that people think about how I could help them. I'm having a great time and all of my clients have offered to provide testimonials for me. It feels good. It feels right.

"CD Update." Thanks to all of you who have bought our new CD, "Wait for Me." It's available on iTunes (search "felix wait for me"). I also carry them with me when I travel! I'm still trying to figure out how to spread the word virally. For now, I need all the help I can get. Thanks.

Here's some feedback on the album:

"Great work Steve...loved the Lennon Song (SF note: My song called John Lennon) .....and really like the "feel" of everything...who's the girl singer?" CFO of Real Estate Investment Manager and garageband keyboard player.

"Enjoying the music very much. Several really good songs. Will see who I can expose it to." Broadway show producer (retired real estate investor)

"Well done. I haven't listened to all of them yet. Great recording on "Wait For Me".Who's singing that one? "Québécois" is a real departure." Professional photographer, great guitarist and my former longtimeago songwriting partner.

"Its great! And what a joy it must be to produce this CD with your sons, Brian, Kevin and your musical friends. What a great guitar player Ernie Hendrickson is. My compliments to all musicians on this CD. Great solid drumming and basswork. Its really hard to pick a favorite song from this album, but I played "Thank You" and "Distance" both four times. "Quebecois" is really fun song, there is some magic in the harmony that makes this a song can that should go on forever." Real estate publisher, former bass player in a popular European band and, most importantly, my good friend.

On the road....

July 11-13: Lansdowne, VA to attend the NCREIF Summer Meeting
July: New York & Boston
Aug: New York & Chicago
Sept. 11-12: Paris to attend the GRI Europe Summit
Sept. 17-18: Chicago to attend the NAREIM HR Roundtable
Oct. 14-16: Chicago to attend the NAREIM Fall Executive Meetings
Oct. 17-19: Denver to attend the ULI Fall Meeting
Oct. 22-24: Los Angeles to attend the PREA Plan Sponsor Real Estate Conference
Nov. 7: Washington, DC to speak with a group of real estate students at Johns Hopkins University about careers in real estate (Note: I'm putting together my fall "tour" speaking with graduate real estate students. If you're interested please contact me).
Nov. 8-9: New York to attend the PERE Summit-New York
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Reinventing Yourself & Your Company / Franny's Pizza / Moody's RCA CPPI / Bice Ristorante / Rate Your Boss
Friday, June 15 2012 | 10:36 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

I¡¦ve reinvented myself many times in my real estate career and lately I¡¦ve been having conversations with a number of people and companies who are thinking about how they can reinvent themselves.

On the individual side, it¡¦s about both finding job opportunities and finding something you really like doing. Some go back to school to get a new degree, let¡¦s say Masters in Real Estate or M.B.A. It¡¦s reasonable to assume that these folks were in the real estate industry in one, way, shape or form and wanted something different. So they invest the time and money to get this next degree, one of the steps on the stairway to re-invention heaven. Then they¡¦re ready to come back into the workforce and, oh no, they can¡¦t find a job. Why? Employers want to and are able to find people who fit nicely into their job box. Someone who has done exactly what they¡¦re looking for someone to do and they¡¦ve done it before. Many employers consider that a much ¡¥safer¡¦ hire.

But there¡¦s a lot more to think about when adding a person to your team and I challenge you to look holistically at the person who has taken the time to reinvent themselves and consider whether they bring something to the table far beyond that of simply done that particular job before.

When companies want to reinvent themselves it¡¦s equally challenging. The industry sees them a certain way. But they want to be seen differently. Well, we¡¦ve all seen cases where companies, both in our industry and outside, have reinvented themselves. And it takes a good idea, a plan, the team to execute it, the investment of some money and, what I believe is most important, patience. When a supermarket company has a successful store they use the analogue process: finding something that is similar to something else. So, one piece of advice that I give to firms looking to reinvent themselves is to look around and see who has done it before and learn from them. Decide what you want your firm to look like and then start behaving like that. And, while it's not that simple, perception is reality. But, you¡¦ll still need to be very patient.


When an internationally famous restaurant consultant suggests you go out for some pretty good pizza, the immediate answer is, "Yes." Last week, my good friend (and international restaurant consultant), Michael Whiteman took me to Franny's on Flatbush Avenue in Brooklyn. I have always loved pizza and could probably eat it every day. When we got there it was crowded but we managed to get a table even without a reservation. Michael told me that Franny's is considered one of the top-10 pizza places in the U.S. Without rambling on let me say this: it is!


The Felix Consulting Group: Someone once told me that if you don't toot your own horn once in a while there's no music. So, I got an email from someone I met at the ULI Capital Markets Conference a couple of weeks ago. He said, "On the elevator down, after the final ULI Panel (the one I moderated), someone remarked: "If only all the other sessions had a moderator like the last one. It was great...he involved the audience, he asked intelligent questions and everyone was engaged." Five other heads nodded in agreement." Moderating panels is something I love doing and I get good reviews. If you're firm is running an event and you're interested in considering the value to the audience of having a knowledgeable, independent, third-party as moderator, host or facilitator, let's talk.

The Moody's/RCA Commercial Property Price Indices (CPPI) report was published this week. These measure price changes in U.S. commercial real estate, based on completed sales of the same commercial properties over time, known as the ¡§repeat-sales methodology.

Notable Observations and Themes
„X Apartment prices were down 1.2% in April after increasing by 37.4% from their January 2010 trough.
„X Industrial saw the only gain among the property sectors in April at 1.1% and was the biggest gainer over the last quarter at 3.9%.
„X CBD office in non-major markets was the first sub-sector to bottom, 31 months ago, but it has yet to gain traction, retracing only 7.5% of its peak-to-trough decline.
„X Suburban office in major markets has seen a significant setback to its nascent recovery, falling by 14.4% over the last 5 months.
„X Prices of non-distressed properties in major markets have recovered to 90.9% of peak levels in nominal terms. Distressed transactions are showing price recovery in major markets, up 27.8% from the trough 19 months ago, while distressed transaction prices in non-major markets continue to languish, essentially flat since Q4 2009.
What and where are you buying today?

I got an interesting survey in the ¡¥mail¡¦ this week: It's called ¡§How do you rate your boss' performance?¡¨

1. Behaves professionally towards employees.
2. Encourages employees to excel.
3. Communicates a clear vision of success.
4. Is willing to undertake the hard jobs.
5. Expresses values and personal beliefs in work.
6. Sets a good example for employees.
7. Earns the trust of employees.
8. Deals capably with workplace conflicts.
9. Is open about own strengths and weaknesses.
10. Delivers on promises made.
11. Acts in an ethical manner.
12. Performs well under pressure.
13. Does not let emotions get in the way of decisions.
14. Motivates employees during adversity.
15. Listens to employees work concerns.
16. Is even-handed in dealing with employees.
17. Is open to suggestions and new ideas.
18. Finds a way to show appreciation for a job well done.
19. Is collaborative and works well with others.
20. Looks for ways to improve leadership skills.

Maybe at least or more important than the way the employee rates the boss is the boss looking at this list and thinking....how would I rate myself?

In 2006 I spent a month in Monrovia, Liberia working with The MacDella Cooper Foundation, which helps needy children. Since then the foundation has made great strides including building and opening The MacDella Cooper Academy: Free boarding school for orphaned and abandoned children. They're having another one of their very cool events and I thought some of you that will be in the Hamptons might like to go. The DJ Universe & All White Party/July 14/15 Prospect Avenue/Southampton. If you¡¦re interested let me know and I¡¦ll forward the invitation to you.

Congratulations:
- Mike Everett, CIO at Sage Hospitality Resources
- Byron Carlock, global real estate leader focused on the U.S. at PwC
- Tom Calahan, investment associate at Aviva Investors

Restaurant of last week: Bice Ristorante: 7 E 54th Street, New York (212.688.1999). My review of this place is simple: Things Done Right. It's amazing how few restaurants really get it. This place, where I've been to about six times, is always on top of their game. The staff is friendly and professional, the room (and sidewalk dining) is welcoming and the food is very, very good. Perfect for a business lunch or dinner and a hangout for commercial real estate people. You never know who you may run into.

Please check out our new CD of original tunes which is now available on iTunes (search 'felix wait for me'). And, yes, the cover photo is from the Summer of 1982. With the guitar is my son Brian, formerly co-leader of the touring jam band, OM Trio, who produced the album and played keyboards and now is an assistant professor of music at UNC-Asheville. On drums is my son Kevin, formerly a member of the band, "Fear of Sheep," who wrote the words to "Me Who Sticks Around" and "Robot Mannequin" and is a producer of TV reality shows. Thanks.
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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

Data Centers as Societal Infrastructure
Tuesday, June 05 2012 | 08:51 AM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

At first glance, it probably seems like an oxymoron to juxtapose the concept of a data center and societal infrastructure, but the thought occurred to me as I read an article by Jill Bunting on GreenBiz.com (http://www.greenbiz.com/blog/2012/06/06/turning-good-data-centers-better-neighbors). The title of the article, Turning Good Data Centers into better Neighbors, makes a point of criticizing data centers as not contributing to the communities in which they’re located by providing a paltry amount of jobs in exchange for plundering local resources (primarily electricity) all the while taking advantage of tax exemptions and rebates that benefit their business operations. Ms. Bunting goes on to suggest that data centers become better neighbors by cogenerating power and giving it back to the grid.

While I thoroughly agree that sustainability and cogeneration should be cornerstones of contemporary and future data centers, the article clearly ignores a host of issues related to data centers, their operations and function.

To begin, data centers are as much a part of community infrastructure as the roads on which we drive. Data centers are becoming inextricably entwined with the power grids from which we receive electricity and the communications networks on which we talk and interact. If all communities had a NIMBY (not-in-my-backyard) approach to data centers, the general level of frustration in our global society would grow at an unprecedented level (OK, that’s a tongue-in-cheek statement). Why? Because we’re all addicted to instantaneous responses from our digital devices. We expect web pages to load without any delay when we type their addresses into our browsers. We expect that when we place a call from a landline or cell phone, that the call goes through immediately. When we send a text message, we want the recipient to respond just like we’re having a face-to-face meeting. We want our entertainment delivered now and without any interruptions. When I turn on my TV and connect to Netflix, I want that movie to stream without any digital artifacts or latency (signal delay). When I visit Amazon or eBay and place an order, I want to know that the transaction that allowed me to buy that item was processed without deferral.

Data centers house the backbone of our technology. These facilities enable us to communicate with and interact with each other over distances near and far. I’m not trying to be melodramatic about the importance of the data center, but just take a look at how important this technology is in relation to our current society.

If we were still an agrarian or industrial economy, things might be different and the data center’s importance might not be as notable. If in order to drive more value to shareholders and create more corporate profits, we hadn’t off-shored the majority of our manufacturing, maybe we would still place more priority on creating jobs than on creating information. But today, the fact that we still grow or manufacture anything is almost incidental to the rest of the business landscape and society at large. We create content; we store information; we peddle statistics, knowledge and reports.

I don’t disagree that data centers should be efficiently designed and operated. For too long, no attention paid to these issues. With the cost of electricity continuing to “amp” up, the rise of corporate consciousness with regard to sustainability as well as a looming carbon tax, data center efficiency has become one of the most discussed, if not the most discussed, topics in the sector. As part of this discussion, cogeneration of clean power has come into the spotlight. The real challenge is finding a methodology that makes as much financial sense as it does social sense.

The cost to construct a data center is enormous. Building a facility that is highly available (has 3 minutes or less of downtime per year) with redundant design and systems ranges between $8,000,000 and $20,000,000 per Megawatt of power that will be installed. Assuming that each megawatt of critical power (power that is delivered to the IT equipment), will deliver about 10,000 square feet of conditioned space, equates to roughly $800 to $2,000 per square foot. Just for a rough order of magnitude comparison, it costs about $250 per square foot to build a conventional office building including the tenant spaces. Adding the additional cost to generate power on site places an enormous burden on the developer, whether that is an enterprise or investor. Also, based on the current level of technology, green technologies aren’t very efficient based on the capital expenditure required. Furthermore, cogeneration requires a fair amount of additional land, which adds another cost to the formula.

I am by no means advocating ignoring cogeneration. I believe that we should continue to invest in new cogeneration technologies and develop new methods to mitigate the pressure that data centers place on the power grid. My point is that data centers are already great neighbors because they support our modern lifestyle and the technological fabric of our society. Data centers and our insatiable need for more information and content are driving commerce. They are improving, not degrading the quality of our neighborhoods, communities and lifestyle.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

IMN, RCA and Rock and Roll
Friday, June 01 2012 | 11:44 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

I've been in New York this week and will be here until next Friday. Other than the terrible news about losing our friend Deb to Glioblastoma on Monday it's been another good week. It included a consulting gig with a new client and attending and moderating a panel at IMN's Opportunity & Private Fund Real Estate Investment Forum. My estimate is that about 900 commercial real estate professionals, from all walks, were at the IMN event. Also, yesterday morning, I attended the Asset Managers Roundtable which has been hosted for the past eight years by my great and good friend, Ed LaGrassa. Some things I heard as I roamed around this week that I want to share with you:
„X "We hired some people who are not the typical opportunity fund wise guys and actually have some real estate operating experience."
„X "Alignment of interests is at the top of the list of institutional investors and consultants."
„X "It's important to have the ability to change course in your investment strategy as economic factors dictate."
„X "Foreign capital sees investing in the U.S. today as their 'flight to safety."
„X "The only investors in our first (time) fund who wanted to beat us up were the hedge funds."
„X "We like to be stealth sometimes when looking at buying mezz pieces."
„X "There is definitely an informational (lack thereof) risk when buying CMBS debt today."
„X "You're getting a discount on the mezz piece; we don't feel obligated to give you a lot of information." Mezz piece seller.

At the Asset Management Roundtable yesterday I was reminded how great it is to listen to real estate people talk about a deal they've done. The good ones of course! They know all the details and want to share the adventure of what twists and turns it took from the start to the finish. Those of us who have been dealmakers can totally relate to it. They're our war stories and today, with the capital stack so complex and convoluted, some of the stories I've heard make me just shake my head. But I guess, in the end, it's all worth it.

RCA (Real Capital Analytics) had their first rooftop party of the season last night and it was a perfectly beautiful evening with moderate temperatures, low humidity and a peaceful, easy breeze. I got to spend time with my old Internet-era buddy, Michael Stewart and his partner, Neville Teagarden of Lucid Holdings who are involved in some very, very cool stuff, as their website states, "Leveraging the Power of Casual Learning AI (Artificial Intelligence)." What they've developed will be a true game-changer in our industry.



Solutions by Steve Felix update: Each of my consulting clients has asked me to help them in different ways. Generally, I'm hired by the CEO. This week's client story: Investment Management firm. Has been investing in apartments for 20 years. Their CFO is changing jobs and taking the role of marketing and raising new institutional capital. While he's been involved in 'pitches' before, until now that had not been his primary job. Basically, I've become his coach. Getting him ready to go on the road to call on pension funds, endowments, foundations and consultants. They have a long and successful track record, their stable of institutional investors has been a small but loyal group. Those of us that have been in the marketing/capital raising role can appreciate that one of the things you have to prepare yourself for is rejection, on a regular basis. But it's part of the game. So we worked on developing a logical process to setting up meetings, how to most effectively tell their story, how to respond to certain questions and what you need to do to break in with the consulting community, among other things.


I've also had a breakthrough in my own new business development: my eight current clients have all known me so there was a basis of trust established long ago. The hiring of me came as a result of each of those firms determining that there was something I could help them with that would add value. But last week I got hired by the first firm that didn't previously know me. They had heard me speak recently at an industry event and something caught their fancy. They checked me out and then reached out to introduce themselves. We scheduled an exploratory phone call during which they explained to me where they are now and where they'd like to be. I told them I could help them and sent them an agenda for a day-long consulting session. They asked me for two references. They reached one quickly and came back to me and said, "Let's do it." So that felt pretty good to me and I'm meeting with their senior team next week.


I got an email last week from the real estate investment person at a college endowment: "I have noticed that many real managers are not on point with their fee structure. I have seen two offerings in the past week that charge 1.75% management fee, 8% pref, 20% incentive up to 12% net return then 50% carry after 12%. Expected return is stated at 12% net. From an LP's perspective that is very rich in any market. I politely declined meeting with them. If this was a one off, I would just think that the one fund just was off, but I see it in too many funds. Is this an industry thing, or are the present offerings just way off base?" I gave him my opinion. Do you guys have any thoughts you'd like to share?


Some very interesting stuff from an interview I read with Kyle Zimmer, president, chief executive and co-founder of the nonprofit, First Book, which provides books for children in need:


Q. Let¡¦s talk about hiring. What questions do you ask?
A. I¡¦ll say, ¡§Have you ever started anything? From the time you were little, did you invent anything? An organization? Did you start a club?¡¨ Then I¡¦ll ask, ¡§What was the hardest part of that? What about failure? Talk to me about failure.¡¨ I think that is really important, because if you¡¦re pushing, you¡¦re going to fail. If you¡¦re pushing in whatever you¡¦re doing, you¡¦re going to fail way more than you succeed. It¡¦s that old saying: ¡§You can fail without ever succeeding, but you can¡¦t succeed without ever failing.¡¨ The culture we live in teaches us to fear failure, and I think that¡¦s a huge mistake. When I look back over the history of our organization, the times we¡¦ve been most creative were a result of the pressure of a failure or near failure. So I¡¦ll have people talk about that, and see if, in their narrative, they blame other people. Or do they have some degree of humility in what they maybe should have anticipated and didn¡¦t? And what they would do differently? We try to detoxify that at First Book. Occasionally, we give out a Brick Wall Award for an idea that should have gone really well, but ended up crashing into a brick wall. It¡¦s a way of saying, ¡§It¡¦s O.K., you did the thinking, and you gave it your best shot, and it crashed, but it was an honorable step.¡¨


Q. What else?
A. I think that somebody with a sense of humor is really important, both directed at themselves and others. So I have an anti-bump policy. We don¡¦t hire people who don¡¦t have a spark. If they seem like they¡¦re just a bump in the road, they¡¦re not going to do well.


Show this one to your son or daughter who is taking piano lessons.


Music news: Our new album, "Felix...Wait for Me", is now available on iTunes and I'm starting to get emails from people telling me what their favorite tune is. We're pumped about this and hope you'll take some time to at least listen, perhaps buy a song or two, and spread the word. Thanks a lot.
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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

Incredible statistics that are definitely worth repeating from Dean Nelson of eBay
Tuesday, May 29 2012 | 12:29 PM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

1) In 2009, there were 5 Million downloads of the eBay mobile application. In just the first part of 2012, there have been 80 Million downloads.
2) In 2009, the value of the trades on eBay was $600 Million. In just the first part of 2012, the value of the trades has exceeded $8 Billion.
3) Due to online and mobile shopping, retailers are being disintermediated. Evidence for this is the demise of Borders and Circuit City, which illustrates how retailers are becoming showrooms for online shopping.
4) Just as the axioms penned by Intel’s Gordon Moore and David House, John Donahoe, eBay’s CEO, recently noted that ‘We will see more change in the next three years than we’ve seen in the past 15 years.’
5) eBay has accomplished what most companies are still trying to achieve: an alignment of IT and Facilities. This is leading the company to use Total Cost of Ownership as a decision-making tool and PUE as a design driver.
6) Using their Data Center Matrix model, eBay is achieving some amazing PUE numbers averaging 1.043 from their Project Mercury container solution, especially considering the 119° F temperature on the day the measurements were taken.
Somewhat underscoring Dean Nelson’s presentation, George Slessman, CEO of i/o, again predicted that the last “snowflake” data center (meaning of unique “stick” design) will be built no later than in 2013. This is understandable based on i/o’s laser-focus on the i/o container product, but still not credible when one considers number of enterprises, developers, colo service providers and vendors that all have their own unique ideas about data center design. He also postulated that IT is exponential. This seems almost self-evident. The storm of cloud-based services and storage needs for data, the proliferation of mobile devices and ensuing never-ending creation of applications, the global IT footprint will, at least until there is a manufacturing and computing-based design, continue to grow. Data centers and the need for power will continue to expend as well. One of the fascinating statistics quoted was that between 2005 and 2010, worldwide data center power usage increased by 56% to 17GW. CPU computing power has increased every year and the cost has been steadily reducing every year while data center construction costs have been static. Support for this statement was the assertion that data center infrastructure is the fastest growing cost in deploying any IT landscape. Of course, this line of argument led to the conclusion that containerized data centers are the future of the business.
Matt Stansberry, Uptime Institute Director of Content and Publications, Program Director of Symposium 2012, gave a great overview of cloud adoption statistics. Using data from Uptime’s survey of 1,100 data center operators, we learned that:
1) 8% of respondents have upgraded their data centers in the past 5 years;
2) 69% have implemented private cloud services;
3) 31% have implemented public cloud services;
4) 54% have used SaaS; and
5) 85% have used colocation services.
Furthermore, over the next 12 months:
1) 49% plan to utilize private cloud services;
2) 37% are considering using private cloud services;
3) 25% plan to utilize public cloud services;
4) 30% are considering using public cloud services; and
5) 82% are considering implementing energy conservation strategies for financial reasons.
I continue to meet with clients that are considering a migration of a part or all of their IT landscape to the cloud until they understand the monthly recurring charges that accompany a cloud-strategy. While recently assisting a client in evaluating options for a 500TB storage requirement, the pricing we discovered from a variety of providers is all over the map, ranging from $0.04 to $0.20 per GB. In some instances, considering all of the additional charges for on/off boarding and transport, the differential is even more extreme. I’m sure as with so many other solutions in the data center and IT fields, competition leads to commoditization, which will in turn lead to higher adoption rates and quicker pacing.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Wait for Me on iTunes / Improve Your Presentation Skills / Driving With Your Knees
Friday, May 25 2012 | 10:25 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

The big news this week is that our new album, "Wait for Me" is now available in the iTunes store (search 'felix wait for me'). This album was three years in the making. It's a collaboration between my sons, Brian, Kevin and me and a very talented group of Chicago based musicians. The initial feedback is very positive and we are very excited about the potential for a few of the songs to be used for movies or TV. You can listen to the tunes free here. And you can buy individual songs or the whole album on iTunes. Let me know which song you like best. Thanks.


I continue to pick up new consulting clients (which is terrific and is keeping me off the streets and on the road). But as I've learned with other real estate consulting companies I've operated, the financial challenge is to get a couple of retainer clients, who pay you monthly for a period of time. This then gives you the cash flow to actually cover your fixed expenses each month (like food and shelter!). While I'm not there yet, the progress has been very encouraging.

Each clients' needs, as you would imagine, are different but what gives me a good feeling is that I'm doing things that I'm good at and have gotten excellent feedback from all of my clients (7 so far with 4 more on the calendar). Interestingly, I have had more conversations (some from referrals, thank you very much) than I've had in a long time from experienced real estate operators who have asked me, "How do we get some of that there pension fund money?" The basic answer has always been pretty much the same: you need to have patience. But what strikes me is that there are a number, of very credible real estate operators, ready, willing and able to invest the time and money that is a requirement to break into the institutional real estate community. And, I think it's a great time for them given how that world has been evolving and that there are more and more opportunities for first time and minority/woman (I refuse to use the acronym) owned real estate investment management businesses. Stay tuned! Things are getting interesting.

One of the things that I've been helping some of my clients with is how to improve their presentations. Getting the message right so that the audience takes away what you want them to is key. But here's something I found years ago, rediscovered this week and want to share with you. Btw, I believe a first impression is formed in four seconds; just long enough for someone to reach out, shake hands and look the other person in the eye.

First Impressions

Within the first thirty seconds of a speech, sales presentation or media interview, audiences decide whether they like you, trust you, and think you know your stuff.

Ironically, most business presentations are weakest at the beginning. Presenters who spend hours preparing their message and creating fancy visual media give little, if any, attention to their critical opening lines. As a result, flat greetings, bad jokes and the predictable welcome-name-topic approach ("Good morning, my name is Mary Smith and today I'm here to talk about...") are the norm.

The negative impact of a weak opening is two-fold. The unprepared speaker not only fails to inspire the audience's confidence in him, but also compounds his nervousness as he recognizes he's not generating any interest.

Your first words quickly set the tone of your presentation. A strong opening is your golden opportunity to capture your listeners' attention, establish your credibility, build rapport and entice the audience to listen to your message.

Make your first moment count. The adage, "You never get a second chance to make a first impression" applies to presenters.

Find a relevant anecdote or quote; refer to a current event or something newsworthy in your industry; or make a provocative statement that will draw your listeners in. Carefully plan and rehearse a compelling opener for your next presentation. You'll appreciate the difference—and so will your audience.

Tips for a Better Beginning:

* Engage the audience immediately with ...a provocative statement ...a reference to a current event ...a quote ...an anecdote
* Elaborate on this initial idea as it relates to your topic
* "Tell 'em what you're gonna tell 'em" and provide a reason for listening
* Rehearse your opening until it feels natural
* Breathe slowly in the moments before your presentation begins
* Direct your opening line to a friendly face and build momentum

So take note of those people who make presentations that grab your attention and hold it. Learn from those who do it well and from those who don’t do it well. Adopt the techniques that will work for you and engage your audience. You don’t have to adopt the exact style of someone else, in fact being yourself is really important. But you can make changes, subtle or otherwise, to the way you handle yourself at the front of a group. Practice on small groups before you take it to Broadway. You’ll find out what works and what doesn’t and you’ll be better for it (and your audiences will too).

Last item: At the suggestion and with the encouragement of a close friend I have started working in earnest on completing a long-standing project: publishing a semi-autobiographical/semi-self-improvement book called Driving With Your Knees to be published Second Quarter 2013.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

'Felix...Wait for Me' new CD released / New Industry Events / The Price is Right
Monday, May 14 2012 | 11:50 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Yesterday was a big day for me. A box with 300 copies of our new CD, "Felix...Wait for Me" was delivered. Some of you know about this second CD of original music that I've recorded with my sons, Brian and Kevin and some great Chicago musicians. It's been three years in the making and we are all very excited about it. It's available today on this site and will be up on iTunes next week. I'll also be walking around with a bunch of them wherever I go. You can get a free taste of the tunes here. We believe that there are three songs that could be of interest to TV or movie people. Let me know what you think. Thanks for your support.

Bob Stewart died this week. He wasn't a household name in television although his name came into millions of homes every day. He was the creator of some of the most culture-defining game shows in TV history. Mr. Stewart¡¦s long-running hit shows, which also included ¡§Password¡¨ and "The Price is Right" relied on his belief that simplicity could fascinate viewers. ¡§Bob had a talent for tapping into Americana, meaning real people: a pricing game, a game of occupations, trying to get you to say one word,¡¨ said the Fred Wostbrock of "The Encyclopedia of Game Show". As Mr. Stewart himself put it, in an interview for the Archive of American Television: ¡§Once you cause somebody at home to talk to the set aloud, even by himself or herself, then you¡¦ve got a good game show. You want them to say, ¡¥It¡¦s number 2! It¡¦s number 2! It¡¦s number 2!¡¦ before the moment of truth comes out.¡¨ Simple. But brilliant.

Congratulations:
„X Real Capital Analytics (RCA) as the first recipient of the ICSC's (International Council of Shopping Centers) Distinguished Research Partner Award. "The research award was established to recognize companies or organizations which have demonstrated a significant commitment to ICSC¡¦s research initiates and provided consistent support to the shopping-center industry", said the press release.
„X Mark Petersen who was promoted to the role of President of Beringer Securities.
„X The guys at the consulting firm, Robert Harrell who this week announced the launch of PERview, an online inventory and reporting application designed to help pension plans to better organize information on their real estate portfolio. PERview was developed for Dallas Police & Fire Pension System and is now available to everyone. Having been connected to these guys through a mutual friend, I got an early glimpse of it and gave them some ideas which they incorporated into the final product. It's pretty cool. You can check it out here: http://www.perview.emaproducts.com
„X Developer Todd Zapolski who closed his deal to buy the Napa (CA) Town Center. If you represent a retailer or restauranteur or know someone who does you may want to look into this project; it is going to become the showplace of a rejuvenated downtown Napa.

Thanks for the great suggestions on how to improve the Solutions by Steve Felix website. I have implemented some of them already. It's much easier making suggestions to others about their websites than working on your own!
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Cas Mollien, Independent Consultant, CLOUD CONNECTED REAL ESTATE

Commercial Real Estate and Datacenters
Monday, May 07 2012 | 01:27 PM
Cas Mollien
Independent Consultant, CLOUD CONNECTED REAL ESTATE

While connecting buildings to 'the internet' is not a new thing, Cloud Connected Real Estate adds a completely new perspective to the utilization of the technologies. As an enthusiast on everything Cloud as well as Connected Real Estate, I have seen the changes take place and have noticed different approaches in different situations. One of the most interesting and unexplored approached, is the connection to a new or existing datacenter.

Some of the larger projects, like Lake Nona in Orlando and PlanIT Valley in Portugal, are actually starting out with a datacenter and build their community around it. Others, like the 600 Brickell project in Miami, use an exisiting datacenter to connect to.

The big question in connecting to a datacenter, existing or not, is the reason behind it. What does it add to the project, the owners and the tenants?

First of all, let's explore the concept of the datacenter. A proper datacenter is everything that a proper office building is not. In its basic form, the differences are clear: In a datacenter. the air is cold and dry, there are no windows, it is noisy and gaining access is only for the (un)happy few. This might be a 'Class A' environment for electronics, but for people it is less than ideal. A 'Class A' office environment, on the other hand, provides proper accessibility for people and offers a conditioned, well lit environment.

Datacenters usually provide more powerful redundancy facilities than office buildings do, since the requirements for availability are based on the needs of electronic equipment, rather than people. Since physical equipment is not able to move itself to a more appropriate location, special facilities that lack (or are significantly less available) in office buildings, are often an integral part of datacenters. Examples are flywheel generators to avoid fluctuations in electric current when a power outage occurs and the generators take over, redundancy in cooling systems and means to get emergency fuel that office buildings do not have.

Looking at these descriptions, one thing becomes immediately clear - People do not belong in data centers and data centers do not belong in office buildings. Many have tried with various levels of success, but one or the other always deviates from its ideal picture.

When connecting realestate to a datacenter with a properly sized and designed connection, a bond is forged that offers an incredible benefit to all parties involved, a marriage made in heaven, a merger of Class A office space and Class A computer space, without concessions on either side. When it comes to all of the benefits of Cloud Computing, in all of its forms, a connection to a datacenter truly enables the Cloud and makes Cloud hosted applications seamless to the end user.

A direct connection to a datacenter removes the added latency (slowness and delays) that are inherent to the Internet. No matter how fast or how good the connection with your provider is, at some point, your data gets routed over a public internet connection at which point nobody has control over the capacity or latency of the connection(s) that you take to your destination. Its like driving to a destination during rush hour - you are aware that traffic jams may (or even 'will') occur, but there is no telling how long the delays will be.

Connecting directly to a datacenter takes this issue away, at least for the path between your office and the datacenter that you are connected to. If your Cloud provider is located in the same datacenter, a cross-connect can be put in place to guarantee enough fast and wide bandwidth for the whole company, at a fraction of the price of an Internet connection that should handle the same. If the cloud provider is physically located in a different datacenter, there is often the possibility of using the infrastructure that is used to inter-connect datacenters, such as a back-bone provided by a tier 1 connectivity provider or by the datacenter itself. Either way, going fully virtual on the desktop is no longer a wannahave, but a cando.

Another great benefit of datacenters is the choice of carriers. While not every carrier is available in every datacenter, these locations are the 'wholesale clubs' when it comes to Internet connectivity. A little shopping around will find you incredible deals on Internet connections, business connections at soho prices with more scalability than you will ever need. Choice is a good thing.

The same goes for providers of other services, from telephony to all forms of Cloud computing. Since many providers are in the same building, you will be able to negotiate great services for amazing prices.

When deciding on the next location for your business, check out Cloud Connected Real Estate and find out what the location is connected to. A great connection to a single Internet provider is great, a great connection to a datacenter is better.
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Cas Mollien, Independent Consultant, CLOUD CONNECTED REAL ESTATE

5 Reasons Your Next Office Should Be in a Connected Building
Monday, May 07 2012 | 01:27 PM
Cas Mollien
Independent Consultant, CLOUD CONNECTED REAL ESTATE

The more I think about it and the more I am talking to people about it, Connected Real Estate just makes sense. For all parties – not only the vendors, but the clients as well, especially those in the SMB segment.
As an advocate of Connected Real Estate, it dawned on me that I never wrote anything about the benefits for the end-user. Connected Real Estate isn't just about internal connectivity of systems, but integration of connectivity and technology into every aspect of a commercial building. So here goes.
If you are moving to a new location, you should consider Connected Real Estate because:
  1. You will share the cost of one business grade connection with other tenants in the building. With the principle of 'Economies of Scale' in place, it is cheaper for a whole building, or community, to negotiate a fair price on a capable connection. With flexible bandwidth sharing arrangements and a well thought-out commit rate, each user can get more than with the each-man-for-himself method.

  2. It will bring the average business higher speed. And with 'speed' I do not mean how many Mb your connection is. Anybody who has ever switched their hosted apps from a whopping 50Mb 'business class' cable connection to a measly 1.5Mb T1 connection, can tell you that size isn't all that matters. As long as the connection is not saturated, latency plays a major role in the end-user experience. It is the difference between 'knowing the application is hosted' and 'thinking the application runs local'. – For those requiring large file transfers, scalability is the ticket.

  3. It truly enables the Cloud. No matter what type of Cloud connectivity you (want to) use, every form is relying on a stable, low-latency connection to your provider. From hosted email to hosted PBX systems, there is no longer any need to carry the expenses of in-house maintenance. Breaking the three traditional barriers to The Cloud (Scalability, redundancy, security), is more easily and cost-effectively done if the building is designed and thought of as a single entity, rather than individual, disparate parts.

  4. It has Business Continuity built in. Since using the Cloud is now a viable option, your business technology systems will be located in dedicated data centers. If a catastrophic event takes down your office, your building, your town or, like here in Florida in hurricane season, half of the state, your systems will still be operational. From any internet connection, from anywhere in the world, your business does not have to close – From phones to your data warehouse, it is accessible.

  5. It takes care of scalability, waiting time for construction of facilities and obnoxious fees. Let's face it. Getting any connection that is slightly out of the ordinary is expensive and costly. The simple fact that facilities are built when a single tenant requests it, means that is after-the-fact. This implies a high cost what is incurred by the single tenant. Commitment rates on the carrier's end often end up delaying the process – There is just not enough infrastructure in place to handle the added capacity. With Connected Real Estate, a relatively large amount of capacity is brought in to the building at the time of construction. It is part of the design and it is available to all tenants. Scaling up (or down) is no longer a matter of physical connections, it is a utilization increase on existing connections. Since this is a logical function, it can be programmed. It can be done on the spot and pro-rated.

There are many other benefits that indirectly affect the tenants, like the cost reduction of building controls through technological advances. Think about a timer on your driveway-pole at home, versus a device that turns the pole on and off as the day and night shift. Now, multiply that with enough lights to light the building, run the HVAC systems based on real-time weather data, runs the sprinklers based on humidity and rain expectations, etc… The cost reduction will ultimately find its way back to your wallet.

And it's good for the environment too.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Symbolic Gestures / How to Find a Mentor / Launch Party in San Francisco
Monday, May 07 2012 | 09:47 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Those of you who also travel a lot know the feeling: there's a whole different rhythm to your day when you're not 'on the road.' For a couple of weeks I'm dog/house sitting and working from home. It's a challenge to avoid some of the distractions and to create a structure to the day that allows me to focus on my business without slacking off on the 'chores.' But it does put things in perspective and is a good thing to do from time to time. So, my next trip starts in, let's see, 12 days and 32 minutes!

The headline read, "Paralyzed Player Signed by His Former Coach." It was in the sports pages but it should have been shouted from the highest rooftops (It probably made it to TV news but since I don't watch that I wouldn't know). "The Tampa Bay Buccaneers made a notable and poignant free-agent signing Wednesday when they added one of Coach Greg Schiano's former Rutgers players: defensive tackle Eric LeGrand, who was paralyzed after injuring his spinal cord in a game in 2010. "Leading up to the draft, I couldn't help but think that this should've been Eric's draft class," Schiano, entering his first season with the Buccaneers, said in a statement. "This small gesture is the least we could do to recognize his character, spirit and perseverance."

This is a wonderful story which is summed up by this quote from the player, Eric LeGrand, " It’s just something that Coach wanted to do, and I just appreciate that. It’s just a symbolic gesture. It just shows the man he is.” Too often, symbolic gestures have self-engrandizing ulterior motives. I've never met Coach Schiano but he sounds like a guy I would like to know.

Mentoring advice from an article I recently read: "Throughout my career, I had a lot of mentors, and I just adopted them. What I found is that, especially if you’re young, when you go up to people and say, ‘Would you mind being my mentor?,’ their eyes widen. They literally step back. What they’re thinking about is the commitment and time involved if they say yes. And time is something they don’t have. So I would not ask them to be my mentor, but I would just start treating them like it. And that worked very well for me."

Q. What career advice do you give people?
A. I think people in general don’t take enough risks. Some people feel that before they can take on that next challenge they need to be 100 percent ready. It’s just not true. Even people in their jobs aren’t perfect at their jobs. So my biggest advice to people is to step out there. Take the risk and deal with it. What is the worst that could happen? It’s about thriving on risk instead of shrinking from risk.

OTR Job Service: If you're looking to hire someone and haven't engaged a recruiter I'll be happy to post a very brief job description here with your email address. There are a lot of very qualified folks out there and it'd be my pleasure to help you connect with them.

Solutions by Steve Felix: Five clients. Five more on the calendar! I've updated my website (like three times a week!). Comments/Suggestions are welcome and appreciated.

Congratulations to:

Eric Lang who has been named to head the Real Assets team at Teacher Employee Retirement System of Texas (TRS).

Eric Goldstein and Oren Klaber who have joined Korn Ferry in their Futurestep division.
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Adriana Canon, Client Advocate, VENTURIAN

5 Reasons Your Next Office Should Be in a Connected Building
Thursday, May 03 2012 | 11:42 AM
Adriana Canon
Client Advocate, VENTURIAN

The more I think about it and the more I am talking to people about it, Connected Real Estate just makes sense. For all parties – not only the vendors, but the clients as well, especially those in the SMB segment.
As an advocate of Connected Real Estate, it dawned on me that I never wrote anything about the benefits for the end-user. Connected Real Estate isn't just about internal connectivity of systems, but integration of connectivity and technology into every aspect of a commercial building. So here goes.
If you are moving to a new location, you should consider Connected Real Estate because:
  1. You will share the cost of one business grade connection with other tenants in the building. With the principle of 'Economies of Scale' in place, it is cheaper for a whole building, or community, to negotiate a fair price on a capable connection. With flexible bandwidth sharing arrangements and a well thought-out commit rate, each user can get more than with the each-man-for-himself method.

  2. It will bring the average business higher speed. And with 'speed' I do not mean how many Mb your connection is. Anybody who has ever switched their hosted apps from a whopping 50Mb 'business class' cable connection to a measly 1.5Mb T1 connection, can tell you that size isn't all that matters. As long as the connection is not saturated, latency plays a major role in the end-user experience. It is the difference between 'knowing the application is hosted' and 'thinking the application runs local'. – For those requiring large file transfers, scalability is the ticket.

  3. It truly enables the Cloud. No matter what type of Cloud connectivity you (want to) use, every form is relying on a stable, low-latency connection to your provider. From hosted email to hosted PBX systems, there is no longer any need to carry the expenses of in-house maintenance. Breaking the three traditional barriers to The Cloud (Scalability, redundancy, security), is more easily and cost-effectively done if the building is designed and thought of as a single entity, rather than individual, disparate parts.

  4. It has Business Continuity built in. Since using the Cloud is now a viable option, your business technology systems will be located in dedicated data centers. If a catastrophic event takes down your office, your building, your town or, like here in Florida in hurricane season, half of the state, your systems will still be operational. From any internet connection, from anywhere in the world, your business does not have to close – From phones to your data warehouse, it is accessible.

  5. It takes care of scalability, waiting time for construction of facilities and obnoxious fees. Let's face it. Getting any connection that is slightly out of the ordinary is expensive and costly. The simple fact that facilities are built when a single tenant requests it, means that is after-the-fact. This implies a high cost what is incurred by the single tenant. Commitment rates on the carrier's end often end up delaying the process – There is just not enough infrastructure in place to handle the added capacity. With Connected Real Estate, a relatively large amount of capacity is brought in to the building at the time of construction. It is part of the design and it is available to all tenants. Scaling up (or down) is no longer a matter of physical connections, it is a utilization increase on existing connections. Since this is a logical function, it can be programmed. It can be done on the spot and pro-rated.

There are many other benefits that indirectly affect the tenants, like the cost reduction of building controls through technological advances. Think about a timer on your driveway-pole at home, versus a device that turns the pole on and off as the day and night shift. Now, multiply that with enough lights to light the building, run the HVAC systems based on real-time weather data, runs the sprinklers based on humidity and rain expectations, etc… The cost reduction will ultimately find its way back to your wallet.

And it's good for the environment too.
Cas Mollien – Founder, SmallBizCIO

Commercial Real Estate and Datacenters
While connecting buildings to 'the internet' is not a new thing, Cloud Connected Real Estate adds a completely new perspective to the utilization of the technologies. As an enthusiast on everything Cloud as well as Connected Real Estate, I have seen the changes take place and have noticed different approaches in different situations. One of the most interesting and unexplored approached, is the connection to a new or existing datacenter.

Some of the larger projects, like Lake Nona in Orlando and PlanIT Valley in Portugal, are actually starting out with a datacenter and build their community around it. Others, like the 600 Brickell project in Miami, use an exisiting datacenter to connect to.

The big question in connecting to a datacenter, existing or not, is the reason behind it. What does it add to the project, the owners and the tenants?

First of all, let's explore the concept of the datacenter. A proper datacenter is everything that a proper office building is not. In its basic form, the differences are clear: In a datacenter. the air is cold and dry, there are no windows, it is noisy and gaining access is only for the (un)happy few. This might be a 'Class A' environment for electronics, but for people it is less than ideal. A 'Class A' office environment, on the other hand, provides proper accessibility for people and offers a conditioned, well lit environment.

Datacenters usually provide more powerful redundancy facilities than office buildings do, since the requirements for availability are based on the needs of electronic equipment, rather than people. Since physical equipment is not able to move itself to a more appropriate location, special facilities that lack (or are significantly less available) in office buildings, are often an integral part of datacenters. Examples are flywheel generators to avoid fluctuations in electric current when a power outage occurs and the generators take over, redundancy in cooling systems and means to get emergency fuel that office buildings do not have.

Looking at these descriptions, one thing becomes immediately clear - People do not belong in data centers and data centers do not belong in office buildings. Many have tried with various levels of success, but one or the other always deviates from its ideal picture.

When connecting realestate to a datacenter with a properly sized and designed connection, a bond is forged that offers an incredible benefit to all parties involved, a marriage made in heaven, a merger of Class A office space and Class A computer space, without concessions on either side. When it comes to all of the benefits of Cloud Computing, in all of its forms, a connection to a datacenter truly enables the Cloud and makes Cloud hosted applications seamless to the end user.

A direct connection to a datacenter removes the added latency (slowness and delays) that are inherent to the Internet. No matter how fast or how good the connection with your provider is, at some point, your data gets routed over a public internet connection at which point nobody has control over the capacity or latency of the connection(s) that you take to your destination. Its like driving to a destination during rush hour - you are aware that traffic jams may (or even 'will') occur, but there is no telling how long the delays will be.

Connecting directly to a datacenter takes this issue away, at least for the path between your office and the datacenter that you are connected to. If your Cloud provider is located in the same datacenter, a cross-connect can be put in place to guarantee enough fast and wide bandwidth for the whole company, at a fraction of the price of an Internet connection that should handle the same. If the cloud provider is physically located in a different datacenter, there is often the possibility of using the infrastructure that is used to inter-connect datacenters, such as a back-bone provided by a tier 1 connectivity provider or by the datacenter itself. Either way, going fully virtual on the desktop is no longer a wannahave, but a cando.

Another great benefit of datacenters is the choice of carriers. While not every carrier is available in every datacenter, these locations are the 'wholesale clubs' when it comes to Internet connectivity. A little shopping around will find you incredible deals on Internet connections, business connections at soho prices with more scalability than you will ever need. Choice is a good thing.

The same goes for providers of other services, from telephony to all forms of Cloud computing. Since many providers are in the same building, you will be able to negotiate great services for amazing prices.

When deciding on the next location for your business, check out Cloud Connected Real Estate and find out what the location is connected to. A great connection to a single Internet provider is great, a great connection to a datacenter is better.

Cas Mollien – Founder, SmallBizCIO
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Adriana Canon, Client Advocate, VENTURIAN

Cloud-Enabled Real Estate: 5 Reasons for an Evolution in Thinking
Thursday, May 03 2012 | 11:42 AM
Adriana Canon
Client Advocate, VENTURIAN

Technology is an integral part of our lives. No one can dispute this fact any longer. From the personal tech of smart phones and tablets to the business applications, systems and VoIP technologies that businesses need, there is no escaping the integrated relationship between technology and society. Internet connectivity, data center access and Cloud services are key to ensuring that operations as small as one person to thousands get their work done. Every business requires basic services such as connectivity, security, co-location and even IT support from day one. Until now, the tenants of commercial properties have had to seek these services externally, through separate vendors, contracts and service providers, while seeking a balance between budgetary constraints and increasing needs. Which begs the question: why aren't the commercial properties which house these tenants providing these necessary services?
Cloud-Enabled Real Estate (CRE) is about integrating connectivity as a fundamental component of a building and incorporating the redundancy, security and scalability needed to truly make it viable. By removing the barriers to the Cloud and creating a robust technology framework, tenants can gain access to services and systems they already need and use, such as VoIP, video conferencing, telepresence, internet connectivity, cloud computing services, server co-location and more, and the developer/managers can reap the rewards. Here are five reasons why cloud-enabling commercial properties is fundamental to the health and future of Real Estate:
  1. Tenants Want It: Yes, they do. In fact, they are demanding it. Imagine being a tenant to a building and being able to move to your new space, and have immediate, turnkey access to the bandwidth your business needs, as well as the technology services that your enterprise depends on. The ability to scale up and scale down (1MBps to nearly 500GBps), along with exceptional security is a key driver for companies seeking their next office space. If a building can offer these options at an exceptional cost, the choice is clear. It's hard to find another business model where the customers are already there, ready and waiting with money in hand for you to simply deliver what they want.

  2. New Sources of Revenue: The Cloud's model is based on multi-tenancy. So is the commercial real estate model. Leveraging the economies of scale to drive down costs, while improving the service delivery is a proven business model. It is less expensive for a new building to incorporate the needed technology and connectivity as part of its design and build, or even retrofit it, than it is for any single tenant to go at it alone. By offering tenants the technology services they want and need, buildings will be able to tap into new revenue streams that have traditionally been outside their reach. Further, by partnering intelligently with the right service providers (Cloud, Managed Services, professional services, et al.), the revenue verticals that can be tapped with minimal investment are bound only by imagination. By making the right partnerships and offsetting the responsibility through knowledgeable IT firms, the tenant will get the myriad services they need and the building ownership/management will see new revenue streams, while still focusing on their core business and market. This partnership has been a key to the success of technology companies and there is no reason to believe that the model will not work with commercial real estate as well.

  3. Tenant Attraction / Tenant Loyalty: Like any industry, if a commercial building can be one of the first that offers the services that a market needs, it will attract a loyal base. When the value-proposition for a company is between spending thousands on building an IT infrastructure, the hassle of getting the connectivity they need and even the basic technical staff to run their technology operations, and getting all those things immediately, seamlessly and cost-effectively, the choice is clear. Plus, through offering a better service experience, the tenant loyalty for longer terms is nearly a guarantee. Once you've experienced a higher level of service and technology, it is hard to go back… have you tried leaving your mobile phone at home for a few days? The same is true. Once tenants move into a Connected property, they will not see how they can do without it. Additionally, companies with multiple sites will also want to have the same services in all the locations they lease, so the potential for multi-national developers and building manages is huge.

  4. Prestige: Let's face it, Technology is cool. In a competitive industry, where the types of companies that occupy your building is nearly as important as the occupancy rate, being seen as a leader and understanding the needs of your tenants can bring prestige and recognition. This prestige and recognition creates a self-perpetuating cycle of attracting new tenants and delivering loyalty as the Developer/Manager reaps the benefits of understanding and leveraging this industry-disrupting force. Time to change the motto from “Location, Location, Location” to “Location, Technology, Connectivity”.

  5. Future-Proofing your building: Developing a new building takes a tremendous investment. This capital must be offset by high rates of occupancy, reduction in maintenance and supporting costs and new lines of revenue from service offerings. At the pace at which technology moves, an investment in IT may seem counter-intuitive, but it is in fact, a very safe investment. Specifically, an investment in a framework that enables pure connectivity to the internet and its services is the safest way to ensure that your building will not become obsolete. In the era of the Cloud, the important aspect of a commercial property is enabling that access to the Cloud. Network technologies are some of the most mature and proven technologies available, and there is rarely a need for a complete overhaul (if the initial design is correct). So an investment in connectivity makes a building more relevant 10 or even 20 years from now, than it is today.

It is easy to make the case for Cloud-Connected Real Estate. The value proposition favors all parties involved and it's hard to see why such a concept, as revolutionary as it seems, is nothing more than evolutionary… even for one of the most conservative, stable and most cautious industries in the world.
Allen Firouz – CEO Venturian


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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

Data Center Efficiency & Operations – It All Matters
Monday, April 30 2012 | 09:56 AM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

I read an article in the marketing newsletter from WiredRE dated, April 20, 2012 titled, “It’s Criticality Dummy” basically citing that aspect of the data center as the most important driver for data center management and measurement. References were made to the fact that levels of redundancy are increasing from N, to N+1, to 2N and that secondary facilities are becoming more prevalent. Furthermore, that virtualization is creating the migration from ‘ad hoc office data centers to purpose-built, scale-data center developments’. Sorry, but that’s going a bit too far and it’s just plain wrong.

It’s been more than 10 years since data center designs moved from N to N+1 and most secondary facilities these days are implemented because the enterprise doesn’t want to build a 2N facility. Why not build two, N+1 facilities when you can do so at half the cost of a 2N facility? Also, there are more reasons motivating the migration from an ‘ad hoc’ office data center/network closet to a purpose-built data center than just virtualization. What I’m saying here is that to argue that any single metric or feature is the overriding driver is pure oversimplification.

Every aspect of efficiency, availability, redundancy, reliability and sustainability should be designed, measured and reviewed including reviewing one’s choice of servers that populate the data center, since that’s the heart of production, the place where heat is generated and power is first used. Planning a data center migration or development should be based on considering all of the key metrics including:

Power Usage Effectiveness (PUE) [total or partial] – the metric that expresses the ratio of the total amount to the amount of power used by the IT equipment. In the case of Partial PUE, the efficiency of components (e.g. container only, cooling system, power delivery) is broken out. PUE is the inverse of Data Center Infrastructure Efficiency (DCiE);

Energy Reuse Effectiveness (ERE), or Energy Reuse Factor (ERF) – a separate metric based on the ratio between the total energy used minus the reused energy divided by the IT Energy used. It can also be expressed at the sum of the energy used for cooling, power, lighting and IT minus the reused power divided by the IT energy used;

Data Center Compute Effectiveness (DCcE) – This metric aggregates server usage efficiency across all servers in the data center and, similarly to PUE, provides a benchmark against which to improve. DCcE is not a productivity metric. It isn’t meant to measure how much work is done, but rather the proportion of work that is useful;

Carbon Usage Effectiveness (CUE) – The goal of this metric is to maximize the useful work for each unit of Carbon expended. To arrive at the metric, the total Carbon emissions created by the total data center energy used is divided by the IT Equipment load; and

Water Usage Effectiveness (WUE) – In the same way that Carbon usage is measured, so too should the usage and efficiency of water. To arrive at this metric, the annual water usage of the data center is divided by the IT equipment load.

In prior blogs, I’ve written about the business case as a data center driver, noted new technology that is leading toward high-production, low-power usage/low-heat production servers as well as geographic and meteorological factors that need to be considered in the decision-making process. In conclusion, as with other complex businesses, the data center is subject to a vast number of factors should be considered, measured and evaluated in the quest to satisfy continuous operations.

Credits: Much of the information contained in this blog was curated from The Green Grid: http://www.thegreengrid.org. This is a great organization that supports the preservation of natural resources and sustainability in the data center and elsewhere.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

PERE Global Investor Forum / RCA U.S. Capital Trends / People Stuff
Monday, April 30 2012 | 09:55 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

I had fought getting a BlackBerry. No one had ever accused me of being 'slow to respond' or 'out of contact' and, with all the travel I was doing on most days it was limited to when I was on my computer early morning and early evening. So everything was cool. But I was at an event and walking in the 'trade show' part and come upon a booth there was this guy on his Blackberry. I asked him, "So, how do you like that thing?" "Don't know how I ever lived without it," he said. "You know, I just don't have that many urgent things going on every day to feel I need one," says me. I'll never forget his tongue-in-cheek response, "You know, until I got this I didn't realize how many urgent things I have going on each day!" Hey, I know that many of us are expected to be 'on' 24/7 and to respond immediately to each and every text/email/call we get. And believe me, I appreciate it. But remember that sometimes, when we respond or react too fast to something we make mistakes; we write something we wish we could retract but it's too late. Anyway, enough preaching for this morning. If you'd be interested in having me come in an conduct a class for your team on "How to get the most out of attending an industry event" or "How to network" or some of the other eclectic skills I've helped people develop just let me know.


Some headlines from RCA's 1Q12 U.S. Capital Trends Review published this week:

• Sales of commercial properties totaled $50.3b in Q1’12, up 40% from a year earlier. Positive momen-tum has returned from the slowing experienced in the second half of 2011 when CMBS conduits and other lenders reigned in their origination activity.
• Sales of retail properties surged ahead 89% from a year earlier on strong portfolio volume. Hotels were the sole exception to the positive volume trends and transaction activity has been declining over the past two quarters.
• Cap rates continued to trend lower for CBD office, apartment and retail properties and were rela¬tively flat for suburban office, industrial and hotel properties.
• Although the pricing disparity between the Major Metros and the rest of the US narrowed somewhat during 2011, it appears that trend has reversed, at least temporarily, in the office and apartment sectors.
• This pricing premium differs significantly across, and even within, each of the six Major Metros. A trend noted across several property types is that the Chicago and LA metros have not rebounded as strongly as the other four. In addition, the pricing disparity in a number of markets within each Major Metro is very wide compared to historic averages.


Congratulations to Andrew Dietz who just joined ASB Real Estate Investments as Head of Marketing and Client Services, Leah Dillion who (not too long ago) joined ProLogis as Vice President/Global Client Relations, Patrick Kanters of APG who was named chairman of INREV and Jon Dishell who recently joined American Real Estate Partners as Managing Director of Fund Management and Investor Relations.

Yes, I do lead a sheltered life. I didn't know until just the other day that there is a professional basketball player in the U.S. whose name is Metta World Peace! (And I only know about it because of the headlines about him being 'barred' for seven games: He hit an opposing player in the back of his head with an elbow causing a concussion). So much for peace!.

Happy Birthday Kev!

New: "You looking for me?" OTR Job Aid
If your company is looking to fill a position and you are doing it yourselves (i.e. have not engaged a recruiter) I'll be happy to post a very brief job description and an email link. Please send it to me by replying to this email. (Also if you've got opportunities for summer interns.)Thanks.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Money, money, money, money/presentationgym/Playful Social Media?
Monday, April 16 2012 | 09:43 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Where are institutional investors putting their money these days? (As reported by PERE magazine)
1. Prudential raises $568m for senior housing fund
2. Cornerstone collects $515m for debt fund
3. Aberdeen hauls $472m for Asia Fund of Funds
4. Hemisferio Sul (formerly Prosperitas) to hold $650m close on latest Brazil fund
5. Westport Capital Partner Fund III has closed on more than $571 (Distressed debt and assets)
6. Angelo Gordon & Co. has closed on nearly $2.3 billion through two commingled vehicles targeting real estate assets (distressed commercial and residential properties or debt from owners and lenders & high-quality, in-fill assets where sub-performance can be corrected and which are likely to appreciate over time)
7. Brilla Group has completed its first round of fundraising for the Colombian Beachfront Hospitality Private Equity Fund, which will invest in luxury hotels and resorts in the South American nation.

And these are not even all of those reported within the last 45 days. Funny, I don't see the word "core" in any of these strategies. From this can we infer that the gush of money that was only recently talking 'core, core, core' and 'safe, safe, safe' has sanctioned a more ambitious direction? But, wait a minute, last I heard there were still substantial, make that huge, queues to get in to some of the large core open-end funds with some investors buying positions in those funds at a premium. So, I'm confused a little. Maybe all this means is that there's a bunch of money flowing into commingled funds again, even with the outcries of wanting more control, separate accounts and club deals. And, that there are more independent thinkers amongst the public pension funds particularly who may have decided that they've put enough money into core and now want/need to kick things up a notch. Whatever is going on, it plays directly into my comments recently that there is change afoot and we are in the midst of it, right here, right now.

Cool find of the week: presentationgym. "We are passionate about practice, feedback and really exercising your skills so that you can deliver creative, authentic presentations which tell stories and win audiences over." This is a terrific service which I intend to use myself. Rather than ramble on about them I suggest you contact Clare Yang at (clare@presentationgym.com) to set up a "Presentation Checkup" and learn about how they can help.

One more job-hunting tip: "Don't send a form letter! I get tons of them and nothing turns me off more than a form letter which is obviously going to a hundred or more similarly situated companies. Personalize the letter, know about the company and why you are a (well-researched) particular fit for them, what it is about you that will ad value to their enterprise and why you are (likely to be) passionate about their business and their products. Why you can "Make a Difference." But, having said that...

There is a very interesting piece in the current issue of Knowledge@Wharton called "Hold That Password: The New Reality of Evaluating Job Applicants." "...some employers have asked for direct access to the Facebook accounts -- including user names and passwords -- of people applying for jobs at their firms; the identity that individuals create in the world of social media is quickly becoming an important factor in hiring decisions and in people's broader professional lives...A 2011 survey found that 91% of recruiters reported using social networking sites to evaluate job applicants...the request for access to login information, however, raises serious legal questions. For one thing, Facebook has stated that sharing or solicitation of rights and responsibilities..."I worry that there is already a sense right now that our participation online may come back to haunt us," says an Internet attorney, "it inhibits our ability to express ourselves. If we can only express public relations-like statements, it takes away a good bit of the utility of the Internet. I think it would be a shame if we were to lose the playful aspect of this new technology."

My two cents: Sadly and pretty quickly we have lost the "playful nature of this new technology" (presumably social media). We've all read about abuses and simply untrue postings and incriminating or phony photos of people. There is nothing playful about that and given that the Internet is an open medium I believe it will only get worse. The more open we think things are the more closed they really become. (Please email me if you'd like a copy of the whole article).

Things beyond business: Michael Giliberto is known to many in the industry. As the co-creator of the Giliberto-Levy Commercial Mortgage Performance Index or as the now semi-retired former managing director at JPMorgan. But some know him as the lead guitar player in two, that's right two bands: The Derivatives whose marketing tag line "....less than a legend, more than a garage band" who have been entertaining audiences in the greater NY/CT/PA area for more than 10 years with their classic rock and soul music and The Winston-Wolfe Band which plays rockin' blues. I've been trying to Michael's act for many years but my schedule never seems to jive with theirs. But, one of these days....

Take Them Out to the Ballgame: Here's a link to a good piece about how holding regular outings and get-togethers is one of the most effective and inexpensive ways of building employee loyalty. I got it from my long-time accountant and good friend, Jerry Shanker.

Just for fun: Watch this video of the duet between Tony Bennett and Lady Gaga. She is terrific!

Congratulations to my friend Carl Schwartz who has joined the law firm of Hunton & Williams. Carl is one of the leading real estate attorneys in New York and a class act.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Change...Good to Great...Finding a Job
Friday, April 06 2012 | 10:03 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

For quite a while, when anyone asked me what I see going on in the commercial real estate industry the answer was easy, "Uncertainty." If you ask me today, I'd suggest adding another word, "Change." While commercial real estate remains basically and old-fashioned business the world around it is continually changing. Retail shopping habits and channels change. Where people want to live changes. Where companies choose to locate their offices, warehouses and factories change. What hotels people stay in change. How people like to get around (i.e. mobility and transportation) is changing (with regular gas now at $4.39/gal and likely to continue going up, we're thinking about where we want to live...city or on a self-sustaining farm (with excellent wireless service, of course!).

The consulting sessions I've been having with my clients, "3-hours with Steve," result in getting people thinking differently about their businesses; about what changes they need to be considering; about whether they can grow their company doing the same things they've been doing. Thinking about the book, "Good to Great," suggests that vital to a company being great vs. simply good are (1) Having the right people on the bus; (2) Sitting in the right seats; (3) With the right bus driver; (4) Driving the bus in the right direction. Simple right? Or maybe not so. Those companies that welcome change and stare it right in the eye are the next generation of great companies. And, I can assure you that there are a lot of younger people out there who remind me of my generation, questioning the status quo and looking at things differently. Like this quote I've always liked which is attributed to several people: "There are those that look at things the way they are and ask 'why'? I dream of things that never were and ask 'why not'?"

After spending time with a bunch of soon to be graduating undergraduates last week at the Villanova Real Estate Case Challenge (btw, the winning team came from Lehigh University followed closely by University of Pennsylvania, Monmouth University and Drexel University) there was much conversation about finding jobs. A good industry friend offers these tips that he gives to students or perhaps anyone seeking a job.
1) Do your homework! Have a good reason why you want to work for a firm in a particular role. Companies don’t really have jobs to fill; they have problems to solve; products/services to deliver; customers to serve; etc.
2) Fill out all the company web site/internet job posting requests. This is the baseline data set.
3) Find out who the senior executives/HR contact/hiring manager might be. One/all. The more the merrier. This is a combination internet research/networking activity.
4) Write a cogent, thoughtful letter describing why you are interested in the industry/company and want to learn more. Ask for a short meeting where you can seek advice about how to get started; take the next career step, etc. (Yes, this is real work.)
5) Visit the office supply store and get really nice paper with matching envelopes.
6) Use the US mail to send it. Give the post office a little time. (They’ll tell you how long it takes your letter to be delivered.) We don’t receive much regular mail, so this improves the odds your information will be read.
7) Follow-up. Diligently, Persistently, Politely. By phone/email/etc.

"New" (to me) music term: Dubstep: 'Sounds like your computer and your lawnmower dying at the same time.' But from Wikipedia 'is a genre of electronic dance music that has been described (by another person) as "tightly coiled productions with overwhelming bass lines and reverberant drum patterns, clipped samples, and occasional vocals".'

New Trends? De-friending on Facebook. De-connecting on Linkedin.

One more comment regarding the results of the survey I mentioned recently that was conducted with one 2011 Bachelor of Science graduating class. "What was missing was the category, "Employed and happy with what they're doing." Thanks for pointing that out John. Like with a lot of 'headline news' it's only the bad things that are sometimes highlighted.

Congratulations to my friend, Betsy Pultz, who took a senior position at s2 Financial Marketing.

Congratulations to the team from Lehigh University for winning the 2nd Annual Villanova Real Estate Case Challenge Competition.

Music update: Thanks to so many of you who have asked me what's going on with my music. Well, there is some news. After three years in the making, we will be releasing our second CD of original material by the end of April. It's called "Wait for Me" and is a collaboration with my sons Brian and Kevin and a team of fabulously talented Chicagoland musicians. There are so many new channels to distribute music these days and we're going to tap into a bunch of them. But you'll also be able to buy it the old-fashioned way: Order through me or buy one from me as I'll be walking around with a bunch of them wherever I go! Stay tuned.
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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

The Most Important Data Center Site Selection Driver
Tuesday, April 03 2012 | 08:40 AM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

Someone recently said to me that no two data centers are alike. There’s probably a good deal of truth in that, or maybe, it’s just that most who design or use data centers like to think that what they design, build or occupy is totally unique. Those who are on the bleeding edge of design have technology on their side of the argument. On the other side, the proliferation of modular data centers is leading the way to some manner of convergence and standardization. Several industry publications like Tier 1 and DataCenter Knowledge (see the article of 2/6/2012, http://www.datacenterknowledge.com/archives/2012/02/06/the-state-of-the-modular-data-center/) have made note of this. According to Jason Schafer, Research Manager at Tier1 Research, “If data center owners and operators are not at least exploring and considering modular components as a means for data center expansions and new builds, they are putting themselves at a significant disadvantage from a scalability, cost and possibly maintenance standpoint.”
Certainly economic factors are considerable when developing a data center and incentives and tax rebates have become increasingly important. At one time in the not-to-distant-past, the optimum location for a data center was determined by the availability of telecommunications infrastructure and, to a lesser extent, power. Now that fiber is pretty much ubiquitous, power availability, quality and cost has become increasingly more crucial. Until such time that servers use less power (and there are some incredible innovations on the way from SeaMicro [owned by AMD] and Calxeda) and create less heat, the need for power probably won’t abate. Other environmental threats such as earthquakes, lightning, tornados as well as contingent risks such as proximity to airports, rail and hazardous materials will continue to be factors in deciding where to locate data centers. However, it seems to me that beyond these operational issues, there is a greater imperative for site selection.
Critical mass seems to take the lead in the argument. Herd mentality plays a role in assuaging the concerns as to whether or not a data center will be successful in one location as opposed to another. If there are other data centers or service providers in a particular locale, it just makes sense to join them. That story has a certain amount of validity right up to the point at which the market reaches saturation and that results in the commoditization of product/services.
Underlying all of the concerns, evaluations and analyses is the business case. Beyond the physical attributes of the site, what are the business motivations that ensure that the venture will be a home run? It all comes down to researching the demand prior to committing to the location. Determining the customer based served, and how it will be served is essential. Understanding the demand for services required is indispensable. This sounds insultingly obvious, but I’ve witnessed so many occasions when second-hand, anecdotal information is cited as support rather than actual research based on either data (IP Addresses) collected, or direct personal interviews with potential end-users or service providers. Research builds the business case, which is supported by every positive attribute of the site, and feature.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Party / Jobs, jobs, jobs / Al Capone & Willie Sutton
Monday, April 02 2012 | 09:09 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

The highlight of the week was the 50+ people who stopped by Joe G Restaurant on Monday night to help me celebrate the launch of my new consulting firm, Solutions by Steve Felix. It was very heart-warming and thank you to everyone who was there and to those who wanted to but were unable. I didn't really know who would be there so it was a nice surprise when three of my former employers, dating back to the early 1980's, were there. It felt, I bet, a little like those people who appeared on the classic TV show, "This is Your Life." 'Well Mr. Felix, to start with, we have tracked down one of your favorite grammar school teachers. (Voice only) "Steve, I thought one day you would be mayor of New York." 'That's right Steve, it's Goldie G. Russakoff, your fourth-grade teacher from P.S. 175 in Forest Hills.' (Applause as Mrs. Russakoff is escorted out to where I am sitting). 'Now, Steve, here's a voice you may recognize.' "All middie boys and middie girls outta the water." 'Yes, it's one of your favorite people from your years at Camp Walden near Bolton Landing, NY, waterfront director Billy Gallin." Normally stone-faced Billy walks out and gives me a hug.' Anyway, you get the picture. As with any of these type get-togethers where everyone works in some part of the commercial real estate industry, I know virtually everyone and I love seeing people who don't know each other talking away, learning about what each other does, sharing stories and connecting. I may hold one of these in Chicago and San Francisco this spring.

If there was a theme to my week it was conversations about jobs. I spoke personally with people who have (1) retired from jobs; (2) gotten new jobs; (3) are looking for jobs; (4) don't like their jobs. Does that pretty much cover it all? And, as the week winds down I'm in Philadelphia where in a couple of hours my role as a judge for the Villanova University Real Estate Case Challenge begins. But last night, at the dinner, I spoke with a number of the students (whose real school affiliation will only be known after the competition ends later today). This is a group of undergraduates (vs. the UNC Kenan-Flagler Challenge which is for real estate graduate students). A number of the 'kids' I spoke with are ready to go out into the workforce now and two of them have lined up jobs, both in the banking industry (as in commercial real estate lending). But others were pumping me for ideas. So I'll let you in on a suggestion I gave them: have a business card. You don't have to be working for a company to have a card. If your school doesn't provide a template simply go here and order 250 cards and pay only postage. All you need to have on the card is your name, your phone number and your email address. My dad taught me the importance of having a business card and I have carried them throughout my life, no matter what I was doing. I was surprised that so many of the students hadn't been taught this (although I have also observed and provided feedback at other university event situations that the art of networking is also not really being taught or perhaps not being taught as well as it could be (Note: My new company will be doing something to help cure this deficiency in the near future).

While there is some hiring going on in the industry it's not across the board. But, I was talking with a friend this week who is one of the more well-known real estate recruiters some advice was offered to job seekers:
-Don't just rely on the Internet or emails.
-If you want to work for a particular firm, be bold. Call the HR people. Contact senior executives. Market yourself.
-Employers respect those who show respect for themselves by 'going for it.'
-Some of the best jobs people get are not those that are posted or necessarily through recruiters. Present yourself. Give a prospective employer the opportunity to think about what value you can bring to their company.

And to finish beating up the topic of jobs, I read about a survey that was conducted on the 2011 B.A. graduating class of a respected East coast college. 17% of their sample is unemployed. 39% have full-time jobs, including six who have both full and part-time jobs. 35% of students who are employed part-time have two or more jobs. 74% of students who are interning are unpaid. 22% of students are in graduate school. 34% of jobs involve food service, retail, customer service, clerical or unskilled work. Here's one quote that I found pretty interesting...until I read the 'hanging out' part: "A lot of it just came down to networking skills. I knew it was going to be hard, so I did a lot of internships. The best thing to do is to have them like you, to keep in contact during the year and hang out with them. I knew the job was there before I graduated. It comes down to networking well and knowing who you need to maintain relationships with when you’re not there." Hmmmm. So there you have it: "Hang out with them." I guess it's just that simple!

Feedback from a friend of mine who is a professional career and life coach: "There are three C's that go into making a hiring decision: Competence, credibility but, and most important, compatibility."

Final item: I want to share with you the copy in an ad in the hotel room magazine: "Eastern State Penitentiary. Former home of Willie Sutton and Al Capone. Eastern State Penitentary was known for its grand architecture and strict discipline." This just struck my funny bone. Can you see it: Sutton and Capone are standing in the exercise yard looking up at the tower where the guards are standing with rifles ready to take them out with one shot if they so much as give them a sideways look. Sutton says, "Al, look at the way that tower makes this place look like a moor castle. Don't you think." Capone: "Listen Willie, I know this place is known for it's architecture but I'm more concerned with the strict discipline part of it although, as you know, I'm pretty much operating the same inside as I was outside thanks to knowing the right people. But, you're right and look over there and that beautiful gate. When I was a kid, my mother read me a book called Little Lord Fauntleroy by Frances Hodgson Burnet and...."
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Feedback on Risk & Communications
Tuesday, March 13 2012 | 09:58 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

First, some feedback from OTR readers about a couple of things I wrote about in recent weeks:

Risk: "One thing I would add to your list is the lack of understanding about risk. Lots of people are talking about risk, but we don't have a good measure and even worse, investors don't have a good understanding of the risks they are exposed to. Some of it is a disclosure issue (which can be easily remedied) and some is a measurement (which we are working on)."

Communications: "Something a client once told me, 'I can tolerate bad news; I can't tolerate surprising bad news.' Get in front of of problems, not behind them and treat your clients like adults and speak up about everything, not merely the good news."

Curious as always, yesterday afternoon I had a chance to meander around the giant global real estate expo they call MIPIM held every year around this time and, as sometimes happens, I came upon a couple of stands (aka booths) that really grabbed my attention:

First, nef, a Turkish developer. Very innovative. You should watch their video. Apartments, offices, dormitories are designed with the same underlying theme: Why pay for space until you need to use it? So, you have one of their 1+1 apartments (one bedroom/one bath). They're small and let's say you want to have some friends to watch a movie. You rent the "Movie Room" for the length of the movie. Now your band needs a place to rehearse or your kid needs a place to practice the piano, drums, etc. You rent the "Music Room." Get the picture. I love it.

Second, Agencja Mienia Wojskowego, a Polish government agency, which is selling military installations (and other stuff). I saw some very cool properties including a great former military barracks site on a river. The price for that one was $10MM but during the MIPIM show I could have had it for $5MM. Amongst their catalogue there's also a peninsula which might be a compromise location for the Isle of Steve but that's a story for another day.


Congratulations to my friend, Lee Menifee, who recently joined American Realty Advisors as Managing Director, Research & Strategy.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Presentation Coaching/Davy Jones
Tuesday, March 06 2012 | 10:33 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Tip: Many years ago, the head of events for a law firm taught me the following: Put your name badge on your right lapel (as in right when you have your jacket on). Why? When people shake hands it's with their right hand. When you extend your right hand your eyes naturally can see the right lapel easier than the left lapel. As for women, I believe it depends on the outfit they're wearing but also good to think about badge on right.


Presentation Coaching: There is a dire need in the industry to improve both people's presentations and presentation skills. Abuse of PowerPoint must be curtailed! It's the obligation of any company that has any of its' people speak publicly, to make sure that those people, have good presentation/public speaking skills. They are representing your company. They could be the first exposure that someone in the audience has to your firm. Those people in that audience could be potential clients/customers of your firm. First impressions are powerful. What first impression do you want people to take away from seeing/listening to someone from your company present or be on a panel?

I continue to learn: When things are going a certain way, don't fight them, don't try to steer them in a way you think they should be going. The energy of the universe is mysterious. There are reasons that things happen (and don't happen). I've been vividly reminded of this phenomenon recently regarding my career. Funny, most times, friends have a more objective view of you than you have of yourself. But, if there's one things I've learned and continue to remember is to listen to people who care about me and I'm very fortunate to have a number of people in my life who do care about me and are open with their thoughts. That is what helped me decide to launch Solutions by Steve Felix.

Davy Jones of The Monkees died the other day. When I was younger, 66, looked really old. Now it looks pretty young. Funny how perspective changes how we see things. Isn't it. And, now that we have the perspective and can look back at that time of The Monkees it was more than a period of innocence, it may represent the end of the innocence given what had begun happening in the U.S. and in Southeast Asia. We were all about to lose our virginity in more than one way. The original band I played in called The Better Half (after a one panel newspaper cartoon). In addition to playing some original songs we did some very interesting covers which included, I believe, one Monkees song. It also included "I'm Not Your Steppin' Stone" by Paul Revere & The Raiders, "When Blue Turns To Grey" (Jagger/Richards), "96 Tears" (? & The Mysterians). We rehearsed in someone's basement (some things never change although basements evolved into garages) and played the local community center dances on Friday nights. They were jammed with kids. We wanted to be rock stars and one of the members of that band, a very talented musician named Larry Ripley went on to find a little piece of fame touring with one of those 'Bubble Gum' bands called "The 1910 Fruitgum Company." That band, which I just discovered has a website, and still tours (although Larry was only with them for a couple of tours and it not in this version of the band). It was a safe time, a happy time. But soon the world turned dark. Davy Jones lived the dream. Rock bands are fragile entities. Egos get in the way. Disagreements lead to people walking out (many or most times to their own detriment) due to 'artistic differences.' But mostly it's immaturity. The Monkees were a fun part of growing up, just like the Soupy Sales Show and others. Other generations had their own experiences that contributed to them growing up but when some of the things that represent your youth start disappearing it's a rude wake-up call. Cherish every day. "Don't put off until tomorrow what you can do today", etc, etc, etc. When you're young you don't think of time running out. Davy Jones died suddenly. Sometimes there is no warning and today is ours for the taking
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James Wallace, Finance Editor, COSTAR

Deutsche Pfandbriefbank to lend €6.3bn in 2012
Thursday, March 01 2012 | 10:19 AM
James Wallace
Finance Editor, COSTAR

Deutsche Pfandbirefbank (PBB) has set out ambitions to lend more than €6bn against European real estate this year, despite admitting to a “slower start to new business in 2012” in its preliminary annual results.

PBB said its lending ambitions are broadly similar to last year’s €6.3bn across Europe, including a notable pick-up in UK property lending where €1bn, or £842m, worth of deals were closed.

The caveat, however, is on the assumption that funding markets normalise and there are no further market distortions.

PBB said: “Assuming that the funding markets normalise, pbb Deutsche Pfandbriefbank plans new business volume for 2012 (including loan extensions) up to the volumes originated in the previous year. Given the state of the capital markets environment, however, the bank expects a slower start to new business in 2012.”

While, PBB did not break down its geographic ambitions, CoStar News understands that last year’s 16% UK property weighting in new lending and refinancing will not be matched again this year.

Across Europe, PBB more than doubled its lending last year, closing 88 deals worth a total of €6.3bn, which included €2bn in the fourth quarter, compared with €3.1bn over 65 deals in 2010.

The net effect of loans matured, refinanced and new business has decreased PBB’s European real estate loan book by €1.3bn to €26.5bn by the end of last year. But the UK overtook France as the bank’s second-largest country weighting, with the net UK real estate loan book rising by €500m to €3bn.

The cornerstone German loan book fell by €900m to €13.1bn, while France stayed level at €2.6bn

Last year’s overall European lending tally was weighted towards new lending, at €3.5bn, with a focus on acquisition finance for existing clients, while PBB provided €2.8bn in loan refinancings. The average loan maturity across last year’s loan book rose to 4.2 years, at 65% LTV, while margins crept up by five basis points to 205 bps over Euribor.

PBB has delivered six consecutive quarters of net profit, including a preliminary €25m pre-tax profit estimate for the fourth quarter of last year taking the full year to €188m, a significant turnaround on the €135m pre-tax loss in 2010.

However, the German real estate lender has forecast lower profits this year – at between €100m and €140m.

On a pro-forma basis, the bank had a core tier 1 ratio of 14.2% at the end of last year, significantly ahead of the European Banking Authority’s revised 9% required ratio.

Manuela Better, CEO of Deutsche Pfandbriefbank, said: “Following the group’s realignment, we have now brought pbb Deutsche Pfandbriefbank back to the credit and capital markets. The bank is profitable, and is playing an important role in financing the real estate sector as well as public infrastructure in Germany and Europe. We have thus taken the next important step towards becoming an efficient specialist bank that is ready for re-privatisation. We want to continue on this path in 2012.”

Stabilising real estate fundamentals across Europe enabled PBB to release €12m in provisions for losses on loans, compared with additions of €443m in 2010.

PBB’s non-performing real estate loan portfolio has fallen from €8.4bn at the end of September 2010 to €1.3bn over 93 loans by the end of last year.
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James Wallace, Finance Editor, COSTAR

RBS’ £25bn 2012 UK property refi challenge
Thursday, February 23 2012 | 09:19 AM
James Wallace
Finance Editor, COSTAR

Royal Bank of Scotland has £25.6bn worth of UK commercial property loans which have matured or are due to mature this year across its combined core and non-core loan books, according to its annual results published this morning.

The aggregate global 12-month refinance challenge of RBS’ matured and maturing real estate loans is £34.19bn, reflecting 46.69% of the bank’s entire exposure.

The state-backed bank’s aggregate UK, including Northern Ireland, refinancing challenge is comprised of: £11.29bn in the core book, including £8.27bn in RBS’s UK Corporate division, and £3.03bn in its Ulster Bank subsidiary; and £14.31bn in the non-core book, comprised of £3.22bn in the UK Corporate division and £11.09bn in Ulster Bank.

The £25.6bn UK total, which includes a legacy build-up of defaulted property loans at maturity through non-repayment, reflects 34.2% of its total £74.8bn global real estate loan book at the end of 2011, which itself has fallen by 14% over the year.

The likely workout of these matured and maturing loans will be through a combination of strategies: matured and maturing loans in the core book will be worked out with borrowers with loans extensions agreed; matured and maturing loans in the non-core book will require the borrower to produce a business plan to RBS which, if accepted, could result in a loan extension, and if not could result in enforcement.

The proportion of legacy property loan matured in previous years which is combined in the £25.6bn UK and £34.19bn global total is not seperated in RBS’ results this morning.

RBS said in its results this morning: “The commercial real estate market is expected to remain challenging in key markets and new business will be accommodated from run-off of existing core exposure. As liquidity in the market remains tight, the group is focusing on re-financings and supporting its existing client base.”

The headline figure of real estate loans which are passed expiry, or up for renewal this year, is a reminder of the scale of the deleveraging work RBS still has to do.

But much was done last year.

RBS reduced its non-core global commercial real estate in the fourth quarter by £3.8bn, and by £11.1bn over the entire 2011, to £31.5bn, comprised of a combination of loan run-offs, write-downs, disposals and restructuring, and currency movements, offset by an uptick in increased drawdowns and extensions.

The state-backed bank’s aggregate core and non-core commercial real estate lending portfolio has fallen by 14% over 2011 to £74.8bn. This is comprised of:

-UK (excluding Northern Ireland): £28.65bn and £6.35bn in investment commercial and property, respectively, plus £1.19bn and £6.65bn in development commercial and property, respectively, totalling £42.72bn.
-Ireland (including Northern Ireland): £5.1bn and £1.1bn investment commercial and residential property, respectively, plus £2.59bn and £6.32bn in development commercial and property, respectively, totalling £15.19bn.
-Western Europe: £7.65bn and £1.05bn in investment commercial and residential, respectively, plus £9m and £52m in development commercial and property, respectively, totalling £8.76bn.
-US: £5.55bn and £1.28bn in investment commercial and residential, respectively, plus £69m and £46m in development commercial and property, respectively, totalling £6.94bn.
-Rest of the World: £785m and £35m, in investment commercial and residential, respectively, plus £141m and £284m in development commercial and property, respectively, totalling £1.25bn.
The above break-down amounts to an aggregate £74.85bn global real estate loan book which, by geography, splits: £42.72bn (57.07%) in the UK; £15.19bn (20.29%) in Ireland, including Northern Ireland; £8.76bn (11.70%) in Western Europe; £6.94bn (9.27%) in the US; and £1.25bn (1.66%) in the Rest of the World.

Of the total, the core real estate book is £40.56bn, down from £42.26bn at the end of 2010, and the non-core real estate book is £34.28bn, down from £47.65bn at the end of 2010.

RBS said in its annual results this morning: “In line with the group’s strategy, exposure to commercial real estate was reduced during 2011, affecting mainly the UK and Western Europe given that these regions account for the majority of the portfolio. Overall this portfolio decreased circa 25% in the two years to 31 December 2011. Most of the decrease is in non-core due to run-off and asset sales.

“With the exception of exposure in Spain and in Ireland, the group has minimal commercial real estate exposure to other eurozone periphery countries. Exposure in Spain is predominantly in the non-core portfolio and totals £2.3bn. The remainder of the Spanish portfolio has already been subject to material write-off and provision levels have been assessed based on re-appraised values.”

RBS’ total Spanish commercial real estate and construction was £2.85bn at the end of 2011.

The final quarter of last year comprised £1.8bn in loan run-offs, £1.1bn in disposals and restructuring, £600m in loan impairments, £400m in currency movements, set against an increase of £100m in drawdowns and extensions in non-core real estate loans.

These fourth quarter figures take the full 2011 equivalent positions to: £5.6bn in loan run-offs, £2.4bn in disposals and restructuring, £3.4bn in loan impairments, £400m in currency movements, set against an increase of £700m in drawdowns and extensions in non-core real estate loans.

Ulster Bank’s commercial real estate loan book reduced by £875m last year to £17.1bn, of which £12.3bn or 72% is non-core. The geographic split of the total Ulster Bank commercial real estate portfolio is broadly unchanged over the 12 months, with 26% in Northern Ireland, 63% in the Republic of Ireland and 11% in the UK.

Loan impairment charges in Ulster Bank have fallen marginally – from £630m at the end of 2010, to £609m at the end of last year. Ulster Bank Group’s non-performing loans increased by £3.5bn across core and non-core, driven by a 39% increase to £600m in residential mortgages and a 25% increase to £2.4bn in commercial real estate, reflecting deteriorating conditions in Ireland’s property market.

RBS said this morning in its results for the Ulster book: “The outlook remains challenging, with limited liquidity in the marketplace to support sales or refinancing. The decrease in asset valuations has placed pressure on the portfolio.”

RBS is in the process of implementing changes to the risk-weighted asset (RWA) requirements for commercial real estate portfolios, which is projected to increase RWA requirements by circa £20bn by the end of 2013, of which circa £10bn will apply in 2012. This will be achieved through the continued run-down and disposal of non-core assets and deleveraging in Global Banking Markets (GBM), the bank added.

In 2011, RBS recorded an operating profit of £1.89bn, while its core operating profit was £6.1bn and the core bank delivered a 10.5% return on equity.

RBS total assets have fell by 39% in the last three years – from a peak of £1.6trn to £977bn, with non-core having fallen by 64%, from £258bn at the start of 2009 to £94bn at the end of last year.
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James Wallace, Finance Editor, COSTAR

Aareal Bank scales back property lending ambitions
Wednesday, February 22 2012 | 10:34 AM
James Wallace
Finance Editor, COSTAR

Aareal Bank Group is targeting a global real estate lending haul of between €4.5bn and €5.5bn as the bank looks to scale back commitments from last year’s €8bn tally, reflecting what it calls a “continued volatile and uncertain environment”.

The German pfandbrief-funded bank lent €1.86bn globally in the final quarter of last year, down from the previous quarter’s €2.99bn, with the €8.0bn annual figure – comprised of €3bn in refinancing and €5bn in new business – up from €6.67bn in 2010.

Increasingly Aareal’s real estate lending is new business over refinancing, with the proportion of renewals down from 60% in 2010 to 38% last year. Over 2011, new business rose by 89% year on year.

This year, Aareal has warned that a combination of a deteriorating economic outlook, the uncertain cumulative effects of differing banking reforms on the real economy as well as a broader uncertain political and regulatory framework has prompted its increased cautious outlook.

Aareal added that there was increased pressure on real estate values, along with volatility and risks in the financial system which mean “further market distortions cannot be ruled out”.

A statement continued: “Aareal Bank will counter these uncertainties, amongst other things, by pursuing a very cautious liquidity and investment strategy. This strategy will lead to a burden on net interest income that will more than offset the positive effect of higher margins on new business originated last year. On these assumptions, Aareal Bank expects a considerable decline in net interest income over the year.”

Dr Wolf Schumacher, chief executive officer at Aareal Bank, said: “We are cautious business people who have to take into account the deterioration of the economic framework during the current year. Nevertheless, our great flexibility allows us to react at all times to changes in the environment and to take advantages of available opportunities.”

Aareal continues to forecast allowance for credit losses in a range of €110m to €140m, unchanged from last year.

Of the European markets which Aareal Bank is exposed to, the lender believes the countries where property values will come under greatest pressure this year are: Belgium, Czech Republic, France, Italy, Netherlands and Spain.

Last year, new interest income rose by 8.8% over 2011 to €50m, taking Aareal’s operating profit to €165m – a 52.8% rise from 2010’s €108m.

Last year’s lending levels have increased Aareal’s overall global real estate loan book by €1.1bn to €24.2bn, of which €20.09bn, or 83%, is weighted towards Europe. The balance of the real estate book is €3.39bn, or 14%, US exposure and €72.6m, or 2%, Asian. Inclive of the aggregate global real estate loan book is €200m in real estate loans which Aareal Bank manages on behalf of Deutsche Pfandbriefbank.

The LTV profile of the loan book comprised 87% of loans at an ratio of under 60%, while a further 10 percentage point of the €24.2bn global loan book between 60% and 80% LTV, with the balance, just 3%, above 80%.

The non-performing element of the loan book comprises €184m of Italian loans, at an average LTV of 59.5%, and €65m of Spanish loans at 82.1% LTV, on average.

Among the bank’s new lending last year three high profile deals: a £350m partial refinance of British Land and Schroders’ joint venture £1.6bn Hercules Unit Trust (HUT), to prepay part of the maturing securitised debt. CoStar News understands that this has been in part retained and in part syndicated.

Aareal Bank also provided €130m to finance a 17-strong German logistics portfolio for ProLogis €3bn European Properties Fund II and taking on Morgan Stanley’s a €195m senior positions in a wider €210m financing package, secured by Beacon Capital Partners and Northwood Investors’ joint venture’s refinancing of the 14-storey Défense Plaza office building in Paris.
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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

Cloudy Skies Ahead?
Wednesday, February 22 2012 | 09:42 AM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

Geva Perry, author of Thinking Out Cloud. * assertion, based on research, is that generally speaking, cloud computing is happening from the bottom up. That really makes sense to me. The Cloud is answering the need of developers who may not have access to or don’t have the budgets for resources. Mr. Perry states, “Amazon understood this, and built its service so it was optimized for developers.” The same was true with SalesForce.com. The early adopters were those frustrated with their own company’s CRM offerings and sought to satisfy their need from a Cloud service.

Further, this reframes and reinforces the capital expense model and converts it to an operating expense model. That is exactly the foundation on which the Cloud is based, especially the public cloud. However, despite the fact that there is a measurably significant financial difference between the costs of public- versus private-cloud services (private-cloud being much more expensive), adoption is at a brisk pace and getting stronger.

Taking an historical look for a moment at projections of a couple of years ago from Enterprise And SMB Software Survey, North America and Europe 4th Quarter 2009 and Forrsights Software Survey 4th Quarter 2010, between 2009 and 2010 SaaS adoption increased by 20%, IaaS adoption increased by 75% and PaaS adoption increased by 80%. Momentum is growing with projections for the respective sectors (SaaS, IaaS and PaaS) between 2011 and 2012 increasing by 46%, 52% and 71%. CDW recently published its cloud Computing Tracking Poll Report** showing 37% adoption in enterprises followed by higher education (34%), healthcare (30%), federal government (29%), state and local government (23%) and SMBs (21%).**

Jumping forward to the present, this morning there appeared an article on the CCIM Institute site** addressing the fact that corporations swamped with excess office space are starting to dispose of it. One of the reasons for this is changes in the ways that employees are interacting with each other. Rather than continue using office space in traditional ways, more companies are using an open layout to create more collaboration amongst workers. Furthermore, Teknion, a furniture manufacturer, published its Workplace of the Future study showing that 46% of companies surveyed currently employ the Cloud and 90% plan to increase their investment in Cloud and other productivity-enhancing technologies by 2015. According to Johnson Controls’ recent Collaboration 2020, predicts that during the coming decade employees expect to spend less time at their desks and more time working in collaborative environments and communicating via video. As long as they are connected, most employees can work anywhere. However, being able to work anywhere also entails that in addition to bandwidth, employees must have access to their files and data, most likely via Cloud-computing.

So should CIOs feel threatened by this? I guess that really depends on the specific goals of the enterprise and its CIO. However, it seems to me that if positioned properly, utilizing the Cloud could provide an incredible advantage for the IT organization. Rather than having to focus on budgets constrained by and at the effect of the continual refresh cycle, CIOs can focus on solving real business issues and driving the growth and expansion of the enterprise. Conjecturing for a moment that there is probably no organization that hasn’t been touched by the recession of 2008, companies have been forced to do more with less. This is especially true with regard relationship between labor and IT infrastructure. Anecdotally, in addition to using less office space, it is apparent that enterprises have chosen to automate, by increasing the footprint of the IT landscape rather than hire warm bodies to do the same work. In most cases, that investment has been manifested in the purchase of more IT hardware (servers, storage, network, etc.) and infrastructure. Not that this is a bad thing, since the slightest bit of consumerism is driving the economy forward even at its current sloth-like pace.

So is adoption still being retarded because of security concerns? Over the past 2 years, the perception of security being an issue has been assuaged in the minds of most, which, I believe, is fueling the increased adoption rates. Certain business verticals are turning to the Cloud to achieve business goals and objectives. A year ago, while attending the Southern California Biomedical Conference, I listened to Steve Phillpot of Amylin Pharmaceuticals describe his company’s migration of its IT environment to the Cloud. Shortly thereafter, I heard Ed Ryan of Allergan discuss the same kind of migration that his company undertook. Both of these are success stories, but not the only ones. Based on the project-oriented nature of its business model, entertainment production companies are starting to utilize the Cloud as well.

Another contributing factor of Cloud proliferation is the increase in mobile applications and storage. Smart phone apps and storage services are supplementing the growth of the Cloud. Tangentially, just last week, Congress approved the auction of additional wireless frequencies. The motivation was to create a new revenue stream to ease budgetary concerns, but regardless of the reason, the result is a positive step in creating more needed bandwidth to support Cloud adoption.

Some worry that the growth of Cloud will have a negative impact on the continued need for more data center space. Fearing that as Cloud adoption grows, and servers become more efficient and virtualized, less data center space will be required. The best analogy that I can offer to counter this position reminds me of the one of the most congested thoroughfares in the US, the 405/San Diego Freeway (located in Southern California). Constructed in the late-1950s, and continually expanded since that time, demand for more lanes has always outpaced the supply. The more lanes that are added, the more cars seem to fill the road. The adoption of mass transit (if you can call it that in L.A.) doesn’t seem to have any effect to reduce the flow. So, applying this to the data center model, despite the fact that companies like SeaMicro (www.seamicro.com) and Calxeda (www.calxeda.com) are producing servers that use half or a quarter of the power and create much less heat than conventionally designed servers, that virtualization is becoming the standard and Cloud service offerings are gaining gigantic momentum, it will be a long time before demand subsides. CIOs fearful of how Cloud-computing will impact their worlds should be mindful of the fact that today and in the future IT will continue to drive the success of the business that it serves.

Footnotes
* (A summary of Mr. Perry’s keynote can be found at http://www.datacenterknowledge.com/archives/2012/02/16/the-bottom-up-nature-of-cloud-adoption/?utm-source=feedburner&utm-medium=feed&utm-campaign=Feed%3A+DataCenterKnowledge+%28Data+Center+Knowledge%29)
**(http://www.ccim.com/cire-magazine/articles/139111/2012/01/resizing-or-right-sizing)
***(http://www.cdw.com/shop/tools/surveys/survey.asp?SurveyKey=D808B2971F634B5A96E452FE7E6FA165)
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Cuba, Close the loop...please!, Networking, The Flying Wallendas
Friday, February 17 2012 | 10:49 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

An article this week about a new law that was passed in Cuba last November reminded me that are some things that we take for granted in the 'developed world.' One being the ability to buy and sell a house or apartment that you own. While this article described the 'hot' real estate market in Cuba, it's not what one would necessarily imagine. "While the new market dynamics may help some, many worry they will do little to solve the housing problems faced by many Cubans, whose wallets would not stretch even to buy a $3,000 one-bedroom apartment." "....an average of three buildings collapse in Havana each day, victims of neglect, overcrowding and improvised construction. Well over 100,000 people are waiting to move to government hostels." A government estimate suggests that it would cost about $3.6 billion to build the 600,000 houses Cuba needs. Independent estimates are more than double that. The creation of construction and housing cooperatives is one step being discussed: such arrangements would reduce building costs and allow groups of individuals to build, say, a small apartment block."

Of all the markets in the world, I have not heard anyone in the institutional real estate world yet utter the word "Cuba" except for those who have gone there to party. And, if you look at the yellow or red flags that might be raised when you are considering where in the world to invest, government instability is definitely one of them. So, while entering 'emerging markets' is not for the faint of heart, if I were a betting man, I would bet that somewhere, behind closed doors in a fancy high-rise office building in some city in the world, there are people, right now, talking about the real estate opportunities in Cuba. Who in our industry will be the first to dip their toe on that long-troubled island in the beautiful Caribbean?

I'm wondering if any of you is also experiencing this phenomenon: you have a conversation(s) with someone, on a rather serious subject. Or you may have several interactions, in person and on the phone. And then you never hear from the other person again, like they drop off the face of the earth but you know they didn't. As as student of people I can't for the life of me comprehend what those people are thinking (or perhaps they're not thinking). Does this type of behavior leave me with a feeling that they are really professionals? People of character? Someone I'd want to do business with? I don't think so. I believe that we all are just looking for the same thing from someone in these situations: close the loop. If it's not something that's going to move forward have the common courtesy to tell the other person. With all the talk about 'lessons learned' over the past four or five years and the word 'transparency and open, timely communications' flowing off every powerpoint slide in every presentation I've seen, as well as out of people's mouths, don't people realize, after all that's gone on, that you actually have to walk the walk and not just talk the talk? Our industry is a very small one, even on a global scale. Our reputation is everything. I'd suggest that some people look at themselves in the mirror tomorrow morning and do a self-assessment about certain things, before it catches up with them.

Someone asked me recently about how you go about networking when you're at some type of event and you don't know too many or any people? How do you approach those people? Are there any tactics or standard lines that have proven successful? It got me thinking about the times that I've been in that situation (yes, it still happens). I don't think there are any secret tactics or magical words. No one really likes approaching someone or a group that they don't know and that doesn't know them. This is especially true if body language and/or facial expressions suggest they don't want to be approached (or include you in their group).


However, I have found it easier to approach a group than certain individuals, those who make an attempt to look at your badge and if you don't resemble somebody they 'have' to meet", they'll just walk away or walk past you without even cracking a smile (and remember, these folks are at events where people are supposed to be interested in networking!). Now, there are 'Networking Rules" that I've accumulated and make my best effort to go by. But getting back to the uncomfortableness of 'cold networking:' It's all a matter of one's threshold for 'pain' in those situations. However, much as I am 'inclusive', there are sometimes when someone who has joined my group ends up being really obnoxious, or someone who is trying to hard-sell someone I'm talking with or is a glommer (der. spammer: Someone who finds a person who knows a lot of people and hangs with them or follows them around expecting to be introduced to all the people that they know. And, while, thankfully, that hasn't happened too many times, I've generally found that a smile and a "howdy-do" works in more cases than not with people you don't know. Probably worth a try.

Achieve Your Dream: Nik Wallenda, a seventh-generation circus performer, has been granted permission to cross Niagara Falls on a tightrope. Mr. Wallenda, 33, has called his ultimate professional dream. “I had a few tears, but it hasn’t sunk in,” he added. “We were told by not one, not two, but probably 50 people: ‘This is impossible, not going to happen.’ This is to prove that if you pursue your dream and never give up, you can achieve your dream.” (Note: The Flying Wallendas is the name of a circus act and daredevil stunt performers, most known for performing highwire acts without a safety net. Sadly, they may have had their most publicity as a result of tragedy. Karl Wallenda developed some of the most amazing acts like the seven-person chair pyramid. They continued performing those acts until 1962. That year, the front man on the wire faltered and the pyramid collapsed. Three men fell to the ground, killing two and leaving one paralyzed. But, for performers, the show must go on. If you want to see something that will give you goosebumps (in a happy way) watch this video.

Solutions by Steve Felix Update: Thanks to all of you who have sent me congratulations and good wishes on the launch of my new consultancy. It's off to a good start. Having operated consulting businesses before I know that the key is to get two or three 'retainer' clients to give the venture the financial foundation it needs. I have a couple of prospects in that area but, while those evolve, I am doing work for several clients. Two involve facilitating brainstorming sessions on how to raise capital in this market, how to market to investors and consultants where there is no prior existing relationship, review, discussion and reworking of presentation materials and ways to educate rather than sell. For the other client I am doing some research that will help them be more efficient in the growing of their investment management business. While my official press release is still a few weeks off, it's been heartening at the reaction I've received already: almost everyone I speak with has something they need help with and, either me or a member of my Consultants Collaborative, may be able to provide just the kind of expertise that the doctor ordered. Stay tuned!

Congratulations to my friend, Eyal Bilgrai, who is joining the consulting firm Wurts & Associates.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Aisle of Solutions, RREEF, World Trade Center
Friday, February 10 2012 | 10:06 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Walking the aisles of one of the large chain "pharmacy" stores this week and seeing the signs above the aisles got me thinking: wouldn't it be great if there was a place like that where we could find cures for our real estate ailments? Need a tenant to fill a long vacant space: Aisle 1. Trying to find some gap financing to close a deal: Aisle 7. Feeling under the weather because your key first close investor just told you they were going to wait a little longer: Aisle 2. You get where I'm going, right? Maybe some of you reading this are saying, "Well, there are firms that offer solutions to problems like those." And you are right, they're called "Service Providers." And while solving one of these problems doesn't happen as quickly or reliably as, say, taking aspirin for a headache or rubbing Ben-Gay on a sore shoulder or gulping down Vicks Forumula 44 to stop your cough, there are people out there who have proven to be good at delivering "a cure for what ails you." But, try as we might to find simple, quick and painless solutions, sadly, it's rare in our industry that there is one.

This week, roaming the streets of New York and speaking to a number of people from all different parts of the commercial and institutional real estate world one thing is clearer than ever before: Things are not clear by a long shot when it comes to us knowing what we'll find around the next curve in the road. We have a lot more questions about our careers, our businesses and our personal lives. There is a lot of stress out there and we can hope that things will just get better. But, remember how the hopes fans in the famous baseball poem, "Casey at the Bat." (Ernest Lawrence Thayer, 1888) were dashed in the end:

Oh, somewhere in this favored land, the sun is shining bright;
The band is playing somewhere, and somewhere hearts are light,
And somewhere men are laughing, and somewhere children shout;
But there is no joy in Mudville-the Mighty Casey has struck out.

Even if you don't know anything about baseball, the phrase 'struck out' is easy to understand. We're all trying to either 'get to first base' or 'hit singles and doubles' or 'make the big play' but success is not guaranteed, not by a long shot, no matter how hard we try and no matter now much success we've had in the past. Some firms have or have had their own "Mighty Casey" who were relied upon to make things happen, to bring home the bacon. But those folks are not magicians. So, when we're faced with situations where we've run out of brilliant ideas or we keep talking and talking and talking and coming back to the same old thing, it's sometimes helpful to bring in an objective, knowledgeable third-party to help you get 'unstuck.' In line with my policy of full disclosure, this last sentence is somewhat self-serving as I have been working with clients in this capacity for years, with good results and excellent feedback. You know why it's helpful: people that work together, just like couples in a committed relationship, sometimes have difficulty being open about things with each other and the conversation slips into a finger-pointing argument which does no one any good. When an intermediary joins the party, they bring one really important thing to the table: they are only interested in helping; they have no axe to grind, no hidden motive, no issues, no politics to play....just helping their clients find a solution to what ails them or at least bring to the surface the root of a problem. Maybe it's something to think about next time you're in a similar predicament.

One more thought on this general topic. There's someone who's website bills her as "America's #1 Female Talk Radio Host" who, after listening to one of her callers tell a story of relationship woe, told that woman, "Whatever you're doing is just not working!" None of us is happy when we admit that what we've been doing is not working but it's a very important step in finding something that will work. We need to remind ourselves from time to time that doing things the way we used to do them won't work in a world that is changing around us. More and more people are talking with me, seeking a different way to do something, particularly in the area of raising capital for real estate funds, joint ventures, etc. The appetite of the many investors has changed and you need to change your menu to give them what they want. Change is not easy but change is good and those that recognize the need for change are the ones who will be the winners. If things aren't happening for you, slow down, take a break, get away from things for a day and think. Or find a confident to brainstorm with. As Einstein said, "Insanity is doing the same thing over and over again and expecting different results."

There's lots of talk on the street about the future of RREEF. From what I can tell, the only people who really know what's going on are those people directly involved in the discussions. I'm not a rumor guy; I don't start them and I don't pass them along but society is built on them. The media is grasping at straws, hoping that something that someone told someone else has an ounce of truth in it. But, until it's a done deal (or until some 'Deep Throat" source leaks the news), we'll just have to sit and wait but, like with lots of big corporate stuff, we aren't alone as employees of companies involved in M&A deals are kept in the dark and learn about things at the same time as the rest of the world. For the sake of my friends at RREEF I hope something definitive happens soon so they can get on with business and with their lives.

You know how sometimes you'll walk by a place hundreds of times and never go it? Then one day, for some reason, you do and you say, wow, this place is great, why didn't I go in before? Well that happened to me this week when a good friend of mine invited me to join him for breakfast at Casa Lever in New York (390 Park Avenue [entrance is on 53rd St.). It's a great room and the food is really good. (Note: It gets busy for breakfast starting at 7:30 and I'm told that lunch is crazy so make a reservation).

Early in the week I was driving back to Manhattan on the New Jersey Turnpike. It was a beautifully clear night as I got to the part of the turnpike approaching the Holland Tunnel. The World Trade Center jumps up like a proud child saying "Look, here I am." It's an wonderful sight to see; construction lights blazing from bottom to top; it's the most massive and dramatic structure in the New York skyline. Yes, it's taken way too long for this building to be built and that's a sad commentary on politics. But it's now at 90 floors and it is a sight to behold.

Phrase of the week: "Brand Guardian." A strong brand identity is more crucial today than ever before.

Always the last to know: Today I became the 417,795,817th person to watch this cute video.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Restricting Retail?
Monday, February 06 2012 | 08:55 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

A proposal is being considered in New York that will limit the ground-floor width of all new stores to 40 feet (and new banks to 25 feet) on two major streets on the Yupper West Side, Amsterdam and Columbus Avenues. "Across New York City, the proliferation of chain stores, banks, pharmacies in the past decade or so has robbed many neighborhoods of the quirky one-of-a-kind shops that give those places their distinct personalities and where customers can form a relationship with their shopkeepers." In Napa, California, there is a group called, "Napa Local" that was formed to protest against a Starbucks leasing space at the corner of First and Main (really!). They want the city to adopt an ordinance controlling "Formula Businesses," i.e. chain stores to "preserve the unique quality that is downtown Napa." Hmmm, let's see, in both cases, as a landlord, you would be restricted from who you can rent to. While tenant mix and use-clause restrictions have been used in the shopping mall industry (where one landlord controls the whole shebang), trying to stop individual landlords, who own a building, from renting their space is not a good direction to be going in. Can you imagine the lawsuits that would be filed against municipalities if they were successful in enacting this type of legislation? Also, to me it's pretty simple why the independent retailers have disappeared from the landscape: customers don't support them. People talk about having quaint shops and no chains but if you can't pay the rent, how are those specialty stores going to stay in business. It'll be interesting to see what evolves. By the way: the 'unique quality' of downtown Napa is vacant. While there have been some wonderful additions in the past years, including a new hotel and several 'celebrity chef' restaurants, if you drive down First or Second or Third Street you'll notice that there are so many vacant or 'fake' storefronts you'd scratch your head...maybe. In Napa Valley, the town that has the 'one of a kind shops' is St. Helena and those merchants have chosen to open stores there because people who spend money go there. I spent many years in the shopping center, shopping mall and outlet center industry. At one point, I developed the "Everything's Big/Everything's Small" theory of retailing. I won't bore you with it now but when reading about these cities (and how many others may be talking about it) it's like you're trying to control things a little too much and, if you look back in history, there are serious prices to be paid when that starts happening...it may be only the beginning.



I've always been a proponent of value of brainstorming. I found this comment from a piece I read this week particularly
enlightening. Early brainstorming advocates strongly recommended that the "Do Not Criticize" rule made those sessions more effective. But recent studies suggest differently: "....debate and criticism do not inhibit ideas but, rather, stimulate
them....imagination can thrive on conflict....dissent stimulates new ideas because it encourages us to engage more fully with the work of others and to reassess our viewpoints....maybe debate is going to be less pleasant, but it will always be more productive." Pretty interesting, huh? It comes down to the idea that we can't get bent out of shape when someone comments on an idea we have but rather take it as contributing to the group goal of coming up with the very best idea or solution. Sometimes easier said than done.

Wouldn't it be great if our memories only remembered happy things? But that's not the way it works. Yesterday, the weather was really nice where I live, probably about 65 degrees in the afternoon. I was driving somewhere and out of the corner of my eye saw a dad and his son throwing a baseball back and forth. What jumped into my mind was a day, a long, long time ago, when I was throwing a baseball back and forth with my older son. It was obviously a moment which I have never truly forgotten. It had been sitting in my sub-conscious all these years. Funny how the mind works isn't it?

More kids: Congratulations to my nephew and his wife on the birth of their little girl. Our family now has five cousins born within less than three years of each other! Are they going to have fun or what?

With gratitude: Thanks to all of you who sent me notes (or talked with me in person) about last week's story of my friend in Geneva. It meant a lot to me.

Final item: Angelo Dundee died on Wednesday (90). If you aren't a fan of boxing (or in my case grew up in a boxing family) you probably don't know his name. For 60 years he was a trainer and manager of professional boxers, the two most well known are Cassius Clay (Muhammad Ali) and Sugar Ray Leonard. My uncle, Barney Felix, the senior boxing ref in New York State at the time, was in the ring when Clay took the heavyweight championship from Sonny Liston in Miami Beach in 1964. Barney told us one story about that bout that never made it into the papers. One day, when we're having a drink together make sure to ask me about it.....


On the road next week...

Feb. 6-10: New York


Go Giants!
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

He not busy being born is busy dying
Friday, January 27 2012 | 11:04 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

"He not busy being born is busy dying." Bob Dylan from It's Alright, Ma (I'm Only Bleeding).


In the spring of 1992, when my mother was dying of brain cancer, I watched as she used her brain to try to fool the doctors. They would ask her questions, "Good morning. Can you tell me your name?" (Her name was Lorna). And some days she got that right. But as she deteriorated, often she couldn't answer that one, or what day it was or what month or what year. Yet my mother was a very sharp cookie. When asked questions she rambled around, telling the doctors about a variety of things, most of it not making any sense depending on which electrical impulses happened to make their way through the frayed wires of the plugs in her brain that used to fit in the right sockets. It was heart-breaking.


While in London this week I took a planned side trip to Geneva to visit my old friend Deb. She was my brothers' first girlfriend when we were all in summer camp. We reconnected after many distant years in 2003 at a camp reunion. My wife and Debbie hit it off and a couple of years after that took a "Thelma & Louise" road trip through the Southwest U.S. which they documented with some incredible (and funny) photos.


As a group, we counselled each other (not the summer camp variety but the kind that good friends do for each other). Deb has always been a brilliantly talented writer (and deft Scrabble player) who for the past number of years has been living in Geneva and working for Rolex, creating and editing some of their most prominent and visible marketing materials. Before taking that job, she was free-lancing as a web music journalist and interviewed some very well-known names in rock, blues and jazz. Music has always been a strong bond amongst our camp friends and her appreciation and love of music even led her to taking up blues harmonica which she played with friends in her adopted country of Guatemala (Debbie grew up in Montreal). We've all seen each other through some of life's growing pains and soul-searching times. Deb is a breast cancer survivor which is one reason why her current condition is so sad. She is suffering from Glioblastoma, an inoperable and except in rare circumstances, incurable brain tumor. More than a year ago doctors gave her three months to live. She embarked on a series of experimental chemotherapy and while it hasn't been any fun (the side effects and what-not) she is still with us. But, her brain is messing with her too.


My wife and I call her periodically and on those calls she sounds extremely lucid and her memory seem phenomenal. She sounds up-beat and tells us of the books she is reading, the writing she is doing and other stuff that had us feeling more hopeful. But a few weeks ago, one of her sisters' told us that all Deb was telling us was fantasy. Well, I witnessed that first hand yesterday and today at her bedside. Yesterday, her 59th birthday, she remembered me as soon as I walked in the door. But this morning she didn't know who I was at first and as the time wore on, she knew me and called me by name. She drifted in and out of making sense or talking nonsense. At times, she used a word that she knew was wrong and tried desperately to correct herself. This morning, a doctor and his colleague came in to talk with her about how she wants to live the remainder of her life. The "living will" stuff. And while Deb gave some conflicting answers (I think I would have too if I was her) she did tell the doctors that her best friend was the one who knew her wishes and should be the one to have the legal authority in such circumstances. It was a heavy scene for me to observe.


The weirdest thing was that during the time I spent with her she got two phone calls and was talking as lucidly (or perhaps even more) than you or I. She remembered projects she'd worked on, the names of children and grandchildren. She said some random things which I told her I'd make into a song and send her the demo. The first line (all her) is "You can't take the sunshine with you no matter where you go." We had a great time writing those lyrics together. The brain is an unbelievable thing; how it works and how it fails to work in almost the same moment.


She is in the palliative care unit of a wonderful hospital just outside Geneva. It's for end of life care, usually very short term, but she has fooled them. There are people who have helped her draw her will for the first time and prepare for death. To some of us, death comes sudden and without warning. The rest of us don't want to admit to ourselves that Bob Dylan's lyric is totally true. And who is to say that we will be given the luxury, of sorts, to have the time to wrap things up in a tidy package and say, "There, I've done what I wanted to do and I am at peace." Deb told me that she's heard how some other patients answer the question, "What do you dream of?" One said, "To swim with dolphins." Deb's dream is simply to see another spring. I don't know that she will. Do we know how many springs we will see? Does anybody really know what time it is? Shouldn't we start caring?
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James Wallace, Finance Editor, COSTAR

Tesco closes £450m UK supermarket CMBS
Thursday, January 26 2012 | 01:59 PM
James Wallace
Finance Editor, COSTAR

Tesco, the world’s fourth largest retailer, has sold a 50% stake in an 11-strong portfolio of UK supermarkets financed by a 30-year dated £450m credit-linked CMBS transaction which closed this afternoon.

As part of the deal Tesco has completed one of the largest sale and leasebacks in recent years with an undisclosed, non-traditional property investor.

The bonds, with an expected maturity of 22 and-a-half years, priced today at 275 basis points over the 4.25% 2032 gilt benchmark, with the coupon set at 5.66%.

HSBC, Goldman Sachs, The Royal Bank of Scotland and Lloyds Banking Group were joint arrangers on the deal, with the bonds thought to be oversubscribed.

UK accounts took 96% of the bonds, with the balance overseas. Around 78% of the investors were fund managers, 18.5% insurance companies and 3.5% others.

The sale-and-lease back of the portfolio was sold to Tesco Stores Limited, a 50:50 limited partnership comprised of a subsidiary of the supermarket giant and a third party investor.

The joint venture partners are financing its acquisition of the £440.5m-valued supermarket portfolio by issuing a single-tranche, 30-year amortising loan that will amortise by the end of 2041 from a newly-created special purpose vehicle, Tesco Property Finance 5.

The 11 occupational leases each expire on Christmas Eve 2041, after the October 13 bond maturity date of the same year. The portfolio security will also be credit linked to Tesco PLC which also acts as guarantor to Tesco Stores Limited.

The whole loan LTV is 102.2%, with the estimated £9.5m above portfolio value likely to cover transaction and arrangement costs.

The occupational leases on the underlying portfolio will finance the interest payment to bondholders, with a swap taken out to mitigate the risk that rental income could fall short of fixed interest due over the life of the 30-year securitised loan.

The portfolio is comprised of 11 UK-wide supermarkets which range in value from £13.88m to £71.69m, including stores across London, Blackburn, a 116,793 sq ft Bradford supermarket, a 101,976 sq ft Doncaster Tesco’s as well as stores in Rotherham and Great Yarmouth (see table below) with the largest five assets reflecting 61.1% of the portfolio’s total market value.

The largest single asset is the portfolio’s only supermarket still under construction, at Woolwich (artists’ impression pictured), reflecting 16.3% of the pool by market value, which is scheduled to be completed this November.

The developer, Spenhill Regeneration, a 100%-owned Tesco subsidiary, is working to a fixed price construction contract with performance and completion guaranteed by Tesco PLC. Rental payments for the supermarket will begin in December 2012 and continue thereafter until lease maturity in 2041, regardless of whether the property has completed or opens on schedule.

Around £23.8m of the issue proceeds will be retained and preserved, representing 103% of the expected costs of completing the development of the property at Woolwich including fees to developers and advisers. The development risk is entirely borne by Tesco PLC.

Once completed, the development will comprise a 179,000 sq ft Tesco Extra store, seven retail units, 613 car-parking spaces for the superstore, 259 residential apartments and 78 car spaces.

Securing property substitutions will be allowed subject to, inter alia, equivalent market rent of exchanged collateral, lease term and rental income at least equivalent as well as maintaining a broad similar geographic concentration.

This is Tesco’s fifth credit-linked CMBS, which in aggregate amount to £3.05bn since 2009, with three of the previous deals sold to Tesco’s own pension fund and the fourth sold to USS’ pension fund.

Tesco remains one of the world’s largest and property developers and managers, with global property assets worth £36bn, against a book value of just under £21bn.

From this financial year onwards, Tesco intends to deliver profits of between £250m and £350m per year, broadly achieved through around £1bn in annual supermarket sales which the retail giant argues is sustainable given a circa £2.5bn yearly investment in land and buildings. As a result, Tesco will continue to grow its net asset base, despite the disinvestment strategy.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

2012: The Year of Caution? The Corner Office. Apple's Obsession
Friday, January 20 2012 | 03:03 PM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Resigned is not a particularly positive word. The thesaurus suggests submissive, reconciled, accepting, stoic, long-suffering, prepared to accept. Well, some of these are even less appetizing. But resigned is the word that came to my mind this week about the state of things in the commercial real estate industry (perhaps throughout the business community in general). While we were all waiting for things to revert to normal, the normal that we wanted it to be, it hasn't. It's been a while now and I believe we've all accepted that we may not see a time like the last 'normal' for a long, long time. But what's interesting to me is that there are groups, not long-time real estate investors but rather private equity firms, hedge funds, etc. who have seen the light and see that there is opportunity in that there real estate business. And, they've started building real estate investment groups within their companies. They're hiring top talent and throwing dollars at, hopefully, doing it right. Some, perhaps most, of the money these firms manage is not institutional in nature and yet, some of it is. And, at a time when many investors are staying close to those managers with whom they've had a good relationship with and who have proven trustworthy and putting new money out with them, either in the form of a separate account or a joint-venture or a club deal, there are some investment fiduciaries who have been successful in raising good-sized commingled funds. That's what makes this time in the history of our industry so fascinating to me. We are living through change and it's not a change that has been thrust upon us by an alien force, it's an organic change that develops based on the fact that any company that launches a new product or service either has to fill a need or solve a problem. And if you can bring that to the table, whether you are an investment manager, a manufacturer or a consultant or any kind of service provider, there is business to be done.


A weekly column called "The Corner Office" interviews executives and asks them a few questions. I thought this one was pretty good: "If you could ask someone only two or three questions to decide whether you would hire that person, what would those questions be? (1) What idea is driving you right now? (2) What’s on your mind about any aspect of life that you’re really excited about? (3) Tell me about that."


CBRE published its' The Global View 2012 this week. Here are the bullets from their executive summary:
-Macro-economic and political landscape uncertainty across the world suggests that a cautious outlook in local property markets is likely to persist into 2012. While 2011 is in the past, many of its challenges continue.
-Corporate occupiers in 2012 will continue to exercise caution in their decisions, and demand for space will remain moderate.
-Investors in Europe and the United States will therefore tend to adopt more defensive strategies, focusing on high-quality buildings in prime locations within the most liquid and transparent markets.
-Asia has not decoupled: Occupiers and investors are becoming more cautious in many markets across Asia due to slowing economic growth in China and concerns about the global impact of the economic slowdown in Europe and sluggish growth in the U.S.
-High-quality real estate assets in prime locations should continue to perform well compared to secondary real estate and very competitively with regard to other asset classes. From an investment point of view, secondary property will continue to underperform.
-A lack of new construction in many markets globally will boost the performance of existing prime properties.

In line with my first paragraph, note these words sprinkled about in their executive summary: uncertainty, cautious, caution, defensive strategies, cautious. It appears that we may be resigned to accept that 2012 will be The Year of Caution. But, it sure sounds to me like there is opportunity out there, ready to be mined.

I've only had a few of my friends become published authors. The latest, a long-time friend and the drummer in the first real band I played in, Ken Segall's. His book, Insanely Simple: The Obsession That Drives Apples' Success will be released on April 26th. While not suggesting that you do it, I've pre-ordered it for my Kindle. Ken is a veteran advertising guy on the creative side. He has been behind some of the most recognizable advertising campaigns over the past 30 years including some of Apple's major ads and branding stuff. He's a brilliant guy and pretty funny as well. I am sure this will be a good read and not just for core Apple fanatics.

On the road...

Jan. 23-25: London to attend the INREV Winter UK Seminar 2012 and the Thompson Reuters Global Property Outlook 2012
Jan. 30-Feb. 1: Scottsdale, AZ to attend IREI's VIP Conference
Feb. 6-7: New York
Feb. 8: Baltimore, MD to speak with students in the Accelerated Masters of Science Real Estate Program as Johns Hopkins Carey Business School about careers in commercial real estate.
Feb. 9-10: New York
Feb. 23-24: Chapel Hill, NC to attend the University of North Carolina Keenan-Flagler Real Estate Conference and be a judge at their real estate case competition.
Feb. 25-26: Asheville, NC
Feb. 27-29: Scottsdale, AZ to attend the NCREIF (National Council of Real Estate Investment Fiduciaries) Winter Conference
March 29-30: Philadelphia to be a judge at the Villanova University Real Estate Case Challenge
April 22-25: Chicago to attend the CRE Mid-Year Meetings
April 25-27: Vienna, Austria to attend the INREV Annual Meeting
May 17-20: North Palm Beach, FL to attend the Hoyt Fellows/Weimer School Annual Meeting
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James Wallace, Finance Editor, COSTAR

Brookfield to build 5m sq ft London office portfolio
Tuesday, January 17 2012 | 10:58 AM
James Wallace
Finance Editor, COSTAR

Brookfield Asset Management, the global real estate developer and investor, is looking to build up a 5m sq ft London office portfolio on an opportunity-driven basis over the coming years, and is currently pursuing a handful of potential City transactions.

The Canadian developer and investor’s current London portfolio is thought to be worth around £500m plus a 22% stake in the Canary Wharf estate, which is worth around £1.04bn as at the end of June 2011.

Relative to Brookfield’s $69bn global empire – across 280m sq ft which includes ownership of around 10% of downtown Manhattan – this remains modest. Brookfield believes, however, that a combination of continued bank deleveraging, wider forced sales due to restricted lending for future refinancing, as well as the likely future M&A-linked opportunities in the years ahead, will all deliver opportunities.

Martin Jepson, senior vice-president for development and investment at Brookfield, said this morning that it is looking at London offices from £60m upwards with and without joint venture partners and would like to grow the London office portfolio to between four and five million sq ft on an opportunity-driven basis.

“We are not going to play in the prime market – given the weight of money that is coming in, yields will likely stay where they are – in good secondary that we are monitoring,” he said. “You need strong balance sheets and the ability to write large equity cheques.”

Jepson, who joined from Hammerson last August, is also leading Brookfield’s interest in 100 Bishopsgate, the planned 900,000 sq ft, 40-storey tower in which it bought a 50% stake from Great Portland Estate for £42.975m. Jepson re-iterated this morning that spades would not go in the ground until pre-lets are signed, suggesting the required minimum would be somewhere in the region of 30% to 40% of the tower’s total 865,000 sq ft of office space.

The guideline threshold to kick-start the scheme for Jepson is British Land and Oxford Properties’ pre-let with Aon, the global insurance and advisory company, which is taking a third (191,000 sq ft) of the total 610,000 sq ft Leadenhall “Cheesegrater” building, at £54 per sq ft, rising to £62.50 per sq ft on the option to take a further 85,000 sq ft.

Pitching 100 Bishopsgate at the £55 to £60 per sq ft range would suggest Brookfield – which is set to become the tower’s majority equity owner when GPE concludes the sale of half its remaining 50% stake – translates in minimum annual income, based on the above figures, of around £14m to £17m before the spades go in the ground, calculated a real estate analyst. “At the top end, say a 40% letting on £60 per sq ft, it would deliver around to £22m which would be a done deal,” added the analyst.

News is unlikely to follow swiftly on the pre-letting front, with the occupier market unprotected from the wider market distress, as evidenced by yesterday’s pre-let withdrawal by CMS Cameron McKenna in Hammerson’s Principal Place scheme in the City because of wider market uncertainties.

All the big developers of the upcoming raft of London skyscrapers have the same list of 20 or so large tenants which are coming up, with everyone chasing the same companies at a time when a nervousness to move has set in.

Jepson’s cautious note, therefore, is entirely understandable. “It takes at least six months in due diligence to secure a major letting, so there will be no news imminently,” he said.

Brookfield’s first investment into the London office market came almost a decade ago when it bought its 22% stake in across 11 office properties, five retail units and a further seven developments schemes at Canary Wharf.

Back across the Atlantic, the Toronto-based global asset manager is understood to be close to a first closing in the coming weeks for its third real estate opportunity fund, which although Brookfield declined to comment due to regulatory restrictions, is reportedly targeting $3bn.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Visualizing woodpeckers, One moment of insight, TV Dinners
Friday, January 13 2012 | 12:00 PM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

One thing that has been coming up more and more in conversations is the idea of raising capital for private equity real estate funds from smaller pension funds, endowments, foundations and family offices. There are investment managers who have been doing this for years. But, as more and more of the big boys are sitting on the sidelines, managers are looking for alternate sources of capital for their commingled funds.

Historically, if you raised money from a family office or just plain ol' rich people, the institutional investors did not relish being in the same fund. I wonder if that will still be the case as we move into a new world order in the institutional real estate investment industry.

Presentation Suggestions (There's obviously a story behind his comments but the main thrust of his suggestions are what grabbed my attention:

The unexpected will rivet audience attention. Breaking a pattern is a very basic way to grab attention. How can you break a visual or sensory pattern in your next presentation to grab attention and get your audience to take action?

Be careful with negative instructions. If you don’t want your audience to do something, don’t even put the idea into their heads. If I tell you to NOT think about woodpeckers right now, guess what you’re going to do? You’re visualizing woodpeckers right now, aren’t you? Yet, you had no intention of doing so… until I told you NOT to do it.

Take words seriously. If you want me to take your words seriously, how about making your font size huge and clearly visible? What about placing your sign (or your PowerPoint) almost smack in front of me, instead of making me peer down a gully or around a post or from the side or through someone’s head?

I've been reading some good books lately-ones that get you thinking about important things. And I was talking with someone this week who said that they'd like to make a contribution to the world and 'leave something behind.' Then yesterday I read this obituary about Dr. Mary Ellen Avery, a medical researcher who helped saved hundreds of thousands of premature infants with a single, crucial discovery about their ability to breathe. Her principal contribution to medicine was in finding out why so many babies died at birth. The answer: their lungs lacked a foamy coating that enables people to breathe. “There was one moment of insight,” she said. “And that was it.”

When Dr. Avery started her work, as many as 15,000 babies a year died from the syndrome. By 2002, fewer than 1,000 did. Estimates of lives saved exceed 800,000. One moment of insight. Such a humble statement about something that has had such an enormous and, in a way, miraculous impact. Very few of us will leave a legacy of this stature. But there is something we can each do that will make a difference. Of course, it'll involve the one thing that I feel is the most valuable thing we have in our lives: time. My proposition to you: make time to spend with an industry person (or someone not in our industry for that matter) who is out of work, or looking to get into the business for the first time or is trying to figure out how to make a career change and get future employers to see them as a whole individual rather than just labeling them by the title of their last job. Most, perhaps all of us, has been in one of those situations in our lives. Remember what it feels like? In learning about what makes me tick, I am clear about one thing: if I can help just one person every day, even in some small way, then it's been a good day for me. We all need each other lean on from time to time. We are all part of a global commercial real estate community (or as Seth Godin calls it 'a tribe.') I can almost guarantee that you will feel better about yourself when you help someone else. P.S. I've been working on a plan to create someplace where we can all gather together and help each other. Stay tuned!

San Francisco International Airport (SFO) always has a cool exhibition in Terminal 3 in the main walkway to the majority of the gates. The current one is on the history Television or TV as we know it. Not only do they have TV sets dating back to the early days, they have games that were spawned by TV shows, lunch boxes (did you have one?) and other sorts of branded stuff. It's a walk down memory lane: We had a black & white TV set. My father and I used to lay on the floor on our left elbows to watch the shows. For some reason the channel dial was funky and periodically my Dad, using his right foot, had to jiggle it a little to get the picture clear again. We lived in a simpler world. There wasn't much fear in America in the Post WWII years (except when we got frightened by who knows who and people started building bomb shelters in their basements). TV was our friend and our nemesis as people bought frozen TV dinners and either set up TV tables or rolled the set into the dining room. So that was our technology addiction. How innocent!

Note: Please feel free to tweet this column.


On the road....

Jan. 17-20: New York
Jan. 23-25: London to attend the INREV UK Winter Seminar 2012 and the Thompson Reuters Global Property Outlook 2012
Jan. 30-Feb. 1: Scottsdale, AZ to attend IREI's VIP Conference
Feb. 6-10: New York
Feb. 23: Chapel Hill, NC to attend the University of North Carolina (UNC)/Kenan-Flagler Real Estate Conference
Feb. 24: Chapel Hill, NC to be a judge at the UNC Kenan-Flagler Real Estate Case Challenge
Feb. 27-29: Scottsdale, AZ to attend the NCREIF Winter Conference
March 29-30: Philadelphia to attend and be a judge at the Villanova University Real Estate Case Challenge
April 22-25: Chicago to attend the CRE Mid-Year Meetings
April 25-27: Vienna, Austria to attend the INREV annual meeting
May 17-20: North Palm Beach, FL to attend The Hoyt Fellows/Weimer School Annual Meeting
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

New Year, New Band, New ________
Monday, January 09 2012 | 09:11 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

In 1975, legendary bluesman, John Mayall, released an album called, "New Year, New Band, New Company." If you haven't heard of him, perhaps you've heard of some of the musicians that have either recorded or toured with him: Eric Clapton, Jack Bruce, Mick Taylor, John McVie, Mick Fleetwood, Dr. John & Paul Butterfield (a seriously partial list). Well, this week that title suits me pretty well also: New Year (duh), New Band (I sat in last week with a group and they've sort of asked me to join them. they're now called "Four Shotz" and are rockin' blues band) and New Company. This last category is a curious one at this exact moment in time. While I am involved in a couple of serious dialogues regarding new 'jobs', nothing is definite yet. So, as I've done for many years, I'm offering to provide fee/assignment based services as a management consultant.


In preparing to 'hit the road' I've ordered some new business cards which have this as the headline: "Solutions by Steve Felix" and my contact information. I'm trying to follow all the things I've been reading, and passing on to you guys, about keeping things short and simple. I've also sent this email to a number of my former clients and industry friends:


Dear Friend:


I am offering my consultative/solutions services to a few companies.

One of the services I could provide is to facilitate an internal senior level strategic discussion about how to grow your business. Using a knowledgeable, third-party facilitator like me helps open the conversation and take it to areas that might not be discussed when a meeting such as this is 'moderated' by someone in the firm.

I can also help you in the following areas:

1. How to make your client events more memorable and effective
2. How to improve your presentation books & marketing material
3. How to make your face2face presentations more effective
4. How to improve your communications with clients
5. How to address certain client feedback about your services and client care
6. How to expand your net of potential new clients/investors
7. Providing internal career coaching to help you retain your best people and understand what their aspirations are.
8. Providing recruiting services.

Anyway, if this has piqued your interest, perhaps we could set up a phone call to discuss.
Thanks.
Steve

So, please let me know if you or someone you know may have an interesting in talking with me. Thanks. P.S. I've received some requests to set up calls starting next week and have sent out my first proposal to facilitate an internal product strategy meeting!



Vis a vis last week's career thoughts I was reminded that one very important thing (how could I have forgotten this one) is finding the right people to work with. This involves confidence and trust. Twice in my career I was in a position where I needed a job to support my family. In those instances, I took jobs with people that I didn't trust and didn't like but thought, "Hey, maybe I'm wrong," But I wasn't and both ended in less than a year. When it comes down to it, it's all about the people, isn't it? Thanks for reminding me, Albert.

I've been putting some down time to good use updating and adding to my contact database. While doing this I found a site that has Career Advice for Real Estate Professionals from some industry heavyweights. I offer a few of them here:

-Get a Solid Education: When you enter into real estate, you may work in only one area, such as property management or brokerage, but it's important to have an educational overview of the entire business to guarantee your long-term success.

-Maintain your Education: Have a commitment to keep abreast of all the changes in the industry by attending conferences, educational programs, and by reading and writing for business and academic literature.

-Have Perseverance: One of the most important skills that you need to be successful in business is perseverance. Quite often when you start down a path, you're naive about what it takes to get there. So you can be surprised to keep running into problems. But, you just have to stay with it until you find solutions to move forward.

-Know What Matters: You must be able to look at many complicated issues and see what really matters. People often get caught up in the preciseness of the numbers and the methodologies instead of finding what really matters. And if you can simplify things, then you can make better decisions, and you can also explain things to your clients.

-Measure the Risk: Risk is an essential element in the business. So learn to manage risk. The key to risk is to do extensive research so that you can carefully consider, creatively integrate, and rigorously test information, before making a decision.

Good stuff, right? Pass it along.


Congratulations to my friend Dietrich Heidtmann who has joined Grosvenor as Managing Director of Client Services.


On the road....

Jan. 11-13: Chicago
Jan. 17-20: Laguna Beach, CA to attend IMN's Ninth Annual Winter Forum on Real Estate Opportunity and Private Fund Investing
Jan. 23-25: London to attend the INREV UK Winter Seminar 2012 and the Thompson Reuters Global Property Outlook 2012
Jan. 30-Feb. 1: Scottsdale, AZ to attend IREI's VIP Conference
Feb. 6-10: (t) New York
Feb. 23: Chapel Hill, NC to attend the 2012 University of North Carolina (UNC) Real Estate Conference
Feb. 24: Chapel Hill, NC to be a judge at the UNC Kenan-Flagler Business School Real Estate Case Challenge
Feb. 27-29: Scottsdale, AZ to attend the NCREIF Winter Conference
March 29-30: Philadelphia to attend and be a judge at the Villanova University Real Estate Case Challenge
April 25-27: Vienna, Austria to attend the INREV annual meeting
May 17-20: North Palm Beach, FL to attend The Hoyt Fellows/Weimer School Annual Meeting
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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

Incentives & Taxation for Data Centers
Tuesday, January 03 2012 | 05:10 PM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

A substantially significant aspect of most data center developments revolves around income taxes, property taxes and incentives. Those involved in the decision-making process consider concessions in this classification as pivotal contributors to or reductions from the bottom-line profitability as well as the internal rate of return formula to determine the efficacy of each contemplated development. Historically, incentives have been tied to employment and for the most part, in many states, that is still the case. However the key to successfully negotiating incentives lies in having a comprehensive strategy to approach the responsible government entities.

Generally speaking, incentives can be categorized into four main areas: property tax relief; income tax credits; sales tax relief; and cash grants. In many states, as mentioned above, much of this is predicated on employment in excess of 50 full-time employees. In some states, tax relief for personal property tax is related to a gross amount of capital expenditure whether for construction or equipment. In some states, legislation has been enacted to create a discretionary fund that offers cash grants that can be used for the purchase of property, or equipment.

A plan of successful plan of attack is best organized around four steps: tax and analytic assessment to create a strategy; strategic negotiations; contract negotiations; and implementation.

In order to create a tax and analytic assessment so that a strategy can actually be created, one must first understand the tax and business fact patterns in any given region. It is essential to create a 10-year business financial operations picture. Before any strategy can be created, all statutory tax regulations and issues must be fully reviewed. Finally, the information derived is molded into a business-driven strategy.

Before contract negotiations can commence, strategic negotiations must be entered. Meeting with state and local officials to explain the business goals and objectives lays the foundation for future negotiations. Once basic information has been transmitted, proposals are usually prepared and received from the respective government agencies. An analysis of the proposals ensues that identifies key challenges and issues requiring solutions.

Contract negotiations continue this process with several rounds of proposals, revisions, analyses (both financial and subjective) and submittal of approvals.

Implementation of the incentives package relies on the preparation of reports and necessary applications, filing for the benefits that were negotiated, tracking data pertinent and precedent to the incentives, tracking of payments or offsets and further training those who will be responsible for tracking such incentives in the future.

In so many cases, the incentives received can equal the total capital invested. Since the cost of power can, over the term of the investment or lease even exceed the capital invested, the incentives package can go a long way to offset the cost of power.
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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

Digital Security & Compliance
Tuesday, January 03 2012 | 05:09 PM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

I have this thing about being as informed as I can. At times it seems overwhelming and that I¡¦ve painted myself into a corner. A few years ago, I discovered web crawlers and then Google Alerts. I created alerts for everything from financial advice to Data Centers and Digital Media. Over the years, that¡¦s turned into a daily digest of 20 different email newsletters on everything related to data centers and IT. Each of those sources contains anywhere between 10 and 20 stories. Of course, I can¡¦t read all of that material, or I¡¦d have no time for work, blogging, or anything else for that matter. What has become clear of late is that much of what I¡¦m seeing right now is about digital security and compliance. This isn¡¦t so much an extension of my last blog, but a different discussion about compliance itself as opposed to the necessity for systems security.

This isn¡¦t just happening in the world of publishing, but also in the real world. Over the past twelve months, I¡¦ve received a number of requests from clients to have SAS 70 Type II audits completed. And that¡¦s just the tip of the iceberg. From what I¡¦m seeing, compliance is one of the most important contemporary issues that is being addressed and considered.

The real question is, ¡§What measures are important and how best to implement those measures?¡¨ The next important question, especially with regard to colocation contracts, is, ¡§What and how should this be addressed in a Service Level Agreement?¡¨

There are compliance guidelines and directives for every different business sector and in general including:
ħ Sarbanes-Oxley;
ħ Service Organizations Controls (formerly SAS 70);
ħ Basel II and III;
ħ PCI/DSS;
ħ HITEC & HIPAA;
ħ TIA 942;
ħ NYSE Rule 446;
ħ NASD Rule 3510;
ħ Check 21, and many others.

A Little History¡K
In December 2009, the International Auditing and Assurance Standards Board (IAASB) issued new International Standards on Assurance Engagements (ISAE) 3402 replacing the prior standard, SAS 70 and subsequently issuing SSAE Number 16 for reporting on controls at a service organization. This represented the first significant change to the AICPA standards since SAS 70 was originally issued in 1992. There are now three different Service Organization Control reports (SOC 1, 2 & 3) that have supplanted the SAS 70 and SSAE 16 (which now falls under SOC 1). Included under the SAS 70 standard was service auditor guidance, user auditor guidance for the purpose of reporting on controls for financial services audits. There seemed to be a high occurrence of misinterpreting SAS 70 reports as a means to obtain assurance regarding controls over compliance and operations. Separately offered were Trust Services Principles and Criteria that included security, availability, processing integrity, confidentiality and privacy. All of this has now been reorganized under:
ƒß The SOC 1 includes SSAE 16 (service auditor guidance), Restricted User Report (Type I or II) for the purpose of reporting on controls for financial service audits. SOC 1 reports are tailored to address controls at an organization that provides services to user entities when those controls are likely to be relevant to user entities¡¦ internal control over financial reporting;
ƒß The SOC 2 includes Attest Engagements 101 (AT 101) to assist CPAs in reporting on the effectiveness of a service organization¡¦s controls related to operations compliance. This combines Trust Services criteria with the reporting detail of SSAE 16. Also included is a generally restricted use report (Type I or II) for the purpose of reporting on controls related to compliance or operations. SOC 2 reports are meant to address security, availability, processing integrity, confidentiality and privacy. This report is perfectly applied to the SaaS or cloud provider that wishes to assuage the concerns or its customers that the service organization maintains the confidentiality of its customers¡¦ information in a secure manner and that the information will be available when it is needed; and
ħ SOC 3, which, similarly to SOC 2, includes AT 101 plus a general use report with a public seal for the purpose of reporting on controls related to compliance or operations. The SOC 3 report is designed for companies that use a business partner to perform part of its operations for selling goods via the Internet and want reassurance that such transactions occur in a private and secure environment.

As important as it is to audit processes and procedures, the implementation of security measures is where the rubber meets the road. This is exemplified in Payment Card Industry (PCI) Compliance. This standard not only relates to hardening the security perimeter, but also creating a secure interior set of requirements that prevent insider security breaches. According to recent white paper written by Sumner Blount for CA Technologies, PCI compliance can be achieved by adhering to six steps:
1) Build and maintain a secure network. This requires installing and maintaining a firewall configuration to protect data as well as creating custom system passwords and other security parameters;
2) Protect customer data. The imperative is to protect all stored data and encrypt transmission of that data and other sensitive information across public networks;
3) Maintain a vulnerability management program. This requires that anti-virus software is used and regularly updated. Development and maintenance of secure systems and applications is a must;
4) Implement strong access control measures. Access to data is restricted based on a need-to-know, unique IDs are assigned to each person with computer system access and physical access to data is restricted;
5) Regularly monitor and test networks. Without tracking, monitoring and testing access to network resources, data, systems and processes, there is no accountability model;
6) Maintain an information security policy. Your policy must address information security first and foremost.

Application to the Service Level Agreement

This will certainly be determined by the type of space or services being rendered by the provider. In the case of a powered shell, the degree of security will be limited to physical measures and facility availability while in the case of managed services, or private cloud services, those measures should be significantly extended. In many cases, service providers will not directly monitor or secure any equipment that it doesn¡¦t own or operate. Network availability and uptime of the data center can and must be protected and there should be a 100% guarantee of backbone network uptime as well as other services delivered such as power. Other measures of latency and packet loss should also have measurable standards of reliability and security procedures are certainly applicable in this case.

Conclusion

Using the PCI Compliance model as an overly and then auditing the IT landscape with the preparation of a SOC report goes a long way toward building a secure environment. Of course, other compliance requirements that are industry-specific will be a necessity, but by implementing these two aforementioned steps, the process will be considerably streamlined.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Sports Slang, Networking Redux, Joe Robert, Necessary Endings
Friday, December 23 2011 | 11:02 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Posted: 23 Dec 2011 05:05 AM PST

Sports slang has been used to describe business situations for years:
1. Play ball. To go along with what everyone else wants.
2. Ball park. To estimate something.
3. Step up. Short for ¡§step up to the plate.¡¨ To take responsibility
4. Level the playing field. Make things even across the board
5. Play hardball. To get mean and get tough.
6. Slam dunk. A complete and easy success.

But when I was reading a listing of upcoming concerts this morning what struck me is that there are words used to describe musicians and bands that are also adaptable to companies and people in the commercial real estate industry. While I will not commit industry suicide to applying any of these terms to any company or person in particular, wouldn't it be fun to do an anonymous survey?

1. Miraculously nimble
2. Smooth and swinging
3. Heartthrob
4. Seasoned trio
5. Powerful vocalist
6. Tragic emblem
7. Enigmatic artist
8. Frequent collaborator
9. Over-caffeinated electronic art rock
10. Nightlife kingpin

Thanks to my friend, Tom, I offer you the following "Tips on Networking" previously published in the Wall Street Journal:

1. Have a Solid Introduction: First impressions count heavily. Make sure your attire, attitude and overall appearance are the best possible before introducing yourself to someone
2. Don't Confuse People with Your Pitch: No one needs to hear your entire work history upon meeting you. If someone asks you to tell them a bit about yourself, your explanation from start to finish shouldn't take more than 30 to 60 seconds
3. Don't Tell a Sob Story: No matter how tough it's been, you need to paint a positive picture when you're making new connections.
4. Spend More Time Listening Than Talking: The old adage is true: People were given two ears and one mouth, and you should use them proportionately.
5. Avoid Being Socially Inept: There's a fine line between being friendly and personable and being awkward. You do not want to be the latter
6. Don't Overstay Your Welcome: Taking up too much of someone's time is almost as bad as ignoring them entirely.
7. Hand out Your Business Card, Not Your Resume: It's not ok to pass along an unsolicited resume. Offline or online, you need to work on forming a relationship with someone before you ask them for anything at all. Many people overlook this professional courtesy, and ask brand new connections to serve as a referral when submitting a resume or application.
8. Follow Up and Through: Perhaps the "Cardinal Rule" of networking is that once you've planted the seeds of a new relationship, you must follow up to maintain it. Whether it's a business referral, job lead, or a professional connection, get in touch ¡V within 24 hours ¡V to say you enjoyed meeting them.

So true although I've allowed myself 48 hours to follow up with everyone whose card I get at any event with a simple email. At the same time I enter them in my contact database with a notation of when and where I met them and anything else that I learned (or that I can remember!) Although it's not acceptable in many Asian countries, the first thing I do when or after I meet someone is make a notation on the back of their card (except for those companies who, for some reason unknown to me, have allowed their card designer to have the back of the card be a dark color. Go figure).

Joe Robert died recently at age 59. As many of you know, Joe became visible during the RTC (Resolution Trust Corporation) days when he started managing and then buying assets from that agency that was formed to workout the Savings and Loan crisis in the late 1980's and early 1990's. He built a successful investment management business. I met him only once, at an industry event some years back where he was the keynote speaker. My first impression was that he was a good guy with a contagious positive personality, a sentiment apparently echoed by many who knew him both in business and real vs. real estate life. Anytime a thing like this happens, dying so young, to someone you either know well or know of. it is another wake-up call. We don't know how many days we will be granted the privilege to exist on earth and when I am awakened I get back to doing certain things that I may have put on, as it were, the 'back burner.' These include documenting as many stories as I can about my growing up as a personal history for my grand children. I also have been working on an autobiography for many years and have been negligent about that after a blazing start. The advice I've been given about writing is to write every day, at the same time of day, for a minimum of 30 minutes. When doing this, don't try to edit yourself but just let it flow-there's time for editing later. But it's the discipline that is the key. We all have stories to tell about a family member, friend or acquaintance dying at a young age. But we also read about people who accomplish a lot during their years. I recently interviewed for a new job and was asked, "After many years in the industry, how would you like to be remembered?" I paused as I had not ever been asked that question before. It's a good one to ask ourselves, both about how we'd like to be remembered by the people in the industry we've served and by those people who know us simply as ourselves, which can also be one in the same.

Final note: A friend recently recommended a book to me: "Necessary Endings: The employees, businesses and relationships that all of us have to give up in order to move forward." It's a good read. My summary of it is pretty extensive (it's my way of both absorbing the stuff that strikes a nerve with me and having a 'permanent record' of it that I can refer back to). Here are just a few things I'd like to share with you:

„X Getting to the next level always requires ending something, leaving it behind and moving on
„X Endings are necessary when there is no hope
„X There are three types of people on earth: The Wise, The Foolish and The Evil
„X If you are a leader sometimes you have to lead, even when no one wants to follow
„X Part of maturity is getting to the place where you can let go of one wish in order to have another
„X The longest-lasting and best relationships, as well as the best businesses, are the ones in which everyone involved sees and loves the whole picture, positive and negative.
„X For the right tomorrow to come, some parts of today may have to come to a necessary ending


Please accept my best wishes to you for a special holiday season and happy 2012. For those that are in a cold climate I hope you get snow; for me there's nothing more perfect than snow on the ground for Christmas. I will not be getting snow where I live but it is pretty chilly in the mornings (remember everything is relative!).

Steve


On the road...

Jan. 17-20: Laguna Beach, CA to attend IMN's Ninth Annual Winter Forum on Real Estate Opportunity & Private Fund Investing
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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

Incentives & Taxation for Data Centers
Monday, December 19 2011 | 08:56 AM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

A substantially significant aspect of most data center developments revolves around income taxes, property taxes and incentives. Those involved in the decision-making process consider concessions in this classification as pivotal contributors to or reductions from the bottom-line profitability as well as the internal rate of return formula to determine the efficacy of each contemplated development. Historically, incentives have been tied to employment and for the most part, in many states, that is still the case. However the key to successfully negotiating incentives lies in having a comprehensive strategy to approach the responsible government entities.

Generally speaking, incentives can be categorized into four main areas: property tax relief; income tax credits; sales tax relief; and cash grants. In many states, as mentioned above, much of this is predicated on employment in excess of 50 full-time employees. In some states, tax relief for personal property tax is related to a gross amount of capital expenditure whether for construction or equipment. In some states, legislation has been enacted to create a discretionary fund that offers cash grants that can be used for the purchase of property, or equipment.

A plan of successful plan of attack is best organized around four steps: tax and analytic assessment to create a strategy; strategic negotiations; contract negotiations; and implementation.

In order to create a tax and analytic assessment so that a strategy can actually be created, one must first understand the tax and business fact patterns in any given region. It is essential to create a 10-year business financial operations picture. Before any strategy can be created, all statutory tax regulations and issues must be fully reviewed. Finally, the information derived is molded into a business-driven strategy.

Before contract negotiations can commence, strategic negotiations must be entered. Meeting with state and local officials to explain the business goals and objectives lays the foundation for future negotiations. Once basic information has been transmitted, proposals are usually prepared and received from the respective government agencies. An analysis of the proposals ensues that identifies key challenges and issues requiring solutions.

Contract negotiations continue this process with several rounds of proposals, revisions, analyses (both financial and subjective) and submittal of approvals.

Implementation of the incentives package relies on the preparation of reports and necessary applications, filing for the benefits that were negotiated, tracking data pertinent and precedent to the incentives, tracking of payments or offsets and further training those who will be responsible for tracking such incentives in the future.

In so many cases, the incentives received can equal the total capital invested. Since the cost of power can, over the term of the investment or lease even exceed the capital invested, the incentives package can go a long way to offset the cost of power.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

INREV Survey, Acronymitis, Documenting A Life
Friday, December 09 2011 | 10:57 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Yesterday, INREV, the European Association for Investors in Non-listed Real Estate Vehicles, published the findings of its' latest survey of their 359 members. Here are some relevant highlights:

- 75% of those surveyed said that equity allocations to non-listed real estate funds should grow. The growth stems from a combination of uninvested equity already allocated but unplaced institutional capital.
- The geographical source of much of this capital is the UK, Germany, the Netherlands and France. But much of that is focused on domestic investing and less focused on value-added or opportunistic investing.
- Approximately 10 percent of fund managers have failed to secure refinancing on at least one asset due to the withdrawal of bank lenders from the market.
- Like investors, lenders have lost their appetite for risk. In rationalizing their loan books, they are focusing not merely on reducing the size of their real estate exposure, but on increasing the quality of it by focussing on high-quality underlying assets in prime capital cities and core markets.
This is very good information coming from the proverbial horses' mouth. But if we look at the 'headline news' in our industry, there's a lot going on although it may not resemble the 'business as usual' we had gotten used to (up until a few years ago). There are big deals being made. There are big hires being made. There are big plans being made. And, yes, there is some big money being invested by pension funds and their brethern. Perhaps there are more separate/segregated accounts and more joint ventures. There has been a lot of talk about interest in 'club deals' but I haven't been hearing about too many of them. Queues grow to get into large core open-end fund grow with seemingly no end to the appetite of investors. So, in some ways we could say that things are the same. But they're really not. So much is changing in our industry and if you take the time to step back, like I've been doing at this point in my career, and get off the dance floor and go up in the balcony, you'll see that a new landscape is being painted. And as most paintings of landscapes don't include people, we need to find a place for ourselves in that painting. For many, it will look the same. But for others, those who thrive on challenges, those that crave change in their careers and lives from time to time and those who see that to grow you have to embrace change, this is a very exciting time. I am extremely fortunate to have a special network of industry friends. As many of you know, my current job is ending at the end of the year and I am looking at different options for my next gig. Thanks to those friends, I have gotten to understand better than at any other time in my life who I am and what I bring to the table. No matter what I decide to do next, with a little help from those friends, I have learned to appreciate myself more. Some things take a while.


One member of our OTR community sent me a link to a recent blot post. It's titled "I Don't Understand What Anyone Is Saying Anymore." I'd recommend you take the five minutes it took me to read the whole thing but I've pasted this section below as it struck a particular nerve in me. I've written before about some research I've done about why it's not good or right to use acronyms. Here is this guy's take on the 'disease.'

Acronymitis
This is a disease of epic proportions in the world of charity. I was at a meeting just two days ago at which several well-meaning staff members of a charity were presenting to their board, and the meat of their discussion revolved around the acronyms SCEA and some other one that began with "R" that I can't recall. In the span of three minutes these acronyms must have been used eight times each. They were central to any understanding of the topic at hand, but they were never defined. So I had not the vaguest idea what the presenters were talking about. None. Could have been talking about how to make a beurre-blanc sauce for all I know.

It was reported this week that the Pearl Harbor Survivors' Association may be disbanding due to the aging of it's members. It got me thinking: My father, a WWII veteran, never talked with us about his experiences during the war. Actually, he didn't talk much about his growing up at all. But that changed in 1990, when I overcame my fear of talking about important stuff and brought a cassette recorder to my Aunt's apartment where she was making breakfast for my father and me. I pulled out the recorder and put it in the middle of the table and said that I'd like to ask them some questions and record the conversation. Neither objected. We had a great conversation which was the ice-breaker for further Q&A with my Dad on other occasions. Maybe he was just ready to talk and he was just waiting for us to ask him. So, my thought about the memories and experiences of people in any walk of life: we need to interview them and record those conversations. We need to do this stuff both in our families and in our industry....before the stories are lost....forever. We need to start doing this now!


Smile of the week: 3 minutes 34 seconds. Who knew James Cagney and Bob Hope could dance?


On the road....
Dec. 10-16: New York
Dec. 12: "Holiday Drink Thing." Russian Vodka Room, 265 West 52nd Street (Between B'way and 8th-closer to 8th). A bunch of commercial real estate industry folks will be stopping by between 6 and whenever to toast the new year (or maybe the end of this one). If you're around and have some time I'd be great to see you.
Jan. 18-21: Laguna Beach, CA to attend the IMN Winter Forum on Real Estate Opportunity & Private Fund Investing.
Jan. 24: London to attend INREV's UK Winter Seminar 2012
Jan. 25: London to moderate a panel at the Thompson Reuters Global Property Outlook 2012
Jan. 30-Feb. 1: Scottsdale, AZ to attend IREI's VIP Conference.
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James Wallace, Finance Editor, COSTAR

Inside DTZ’s corporate debt pile
Wednesday, December 07 2011 | 10:19 AM
James Wallace
Finance Editor, COSTAR

DTZ’s acquisition by UGL, the Australian support services group, on Sunday has left the Royal Bank of Scotland, former majority-owner Saint George Participations and HSBC out of pocket by an estimated £34m.

The troubled global property services firm had four separate drawn debt facilities amounting to £111.6m.

Alan Michael Hudson and Benjamin Cairns, the Ernst & Young partners who were appointed joint administrators of DTZ Holdings on Sunday to facilitate a pre-pack administration ahead of UGL’s acquisition, are writing a creditor’s report which will outline the sequential repayment order to DTZ’s creditors.

A creditor’s report, by Hudson and Cairns, is expected to be published the week beginning 19 December.

The most recent, and senior ranking, of DTZ’s debt facilities is the £10m revolving senior debt facility provided equally between RBS and SGP which was signed on 17 October – the day takeover talks which would have led to DTZ’s merger with BNP Paribas collapsed.

However, DTZ has only drawn down £5m of this facility, which replaced £10m in an undrawn mezzanine loan provided by SGP. It is understood that the £10m facility was only half drawn and will be repaid first.

Therefore, RBS and SGP are expected to receive £2.5m back from their joint revolving facility, leaving the remaining £72.5m from UGL to be distributed across the remaining three facilities which, together with £312m in local overdraft facilities, amounts to £106.6m.

The three remaining facilities comprise: the principal £86.5m facility with RBS; a £15.6m mezzanine loan with SGP; and a £4.2m loan with HSBC. Of the three facilities, a spokesperson for DTZ has confirmed that the SGP mezzanine loan “will get paid down”.

The euro-denominated mezzanine loan by SGP, worth £15.6m, was priced at 400bps over EURIBOR with an additional PIK coupon priced at 700bps over EURIBOR, and was due to mature on 30 April next year.

What is unclear is which ranks senior between the principal RBS £86.5m facility and the Hong Kong dollar-denominated two-tranche, worth £4.2m, with HSBC.

Therefore, the extent to which RBS has lost out on the £86.5m corporate loan lent to DTZ, is between £18.2m and £14m, assuming there are no other creditors that rank ahead of repaying the banks.

Ernst & Young’s creditor’s report will provide clarity on the final loss position to Royal Bank of Scotland, HSBC as well as SGP. UGL, which was advised by Goldman Sachs, has confirmed its £77.5m acquisition was fully debt-funded.

The acquisition has increased UGL’s own debt position by AUS$139m (£91m) to AUS$317m (£207.5m), with the company confirming yesterday in a presentation to investors that its corporate “leverage and gearing ratios [is] still maintained at conservative levels”. UGL’s net debt position, post-acquisition, is now 21.4%.

UGL’s previous debt raisings have included, inter alia, a US$250m private placement issuance in three tranches with fixed interest rates at a weighted average of 6.62%.

DTZ will not issue a customary interim management statement next week, following its delisting in the UK yesterday at a closing share price of 7p, down from an all-time high of 835p at the close of business on 29 December 2006.
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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

Continuing Security Threats and Security Protection Procrastination
Wednesday, November 30 2011 | 10:42 AM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

In my last post, I mentioned a presentation given at the 7×24 Exchange International Fall Conference by Kevin Kealy, Security Architect at AT&T regarding the lack of security measures protecting control systems as well as the popularity of control systems as the new target for hacking. Two of the topics on which Kevin touched during his presentation were the Stuxnet virus and the Son of Stuxnet, DUQU.

Interestingly enough, in preparing for this posting, I did a little research to see if anything new had been discovered about the DUQU virus and found on the Symantec site (http://www.symantec.com/connect/w32-duqu_status-updates_installer-zero-day-exploit) a notification that CrySys, the group that initially discovered the original DUQU binaries, has since located an installed for the DUQU threat. Until now, no one had been able to recover the installed for the threat and, therefore, there was no understanding of how it was infecting systems. We now know that the installer file is a Microsoft Word document (.doc) that “exploits a previously unknown kernel vulnerability that allows code execution.” Symantec and Microsoft are working toward issuing a patch and an advisory.

What’s really scary here is that, similar to the Stuxnet virus, this virus was created so it definitively targets the intended recipient and its shell code ensured that it would only be installed during an eight-day window in August 2011. The virus only has a shelf life of 36 days after which it becomes almost undetectable. The installer that was identified was the only one found, but there may be other methods that were used. Fortunately, most security software vendors have already detected and are blocking the main DUQU files, somewhat preventing an attack. However, once DUQU is able to penetrate an organization, through the zero-day exploit, the attackers can command it to spread to other computers, many of which were not even connected to the Internet by using a file sharing C&C protocol with another compromised computer that had the ability to connect to the Internet.

As of November 3, 2011, six possible organizations in eight different countries were confirmed to have been contaminated.

This leads me to my next point… There’s no time like the present to secure your IT environment. While I was reading an article this morning titled, “Top 10 Dumb Computer Security Notions and Myths”, written by Fahmida Y. Rashid (http://www.eweek.com/c/a/Security/Top-10-Dumb-Computer-Security-Notions-and-Myths-740587/?kc=EWKNLEDP11282011A), it occurred to me that too many have become complacent about security issues. This article highlights a keynote speech given by Charles Pfleeger (Pfleeger Consulting Group) to a meeting that was jointly held by Kaspersky Lab and NYU Polytechnic University in New York City.

In light of virus and intrusions, whether your company utilizes the cloud, virtualized environment, or conventional assets, security is imperative. Mr. Pfleeger outlines the following ten ideas and myths that should be heeded.

#1 – We’ll do security later. Security should never be an afterthought. It should be designed in from the beginning;

#2 – We’ll do privacy later. Compliance issues should outweigh speed to market and privacy issues strike at the heart of compliance;

#3 – Encryption is enough. Encryption is certainly important as practically every data breach has been unencrypted or under-encrypted, but architecture is equally important to ensure that the network is secure;

#4 – One tool to defend them all. A one-size-fits-all approach doesn’t work. Security solutions are very specialized and should be customized to each different environment and application;

#5 – Security must be perfect. As with everything else, balance is important. In this case, even if the solution isn’t perfect, a solution must be deployed, so the discussion becomes one of the cost-benefit equation between the level of protection and the cost of the solution;

#6 – Security is easy… DIY Security. Unless you really know what you’re doing, leave the design and implementation of the tool to a professional that has experience;

#7 – Find and Patch is sufficient. Really? Of course it’s important to continually be testing your systems, but this isn’t a replacement for having security by design. As Mr. Pfleeger states, “True security is making sure the common issues are not in the application in the first place and addressing subtle, more complex problems that are discovered down the road;

#8 – We aren’t a target. Everyone is a target. If you store any kind of sensitive or propriety data, financial information, or have control systems operating your business, you are definitely a target;

#9 – No one knows about it. Some people mistakenly assume that the software their enterprise is running is obscure and, therefore, is not subject to attack. This is not true. Many attacks are easily prevented, but many times overlooked by developers and this includes the most common attack vector, cross-site scripting and SQL injection;

#10 – We just need to train the users. Despite the fact that security breaches occur when a user click on infected documents or viruses, that doesn’t address more sophisticated intrusions that we’re now seeing proliferate.

The above focuses on digital threats to the IT environment, but there are other physical security threats that exist, even in a secure data center facility. Those include:

- Power & Cooling problems or interruptions;

- Human error or malice;

- Fire, or other casualty events;

- Water leaks; or

- Air quality.

These threats are constantly being monitored, but can still cause problems and interruptions if the underlying design was not initially well-conceived. Additionally, some serious threats, which may cause problems and for which certain data centers may not have designed in adequate monitoring is poor humidity control. All of the threats mentioned can and should be monitored. Over the past year, we’ve seen some unique methods for addressing human error and malice that also address inventory control. One such solution uses fixed cameras on top of each rack that feeds to the NOC (Network Operations Center), is recorded and constantly monitored. When work is being done on that particular rack, the camera captures all of the activity.

Furthermore, all of the data that is collected from monitoring sources can be aggregated at certain points that are distributed throughout the data center. This eliminates the risks associated with single points of failure, which should be avoided at all costs.

Conclusion

Addressing digital and physical security threats should be a current and prime directive for every enterprise. Finding the right tools and solutions need to be included in strategic planning and regularly implemented
0 Comment | Add Comment(s) | Colocation, Security, Digital_Security, Physical_Security, Data_Center_Security, Cloud, Virtualization, Viruses, Virus, Computer_Virus,


James Wallace, Finance Editor, COSTAR

Intesa Sanpaolo lines up shortlist for giant loan portfolio
Wednesday, November 30 2011 | 10:26 AM
James Wallace
Finance Editor, COSTAR

Intesa Sanpaolo, Italy’s largest bank, is close to selling a multi-billion euro non-performing loan portfolio with four buyers in the final shortlist, CoStar News has learned.

Deutsche Bank, Goldman Sachs Whitehall Funds, Morgan Stanley Real Estate Investing and Fortress Investing Group are vying for the heavily-discounted portfolio, the final size of which is still understood to be decided.

The NPL portfolio first came to market back in early summer, with a portfolio size of €3bn first mooted, but this remains unconfirmed.

Intesa Sanpaolo declined to comment.

The winner of the portfolio is expected to leverage the deal with senior debt, which in the case of three of the four could be underwritten internally although the debt would be expected to be syndicated in each case.

Intesa (headquarters pictured) had €22.2bn worth of non-performing loans at the end of September, according to the bank’s third quarter results, and in April implemented a new organisational model to categorise its exposure: past due, doubtful, substandard and restructured.

Last week, Intesa appointed Allianz’s Enrico Tomaso Cucchiani as chief executive, to replace Corrado Passera who was named economic development minister the previous week in Mario Monti’s new technocratic Italian government.

Cucchiani is expected to quicken the pace of the bank’s own deleveraging ambitions at a bank which has heavy exposure to both Italian and Greek sovereign debt.

Cucchiani, who is due to take up the role on December 22, is non-executive board member of Intesa Sanpaolo’s main domestic rival, UniCredit.

It is unclear whether Cucchiani will leave UniCredit’s board of directors.
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Michael Siteman, EVP - Data Center Solutions, JONES LANG LASALLE, INC.

IMN Data Center Conference 11/9 – 11/10/2011
Wednesday, November 30 2011 | 09:34 AM
Michael Siteman
EVP - Data Center Solutions, JONES LANG LASALLE, INC.

Yesterday and today, I attended the second annual conference put on by the Information Management Network related to Data Centers, Real Estate and Investing. The event was quite well attended and draws a very interesting cross-section of professionals from the investment community, colocation providers, enterprise users, real estate developers, wholesale data center operators and others.

The opening remarks were given by Jeffrey Moerdler, Esq of Mintz Levin (www.mintz.com), who provided perspective on where the data center industry has been, the evolution of technology and what is driving the continued changing landscape in the data center environment.

Chris Crosby, formerly of Digital Realty and now leading his new firm, Compass Data Centers (www.compassdatacenters.com), presented on the various data center models in an era of convergence, how the lines between the models are blurring, how profitability and capital expense vary from model-to-model and trending that is leading many to believe that over the next 24 months there will continue to be a significant reduction of traditional IT being hosted in-house leading to more outsourcing and migration to cloud-applications.

The Presidents Panel moderated by Marty Friedman of DH Capital (www.dhcapital.com) included Todd Aaron of Sentinel Data Centers (www.sentinel datacenters.com), Avner Papouchado of Server Farm Realty, Inc. (www.serverfarmrealty.com), Pete Marin of T5-Mission Critical Facilities (www.t5-mcf.com), Jim Trout of Vantage Data Centers (www.vantagedatacenters.com) and Tony Wanger of i/o (www.io.com). Each of the CEOs had interesting comments from different perspectives. Mr. Wanger noted that the data center industry as a whole has failed to create a standardized base of analytics related to supply and demand. Mr. Aaron suggested that supply and demand is regionally based. Mr. Trout spoke about the advantages of climate and power in Eastern Washington. Mr. Marin highlighted that most enterprise users, though desirous of higher Tier rated data center space, reject the pricing associated with it and don’t really want to pay for 2N builds. Mr. Papouchado’s insight was related to the fact that the mores sophisticated the end-user, the clearer the definition of the project and the easier it is to actually close a deal. A broad discussion ensued related to geography and the benefits of one location over another, but I have to ask, isn’t identifying a data center location really a result of building a business case? Doesn’t (or shouldn’t) the business case trump everything else?

The panel titled, “What are the Coolest Parts of Cooling you need to know?” moderated by Anton Self of Bastion Host (www.bastionhost.com) and included Gary Cudmore of Deerns America (http://www.deerns.com/contact/united_states_of_america/?cid=71), Fletcher Kittredge of GWI (http://www.gwi.net/), Bruce Myatt of M+W Group (www.mwgroup.net), Tarif Abboushi of NTT America (www.nttamerica.com) and Jim Kennedy of RagingWire Data Centers (www.ragingwire.com). The first (and most controversial) question posed by Mr. Self, asked who thought that within our lifetimes we would witness the end of the use of mechanical cooling in data centers. Everyone on the panel except for Jim Kennedy agreed. Mr. Kennedy reacted that in some parts of the world, using air economization, or free air cooling, just isn’t possible. I would agree in that as long as there is a need because of latency, redundancy or otherwise, to have multiple data centers in geographically diverse locations and then current server technology either doesn’t allow for extremely high environmental temperatures or servers still generate excessive heat, additional cooling will be needed.

One of the most interesting panel presentations focused on Colocation and Service Level Agreements. The panel moderated by Shawn Mills of Greenhouse Data (http://www.greenhousedata.com/) located in Wyoming that is powered by a wind farm. The panel included Barry Novick of Blackrock, Inc. (www.blackrock.com), Jeffrey Moerdler (previously mentioned above) and Everett Thompson of Wired Real Estate Group (www.wiredre.com). The positions and perspectives varied greatly with Mr. Moerdler taking a very middle ground. Mr. Novick’s opening comment was that his top 2 requirements in a data center are keeping the lights on and cooling the data center. Mr. Thompson’s rash comment that he relies on attorneys to negotiate the SLA and that they’re worthless anyway brought some well-directed comments from Mr. Moerdler to somewhat soften the glib remark. As expected from a thoughtful expert, Mr. Moerdler offered a list of extremely important issues and distinctions to be addressed in thoroughly negotiating a colocation service level agreement. Those included security, access control, responsiveness to unscheduled access requests, delivery of additional power circuits, uptime, maintenance, testing and repair procedures and schedules, self-help, web access to the NOC for maintenance repairs, notifications/certifications, compliance, outages, termination rights and more. Listening to this man is always enlightening. The bottom line as agreed by the entire panel is that the SLA is not there to only extract credits and compensation from the operator or service provider, but rather, as Mr. Moerdler so eloquently stated, ‘to act as a guideline for building operations and as a dis-incentive to the operator to avoid and prevent outages and bad practices.’ I couldn’t agree more.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Summer Internships, The Ones In Between, Thanksgiving
Friday, November 18 2011 | 10:05 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Summer internships: If your firm takes on summer interns please let me know. I have been asked by a few top-notch students if I could help them connect to find one...both in the U.S. and Europe. Thanks. BTW, in preparing some years back for a tour of Graduate Real Estate Programs and speaking with those students about careers in real estate, I reached out to a number of my industry friends and asked them "What advice would you give a graduate student who is focused on the real estate industry? I've been invited to visit some of these programs again in 2012 and have pulled out that document and will be handing it out to the groups I talk with. I'd be happy to send you a copy. Just email me (steve@simplicate.com) with the word "Advice" in the subject box.

Here are a few websites I added to my "Bookmarks" this week. I hope you find one or more of interest:

1. The Domino Project
2. Songs that made you feel good
3. Meaning & Heart
4. Bondi's Blogspace
Someone sent me this years ago. I re-discovered it poking through some document folders and wanted to share it with you.

" The Ones in Between"

When the road we walk on
is sometimes rough
or is it that we suddenly
take away all what is not necessary
shoes, boots or high hills
from which we easily fall
i suddenly prefer the thrill
to walk on my bare feet
to feel each imperfection of the street
to know each things i did right or wrong
to learn from each mistake
nor to be rich nor to be strong
but just to be human again

like the first day , like the last
and all the ones in between

The U.S. will celebrate it's Thanksgiving Day next Thursday. Canada, already celebrated theirs. While it's roots (no pun intended) were about celebrating a good harvest, it's become a holiday where families and friends get together to eat, enjoy each other and in some neighborhoods, play touch football. As a holiday, it can be a time for personal reflection as well. In challenging times like these, that's not a bad thing to do once in a while and maybe, just like it's suggested that you replace the battery in your smoke detector every year on a holiday, it's important to rediscover "the things worth being, a search that many neglect while striving to obtain the things worth having." (Meyer Friedman, Type A Behavior and Your Heart). My family is spread out geographically and while we'll be together in spirit we won't be able to be physically together next week. I wish you and your family a happy Thanksgiving and just want to let you know how grateful I am to you for being part of the global community that has been created around this weekly column. Thank you.
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James Wallace, Finance Editor, COSTAR

CBRE instructed on Devonshire Square Estate
Tuesday, November 15 2011 | 03:02 PM
James Wallace
Finance Editor, COSTAR

CBRE has been instructed by Rockpoint and Abu Dhabi Investment Authority (ADIA) to a strategic advisory mandate on the Devonshire Square Estate, CoStar News has learned.

The advisory mandate is part of a concurrent strategy employed by the joint venture partners to consider both a possible refinance of its recently-extended securitised debt maturity by 18 months to April 2013, while maximising value in the eight-strong City of London office estate in Aldgate ahead of a potential sale if a refinance is not viable.

CBRE beat off competition from a number of agents to the strategic brief, including Jones Lang LaSalle and Knight Frank. CoStar News first reported that agents were eyeing the mandate back in September.

Initially, the brief is thought to be limited to the further re-gearing of expiring leases as well as finding a replacement anchor tenant following insurance company Aon’s move to British Land and Oxford Properties’ Leadenhall Building on a 19-year lease in the second half of 2014.

“No one can say for sure whether they will or won’t complete a refinance during the 18 month loan extension time period – things will change so much over the period,” said a City source familiar with the situation.

City sources suggest that, subject to finding a replacement long-term tenant for Aon, the value of the estate is likely to be around the £300m mark. Aon reflects 45% of the estate’s annual £23.7m rent roll, at £10.7m.

Devonshire Square Estate (pictured) was bought at the very top of the City office market in late 2006 for £410m from JPMorgan and O’Connor Capital, financed with a £340m senior and junior loan underwritten by Morgan Stanley.

Earlier this year, debt investors in the £336.2m Devonshire Square whole loan – comprised of a £285.5m securitised loan in Morgan Stanley’s ELOC No. 26 CMBS and a £50.7m junior loan – traded out of their positions in anticipation of loan extension difficulties. Morgan Stanley, the loan servicer, has retained the securitised loan in primary servicing.

As part of the agreement with Morgan Stanley, the joint venture partners have injected £3m equity to re-gear leases – including a new 25-year lease which increases one tenant’s rental income by £300,000 pa – which is expected to deliver long-term capital appreciation at the next valuation.

The City is awash with office stock up for sale for which there appears to be polarised pricing expectations among vendors. “Those city offices ‘properly priced’ are attracting investor interest. Those which remain overpriced are just hanging around. The market knows what sensible prices are and what are not, given the wider macro context,” another source said.

All parties declined to comment.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Presentation plea; Joe Frazier
Friday, November 11 2011 | 10:55 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

I've mentioned Reutersrealestate.com to you before but got a chance to poke around the site this week. There's a bunch of information including analytics and slides you can use in your own presentations. There are free research reports from some of the top commercial real estate industry service providers. This site is in Beta test mode for now. It's a good time to take advantage of it...and it's free!

Some stuff from The Recovery at a Crossroads piece published this week by Asieh Mansour, Head of Americas Research at CBRE:
-Recent evidence confirms our view that the U.S. will avoid a recession.
-The Canadian domestic economy is performing well. Both business and consumer spending are expected to make modest headway this year.
-The outlook for economic growth in Brazil has downshifted.

Africa. It's a word I've heard several times in the past two weeks in relation to where will the next real estate/infrastructure investing opportunities be. There are certainly some compelling reasons to take a look at Africa as a continent and more specifically certain countries. Like with everything, there will be those who are 'early', just like when any investment market emerges. Think back to when U.S. institutional investors first started going abroad (i.e. Europe). It wasn't that many years ago. But, if we want to live up to our own self-billing as a global industry we need to keep looking for those countries/markets where our capital can both make a difference and can provide a reasonable return on our investments. As many of you know, my only personal experience with Africa was my time in Liberia, now five years ago, working with needy children and experiencing a third-world country, up close and personal, for the first time. But listening to a presentation last week by a firm looking to raise capital for investment in Africa has gotten me thinking.....



An open letter to presenters of any type:
If you use statistics in your presentation/speech (and this is particularly obvious when you use PPT slides...which as you know from earlier writings I feel is the most abused technology tool known to mankind) please update your information periodically. Making any presentation today, for example, with data from 2008, 2009 is absolutely unacceptable. You owe it to your audience to have current data. Making the excuse, "I've been too busy to update the information" is an insult to the audience. And, as 2010 comes to a close, as soon after year-end as the data in your 'one size fits all' presentation becomes available, you have an obligation to update it. Whether you realize it or not, people in the audience notice it...they won't be as vocal as me, but it doesn't make you look good at all.

Joe Frazier, the former heavyweight champion of the world, died this week at 67. My father's was a boxing family (except for him). A couple of this older brothers not only fought in the streets of Brooklyn and the Lower East Side, they also fought professionally. The one who went the furthest was Harry Felix, the oldest brother, who fought for food money for the family and was at one point a middle-weight contender (before an opponent 'thumbed' his eye and ended his career). Another of my fathers' brothers, Barney, was a referee who officiated a number of major bouts including the first Liston/Clay fight when the title was transferred for the first time to Cassius Clay soon to become Muhammad Ali. My Dad liked watching boxing on TV right up to his death on November 19, 2009. But over the years things had changed in the boxing world (as in all other sports) and he more often than not referred to some of the fighters on TV as 'bums.' That term apparently referred to boxers who were brawlers and not fighters or other definitions of his own creation. During the period when Ali was banned from boxing due to his stand as a conscientious objector during the Vietnam War, he went on a college speaking tour. At that time I was the sports editor of our school weekly newspaper. When he came to our school, I was invited to the press conference held before he spoke to the general audience. I asked him, "Champ, do you think Joe Frazier could ever beat you?" Ali replied, without skipping a beat, "Son, if Frazier even dreamed of beating me, he would wake up apologizing!" Joe Frazier was no bum. Frazier, in his quiet, workmanlike way, brought some class into the ring every time he entered it. He exuded quiet confidence. He was a class act.

OTR news: There have been some people starting to follow OTR on Twitter as well as through the Linkedin.com OTR group. I am trying to increase the number of subscribers. There's a reason behind it but I can't tell you about that just yet. So, if you have had this forwarded to you and are not a subscriber please sign up. Also, if you are so inclined I'd appreciate you sending this to others and asking them to sign up as well. Thanks a lot.

Steve
Publishing from somewhere between New York and California in 'The Friendly Skies."
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Counselors of Real Estate, Tent Cities, 70 year olds talk about their lives
Monday, November 07 2011 | 09:27 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Some takeaways from a presentation from a well-known and respected industry strategist:

 "Those of us who don't live within The Beltway (Washington, DC area) don't really understand what's happening."
 "Today money is basically free."
 "Maybe its' time for radical answers."
 "The other shoe? Forget about commercial real estate, it's state and local governments....and it's dropping."
 "State and local governments had always been an engine of growth...but no more."
The more people, of all ages, that I talk with, the more two things are clear: (1) Things are changing on a daily basis globally; (2) No one really knows what is going on or what to expect. Uncertainty, about most anything in our lives, creates stress. Stress is not healthy. But now, in addition to personal stress, we have an inordinate amount of Earth-stress, challenges to our basic way of life and to the future of our planet. I've always admired the 'big thinkers', those that don't get bogged down in the day to day stuff. I haven't been hearing much from these people lately, in fact, I'm not even sure who will go down in history from this period as a truly big and forward thinker. Right now, I'm focused on the small things but I am not sweating them. However, I recall Steve Winwood's voice when he and Traffic recorded, "Who Knows What Tomorrow May Bring?" Let's put our collective mental energy together towards a better tomorrow for our selves and our children's children children (Moody Blues).


New York Times columnist, David Brooks, wrote in one of his columns this week, "If you are over 70, I’d like to ask for a gift. I’d like you to write a brief report on your life so far, an evaluation of what you did well, of what you did not so well and what you learned along the way." He got more than 200 comments submitted pretty darn quickly. I like this kind of life stuff so went through those comments and pulled out some things that I found interesting and I hope you do too:

 The United States, for the past 70 years, has been a place of soaring optimism, where things always got better. So 70 year olds today, for the most part, can recall fondly their past lives (despite any foolish risks they took)--because today they are still much better off than when they were growing up. But it is now possibe to contemplate that the US has peaked, and life in the United States, today, may be the best the younger generation will ever experience.
 Don't try to prove things to other people, especially your parents and friends, try to prove a few things to yourself. Try to balance being responsible with the grand adventure that life can be while also making a positive contribution. Our existence on this tiny planet is a miracle, don't waste it.
 Aim high and see how far you can go. Learn from everything and everyone, all the time. Be self critical only when it can help you grow, not as a force of habit. Realize, too, that everyone before you who accomplished something grand started out with doubts, fears and doubters saying it couldn't be done. Live your dreams because, otherwise, you will have to watch while someone else does it in your stead.
 I have learned that I don't know anything, don't understanding anything, and never will. Far from making me despondent, this has been a big relief. I also realize that no-one else knows anything or understands anything, especially the "experts" - a word I think should always be in quotation marks. Trust your own judgment more than you trust anyone else's. Even the honest and well-intentioned can lead you astray, and most certainly they do not have your well-being at heart as much as you do.
These are just a few. If you like this kind of stuff here is the link to the page where all the comments are posted. It's a pretty interesting read.

RCA’s 3Q2011 Europe Capital Trends report was recently published. Here are a few of their conclusions:
 Despite the economic and financial market turbulence European investment activity continues to improve. Countries showing an improvement in transaction volume, notably Germany, France, Nordics and Central Europe are increasingly being driven by cross-border capital.
 Prime retail continues to perform strongly, with office volume flat year-over-year. Hotels also posted robust gains, while large transactions boosted the apartment and in¬dustrial sectors.
 While London and Paris still boast the larg¬est volume, many other cities now are drawing a larger percentage of cross-border investment.
 The most significant changes in the sources of these global inflows have come from Asia and Can¬ada, with their investment activity in Europe reach¬ing or surpassing peak levels.
 US investors, while comprising half of global capital flows into Europe, acquired just €14.7b over the past 12 months, a frac¬tion of 2007 levels.

To me, Canada is the story to watch as they have become a very aggressive investor in direct real estate in many parts of the world.


Congratulations to my friend Julian Schiller who joined Brookfield Asset Management as senior vice president at the firm’s global private funds group in London.

Cool stuff of the week: ArX Solutions. Terrific animation company. This art/technology has really evolved since I was first exposed to it at the MIPIM conference in about 2004.
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James Wallace, Finance Editor, COSTAR

Bids in for Starwood Capital’s €800m hotel portfolio
Thursday, November 03 2011 | 01:41 PM
James Wallace
Finance Editor, COSTAR

Starwood Capital, the global private equity real estate firm, has received bids for its predominantly French hotel portfolio from three major hotel chains, backed by sovereign investor equity, as well as its former hotel company subsidiary, CoStar News has learned.

Marriott International, Hyatt Hotels and InterContinental Hotels Group have each bid on the entire or the majority of the hotel, which was put up for sale by Starwood in September, with capital sourced from sovereign wealth investors.

The hotel chains are understood to be solely seeking to manage the hotels and incorporate the assets in their portfolios.

Bids on the full eight-strong portfolio have come in it at around €800m to €850m.

Starwood Hotels & Resorts Worldwide, the US listed global hotel company which Starwood Capital established before floating, is also understood to be one of the principal four bidders.

In addition, a number of Middle Eastern investors, including the Abu Dhabi Investment Company (ADIC) and Abu Dhabi Investment Authority (ADIA), are understood to have bid on select hotels within the portfolio.

The portfolio comprises six French hotels, including three in Paris, and one each in Germany and Switzerland. The most well-known of the bunch is the European real estate sector’s hotel of choice at MIPIM, the flagship annual industry conference – the Hotel Martinez on La Croisette in Cannes (pictured above).

The three Paris hotels are: Hotel Concorde La Fayette, the Concorde Opera Paris Hotel and the Hotel du Louvre. Also in France is Nice’s Hotel Palais de la Méditerrranée and Marseille’s Villa Massalia Hotel.

Making up the portfolio is the Hotel Concorde Berlin and the Hotel de la Paix in Geneva.

Starwood Capital declined to comment.

The global private equity real estate firm is understood to be evaluating the bids, seeking details on the equity investors behind the hotel chain bids, and the extent to which leverage will be applied to complete any deal. After which, Starwood Capital will determine a shortlist by the end of November with a view to confirming a sale by the year end.

Starwood Capital is thought to be open to both a portfolio and piecemeal sale, as it seeks to get the best price for its assets. The hotels sit across the Starwood Opportunity Fund 7 and Starwood Hotel Investors 1. Once a sale is complete, the capital is expected to, in part, repay fund debt.

Jones Lang LaSalle Hotels and UBS are jointly marketing the portfolio.

According to research from JLL, there was $14.8bn of hotel investment deals completed in the first six months of 2011, a 117% increase on the same period last year.
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James Wallace, Finance Editor, COSTAR

IMN 2011: prolonged uncertainty to stifle debt markets
Thursday, October 27 2011 | 10:40 AM
James Wallace
Finance Editor, COSTAR

With the world’s eyes on Europe’s politicians today after finally reaching an agreement with private investors in Greek sovereign debt to accept a 50% haircut, the consequences for European real estate debt markets are palpable.

Since the summer, market visibility has been stifled by political and macro-economic uncertainty eroding investor appetite – for buying and lending – which has reduced liquidity and, ultimately, property fundaments. If the market trips back into recession and employment levels contract, the occupier market will suffer, deepening concerns for real estate markets.

There is now no doubt as to what was at stake this last week, with many calling Greece “Europe’s Lehman Brothers” in that if it were allowed to fail, as the US Federal Reserve did for the once fourth largest investment bank in the world, the consequences would have been a financial tsunami unstitching fragile banking markets – the lifeblood of property markets.

So it was no exaggeration when Angela Merkel, the German chancellor, said earlier: “The world had its eyes on us today.”

Europe’s private equity markets real estate gathered this week for a two-day event hosted by IMN at London’s Landmark Hotel, with the talking points all around macro-economic influences on real estate regulation, lending appetite and the changing debt markets.

“The interbank lending market is almost not there,” Andreas Wuermeling, head of secondary markets at Deutsche Pfandbriefbank told delegates, “and if it is there it is only for a short period of time. As a result, banks are scared about lending long term money, supported by short term money.”

The uncertainty is polarising lending intensions to real estate, with banks understandably worried that they may lend at the wrong time, and that things might improve by the turn of the year.

As a result of this uncertainty, a number of European banks are shifting new lending plans into next year, but funding markets are unlikely to be any better, added Wuermeling. “We decided to keep going, but we wish that more lenders were still active because we need more debt.”

The last property cycle has certainly left senior lenders with differing perspectives on how to interact with junior lenders.

These range from ‘never again’ to ‘only if it is my way’ to a few who believe junior capital can genuinely be a positive contributor to the overall outcome even in the event of distress.

Michael Zerda, a director who manages LaSalle Investment Management’s two mezzanine funds, said: “Mezzanine deal flow has increased because there is more supply on the market, specifically on the secondary asset side. On the refinancing side, we are seeing senior LTV levels drop – it seems like the new normal is setting in at 60%, compared to 65% last year.

“In terms of the overall cost of debt, we don’t think the cost of mezzanine will move out, but we do think overall cost across the capital structure will as mezzanine becomes a larger component due to lower senior debt LTV levels. And as non-bank lenders come into the senior lending market, this will increase liquidity, but at a price.”

There are a number of pension funds that are expressing interest in providing senior debt, or investing into senior debt funds but at a greater margin than those currently quoted by active lenders, added Zerda.

In terms of regulation, all the talk was of the impact Basel 3, for the banking market, and Solvency 2, for the insurance sector, will have on lending intensions.

“Credit prudence is really going to dominate lenders’ approach for the next couple of years,” argued Paul Rivlin, co-founder of real estate debt investor Palatium.

He added: “There is a tension between two processes going on side by side but are actually at odds: Basel 2, Solvency 2 and, to some extent, Basel 3 all depend upon institutions making their own assessments of what their risks are. On the other hand we have major parts of Basel 3, the Vickers process in the UK and similar processes in Switzerland and for EU banks, which go back to prescribed asset value weightings which simply require higher capital and reserve requirements and extra prudency.”

Not only could banks see their capacity to lend diminish again, but also their will to do so. Capital weighting will not stop institutions from investing in alternative assets like real estate if they think they are going to get teen and higher internal rates of return, Rivlin said.

“There is a lot of expensive work being done on Solvency 2 and Basel 3, but actually I suspect at the end of the day that it will be Vickers and the equivalents that will bite on what institutions can do after the world normalises and in the meantime non-regulatory constraints, particularly internal credit policies will rule the roost.”

The extent to which insurers emerge as the saviours of the great wall of refinancing is another known unknown.

As the British Property Federation’s director of policy Peter Cosmetatos put it: “The challenge, I suspect, is that insurers will want to lend against the type of real estate assets which we don’t difficult to raise debt finance: prime property with strong underlying tenants, as opposed to secondary and tertiary shopping centres.”
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Animal Murder, Networking: Women v. Men
Friday, October 21 2011 | 11:13 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

How many of you besides me had tears flood their eyes when reading or seeing the murder of animals that had been let loose by their cowardly and warped owner in Ohio this week? The police defended their actions (Don't they always?) I know, some animal rights people said the police had no choice. Sorry. Some local police force who were completely unprepared for anything like this just reveled in being big game hunters for a few moments. Why couldn't all or at least a majority of those animals been tranquilized and saved instead of being killed? In killing those animals, aren't we killing ourselves as well-aren't we all animals, trying to survive on the same planet, bring our off-spring into this crazy world and praying that mankind will not destroy itself? How sad. Who will save our souls? And, how dare that guy that owned these animals...letting them out....dooming them.

"All about Steve:" For those that got my announcement last week or saw the article in PERE about my job situation, I appreciate your support as I received a overwhelming and heartwarming number of emails, wishing me well and offering to help in however they could. At the PREA conference as well, so many people asked me what I was going to do next. I can't tell you how that made me feel. I am thinking about what the next chapter in my career should be, looking at myself and trying, as one friend told me, "to be my own career coach." Part of that exercise is that I'm learning to appreciate myself more. Also, to sit down and make a list of what I'm good at, what I like to do and how to combine those two into making a living. There are a few very interesting conversations I'm having as we speak. But, because this is a very important time in my career and my life ("Is there any other kind," Jack Nicholson would say to me (stolen and adapted from "A Few Good Men.") I want to take my time and do the right thing. I'm looking at another 15 years of full-time work. My father was very proud of working full-time until he was "79 and a half" as he used to tell people. 15 years is still a healthy chunk of time and ideally I'd like to get into something that will take me to 2026! And, be true to myself. Anyway, stay tuned!

Within the past few months (this is all about me right :-) more and more people have been asking me, "So what's up with your music?" The answer is this: After more than two years in the making, our next CD, "Robot Mannequin" will be available before the end of the year. This is another collaboration between my sons and I and an all-star cast of Chicago-based musicians. "What kind of music is it?" Impossible to describe as all songs different!

My good friend, Barbara Fish, is a career counselor based in Toronto. Actually she and I were both summer camp counselors together years ago. Camp counselor/Career counselor. Hmmm, maybe they're connected? Oh well, last week she forward me a piece called The networking gender gap and how to bridge it. While there are few things in life that we can all agree on, I know one of them is that, well, men and women are just plain different. It's part of the attraction (I think). Anyway, here are some snippets from that piece (If you'd like the whole article just email me with the word "Networking" in the subject box).

-Networking observers say that for men, networking is largely about selling themselves or a product, or trading information. They want their conversation to lead to a tangible result, such as a business lead, a sale or an introduction. They get straight to the point.

-Women, on the other hand, will often initiate an exchange with a pleasantry or a compliment (“Love your shoes”) and will converse on a range of subjects, regardless of potential professional benefits. Rather than thinking quid pro quo, they think “How can I help her? How can I connect?” One networking commentator on Linkedin put the difference succinctly: Men “start with a statement of their status ... Women create community.”
-Another key difference is that women use networks for what psychologists call “social comparison,” a process by which we understand ourselves and learn how to behave by comparing our attitudes and behaviors with those of others.
-Sadly, women often don’t take advantage of their ability to connect. Here’s where they can take a lesson from the guys. Whereas men talk matter-of-factly about their accomplishments, women tend to undersell themselves lest they be seen as boastful. Or where a man might bluntly ask, “Could you please introduce me to ... ?” women are so nuanced about asking for assistance that a person whose help they seek might not even realize a request has been made.

Interesting stuff, right?

New: NCREIF Research Center: Jeff Havsy, Director of Research for NCREIF told me that there's a new 'button' on the top right hand side of their home page. This is a new section on the NCREIF website designed to answer a question that was posed by or to Jeff or one of the other members of the staff. One piece that's posted is called Cap Rate: Please Explain! A really good value-add service to the industry.

New Book: Real Estate Mathematics will be published next week by PEI Press. "Real Estate Mathematics is a detailed and practical guide for private real estate fund managers and investors. Edited by David Lynn and Tim Wang of Clarion Partners, this guide features contributions from over 25 leading real estate professionals in the industry today that will shed light on some of the most challenging arithmetical problems that face private real estate today." Congratulation you guys.

Restaurant of the week: Sunda, 110 W. Illinois, Chicago, IL. A multi-manager hosted cocktail party on Monday evening brought me to this place for the first time. When you walk in, the dramatic design suggests an immediate, "Wow." To call it Asian-Fusion is not fair; yes, there is a serious sushi bar but it's also a lot more than just sushi. Actually, just go there. Ask for Nicole who is the Director of Sales and Marketing and enjoy yourself. Oh, did I mention that it's one of the hippest places in Chicago?

Congratulations to my friends Bob Weaver who is joining TPG Capital and Roman Bas who joined The Carlyle Group.

My, and I know the industry's, sincere condolences, to the family of Keith Brown of Klaff Realty in Chicago who passed away recently. Too young. Too soon.
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James Wallace, Finance Editor, COSTAR

IMN: CRE at London’s Landmark Hotel next week
Monday, October 17 2011 | 10:43 AM
James Wallace
Finance Editor, COSTAR

There are only a handful of remaining delegate places left for next week’s premier European private equity real estate conference at London’s Landmark Hotel.

IMN, the industry leading conference organiser, is offering CoStar News readers a 10% discount on the full price cost to join the more than 400-plus delegates attending next week’s 12th annual IMN European Real Estate Opportunity & Private Fund Investing Conference over October 25 and 26th.

This year’s two-day annual event promises to be more expansive in its content and networking opportunities than ever before, with more than 75 seasoned commercial real estate experts from across the UK, Continental Europe and the US fund and investor market.

The themes, which will be covered, are timely, including:

-Are the Lessons Learned from the Financial Crisis Permanent?
-What Are Your Geographic Allocations In Uncertain Times?
-What Kind of Deals are Getting Done?
-The Balance Sheet & Conduit Lender Panel;
-How To Make The Best of Your Joint Venture Strategy.
-Fundraising from Non-Traditional Sources; Attracting Non-European Fund Capital.
-NY, London, Paris, Munich vs. Regional, Second Tier and Secondary Cities.
-Lease Renewals, Restructuring & Workouts
Delegates’ favourite sessions from last year also return, including: state of the market; large fund strategies; and fund structures and fundraising.

The two-day event will have represented some of the largest and most innovative real estate property funds, endowments, fund-of-funds and pension investors speaking.

For the full conference programme and list of speaker, please click here.

To register: telephone +1 212-224-3428 (9:00 am – 5:00 pm, US Eastern Time), or online at www.imn.org/europeanoppfunds

A limited amount of speaking and exhibiting opportunities and food & beverage event sponsorships are still available.

For more information, call Andy Melvin at 212-901-0542 or email amelvin@imn.org or Joanna Christopoulos on (212) 224-3784 or email jchristopoulos@euromoneyny.com
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Fall Conferences, Seth Godin, Tap Dancing
Monday, October 17 2011 | 10:04 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

It's interesting: This morning I sent an email out to a large group. The number of "Out of Office" automated replies was surprising in some ways but in other ways it wasn't...it's just indicative of how much traveling people are still doing (or are they?). Yes, this time of year there are all kinds of conferences and while the bean-counters in many firms have clamped down on travel expenses, when there's a "Must Attend" conference or meeting, people still should be permitted to go. Our industry manages gazillions of dollars of money invested in real estate, much of it wisely invested for the benefit of retired people who are counting on getting their monthly check (I wonder what that would be like!). Anyway, to seriously limit those folks that are managing that money from attending any/all conferences that they believe are important to them doing their job properly (and learning something along the way that may help them do their job even better) seems to me to be penny wise and pound foolish.

Some of my takeaways from one of the most stimulating sessions I've attended in quite a while given at the CBRE Americas Summit last week by Lara O¡¦Connor Hodgson:

„X What happens when what we know gets in the way of what we notice?
„X ¡§Why¡¨ is what you notice.
„X ¡§What¡¨ is what you know.
„X We stop asking ¡§Why?¡¨ because we're afraid to let people know that we don¡¦t know something.
„X Be a contrarian
„X What would I never do?
„X Defiance
„X That won¡¦t work-so how can I make it work?
„X Creative Reconstruction
„X Break down your assets/challenges and take each one away
„X Scenario-based thinking
„X Where would we never look?
„X Laughter at an idea means something is working
„X Innovation: look at a place completely differently and apply it to your industry
„X Quotes from Dr, Jonas Salk (Polio Vaccine):
„X ¡§The answer is the question.¡¨
„X ¡§Ask the right question to find the answer.¡¨
„X ¡§You don¡¦t invent the answer; you reveal the answer.¡¨
„X Fostering Innovation in Real Estate
„X To succeed consistently over time you must understand key trends and time their activities accordingly
„X Creativity: the ability to look at the same thing as everyone else but see something different
„X within 8 seconds of creating an idea, someone will tell you there¡¦s something wrong with it-often it¡¦s yourself.
„X Suggestion: Wait 8 seconds before commenting/criticizing
„X Real estate: we literally change the world (buildings, cities, etc)
„X We commoditize our projects. So, if we change our thinking.....(i.e. we think about how to get 10 cents more per square foot, etc).
„X What drives value?
„X What is unique¡¨
„X Don¡¦t commoditize your product.
„X Success vs. Significance
„X Success is finite
„X Significance is infinite
„X If you¡¦re focused on success you¡¦re not thinking big enough.
„X Innovation is driven by noticing human behavior.
„X Your greatest solutions happen when you lack resources.
„X If you quit with the first ¡§No¡¨ you may be asking the wrong question.
„X Don¡¦t be afraid of coming back with another, ¡§Why?"
„X Force your brain not to be you!
„X Your customer is not you-you have to get into their heads to understand their challenges/problems before you can come up with a solution
„X Figure out who does something well-what makes them own their industry-and apply it to your business
„X Look in places you¡¦d never look-that is where innovation is-not at your competitors.
„X In a down economy no one is talking-you can sneeze and get noticed.¡¨
„X Einstein: ¡§The world we live in today has problems that cannot be solved by old thinking

Seth Godin is a very interesting guy. I was first introduced to his writing via one of his books called, "The Purple Cow." He describes himself as a writer, speaker and agent of change. I subscribed to his blog earlier this year and have found certain of his writings resonate with me. He publishes every day and one from this week I share with you as I thought many of you would get something out of this:


Open Conversations or Close them.
„X A guy walks into a shop that sells ties. He's opened the conversation by walking in.
„X Salesman says, "can I help you?"
„X The conversation is now closed. The prospect can politely say, "no thanks, just looking."
„X Consider the alternative: "That's a [insert adjective here] tie you're wearing, sir. Where did you buy it?"
„X Conversation is now open. Attention has been paid, a rapport can be built. They can talk about ties. And good taste.
„X Or consider a patron at a fancy restaurant. He was served an old piece of fish, something hardly worth the place's reputation. On the way out, he says to the chef,
„X "It must be hard to get great fish on Mondays. I'm afraid the filet I was served had turned."
„X If the chef says, "I'm sorry you didn't enjoy your meal..." then the conversation is over. The patron has been rebuffed, the feedback considered merely whining and a matter of personal perspective.
„X What if the chef said instead, "what kind of fish was it?" What if the chef invited the patron back into the kitchen to take a look at the process and was asked for feedback?
„X Open conversations generate loyalty, sales and most of all, learning... for both sides.

On Sunday I happened to catch the last half of "Dirty Dancing" on TV. What a great movie. How sad that Patrick Swayze died so young (57) another victim of cancer. Watching that movie got me on to Youtube. Many years ago, I worked for a company where one of the administrative assistants was the daughter of the famous dancer, Honi Coles (who also had a role in Dirty Dancing). Check out this great dance routine. Sad also that tap dancing like is from an era long gone.

Congratulations to Paul Anthony DiCarlo who has joined Rockrose Development in the acquisitions group and Yokasta Baez who joined Pantheon as Vice President, Global Client Services in New York. She was most recently with AXA Private Equity.

San Francisco Event: Larry Souza, a very insightful guy is presenting the conclusions of his deep research project on real estate finance and capital market research, which includes monetary and fiscal policy analysis, public administration and political science, political economy and philosophical analysis. It's on Tuesday, October 18th at 5:30-6:30 pm at Golden Gate University (536 Mission Street) in San Francisco, in Room 6208. Larry says "You are all invited."
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James Wallace, Finance Editor, COSTAR

LandSecs’ £1.5bn debt refinance talks underway
Thursday, October 13 2011 | 09:56 AM
James Wallace
Finance Editor, COSTAR

Land Securities, the UK’s largest property company, has begun talks with banks to refinance its £1.5bn revolving credit facility by the end of the financial year, as part of a strategy to materially pare back it total debt facilities, CoStar News understands.

The real estate investment trust (REIT) has two overall pools of debt: a £1.5bn revolving debt facility, which was written at sub 30 basis points over LIBOR in August 2006 and expires on 29 July 2013, and five separate bilateral revolving facilities ranging in size between £50m and £250m, with staggered maturities between April and November 2014.

Revolving debt facilities allow borrowers to change the underlying properties, against which they lend, providing much-need flexibility for opportunistic off-market transactions.

Land Securities is planning a material reduction in its overall total £2.25bn debt facilities, with negotiations already underway between the REIT and existing banks – which include a broad mix of the UK clearing banks and overseas banks.

Negotiations between the REIT and the banks – and the margins which are agreed for the replacement principal revolving facility – will be priced on corporate terms, as opposed to asset-level pricing, and will largely be determined by the ancillary pipeline which Land Securities has to offer its relationship banks.

Banks are usually willing to offer preferential terms to the larger property companies in expectation of lucrative ancillary business – such as interest rate and currency swaps, corporate bond agency mandates, money transmission, advisory services and foreign exchange – all of which which makes up for the reduced profit from headline margins on the secured loans themselves.

This explains the gulf in pricing that the big REITs and quoted companies can achieve – base property loan margins on UK property, on asset level pricing, are now as high as 250 bps over LIBOR against UK property, while some commentators believe Land Securities could achieve less than half that margin.

Another key to negotiations is likely to be Land Securities’ own three to five year plans.

Immediately post Lehman’s collapse, the writing was on the wall that banks’ costs of capital would rise and available lending would shrink so Land Securities have had in mind for three years now that a £1.5bn facility could not directly be replaced, analysts argued.

As a consequence of all these issues, most bankers expect Land Securities to choose fewer rather than more banks, which are willing and able to commit larger pools of their balance sheet.

Revolving debt facilities tend to include staggered margin uplifts after agreed thresholds are passed – known as utilisation fees – where those thresholds are, and what the subsequent margin uplifts will be agreed will be central to negotiations – suffice to say, lower thresholds and higher uplifts are expected.

Utilisation fees naturally encourage property companies to remain reasonably leveraged.

Unlikely participants on the new ticket would be the pfandbrief-funded banks because pfandbrief funding lines require fixed, not alternating, collateral. The extent to which such banks ever do appear on revolving debt facilities is through the use of their direct balance sheet, for which funding costs are higher.

“The Germans don’t like revolvers,” as one banker put it.

In July, British Land issued an oversubscribed dollar-denominated $480m US private placement, implicit in which would be incurred cross currency swaps to price the capital back to £300m in sterling, the total liabilities of which will be dependent upon the duration of the swaps and market movements over the period. British Land’s decision to tap into the US private placement market helped it achieve 146 basis points over LIBOR.

In February, Grosvenor issued a sterling-denominated £125m, with debt investors, rather than Grosvenor, taking on the swap risk with banks.

Land Securities declined to comment.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

On the road...Asheville, Las Vegas, Steve Jobs
Friday, October 07 2011 | 11:16 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

RCA Briefing Note: As overall sales volume slowed sharply in Q3, foreign investors were bucking the trend by continuing to expand their acquisitions of US commercial real estate. With Asian and Latin American capital growing at the fastest rate, cross-border investment should top $5.0 billion in Q3 for the first time in four years and account for over 10% of market activity.

Sad news. Wayne King of The Goldstein Group in New Jersey passed away at 52, another victim of cancer. Wayne was the second employee at CREOL (Commercial Real Estate Online) which was one of those ahead of the times Internet ideas that didn't make it. I worked with Wayne. He was the architect that took Steve Oder's vision and made it real. Wayne was a bright, interesting and just plain nice guy who had a heart. I hate this cancer crap!

I spent time last weekend with my son, his wife and their two sons-yes, my grandsons, Sean (2+) and Gavin (one month) in their home in Asheville, NC. A busy house to be sure! Hanging out with Sean I was reminded about how kids find such simple ways of entertaining themselves, being entertained and entertaining us. Things we take for granted, the trees swaying in the wind, the fog that appears on a window when you breath on it, running around and diving onto a couch, banging on a drum, laughing at silly words that your Grandpa teaches you (i.e. Pizza Juice), listening to The Beatles while in the car seat of your Daddy's car. It's wonderful to see and served as a great reminder to me about how there are so many simple things in life that we just take for granted, or overlook or, don't have time for. It's these simple things, most of them with no cost involved, that can give us pleasure every day if we just take a minute to appreciate them. Btw, Asheville is very cool. It's like a time warp in some ways back to the late 60's/early 70's. It's a college town with a vibrant restaurant, shopping and music scene. There's also a lot of 'real green' (trees) in and around that beautiful part of America.

Dig This!
The world's first Heavy Equipment Playground: Where you can relive your childhood sandbox days. It's in Las Vegas, not far from the Strip and this week I had a chance to experience it for myself. It's the kind of thing that you will keep telling people about. It's fun by yourself (but more fun with a group) and it's run in a first-class and extremely safe way. Some participants were on the bulldozers and I was on an excavator (see below). It's a really cool thing to do and this is the only place in the world (for now) where you can do it. It's attracted people of all shapes, sizes, ages and genders and is the #1 attraction/thing to do in Las Vegas on Tripadvisor.com. I met a couple of guys whose wives gave it to them as a birthday present. It's also a perfect venue for 'team building.' Special Offer: Because I have a connection with the ownership of Dig This, they have authorized me to offer a 25% discount to anyone who mentions my name when they make their reservation.


Dig This site: I drove this heavy machine (there's a better picture here). Didn't do as well as the other two drivers but I had tons (140,000 pounds worth) of fun.

I heard some very good stuff this week from a very interesting speaker but I want to take some time to digest what she said before I share my takeaways with you....next week.

"A legendary hero is usually the founder of something-the founder of a new age, the founder of a new religion, the founder of a new city, the founder of a new way of life. In order to found something new, one has to leave the old and go on a quest of the seed idea, a germinal idea that will have the potential of bringing forth that new thing." Joseph Campbell, Hero with a Thousand Faces.

Steve Jobs: he had a vision that was right on as far as what the world wanted/needed and how Apple could fill that need. But identifying a customer need isn't what Jobs was all about; he created a need but having not just his fingers but his whole being on the pulse of the future. He figured out who his customers were and what they wanted. There have been some folks, in our lifetime and throughout history, who have had the same 'seventh sense' and perhaps it's because Jobs made his mark in an era of unprecedented media coverage and Internet connectivity, that he's achieved the status that society is putting on him. Originally, Mac users were a cult; going against the grain of the PC. They did 'think different' and now there are many of us who are using Mac's and other Apple products and it seems like more and more are adopting them. PC use is still in the majority...particularly as companies, for the most part, use them. But from a personal perspective, how many of us use a PC and related peripherals for work and an iPhone, iPad, Nano (is that still the current thing for music or are people just using their iPhones for everything) for everything else? At a time when the world needs more heros, Steve Jobs will go down as one of them.


Congratulations to my friends, Joan Matera who has joined JPMorgan as a Senior Credit Banker in their Real Estate Banking Group and Hugh MacDonnell who has joined Clarion Partners as a Managing Director in their Capital Raising group.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

On the road with Steve Felix
Monday, October 03 2011 | 11:55 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

As I promised to here is the Summary of Key Findings & Trends from a Compensation Survey that was recently conducted in the real estate investment industry (U.S.). 46 companies participated:
1. After two years of declining compensation, pay levels for performance year 2010 were up, but still below pre-recession levels at most companies.
2. 88% of participants raised salaries in early 201, with most increases falling in the 3-5% range. Increases were most prevalent for mid-level and junior professionals.
3. 76% of participants paid out larger bonuses for performance year 2010 than they did for performance year 2009, with amounts at or above target levels in most cases (60% of respondents)
-Executive managers fared the best: median increase of 31% and average increase of 70%
-Less than 10% of firms reduced bonuses, whereas over 40% reported doing this in last year's survey
4. Year-over-year changes in long-term incentive awards varied considerably among participants
-Roughly half of participants (52%) increased long-term incentive awards for performance year 2010, with the remaining companies split between keeping long term incentive awards flat (24%) and reducing it (24%)
5. Looking ahead, most firms expect to increase pay for performance year 2011, but at relatively modest rates due to uncertainty regarding how the rest of the year will pan out from a performance perspective
-2012 salary increases are expected to be 3-4% (on average), although a meaningful number of firms (24% of participants) expect to keep salaries flat (only 11% took this approach in 2011)
-44% of participants expect to pay out larger bonuses, most of whom expect 1-20% increases over performance year 2010 levels, while 41% of participants expect to keep bonuses flat (18% reported this in 2010)
-long-term incentive awards continue to vary by company, and eligibility parameters may broaden at some firms.



A friend and very talented artist, Shannon Corey, has announced the following shows. Unfortunately I won't be able to attend either but if you're in NY or Philly and like singer-songwriters (she's a piano player) you should check her out:
1. Mon, Oct. 3rd - NYC - Birthday Show - The Bitter End-free download and cupcakes - Amazing
2. Wed, Oct. 5th - Philly - UPenn - to get in you have to be on the 'list.' Write directly to Shannon and she'll get you on the list (shannoncorey88@gmail.com).

I got an email from a friend in Europe who got this from a friend which I pass along to you even though I have no stomach for political rhetoric but I know that a lot of folks will find these comments interesting: "Last night I attended a dinner hosted by Nigel Bolton (head of European equities at Blackrock) who on the previous night had dinner with Frau Merkel with a small number of European investors. Merkel believes the IMF is trying to force EU into leveraging the EFSF fund but this is basically a US scheme. Q. What is the EFSF? A. As part of the overall rescue package of €750 billion, EFSF is able to issue bonds guaranteed by EAMS (Euro Area Member States) for up to € 440 billion for on-lending to EAMS in difficulty, subject to conditions negotiated with the European Commission in liaison with the European Central Bank and International Monetary Fund and to be approved by the Eurogroup. Merkel says this is a non runner... It would be Unconstitutional in Germany. She is totally is against this. Her view is this crisis will take time and there is no short, easy solution. She was very negative on the US and their response. Her tone was a shock to those investors listening. She was more positive on the long term benfits of the EUR as long as the peripherial countries focused on balanced budgets.... Spain & Ireland OK. Greece - "we can only get the PM to do things if we half drown him... He didn't want want help last year but we have to force him into this life support system."

Reuters Real Estate has revamped its site and is in their Beta test period. They have made some excellent updates and there's a lot of good information and other stuff there.

Remember: There are only a few seats left for The Nick Tyrell Memorial Seminar on October 12 in London. You can register and contribute here. It'll be an educational and beautiful day honoring the memory of an industry influencer and beautiful guy.

A find in Amsterdam. I was walking down the street and walked by a very interesting window display. I couldn't figure it out right away but it looked like a place where I could buy something for my wife. I went in and realized that it was a massage place called 'doctorfeelgood.' I hadn't had a massage in ages and after studying the menu board, made an appointment for the next morning. After the massage, which was long overdue (I hadn't realized how much stress had built up), I was sitting, zone-ed out in a peaceful place and sipping water, when in front of me I noticed hanging on the wall, two large framed montages and went to take a closer look. There were a lot of backstage passes to rock concerts and a lot of hand-written notes of thanks from some very well-known rockers. They were all addressed to the owner of the salon who I learned had been a go-to massage person for rock musicians on tour for a number of years. It's a great place.
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James Wallace, Finance Editor, COSTAR

Chalkhill expands property lending as bank debt dries up
Friday, September 30 2011 | 09:35 AM
James Wallace
Finance Editor, COSTAR

Chalkhill Partners, the boutique investment bank, is expanding its European real estate loan origination team in London with two hires, as it seeks to take advantage of the deteriorating availability of debt finance from banking markets.

Ricky Kullar, most recently of Paul Taylor’s now defunct Three Delta, joins on Monday, while HSH Nordbank’s head of real estate origination, Andrew Sutherland, starts on November 1.

Kullar and Sutherland will be joining the existing real estate finance team as Chalkhill’s execution arm looks to work through a growing pipeline of deals.

Co-founder Stewart Booth told CoStar News the pipeline continues to grow as traditional real estate lenders are forced to continue their net disinvestment to the asset class, driven by capital adequacy requirements under Basel III.

Booth explained: “Banks will continue to cut their exposure to all kinds of balance-sheet intensive asset financing, and clearly commercial real estate is one of the bigger of those balance sheet activities. The natural solution for that is for institutions to play a bigger role in the financing of commercial real estate – which brings the two sides of our business together.

“We cover the institutions in the research, trading and sales business on a day-to-day basis and we use that intelligence and distribution to drive real estate coverage business. Recruiting Andrew and Ricky is part of the build-up of the existing origination team.”

Chalkhill’s first loan was written last December. It says its capital is sourced from insurance companies, mutual funds and private equity firms throughout Western Europe. This year, Chalkhill has closed equity, mezzanine and senior debt financings.

Booth added: “We have a list of mandates across geographies and property sectors, including offices, retail, logistics and hotels. The demand from sponsors for institutional funding continues to grow as banks’ face up to the impossible challenge of refinancing over €500bn of real estate debt over the next three years.”

Booth, former global head of credit trading at Royal Bank of Scotland, quit the bank in 2009 to set up Chalkhill Partners in July 2009 with fellow RBS colleague, Cirine El Husseini, a restructuring analyst formerly of Aviva Investors and Chander Gupta, a mortgage backed securities trader, previously of Greenwich Capital, to become one of the early boutiques set up to take advantage of what they believe is a structural change in asset financing, driven by the shrinking banking proposition. As well as structuring senior debt finance, the firm advises on restructuring is active in arranging mezzanine and equity finance.

Three years ago, the global financial crisis changed the lending landscape, with echoes of that dramatic year – predicated on banks' refusal to lend to one another on the interbank market for fear of undisclosed US subprime exposure – heard today in relation to Greek sovereign debt exposure. Such is the deepening crisis, that some banks are starting to renegotiate with borrowers on deals looking for increased margins as liquidity worries deepen.

“In the last cycle, commercial real estate debt was 85% financed by banks – through bilateral and syndicated lending. If that reduces, even by 25%, institutions are the realistic alternative capable of providing that much debt capital. Mutual funds and insurers, benefitting from favourable treatment for the asset class under Solvency II, are actively adding capability to take advantage of the opportunity.”

The circa €500m of European real estate debt to mature in the next three years, which Booth points to, underscores the need for new lenders. Last Thursday, CoStar News revealed that US investment bank Jefferies is expanding its real estate lending capability and has recently hired former Barclays Capital banker Christian Janssen, while Hatfield Philips’ former primary and special servicing director, Stewart Hotston joined AIG last week to head up the once world’s largest insurance companies push into real estate lending.

Legal & General is also close to launching its property lending platform, under Ashley Goldblatt. But it is not just the insurers, the world’s largest mutual funds, are also now starting to see the opportunities in the market given attractive margins and limited capacity of traditional lenders.

Booth added: “There are certainly a lot of real estate loans being written at the moment that look very attractive versus the securities market for investors that have the ability to invest across asset classes.

“Banks with access to the Pfandbrief market are still relatively keen to do a certain type of financing but in practice it tends to be prime assets with low-leverage and, even then, large loans tend to struggle. Many alternative asset classes are becoming orphaned.”

Fixed income managers are likely to increase their real estate lending exposure. UK institutional fixed income assets under management are around £30trn and growing steadily, says Chalkhill. With a growing pool of capital, real estate debt offers attractive margins and diversification benefits to a part of the market where they are underexposed, Booth argued.

There is an old adage that “good loans are written in bad times”. For some, at least, let the bad times roll on.
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James Wallace, Finance Editor, COSTAR

IMN Conference: CRE experts gather in London next month
Friday, September 23 2011 | 09:59 AM
James Wallace
Finance Editor, COSTAR

A star-studded line-up of Europe’s leading real estate bankers, investors and managers are gathering in London next month to discuss the market’s major issues from the macro to the micro.

IMN, one of the industry leading conference organisers, is hosting the 12th annual IMN’s European Real Estate Opportunity & Private Fund Investing Conference over October 25 and 26 at the Landmark Hotel in London.

More than 400 real estate professionals are expected at this year’s event which will cover themes such as how to attract non-European capital; should bankers start underwriting for a double dip and; what is worse – inflation or deflation?

Delegates’ favourite sessions return also, including: state of the market; large fund strategies and; fund structures and fundraising.

The two-day event will have more than 75 speakers representing some of the largest and most innovative real estate property funds, endowments, fund-of-funds and pension investors speaking.

For the full conference programme and list of speaker, please click here.

To register, please either: telephone +1 212-224-3428 (9:00 am – 5:00 pm, US Eastern Time), or online at www.imn.org/europeanoppfunds

A limited amount of speaking and exhibiting oppor tunities and food & beverage event sponsorships are still available. For more information, please call Andy Melvin at 212-901-0542 or email amelvin@imn.org
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James Wallace, Finance Editor, COSTAR

Caring gets £330m funding for Project Navy
Tuesday, September 20 2011 | 02:21 PM
James Wallace
Finance Editor, COSTAR

Billionaire restaurant tycoon turned property developer Richard Caring has finally secured a debt financing package needed to redevelop 20-21 Grosvenor Square into some of the most luxurious apartments in London, CoStar News can reveal.

Caring heads a consortium of investors, alongside long-time associate Stephen Sharp, that has agreed in principle a £330m three-year facility to complete the acquisition of the US Navy’s former headquarters in Grosvenor Square from Ireland’s NAMA.

The three-year financing package – dubbed Project Navy – includes a 12-month extension option and comprises a £230m senior debt component shared between the Royal Bank of Scotland, Deutsche Bank and United Overseas Bank, the Singaporean bank.

Two mezzanine lenders have provided £100m in junior debt: LaSalle Investment Management has written a £40m loan from its Special Situations Fund and Swiss-based Middle East high net worth and hedge fund investor SAFANAD has provided a £60m mezzanine loan.

The financing deal struck has been complicated by the dormant property having fallen into NAMA after the previous Allied Irish Bank loan securing the asset breached its covenants. Caring and Sharp are very close to finalising the discount to which the consortium buys 20 Grosvenor Square from NAMA, which part of the mix of senior and junior debt will be used to finance.

After this, staggered debt drawdowns will be used to finance construction costs before, eventually, payments from pre-sold units – which are expected to vary in value between £5m and £20m – will be used to help pay down the outstanding balance.

The cost of the senior debt is thought to be more than 400 basis points over LIBOR, staggered according to the part of the finance which is acquisition and development finance, with the package also including upfront fees. The overall facility takes the consortium through to the end of the sale period, with phased margin uplifts.

The consortium is understood to be very keen to conclude negotiations with NAMA, now that bank finance is in place, realising Caring’s long-held ambition of converting such an historic London building into one of the most coveted residential addresses in the capital.

Caring’s original conversion plans, prior to the onset of the credit crunch, were to turn the empty premises – which during the Second World War was US President Dwight Eisenhower’s military headquarters – into 41 luxury flats, but after development finance seized up the project stalled.

Planning permission to redevelop the former US Navy headquarters into luxury flats was finally won in May 2009. Development work could finally start as soon as next month.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

You may be walking around lucky and not even know it.
Friday, September 16 2011 | 11:26 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

There are very few 'life-changing' moments that I can remember experiencing but this past week I had one. It came in the unexpected form of a meeting I had with someone I had never met before. And, as our conversation evolved, it was pretty clear that we had connected at some level, finding that some of our beliefs, about people, about business and other things had similarities. But 3/4 of the way through our meeting, he told me something he had observed about me, in a very constructive way. I sat silent and motionless for a few seconds, digested what he had said, and then simply said, "You're absolutely right. That's a very helpful observation. I can't thank you enough." What he told me isn't really important (except to me :-) What is important is that once in a blue moon, you meet someone who shows interest in you, as a person. Whether this fellow and I ever end up doing business together doesn't matter. What matters is that he and I connected as people. I had the tables turned on me for the first time in I can't even remember how many years as he wanted to help me! It was huge and I woke up the next morning feeling different about myself....in a positive way. There's a line in one of my favorite movies, "Let it Ride", when Richard Dreyfuss is having, in his words, "a good day" (which was not usual for him), and he walks up to a waitress he knows at a food stand in the race track; they banter a little as he orders a hot dog; and then with a very piercing but kind stare she turns around, points a 'magical' finger at him, and says, "You may be walking around lucky and not even know it." In his case it was about betting on horses. In my case, it's about changing my life.


Too many of the conversations I had this week end up with the same theme: "What the heck is going on in the world?" And, because most of the conversations I have, at least during working hours, are about real estate that translates to "Where are we heading?" Well, as I think we all know, but may be reluctant to admit, we're either stalled or slipping backwards. In a preview of their August "Month in Review", which will be published next week, RCA has moderately lowered their 2011 transaction volume projections. An email I got from RCA Editorial Director, Peter Slatin states, "The slowing likely reflects greater unease about the broader economy as well as the recent pullback in CMBS originations and tighter credit availability from other lenders as well."


I totally agree. But I believe, in general, that it's simply a feeling of total uncertainty about so many things that have put people into a funk. The answer simply is: We just don't know. We no more know what's going happen tomorrow than we know what will happen in a month, six months, a year, five years. All we are pretty sure about is what we know that happened yesterday. And what we can do, while the world is, hopefully, sorting itself out is to focus on those things that we can change and make a positive impact on. While these are the kinds of times that try mens' souls, these are also the times when we learn more about who we really are. And, to me anyway, there is nothing more important than being true to yourself.




Update: The Nick Tyrell Memorial Seminar. October 12, 2011.
You can register here (it's free to attend) and I'll send you a link next week about how to donate to the fund set up in Nick's name. The program for the day looks great with presentations by a number of the leading industry thinkers. My colleague, John Gellatly, and Paul McNamara will deliver the eulogy. If you can, please attend.



Congratulations to my friend, Jeff Fisher, who was appointed by both ARGUS and RCA to the position of Senior Global Consultant strengthening and further aligning the partnership of the two companies.


Memorable Experience of the Week: Kitchak Cellers, Napa, CA. Many months ago, I met a couple while having dinner by myself at the bar in a Napa bistro. They offered me a taste of the wine they had brought with them. It was delicious. I learned that it was wine that they make themselves. But in another amazingly small world encounter, Peter Kitchak is a career commercial real estate consultant. So, with that as the backdrop, last weekend, after months of back and forth about trying to schedule a day for us to stop by their place, we finally made. Not having gone on their website beforehand, I truly had no idea what to expect. But if you go on their website, you will have an idea and what you see there truly exists and is even more special in person. Kitchak is a private winery with tastings by appointment only. They have a wine club with a significant membership and Patricia and Peter Kitchak are very nice, interesting and passionate people. If you are serious about wine I encourage you to contact them next time you are in the Napa area. But, if that may be a while out, I can, without reservation (no pun intended) highly recommend their wine which you can get via their wine club.
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Patrick Blount, President / CEO, BENEWOLF, LLC

Happy 4th Anniversary Financial Crisis
Wednesday, September 14 2011 | 11:39 AM
Patrick Blount
President / CEO, BENEWOLF, LLC

Four short years ago (or “long” years if you are in the financial services industry) on August 17th the “sub-prime” markets crashed and began the domino effect that led to the global financial disaster of the of 2008. The anniversary date is more like a wedding anniversary than a date signifying a one-time event, like the death of Elvis, because the carnage continues. The Great Depression officially lasted 12 years so maybe I’m jumping the gun wanting to hurry up and have this problem behind me.

Over the past few weeks the American Banker headlines read:

•Investors Give Banks a Swift Kick in the Pants;
•Private equity firms and hedge funds are forcing the banks they invest in to clean up problem loans, and it's starting to show in the data;
•Buffet’s $5 Billion Lifeline Could Become B of A’s Capital Noose;
•Numerous articles regarding Banks Robo-Signing woes;
•FHFA Suing 17 of the largest U.S. banks for mortgage fraud;
•B of A is fighting major battles on multiple fronts from mortgage fraud;
•Large Banks accused of taking $6B in kickbacks from mortgage insurers;
•Lawsuits Highlight an Administration at odds on housing;
•Banks accused of fabricating foreclosure documents;
•Community banks using Small Business Loan Fund proceeds to exit TARP
And the American Banker publication is on the bank’s team. You can only imagine what the rest of the press is writing about this nation’s banks.

I was truly hoping by this point that banks would have cleared their decks of distressed balance sheet loans and we would be on to something new like the next great bubble. The FDIC recently announced that there are fewer banks in trouble in Q3 2011. I find that hard to believe since we have still not seen the great purging of distressed loans we have anticipated since 2007.

Did asset quality improve without the rest of us knowing?

Did rents and occupancy rebound on a national level while we weren’t looking?

Was there some unknown force that caused hidden massive property appreciation whereby borrowers are no longer upside down in their mortgages?

Could these same big banks that are currently being sued by AG’s offices in fifty states, the Federal government and investors of every ilk be lying about asset quality and market conditions?

Surely not.

Happy fourth anniversary indeed, unfortunately I feel confident we will see anniversary number five.
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William Procida, President, PROCIDA FUNDING & ADVISORS, LLC

Procida, F&G Life Form Lending Venture
Monday, September 12 2011 | 05:11 PM
William Procida
President, PROCIDA FUNDING & ADVISORS, LLC

Procida Funding and Fidelity & Guarantee Life Insurance Company have formed a venture to originate loans of $2-10 million in the New York tri-state area. The venture is seeking value-added, distressed and rescue capital opportunities, including properties that were partially built or require significant lease up and repositioning. “Once these transitional assets are stabilized, we would then hope to offer borrowers more conventional, longer term financing,” said Billy Procida, founder of Englewood Cliffs, N.J.-based Procida Funding. The partnership wants to originate short-term, bridge and permanent loans. It believes that its target area is underserved by most conventional lenders today. “We see a tremendous opportunity to provide financing for these kinds of situations,” Procida added. The partnership will target all sectors, including industrial, retail and office.

Procida, who has done about $100 million of new loans so far this year, expects to originate about another $50 million through year-end. Pricing on bridge loans start at 12% and pricing on permanent loans start at 6.5%. The partnership recently completed its first loan, a $3.6 million mortgage on a partially built, 28-unit condominium in Union City, N.J. Construction stopped after the borrower experienced financial distress and the loan enabled the borrower to avoid foreclosure. Construction has now started up again under a new developer, who is converting the project from a condo to a rental complex.

Procida originated the loan, which it then sold to F&G Life, and is looking to source additiona lopportunities of this kind for the partnership. The company completed a similar transaction for TAK Group on Freehold Commons in Freehold, N.J., purchasing and restructuring a $7.7 million loan and also originated a $4.25 million bridge loan to acquire debt at the Gull’s Cove Condominium in Jersey City, N.J.

Separately, Procida is preparing to launch The 100-Mile Short Duration Fund, which will originate short-term loans within a one hundred-mile radius of the company’s headquarters. The company hopes to raise about $25-50 million for the fund with the aim of deploying capital and getting it back within a short time frame.

—Samantha Rowan
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Patrick Blount, President / CEO, BENEWOLF, LLC

Happy 4th Anniversary Financial Crisis
Monday, September 12 2011 | 09:34 AM
Patrick Blount
President / CEO, BENEWOLF, LLC

www.benewolf.typepad.com

http://benewolf.typepad.com/benewolf/2011/09/happy-4th-anniversary-financial-crisis.html


Four short years ago (or “long” years if you are in the financial services industry) on August 17th the “sub-prime” markets crashed and began the domino effect that led to the global financial disaster of the of 2008. The anniversary date is more like a wedding anniversary than a date signifying a one-time event, like the death of Elvis, because the carnage continues. The Great Depression officially lasted 12 years so maybe I’m jumping the gun wanting to hurry up and have this problem behind me.

Over the past few weeks the American Banker headlines read:

Investors Give Banks a Swift Kick in the Pants;
Private equity firms and hedge funds are forcing the banks they invest in to clean up problem loans, and it's starting to show in the data;
Buffet’s $5 Billion Lifeline Could Become B of A’s Capital Noose;
Numerous articles regarding Banks Robo-Signing woes;
FHFA Suing 17 of the largest U.S. banks for mortgage fraud;
B of A is fighting major battles on multiple fronts from mortgage fraud;
Large Banks accused of taking $6B in kickbacks from mortgage insurers;
Lawsuits Highlight an Administration at odds on housing;
Banks accused of fabricating foreclosure documents;
Community banks using Small Business Loan Fund proceeds to exit TARP
And the American Banker publication is on the bank’s team. You can only imagine what the rest of the press is writing about this nation’s banks.

I was truly hoping by this point that banks would have cleared their decks of distressed balance sheet loans and we would be on to something new like the next great bubble. The FDIC recently announced that there are fewer banks in trouble in Q3 2011. I find that hard to believe since we have still not seen the great purging of distressed loans we have anticipated since 2007.

Did asset quality improve without the rest of us knowing?

Did rents and occupancy rebound on a national level while we weren’t looking?

Was there some unknown force that caused hidden massive property appreciation whereby borrowers are no longer upside down in their mortgages?

Could these same big banks that are currently being sued by AG’s offices in fifty states, the Federal government and investors of every ilk be lying about asset quality and market conditions?

Surely not.

Happy fourth anniversary indeed, unfortunately I feel confident we will see anniversary number five.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Good Ole Days, Nick Tyrell, Dreams and ice cream
Friday, September 09 2011 | 01:26 PM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Matt Slepin and his colleagues at Terra Search Partners publish a regular piece called Viewpoints. Yesterday their most recent issue hit my mailbox. I thought you'd find this section particularly interesting.


"At the beginning of this year, it felt like we were exiting the darkness of the recession. There seemed to be a light at the end of the tunnel, a glimpse that maybe we would indeed return, although cautiously, to the realm of the Good Ole Days. CMBS 2.0 was gaining momentum, investment sales volume seemed to be returning, and indeed our search business felt back on a roll. But the second quarter brought us back down to reality as employment remained flat, CMBS 2.0 fell apart, and the ripples of the failed debt reduction talks, the S&P downgrade, and the parallel dysfunctions in Europe sunk in. Now it feels as though the first quarter was the effect of pent-up demand and the settling into the New Normal versus a return to the Good Ole Days. Real estate in the US is saying crazy, contradictory things. Multifamily is the one sector with largely positive long term drivers. The other sectors all seem more affected by secular changes – technology, globalization, and corporate efficiencies all have deep and obvious impact on the other major real estate “food groups.” Hospitality is, as always, more volatile and the bottom in the residential sector sadly still seems to be several years out."


Special Event: The Nick Tyrrell Memorial Seminar : Applying Research Insights to Real Estate Investment Management:


Nick was a friend of mine as he was of many in the industry. This looks like a great program with some of the leading Research/Investment Strategists in the industry in attendance. Unfortunately, I will only be able to attend in spirit. The seminar will be used to raise money for the Nick Tyrrell Memorial Fund, which will present awards to papers that combine academic discipline with practical insights for the real estate profession. The event is being hosted by JPMorgan Asset Management, Nick's last employer and is being held on October 12 at 4pm to 8pm at Victoria Embankment, London. I will include more details as I get them.


This quote, sent to me yesterday by a good friend, really hits home: "We live in a moment of history where change is so speeded up that we begin to see the present only when it is already disappearing." Ronnie Laing


I don't dream all that often. I've been trying to corollate my dreaming being associated with when I eat ice cream just before going to bed...but I'm going to have to keep testing that thesis! But early this morning I woke up from a dream and just couldn't go back to sleep. I dreamed about getting up and calling my father. Just to see how he was doing. The problem is that he died in November 2009. I guess in my dream he was still reachable by phone. But, I remember what one of you guys wrote me when I was spending a lot of time with my Dad in his final months: you can talk with him anytime you want. I remembered that just now and decided to close my eyes and have a chat with him. He really didn't want to talk much about how he's doing and what type of things he's involved with...perhaps he's not allowed to divulge that kind of stuff. But he did listen to what was on my mind and these days there are a few things that should be keeping me up at night. It's been a good early morning for me, simply the ability to reach out to my Dad and also to write about this to you. Actually, the more I think about it, I'm pretty sure the dreaming is due to ice cream but maybe it's only specific flavors. More research is definitely in order.


Enjoy your weekend.
Good Ole Days, Nick Tyrell, Dreams and ice cream
Posted: 09 Sep 2011 05:28 AM PDT


Matt Slepin and his colleagues at Terra Search Partners publish a regular piece called Viewpoints. Yesterday their most recent issue hit my mailbox. I thought you'd find this section particularly interesting.


"At the beginning of this year, it felt like we were exiting the darkness of the recession. There seemed to be a light at the end of the tunnel, a glimpse that maybe we would indeed return, although cautiously, to the realm of the Good Ole Days. CMBS 2.0 was gaining momentum, investment sales volume seemed to be returning, and indeed our search business felt back on a roll. But the second quarter brought us back down to reality as employment remained flat, CMBS 2.0 fell apart, and the ripples of the failed debt reduction talks, the S&P downgrade, and the parallel dysfunctions in Europe sunk in. Now it feels as though the first quarter was the effect of pent-up demand and the settling into the New Normal versus a return to the Good Ole Days. Real estate in the US is saying crazy, contradictory things. Multifamily is the one sector with largely positive long term drivers. The other sectors all seem more affected by secular changes – technology, globalization, and corporate efficiencies all have deep and obvious impact on the other major real estate “food groups.” Hospitality is, as always, more volatile and the bottom in the residential sector sadly still seems to be several years out."


Special Event: The Nick Tyrrell Memorial Seminar : Applying Research Insights to Real Estate Investment Management:


Nick was a friend of mine as he was of many in the industry. This looks like a great program with some of the leading Research/Investment Strategists in the industry in attendance. Unfortunately, I will only be able to attend in spirit. The seminar will be used to raise money for the Nick Tyrrell Memorial Fund, which will present awards to papers that combine academic discipline with practical insights for the real estate profession. The event is being hosted by JPMorgan Asset Management, Nick's last employer and is being held on October 12 at 4pm to 8pm at Victoria Embankment, London. I will include more details as I get them.


This quote, sent to me yesterday by a good friend, really hits home: "We live in a moment of history where change is so speeded up that we begin to see the present only when it is already disappearing." Ronnie Laing


I don't dream all that often. I've been trying to corollate my dreaming being associated with when I eat ice cream just before going to bed...but I'm going to have to keep testing that thesis! But early this morning I woke up from a dream and just couldn't go back to sleep. I dreamed about getting up and calling my father. Just to see how he was doing. The problem is that he died in November 2009. I guess in my dream he was still reachable by phone. But, I remember what one of you guys wrote me when I was spending a lot of time with my Dad in his final months: you can talk with him anytime you want. I remembered that just now and decided to close my eyes and have a chat with him. He really didn't want to talk much about how he's doing and what type of things he's involved with...perhaps he's not allowed to divulge that kind of stuff. But he did listen to what was on my mind and these days there are a few things that should be keeping me up at night. It's been a good early morning for me, simply the ability to reach out to my Dad and also to write about this to you. Actually, the more I think about it, I'm pretty sure the dreaming is due to ice cream but maybe it's only specific flavors. More research is definitely in order.


Enjoy your weekend.


Steve


P.S. My cousin, Jeff Smiley, went to the Air Force Academy and flew B-52's in Vietnam. More than 20 years ago, at age 41, he died of some type of leukemia. After the funeral ceremony, attended by hundreds of people whose lives he had touched, I went back to his house and found the following poem, framed and hung on a wall. My old classmate, Peggy Noonan, drew from this for President Regan's speech after the Challenger disaster. Even though it's been adopted as a mantra by pilots, I thought it also had meaning for those who had innocently boarded those airplanes on September 11, 2001. I offer it to you in honor of their memory.


High Flight
Oh! I have slipped the surly bonds of earth
And danced the skies on laughter-silvered wings;
Sunward I've climbed, and joined the tumbling mirth
Of sun-split clouds - and done a hundred things
You have not dreamed of - wheeled and soared and swung
High in the sunlit silence. Hov'ring there
I've chased the shouting wind along, and flung
My eager craft through footless halls of air.
Up, up the long delirious, burning blue,
I've topped the windswept heights with easy grace
Where never lark, or even eagle flew -
And, while with silent lifting mind I've trod
The high untresspassed sanctity of space,
Put out my hand and touched the face of God.

Pilot Officer Gillespie Magee
No 412 squadron, RCAF
Killed 11 December 1941
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Labor Day 2011
Tuesday, September 06 2011 | 09:33 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

So, the big news this week was the announcement that The Townsend Group had sold a 70% interest in their firm to a start-up private equity group. Congrats to Townsend on what appears to be an excellent deal. Also good to read was that the remaining 30% still to be controlled by Townsend has been divided amongst a number of their current 'internal' partners. A classy move I'd say as there have been too many of these type deals, not necessarily in our industry, where a few people get really rich and the rest of the employees basically suck wind. I guess one thing that crosses my mind in reading the news is whether Townsend will continue to focus on growing their investment management business vs. their advisory business and how their advisory clients are going to react (if at all) to this deal. I guess, there's a lot more buzz amongst the consulting community who may be licking their chops feeling that Townsend's advisory client list is ripe for picking off. It could be an interesting story unfolding right before our eyes.


Well, the summer is over...can it possibly be? But, I see it in some ways as a time of renewal, or perhaps renewed energy. In some ways Europe basically shuts down as people are off on their holidays and it's difficult to either get to someone or get an answer on something. In the U.S., from where I sit, it was a confusing summer and perhaps we all should have taken the summer off as well. But with the crisp mornings and clear skies (at least in Napa) it's energizing. Those who are looking for new jobs are hoping that the fall brings with it more clarity; those that are looking to raise capital hope that the uncertainty that has constrained some institutional investors from making commitments, is over completely, that it's understood or accepted enough to allow them to move forward; those of us who attend fall conferences are finalizing our travel schedules and those who need to be 'on the road' to get their job done are looking at how to arrange everything they want to accomplish without going nuts. There's a lot going on!

I guess that by next week virtually all public school systems in the U.S. will be back in session. I remember those years, going shopping for school supplies which included loose leaf binders, dividers, pencil cases (I know, sounds nerdy but we all had them), book straps (dangerous elastic things that allowed us to carry a number of textbooks to and from school; book bags have made that easier). It all sounds antique now. But other than during the years that I went to summer camp and the end of the summer (for those of us teenagers and older) meant teary good-byes, I don't remember ever feeling bad about going back to school. In fact, I wouldn't mind going back now but perhaps as a teacher (although aren't we always students? A friend recently told me, "When a student is ready, a teacher will appear"). I've approached my local community college about teaching some classes on improving presentation skills (aka how to live without PowerPoint slides), networking skills and managing a contact database, public speaking skills, you get the idea. I don't think too much of this is actually taught these days although I do know that some schools do offer interview skills classes. Anyway, I wrote to the President of the school this week and I'll let you know if anything transpires.

My life is people. I love learning about people, not just what they do but who they are, where they grew up, went to high school, etc. . And what's great is that people love sharing stuff about themselves; all you have to do is ask them. It really brings us closer together. When I was running an RTC contractor office and had hired 55 people in short order to work out hundreds of troubled loans and assets, I started a Friday morning "Bagels and..." session. At these, each week, three people would tell the group about themselves; stuff we might not know and also about their background in the real estate industry and skills they'd developed. Not only did we learn more about each other as people we also learned who had specialized experience in this, that or the other thing so that when something came up regarding one of our assets, we knew who the 'go-to' person was. It's the true value-add. Do you know who in your shop knows more than they may be asked to do on a day-to-day basis? It might be interesting finding out, don't you think?

"Labor Day, the first Monday in September, is a creation of the labor movement and is dedicated to the social and economic achievements of American workers. It constitutes a yearly national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country. The first Labor Day holiday was celebrated on Tuesday, September 5, 1882, in New York City. The form that the observance and celebration of Labor Day should take were outlined in the first proposal of the holiday — a street parade to exhibit to the public "the strength and esprit de corps of the trade and labor organizations" of the community, followed by a festival for the recreation and amusement of the workers and their families. The vital force of labor added materially to the highest standard of living and the greatest production the world has ever known and has brought us closer to the realization of our traditional ideals of economic and political democracy. It is appropriate, therefore, that the nation pay tribute on Labor Day to the creator of so much of the nation's strength, freedom, and leadership — the American worker."

The preceding is from the U.S. Government website. It seems a little self-serving, perhaps typically American. Another way to look at it might be simply that it's time to give each other a little pat on the back because, when you come down to it, all of us who work for a living are connected. Perhaps it's time to revisit the definition of Labor Day and use it as a way to bring America together again.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Are you getting OTR into your inbox?
Monday, August 29 2011 | 10:38 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Hi. Two people wrote me to say they wondered if I had stopped publishing as they hadn't heard from me in the past two weeks.

Could you please reply and let me know 'yes' or 'no' if you've received OTR the past two weeks?

Thanks a lot.
Steve
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James Wallace, Finance Editor, COSTAR

Deustche Annington to outline plans for Europe's largest CMBS refi
Monday, August 22 2011 | 03:41 PM
James Wallace
Finance Editor, COSTAR

Terra Firma-owned Deustche Annington hopes to implement its “amend and extend” strategy for the €4.7bn GRAND securitisation by the end of the year.

An outline of Deustche Annington’s proposed strategy to refinance Europe’s largest CMBS will be delivered by early October which will enable the “full refinancing of the GRAND securitisation over time… to deliver noteholders a full recovery over the extended term,” the issuer said in a statement.

The proposals by Deustche Annington, which is being advised by Blackstone and Allen & Overy, seek to tackle the massive refinancing risk through a phased refinancing strategy involving staggered new loan and bond maturity dates at a pace and volume of new debt that banking markets can accommodate.

Currently, the securitised loans are set to mature in July 2013, while the bonds’ legal maturity is three years thereafter. But any loan extension is likely to necessitate pushing out the final legal maturity so as to avoid a possible downgrading in the notes’ ratings.

Speculating on the maturity extension of the final maturity of the bond, Krishna Prasad, CMBS analyst at RBS wrote in a note today: “Given the difficulty of refinancing bonds in the current, we would expect that an extension of three to five years will be necessary at the minimum.”

The original €5.8bn GRAND CMBS transaction was secured against more than 180,000 multi-family units predominantly consisting of residential properties spread across Germany. The structure of the GRAND securitisation is complex, consisting of separate loans to 29 Real Estate Funding (REF) issuers. “It is possible and even likely that each of these REFs will be refinanced separately,” writes Prasad.

Any proposed maturity extension will require a vote by noteholders at an EGM, with each class of noteholders required to vote for the decision to be passed.

Furthermore, any proposal that constitutes an amendment to the REF notes will also require the consent of the servicer, which suggests that Capita’s role will be undiminished by the appointment of Rothschild and Freshfields by the Ad-Hoc noteholder group on July 15. At which time, the group represented 64% by value of the outstanding notes, and 50% by value in all but one of the junior classes of the outstanding notes.

But before any vote can take place, the documentation must be amended so a threshold is set at which a decision will be carried. This documentation “defect” has been cited as a major obstacle date over the resolution of the mammoth refinancing.

Typically, the highest threshold in CMBS trust deed documentation to pass resolutions is 75%, but the absence of any stated figure has caused unease among particularly the junior bondholders who are worried that their voices will be unheard.

A new valuation has been commissioned, and is expected to be published soon, which will enable all parties to form a view as to the most logical direction to take next. A third possible string to the strategy is a more concerted sales strategy – which so far has been slow with only 1,679 units sold this year – of the underlying German residential properties.

But the borrower has intimated in the past that it considers a disposal strategy would undercut the inherent value in the performing portfolio, which makes the refinancing critical for the future of the transaction.

Prasad continues in today’s note: “While we recognise that some form of refinancing is necessary, the impact of the proposal on the valuation of the bonds will depend on the details, which remain sketchy. Whether the impact is positive for the transaction as a whole will depend on whether the sponsor will put cash into the transaction. If it does not, then any reduction in LTV is due to an increase in valuation or natural amortisation, which we view as largely optical. Even so, a formal refinancing or extension will take away the uncertainty and should be considered a positive.”

In a separate note this morning, Chalkhill Partners wrote: “We would highlight that the ramifications of the solvent ‘scheme of arrangement route’ is unclear to us at this stage. Particularly, the wording around ‘the equal treatment of each class of noteholders’ raises some questions as to the preservation of waterfalls / seniority that constitute the cornerstone of structured finance transactions.”

So, what happens next? A lot more specifics are needed on the refinance strategy, together with commissioned but unpublished updated valuation. And also, while Deustche Annington may propose a solution, and noteholders may vote on it, Capita Asset Services also have a fiduciary duty to uphold in what is not only the largest European CMBS refinance – it is also the most convoluted. Deustche Annington, the Ad-Hoc noteholder group and Capita each have a financial adviser and a legal adviser.

As one source put it: “The pitch is a bit crowded and people are grappling for position.”
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

CalPERS; organizing your email; concert stage collapse
Monday, August 22 2011 | 09:11 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

CalPERS has often been looked at as one of the leaders that many other pension funds follow. just this past week they announced plans to launch a new emerging manager program. in a world that likes labels, the definition of 'emerging manager' has been somewhat of a moving target but the CalPERs definition is one that i personally subscribe to: "managers with (a) less than $1Bn of assets under management and (b) no more than three prior commingled funds or separate account investment vehicles." like with anything, there will be objection to this definition from some managers who think of themselves as still emerging. as stated in the public record of the recent investment committee meeting, the proposed five-year program will not exceed $200MM and will focus on investment in managers and assets located in urban California markets. CalPERS retained Crosswater Realty Advisors (aka ted leary and his posse) to present a report to the investment committee on this subject. while a number of public pension funds already have an emerging manager program in place, it'll be interesting to see if others follow.


i apologize for overloading your inbox with three OTRs this week. without boring you, after two weeks of failing to deliver OTR to you, i finally found out what the problem was (i hope).

update on my new email management system. a few months ago i wrote you about a new way to manage emails that i read about. i decided to implement it immediately. i'm here to tell you that it is working for me. simply, it's the same idea that was suggested years ago when all we had was paper. when something lands on your desk or in your in box, do one of three things with it: act on it, delegate it or toss it. this email system is similar but with a couple of extra wrinkles. yes, every day, i do use that system (although i don't have many situations where i can delegate stuff) but i also created email folders with the following labels: tickler (which i check first thing every day and which contains items that need attention soon); reference (for stuff that i want to 'file' that could be research stuff or things i feel i will be able to use somewhere down the line); waiting for (as it says, for things that i'm waiting for from somebody); future meetings (where i want to remember to schedule a meeting with someone at a future date); someday/maybe (needs no explanation). i also have labels for each month where i do save a number of emails from that month but then, at the end of each month, i purge those files wondering, "why the heck did i save this one or that one?" anyway, it's working for me although we all have different ways of keeping our lives organized and, it's whatever works for you that counts, right?

as the media tends to behave, when one disaster, natural or otherwise happens, they scour the world looking for other things that resemble the first disaster. but, i can't let this week pass without mentioning the horrible stage collapse at the music venue in indiana. watching the one video on you-tube which captured the horrific scene brought tears to my eyes and chills to my body. i haven't read anything in the past couple of days but as you would expect, there is finger pointing and stuff that comes along with it, looking to place blame. and, just from going by what has been reported, some are suggesting that there were advance warnings of very high winds approaching. should they have been heeded immediately? were they even communicated to the stage manager and audience?

looking at the size and elaborateness of the stage/sound/lighting and everything that goes along with producing a big, live music event, i was thinking about how it's all grown, so big, from the good old days when the beatles played shea stadium in ny with their vox amplifiers and simple stage arrangement (of course, no one could hear them due to all the screaming!). and, as ticket prices for live shows have soared, promoters and the bands themselves have escalated the elaborateness of the delivery (i saw the stones in germany a few years ago when their stage recreated an ocean liner and U2 and bon jovi and pink floyd which also had huge set ups). this tragedy won't change things but i think that given the great advances of technology, especially in sound engineering, music can be delivered to certain size crowds with less gigantic structures (although a lot of what's on those structures is lighting related). i remember when MTV first launched. my reaction was, "this is music, it's an audio sensory thing, not a visual sensory thing." of course, history has shown that that has all changed. but in my simple way of looking at things, it's still all about the music, the sound, the human beings performing rather than the ancillary entertainment that almost serves as a distraction from the music. but (big sigh), i'm probably exposing the fact that i yearn for some of the simpler things and yet, i know that they will most likely never return. those killed and hurt in indiana could have (and may actually be) our sons or daughters or our friends who had just gone there to groove on the music. what happened is just so, so sad but just like lots of things. it seemed like it was mother nature, once again flexing her muscles, perhaps warning us in some ways that she's concerned about the direction society is moving. who knows?

who said “size matters”? there are two published pieces i receive that are in an interesting format (is it a trend?). they’re about half the size of an 8 ½ x 11 piece of paper and are very cute. one, called the decisive eye is published by Internos Real Investors and the other called the property perspective is published by Frogmore. I like the “kindle” size as it makes it easy to take with you. Nice to see some people thinking differently.


restaurants of the week (first time at both):
1. fig & olive, several manhattan locations. i ate at the one on 52nd street between madison and fifth. thanks zoe.
2. fresco by scotto, also on 52nd between park and madison. thanks jerry (my accountant for longer than we both want to admit) who published a periodic blog called, achieve great things!

OTR was listed as #7 in the best real estate/finance blogs in a just published survey in The Institutional Real Estate Letter-North America. thanks for all your support and encouragement over the years.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

what's going on?; coulda, shoulda, woulda
Monday, August 22 2011 | 09:07 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

this morning, for the first time in a long, long time, i sat down to write this little story to you, stared at the blank page, and wondered what i could write that would be of interest to you.

i’m not qualified to write about the craziness of the stock market (although my opinion is that, just like so many things, over-reaction is rampant in the world).

as you know, with an occasional slip-up, i’ve stayed away from politics (also not qualified to comment).

and, as many of my european real estate industry friends are off on ‘real’ holidays (i.e. at least two weeks during the summer and when you get a ‘gone fishing’ email reply, saying they will not be checking email, you know they mean it.

but, the commercial real estate business chugs along, just like the little engine that could, working it’s way up a steep hill and trying to find itself again.

RCA published a release this week on the subject of Development Land deals.


• Sales of developable land increased by 64% year-over-year in H1'11 to $3.2 billion. Though that's still below growth for other property sectors, increasing volume in this sector indicates some loosening of what has seemed a near moratorium on development.
• As in the broader market, investors have focused on multifamily and CBD sites in primary markets. Prices for land have fallen farther than for all other property types, and lenders are still achieving lower recovery rates on average for land than in other sectors. Nonetheless, well-located land has achieved close to peak-era pricing as well as recovery rates that are closer to the average rates for other property types.

to me, this is not unexpected. developers have always been the real risk takers in our industry. through exhaustive market research (sometimes) they determine that a piece of property has potential. when they’re right, it’s a big win. when they’re wrong, well, it’s a problem. real estate has always been a game of deep pockets, deep enough to ride out the storms that affect absorption of houses, apartments, office, retail and industrial space, what have you. and with a renewed optimism about things, it’s not surprising that development sites are hot again. and, if you were trained, like i was, that the upside is made on the buy, prices like these are probably very tempting. who is lending money for development sites i’m not sure about but there are more pockets of money these days than the traditional sources, deep or otherwise, which have a higher threshold of risk (although there will come a day of reckoning when they’ll have to face their investors…either with a check, a bill or the news that they had to give the property back).



there is one thing that i would like to share with you today: in the summer of 2008, when i was thinking about the next step in my career, i read a bunch and summarized of books. these days i've been thinking about me waking up one day, just after my 106th birthday, and feeling, ‘i shoulda done this or i shoulda done that or i shoulda…..’ i’m sure some of you know those feelings. so here are a few things from some of the stuff i've read (and in some cases been re-reading) that have struck me this week:


• it’s human nature for people to take precisely as much interest in you as they believe you’re taking in them. there is no stronger way to build relationships than taking a genuine interest in other human beings and allowing them to share their stories.
• everyone should start at ground zero. they should ask, ‘is this viable anymore? is this what the world wants?”
• having a vision is not enough; if you fail to envision the potential of your creation, it will be left for others to exploit. what you need is a vision and the ability to develop a strategy to achieve it.
• “if a man has a talent and cannot use it, he has failed.” thomas wolfe
• “what you can do or think you can do, begin it. for boldness has magic, power and genius in it.” goethe
• "if you let them, things just happen in the right way, at the right time. at least they do when you let them, when you work with circumstances instead of saying, “this isn’t supposed to be happening this way, “ and trying hard to make it happen some other way. if you’re in tune with The Way Things Work, then they work the way they need to, no matter what you may think about it at the time. later on, you can look back and say, “oh, now I understand. that had to happen so those could happen and those had to happen in order for this to happen….” then you realize that even if you’d tried to make it all turn out perfectly, you couldn’t have done better and if you’d really tried, you would have made a mess of the whole thing.” the tao of pooh
here are the tour dates for a good friend (and the guitarist in my ‘band’) ernie hendrickson. if he is coming to a place near you i encourage you to check him out. i also guarantee that you will enjoy it. ernie is the real deal!
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

ceo's and bono, industry events, networking
Thursday, August 18 2011 | 02:50 PM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

in a harvard business school case, “bono and U2”, professor nancy koehn discusses business lessons to be earned from the famous band.




key concepts include:
· take stock of how you are using your funds, your authority and your people.
· a leader’s mission and purpose isn’t static; it evolves.
· the mission of the ceo should be related to the organizations performance.
· who you are and what you stand for as an organization have great relevance to the people who buy your product (or service)


“in the bigger picture, U2’s journey reflects our own moment here in the early 21st century. U2’s appeal has always been about our common humanity and the yearning we all experience to follow a higher path. people are looking for the light and U2’s music has spoken to that since the band started.”


“any ceo who thinks his or her job is primarily about maximizing shareholder value is living in the past. the game of what kind of capitalism will define this century has changed very quickly and dramatically. creative capitalism, conscious capitalism, stakeholder capitalism, call it what you will. the larger social footprint and role of business are here to stay.”


it’s a very interesting piece which i’ll be happy to send you. and, while it’s written towards ceo’s of companies, when you think about it, we are all our own ceo’s of ourselves and the way we choose to live our lives matters to us, if to nobody else. we have those choices to make. i have made it my mission to try to bring the world closer together, one person at a time. one of the wonderful byproducts of all the travel I’ve done is getting to meet people and understanding them better and hopefully leaving them with a little better understanding of americans. we're talking about people here, not countries, not religions as we are all the same....human beings. from the time very early one morning that I talked with a paris policeman who was guarding the palace of the president of france right after we invaded iraq and americans were ‘personna non gratt’ in france and we agreed that we did not hate each other, we just hated what america had done to meeting people in liberia and bringing back the challenges that they face, these experiences have been really meaningful to me.




like many of you, i’ve been planning what industry events to attend this fall and winter. and as you can see by my schedule below, i’ve made some decisions already. but it got me thinking: what are my expectations from attending a conference? are they met? exceeded? what is it that you’re not getting that you’d like to? after all, attending almost any conference (and some in particular) is expensive and time consuming and when you combine those you’d like to leave a conference feeling that not only was it worth spending your time and money but that you would recommend it to a friend.


if you have some time, i’d really appreciate you sending me your thoughts, perhaps wish list, when you say, “ I wish there was an event which provided this (whatever this is to you).” thanks.


thanks to drew genova of cbre in washington, dc who sent me an article called “secrets to better networking.” the suggestions come from a book called “never make the first offer” by donald dell, founder of the proserv sports agency.


1. make friends. create opportunities to get to know people out of the office, out of the normal parameters of the business relationship and outside mutual comfort zones.
2. make friends of their friends.
· 3. find mentors.
· 4. give advice (carefully)
· 5. don’t keep score.
· 6. massage your network. send personal notes.
· 7. show no fear.
· 8. do good works. charitable endeavors


i’ve built a wonderful network of people which is now global. this column is read (or at least received J by people all over the world. i consider it both a privilege and a responsibility and have always treated the people i know with respect and consideration. my connectivity has never been calculated. i just love people and love helping people. i realized, not all that long ago, when I was trying to identify what made a good day for me, it was when i was able to help someone, not necessarily in a big way. it feels good. i endorse some of the points that dell makes above but a couple of things i’d add is ‘be yourself’, ‘be natural’, 'don't take people for granted' and 'don't abuse your network.'
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Robert Knakal, Chairman, MASSEY KNAKAL

Breaking It Down by Borough
Thursday, August 18 2011 | 02:48 PM
Robert Knakal
Chairman, MASSEY KNAKAL

In last week’s column, we took a look at the overall New York City building sales market and compared its recent performance with past periods. This week, we will take a similar look at the first half of 2011 (1H11) but will analyze the performance of each individual geographic submarket.

As I have written for some time, we fully expected the Manhattan market to lead the entire marketplace out of the downturn and are indeed seeing this happen. Sales volume picked up in Manhattan before it did in other submarkets, and we are starting to see value appreciation in Manhattan.

In the outer boroughs (including northern Manhattan), sales volume has been lagging and, in some cases, has only recently started to recover. Value in these areas remains uneven with some product types experiencing continued slides in the price-per-square-foot metric.

A detailed look at each of these submarkets will highlight how each is performing.



Manhattan

In the Manhattan submarket (defined as south of 96th Street on the East Side and south of 110th Street on the West Side), there was approximately $11 billion worth of investment sales in 1H11. This activity reflects a 124 percent increase over the same period last year, when $4.9 billion traded. In 2Q11 alone, there was $7.9 billion in sales volume, the highest quarterly total going back to 4Q07.

If 1H11 activity is annualized, the Manhattan submarket should experience a near doubling of last year’s $12 billion sales volume. This year’s total will likely be five times the $4.2 billion in 2009. At the peak of the market in 2007, there was $52.5 billion in sales volume.

Regarding the number of properties sold in the Manhattan submarket, 277 properties traded in 1H11, which, if annualized, is up 17 percent from the 473 properties sold in 2010. At the peak of the market in 2007, 999 properties sold. Clearly, we still have a long way to go before hitting the activity levels seen at the peak.

Value in Manhattan is trending upward in almost all property segments. There is still some downward pressure exerted on development-site sales, but this has less to do with actual value and more to do with the number of transactions. Value of land on a price-per-buildable-square-foot basis is improving, notwithstanding what comparable sales data indicate. With the number of sales increasing significantly, it is not surprising to have averages fall as we come off periods during which only those sites obtaining top values were trading. All other property types are experiencing nice appreciation.

Overall, value is up almost 11 percent, on a price-per-square-foot basis, in 2011 versus 2010. Hindsight will show us that 2010 was the bottom of the Manhattan submarket in terms of value.



Northern Manhattan

In the northern Manhattan submarket, in 1H11 there was $167.4 million in sales, significantly less than the $335 million in 1H10. If we annualize the dollar volume in 1H11, the market is running about 34 percent below the $509 million in sales in 2010. At the peak of the market in 2007, there was about $1.5 billion in dollar volume in this submarket.

In terms of number of properties sold, 69 properties traded in 1H11 as compared to 66 in 1H10, an increase of 4.5 percent. Annualizing the 1H11 total would lead to an estimated 138 sales for the year, an anticipated increase of 9 percent for over 2010’s 127 sales. At the peak of the market, in 2007, 327 properties sold.

Values in northern Manhattan remain uneven, with some property types showing increases in value per square foot with others continuing to show decreases.



The Bronx

In the Bronx submarket, there was $282 million in sales volume in 1H11, a total significantly higher than the $194 million in 1H10. If we annualize the 1H11 totals, the $565 million result will show an increase of about 16.5 percent over the $485 million of sales last year. At the peak of the market in 2007, there was about $2.2 billion in sales in this submarket.

In terms of number of properties sold, there were 114 properties sold in 1H11, up 21 percent from the 94 in 1H10. Annualizing the 1H11 total would yield 228 sales, which would be up 19 percent from the 191 total last year. At the peak of the market in 2007, 701 properties sold.

Value in the Bronx remains very mixed, with half the product types seeing slight increases in value and the other half seeing values continuing to slide.



Brooklyn

In the Brooklyn submarket, there was $699 million in sales volume in 1H11, up 37 percent from the $509 million in 1H10. If we annualize the 1H11 totals, the $1.4 billion in activity would be up 45 percent from the $963 million 2010 total. At the peak of the market in 2007, Brooklyn saw $3.8 billion in sales.

In terms of number of properties sold, this submarket saw 336 sales, up 23 percent from the 274 in 1H10. On an annualized basis, the 672 sales would show an increase of 18 percent over the 569 properties in the borough last year. At the peak of the market in 2006, 1,916 properties were traded in this submarket.

As in other outer-borough submarkets, Brooklyn has been seeing mixed value performance with five product types showing continued reductions in average prices per square foot and three product types increasing in value.



Queens

Lastly, in the Queens submarket in 1H11, there was $452 million in sales volume, up 73 percent from the $260 million in 1H10. If we annualize the 1H11 totals, the $904 million worth of expected activity would be up 62 percent from the $558 million last year. At the peak of the market in 2006, there was $2.6 billion in sales activity in Queens.

In terms of number of sales, 164 properties sold in 1H11, down slightly from the 171 in 1H10. If we annualize the 1H11 totals, the 328 sales would be up 7 percent from the total of 307 sold in 2010. At the peak of the market in 2006, 1,191 properties sold in this submarket.

In the Queens submarket, most product types are still experiencing value reductions in average price per square foot. Within five product types here, values dipped in 1H11 from 2010 totals, while within three segments, values increased.



ALL OF THIS DATA lead to conclusions that are not necessarily unexpected. The Manhattan submarket is clearly leading the recovery and should help pull the other submarkets along with it. What is somewhat surprising is that value per square foot is not recovering as quickly outside Manhattan as we would have expected.

It appears that our real estate recovery is following the sluggish economic recovery that the nation is facing. We are lucky that we are in the New York City marketplace, which is doing relatively well compared with other locales. Notwithstanding how well we are doing here, things are still not all blue sky ahead. In June, the state unemployment rate rose to 8 percent from 7.8 percent in May. In New York City, the jobless rate increased from 8.6 percent to 8.7 percent. This is a troubling sign for the market given how impactful jobs are on our underlying fundamentals.

Even with a pace of activity that’s slower than we would like, and the outer boroughs on a difficult footing value-wise, we expect the second half of 2011 to firm up. We believe we are still on pace to see very healthy volume increases and values appreciating in Manhattan and stabilizing in the other submarkets.


COURTESY OF THE NEW YORK OBSERVER
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Robert Knakal, Chairman, MASSEY KNAKAL

What’s Driving Investment Sales Right Now
Wednesday, August 03 2011 | 10:48 AM
Robert Knakal
Chairman, MASSEY KNAKAL

During the first half of 2011 (1H11), the dollar volume of investment sales transactions in the New York City market was $12.6 billion. On an annualized basis, activity is on pace to increase by 73 percent over the 2010 total of $14.6 billion.

At face value, this number leads to an extremely optimistic perspective regarding the market’s performance. However, it is important to take a much closer look at the data, and realize that the market, while trending positively, remains uneven.

In the first quarter of 2011 (1Q11), there was approximately $4 billion of investment sales activity. We were pleasantly surprised by this number, having expected it to be more muted given the extraordinary activity in the fourth quarter of 2010.

Transactions that normally would have closed in 1Q11 were accelerated into 4Q10 based on lenders wanting to clean up balance sheets by year-end and a significant number of discretionary sellers who pulled the trigger last year in anticipation of a rise in the capital gains tax.

In 2Q11, there was a whopping $8.6 billion worth of transactions closed. This was the best quarter in 15, going back to the fourth quarter of 2007. Annualizing the 1H11 total shows $25.22 billion of expected activity for the year, which, as stated earlier, would be up significantly from the $14.6 billion in 2010.

A sector that has had a significant impact on the market’s performance is the larger transaction segment and, specifically, the number of $100 million-and-larger sales.

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concrete thoughts

What’s Driving Investment Sales Right Now
By Robert Knakal 7/21 12:26pm
During the first half of 2011 (1H11), the dollar volume of investment sales transactions in the New York City market was $12.6 billion. On an annualized basis, activity is on pace to increase by 73 percent over the 2010 total of $14.6 billion.

At face value, this number leads to an extremely optimistic perspective regarding the market’s performance. However, it is important to take a much closer look at the data, and realize that the market, while trending positively, remains uneven.

In the first quarter of 2011 (1Q11), there was approximately $4 billion of investment sales activity. We were pleasantly surprised by this number, having expected it to be more muted given the extraordinary activity in the fourth quarter of 2010.

Transactions that normally would have closed in 1Q11 were accelerated into 4Q10 based on lenders wanting to clean up balance sheets by year-end and a significant number of discretionary sellers who pulled the trigger last year in anticipation of a rise in the capital gains tax.

In 2Q11, there was a whopping $8.6 billion worth of transactions closed. This was the best quarter in 15, going back to the fourth quarter of 2007. Annualizing the 1H11 total shows $25.22 billion of expected activity for the year, which, as stated earlier, would be up significantly from the $14.6 billion in 2010.

A sector that has had a significant impact on the market’s performance is the larger transaction segment and, specifically, the number of $100 million-and-larger sales.

If you’re a frequent reader of Concrete Thoughts and you read my quarterly market overviews, you know that we look much more closely at the number of properties sold than to the dollar volume to get a true feel for market activity. This is due to the fact that the dollar volume of sales can be skewed very significantly by a few large transactions. If an asset like Stuyvesant Town/Peter Cooper Village sells for $5.4 billion, it can have a very significant impact on the marketplace. Similarly, last year’s $1.8 billion sale of 111 Eighth Avenue to Google represented over 12 percent of 2010’s annual city total.

If we consider the number of properties sold, we see that in 1H11, 960 properties were sold, which, if annualized, would yield only about a 15 percent increase over the 1,667 properties sold in 2010.

Comparing the two volume metrics, we see a projected increase of 73 percent in dollar volume, while on a number-of–properties-sold basis the increase is only 15 percent. Larger transactions account for this disparity.

If we look at the number of transactions that took place in excess of $100 million, we see that in 2009 there were only seven. In 2010, there were 29 of these sales and in the first two quarters of this year there have been 31, already eclipsing last year’s total. If we consider that these 31 transactions totaled $8.5 billion in sales activity, this represents about two-thirds of the $12.6 billion total of all 1H11 dollar volume.

Simultaneously, these 31 transactions, out of the 960 total, represent only about 3.2 percent of all properties sold. The activity in the over-$100 million market is also on pace to more than double last year’s total of $8.2 billion, as annualizing 1H11 activity results in a projection of approximately $17 billion for this year.

While the over-$100 million market is booming, with a projected increase in the number of sales on pace for a 114 percent annual increase, the under-$100 million market is not nearly keeping pace. In 1H11, the pace of sales under $100 million was set to produce an increase of just 13 percent and, if we look at the under-$50 million market, the contraction is even more severe.

Properties selling for less than $50 million saw 237 sales in 1H11 compared with 507 in 2010. Annualizing the 1H11 total, we extrapolate 474 sales for the year, a decrease of 7 percent from last year’s totals. This result was unforeseen and has been an eye-opener.

Additional data reinforce the trend of larger transactions gaining traction. In fact, in 1H11, the average property sold in New York City had a price of $13.125 million, shockingly exceeding the $12.4 million average in 2007, and setting a new all-time record for this statistic! (This average property price had dropped as low as $4.4 million in 2009.)

Clearly, dollar volume is increasing rapidly based upon the pace of mega-deals, while the number of properties sold is simply limping along, seemingly shadowing the molasseslike growth in our national economy. Notwithstanding the lackluster growth in properties sold, overall market activity, whether we look at dollar volume or number of properties sold, clearly demonstrates that 2Q09 was the bottom of the market in terms of the volume of sales.

If we turn our attention to property values, we see that the unevenness within the market remains, particularly in the outer boroughs and northern Manhattan.

In past articles, we have discussed the divergence between the fundamentals within the Manhattan submarket (south of 96th Street on the East Side and south of 110th Street on the West) and the other submarkets of New York City. These trends, while generally improving, continue.

In Manhattan, capitalization rates compressed for all product types in 1H11 versus 2010; however, if we look at average prices per square foot, we see that seven product types have experienced increases over 2010 levels and three product types have seen decreases. It seems counterintuitive to see cap rates falling and price per square foot falling simultaneously, but this dynamic can be explained by reductions in net operating incomes.

If rents are falling or stagnant (or even rising slightly as they are in some sectors) value per square foot can drop, especially with the increases in operating costs that we have seen on a year-over-year basis. These market conditions can easily produce these seemingly strange results.

In northern Manhattan and the outer boroughs, cap rates are mixed, compressing on some property types, while increasing on others. On a price-per-square-foot basis, cumulatively we see that 15 product types in the outer boroughs are up and 14 are down, demonstrating that these submarkets are still having difficulty finding a consistent recovery.

At the beginning of the year, we projected a 12 percent appreciation rate on a blended basis within the Manhattan submarket and expected to see values stabilize, i.e., to stop falling in the outer boroughs. We believe that what we are seeing from the market thus far in 2011 demonstrates that we remain on pace for these projections to hold.

In terms of number of properties sold, the Queens submarket demonstrated the most improvement in 1H11, with 164 properties sold, representing a 21 percent increase versus the 136 sales in 2H10. The northern Manhattan market improved the least, with 69 properties sold, representing just a 13 percent increase versus the 61 sales in 2H10.

By dollar volume, the Manhattan submarket improved the most, given the overwhelming number of $100 million-plus transactions here, with a 56 percent increase in activity in 1H11 versus 2H10 and a 124 percent increase versus 1H10. Northern Manhattan, again, improved the least, showing a 4 percent decrease in the dollar volume of sales in 1H11 versus 2H10 and a whopping 50 percent decrease versus 1H10.

As I have stated for several quarters now, the biggest potential land mine within the investment sales market is a potential increase in interest rates. The extraordinarily low interest-rate environment that has benefited us for quite some time has allowed for an orderly deleveraging of the market.

Properties that have significant negative equity positions have, in many cases, been able to maintain positive cash flow, thus treading water as owners and lenders hope for a viable exit strategy. Mortgage maturity is currently the biggest challenge for these assets as refinancing in today’s market cannot produce the same proceeds that were available in 2006 and 2007. Additionally, rates were so low at that time, mainly due to minuscule spreads over LIBOR, that extending these loans at anywhere near the old rate is not palatable for lenders today.

To the extent interest rates rise sharply, it could have a devastating impact on these properties, which are hanging on by a fingernail. We have seen distressed-asset sales continue but at a slower pace than last year. Through 1H11, in the note sale market, we estimate that there has been about $2.2 billion in activity, which would result, if annualized, in $4.4 billion for the year, well below the $6 to 7 billion that we believe occurred in New York City last year.

At the time of this writing, Congress has yet to approve a debt ceiling increase and the implications of a possible default on the country’s credit rating are significant. If interest rates are to remain at, or near, their historically low levels, it is important that Congress demonstrate leadership and an ability to control itself fiscally.

Now that the Fed has ended its QE2 asset-buying program, it will be very interesting to see the performance of upcoming Treasury auctions. At several of the last auctions, the Fed purchased as much as 70 percent of all Treasuries sold. If it doesn’t show up at the table, it could be mean significant reductions in the price of these bonds, which would exert significant upward pressure on rates.

We remain pessimistically hopeful that our interest-rate environment will stay low, buoying the marketplace for investment properties. If it doesn’t, it will create even more issues for those who took advantage of all the leverage the market had to offer.
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James Wallace, Finance Editor, COSTAR

Westfield Closes in on £550m Stratford City Bank Financing
Wednesday, August 03 2011 | 08:47 AM
James Wallace
Finance Editor, COSTAR

Westfield, the Australian property developer, is expected to close a circa £550m five-year senior debt finance package for its Stratford City shopping centre with a consortium of three banks by the end of August.

Eurohypo, HSBC and Credit Agricole CIB are the joint lead arrangers on the finance and will underwrite a third of the deal each, at around £180m.

Pricing on the debt is thought to be around 225bps to 250bps over LIBOR, with either an increased provisional margin during tail end of construction and until near full occupancy is reached or alternatively Westfield will not draw down the debt until construction is finished and full occupancy is achieved.

The club deal is expected to reflect a leverage in the low 50s LTV. Savills has been appointed by Westfield to carry out a valuation of the shopping centre, assuming full occupancy at desired rental levels. The gross development value of the east London shopping centre is £1.45bn.

The bankers are “locked in rooms with lawyers as we speak with everyone aiming to close the deal within the next three, maybe four, weeks”, said a person familiar with the deal.

The total cost of the financing for Westfield, assuming it is fixed against the five-year swap rate, which as at yesterday was 2.05%, will be around 4.3% to 4.55%.

The three banks are expected to hold a final hold of around £50m to £75m.

The remainder will be distributed through a co-ordinated sell down into the syndication markets, with the German pfandbrief-funded banks and real estate debt funds the likely partners. Possible syndication partners include Deutsche Pfandbriefbank, DekaBank and Heleba as well as funds like AXA Real Estate Investment Managers’ Commercial Real Estate Senior 1 fund.

This process is already under way with around a dozen potential debt investors having approached or been approached by the three banks’ syndication teams, with preference for between four and five investors which are able to take close to a £75m-sized position.

The interest in the shopping centre debt finance has been considerable, because of its near full occupancy even at prelet status in a major geographical location for London in a part of the capital which is benefiting from huge regeneration.

The 1.9m sq ft shopping centre is adjacent to the Olympics site and is due to open in mid-September and as at May was 79% prelet to tenants including anchors John Lewis with Waitrose, as well as Marks & Spencer, New Look, Reiss and Hugo Boss.

Westfield sold a 50% stake in the Stratford City shopping centre to two pension funds in December of last year - Algemene Pensioen Groep and the Canada Pension Plan Investment Board - for a combined £871m. The two pension funds we advised by Henderson Global Investors.

Westfield and all banks declined to comment.
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Patrick Blount, President / CEO, BENEWOLF, LLC

Loan Sale Market Update Q-3 2011
Tuesday, August 02 2011 | 01:54 PM
Patrick Blount
President / CEO, BENEWOLF, LLC

I wrote in early 2011 that the loan sale market appeared to be strengthening, that bid prices were steadily increasing and sellers were finally pulling the trigger on select transactions. It appeared that the much maligned extend and pretend, pray and delay, modify and pacify tactics employed by most banks since 2007 had worked in their favor and we were about to finally see significant reductions of non-performing loans purged from balance sheets. Not so much.

From what I am seeing today the market is in the “Junior High Phase,” where everyone is talking big about what they are “going” to do… but no one has “actually” done it.

I have personally heard numerous banks talk about their intent to offer billion dollar plus portfolios of distressed loan assets in 2011 and I have physically reviewed a significant number of very large portfolios but I have not seen anyone actually coming to the market with these assets much less pulling the trigger on a sale.

The CMBS markets appear to be a closed shop limited to very few buyers mostly consisting of Special Servicers exercising their first right of refusal to purchase. The prices I see quoted on reports from groups such as Realpoint or Trepp are sub 50% of the unpaid loan balance and appear to be much lower that what I see and hear "banks" are receiving on similar credits which leads me to believe that if they “were” marketed in a “competitive bid” situation it was only to justify the Special Servicer’s low bid.

The super regional and money center banks appear to be selling off select or easy to sell assets like multifamily or actual income producing loans themselves at reasonable prices but are leaving themselves with the “ugly,” more difficult loans in their held portfolio which will likely eat up any upside they received on the early “easy” sales when they finally do reach the market.

The unhealthy regional banks and the vast majority of community banks are still out of the market because insufficient capital prohibits them from taking the necessary market discount to sell non-performing assets in bulk.

There are definitely a huge number of buyers waiting for a wave. Most are extremely frustrated by the continued calm seas. It will be interesting to see if the fourth quarter produces the typical wave action and if any lenders will graduate junior high and actually prove up their boasts. My prediction is; that if the numbers of loans actually show up on the market as touted, that prices will “fall” significantly from those seen in the first three quarters of 2011.

The delay and pray ploy certainly got us from 30% to 65% bid levels since late 2007 however I don’t think we can expect to see the same type jump from 65% plus. Sellers, you may have missed your window.
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

RCA mid-year reports; “above all, be true to yourself, and if you cannot put your heart in it, take yourself out of it.”
Monday, August 01 2011 | 09:20 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

one of you guys wrote me last week asking why i hadn’t mentioned RCA’s Mid-Year Reviews. i think it was because i can’t believe we are this far into 2011 already. but now that i’ve overcome that, here are some take-aways from the RCA reports:

Sales Surge at Mid-Year: Extend and Pretend Kicked Down the Road
Investment volume surged to $55.6b in Q2, a 117% increase from a year earlier
and totaling just shy of the year-end spike in transactions recorded in Q4’10. The acceleration in sales cut across all property types but was led by retail property sales of $15.2b. Prices were generally stable or improved over the quarter, but the dichotomy in pricing between the favored major markets and all others persisted, with some closing of the gap noted in the apartment and retail sectors.
New offerings also surged in Q2 and totaled $76.2b as improving prices have encouraged many more investors to list properties for sale. The volume of offerings in Q2 jumped 79% from a year earlier, the highest yoy gain since 2005, a point marking the end of the previous post recessionary period and the beginning of the pre-crisis property boom. Most property types should readily absorb this new supply of offerings, except the industrial sector, where offerings exceed closings by more than 2:1.

before sharing more of RCA’s mid-year commentary i have one comment to make:
the FDIC is doing a disservice to the industry, the American economy and the American people by allowing banks to extend loan maturities. they are trying to do something different than the RTC did and for which the RTC came under significant criticism. but, if the hope, and i can’t see it as anything more than hope, is that they’ll continue to allow this until the real estate market ‘picks up’, well, i’d like to know when in their crystal ball they see that coming. oh, wait a minute, i seem to recall reading somewhere : it’s going to be march 24th 2012. sorry, but these assets should be cleared now. will banks take losses? sure. but the positive contribution that this will make to the industry will be a good thing. i know from talking with people on this that there is a lot of dissenting opinion and i fall back on ‘who knows?’ just a thought…now on with the RCA stuff:


1. Hotels: the hotel market continues to move smartly forward, with sales in Q2 of $4.7b providing the fifth consecutive quarter where volume increased by more than 150% year-over-year (yoy).
2. Industrial: with $6.6b of significant sales in Q2, the industrial property market had its second most active quarter since Q4’10, and enjoyed a 64% gain year-over-year (yoy) from the same quarter last year. the growth was fairly even across both sub-types, with flex boosted by the big-ticket sale of huge showrooms in Las Vegas and North Carolina.
3. Retail: the second quarter marked a breakout point for retail properties, with $15.2b in sales volume bending the growth curve skyward to 337% year-over-year (yoy), the highest of any property type. More strip centers changed hand in Q2 than in all of 2010 in the wake of the Blackstone/Centro deal. even excluding that benchmark transaction, yoy gain in Q2 was a respectable 75%, an acceleration from Q1. volume in the mall & other subtype rose 66% in Q2 from the year-earlier quarter. cap rates overall were relatively unchanged in Q2 and are at slightly lower levels than at the beginning of the year.
4. Apartments: with nearly $14.0b in volume, the sales trajectory for apartments was phenomenal, turning in the most active quarter since Q4’10. transaction volume surged 132% on a year-over-year (yoy) basis, a strong acceleration over Q1’s 72% increase. pricing has been stable, with average cap rates steady in Q2 and down only slightly from the beginning of 2011, while average pricing has remained near $100,000 per unit.
5. Office: with sales of significant properties reaching $14.0b in Q2’11, the office sector enjoyed its second best quarter since the financial crisis. Q2 office volume was up 50% year-over-year (yoy), a slower increase than the overall market, yet the sector was the first to witness a spike in activity beginning this time last year. sales of CBD properties, at $7.8b in Q2, were up 66% yoy buoyed by DC and Manhattan, which accounted for more than half of total volume. cap rates fell slightly nationwide but are only marginally below levels recorded at the beginning of the year.

i was interviewed this week for the 2012 edition of a well-known industry report. i knew that i had left my own crystal ball somewhere in my house (or maybe the FDIC had borrowed it) but try as i might i couldn’t find it so i had to wing it. actually, the questions i was asked got me thinking about what i’ve seen, what i’ve heard and what i believe....about the overall economy, about capital markets, about property types, about debt, about whether the situation with the banks (i refuse to write E&P) will end up being good or not, etc. this was no ‘puffy’ interview. and i too will have to wait to see what some of my industry colleagues had to say and what they were thinking in the middle of the summer of 2011 about our vision for 2012. fortunately, the interviews are confidential and there are no attributable quotes....that’s a relief!


have you ever wondered why someone comes into your life at a certain time? or why you hear a song that means so much to you just at the time you needed to hear it. or when something arrives in your mailbox and it says things that you’ve been thinking or that you read at another time in your life but the day it appears is the day that you needed reinforcement? well, that happened to me this week when an email called “Zen Habits” arrived.
a guy named scott dinsmore of Liveyourlegend.com wrote this special guest post on Zen Habits. maybe some of it has meaning for you too.
1. surround yourself with passionate people.
2. create space. If you don’t give big ideas room, they’ll never show up.
3. help someone in a way only you can.
4. keep a journal of what inspires and excites you.
5. challenge the norm.
6. scare yourself – live outside your comfort zone.
7. find the right reasons. you can’t control what happens but you can control your reaction to it. what challenges have come up today? How could you reframe them? the juiciest possibilities often have the best disguises. notice them.
8. learn something new.
9. the point is to constantly fuel something that interests you.

“above all, be true to yourself, and if you cannot put your heart in it, take yourself out of it.” Hardy D. Jackson

enjoy your weekend.
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James Wallace, Finance Editor, COSTAR

Edinburgh House Completes €450m Refi
Thursday, July 28 2011 | 04:15 PM
James Wallace
Finance Editor, COSTAR

Edinburgh House Estates’ near €450m of real estate debt has been extended by up to four years after passing its maturity deadline this week, CoStar News can reveal. The arrangement is one of the biggest securitised debt extensions since the credit crunch.

Property asset manager Edinburgh House Estates has negotiated a refinancing of the outstanding balance of €442m comprising €388.2m in senior debt and €53.7m in a junior loan at its interest payment date (IPD) this week.

The value of the 42-strong German commercial real estate portfolio was €318m, according to a July independent valuation, compared to the €442m remaining debt. As a result, the overall LTV ratio at the July IPD was 138.9%, while the senior portion was 122%.

EHE was advised by Andrew Haines and Sam Mellor, part of the team which recently moved to Chenavari Investment Managers, the investment and advisory asset manager.

The underlying portfolio of over 42 properties will continue to be managed by Estama GmbH, the German asset management company with over €3bn under management.

The initial debt extension is until October 2013 with a clause for two additional one-year extensions, which can be exercised in October 2014 and 2015, respectively, subject to repayment conditions.

The weighted average remaining lease term was five years while the occupancy level was 96%.

The loan was part of the circa €1bn Natixis-lead Infiniti SoPrano CMBS issuance in 2007. Natixis also hold subordinate debt in the transaction along with Blackrock both of whom were understood to have been involved in the negotiations.

Haines, partner at Chenavari, said “We are delighted with the successful conclusion of this loan restructuring. Transactions such as this with multiple investors and advisors are difficult to execute, but with a strong, respected borrower and sensible business plan, we were able to get all the lending parties on board.”

Bobby Sheehan, director of EHE, said “In a challenging time for refinancing, we are pleased to have agreed these terms with our lenders and continue our strong relationship with them. This is testament to the strength of our asset management team and an endorsement of our ability to deliver maximum returns over the longer term”.

Special servicer, Capita Asset Services, said in a statement: “Given the high LTV, the underlying real estate fundamentals, the impending maturity date and Edinburgh House Estates being unwilling or unable to contribute capital, the opinion of the servicer was that there was no reasonable prospect of repayment.”

“In the circumstances, the realistic alternatives were therefore to either negotiate and agree restructuring terms with the multiple loan and securitisation counterparties or enforce the security on the maturity date and engage in the process of selling the Reference Properties Pool through the German law insolvency procedures."
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James Wallace, Finance Editor, COSTAR

CoStar Exclusive: Chenavari poaches Etesian trio for debt venture
Tuesday, July 26 2011 | 10:18 AM
James Wallace
Finance Editor, COSTAR

London-based hedge fund Chenavari Investment Managers has poached Andrew Haines, Sam Mellor and Duncan Elley from Etesian Capital Partners to expand their activities in real estate debt investment and advisory.

Haines, Mellor and Elley, who joined this week, have worked together for seven years, including a stint at Capmark, since rebranded Capita Asset Services, before setting up Etesian Capital Partners in 2008.

They subsequently entered into partnership with property company Levanter. Together the team have sourced and executed more than €5bn of transactions.

At Chenavari, Haines and Mellor, who join as partners, and Elley, who joins as a director, will be responsible for sourcing and investing in real estate debt, including CMBS bonds as well as mezzanine and preferred equity positions throughout Europe.

Chenavari, headquartered at 1 Grosvenor Place (pictured above), already has committed capital of $1.8bn, with the team’s target to invest around $350m in year one. The team has already closed its first investment: the purchase of a €7m mezzanine loan secured by retail and multi-family commercial real estate in Germany.

Haines, Mellor and Elley built up a portfolio of debt restructuring and raising mandates at Etesian, including acting as debt advisor on Edinburgh House Estates’ €500m German loan portfolio, for which the team has retained the brief.

In a joint statement, Haines and Mellor, said: “Chenavari’s reputation and success will provide an extremely strong platform to enable us to continue to invest in real estate transactions alongside the many property companies and partners we have worked closely with over the last 15 years. The ability to make significant investments across the capital structure without arbitrarily restrictive criteria allows us to add scale to the successful investment strategy we have been running previously.”

Loic Fery, managing partner at Chenavari said: “Our investment philosophy is to be focused on complex credit market opportunities where specific asset collateral expertise allows to generate a specific alpha. Beefing up our capabilities in real estate debt investment is a logical and complementary step in the continuation of our existing activities in European structured finance.”

Frederic Couderc, managing director of Chenavari, added: “We are pleased to welcome Andrew, Sam and Duncan as senior members of the Chenavari investment teams. We intend to deploy significant capital in the real estate space as we see it offering an attractive risk/return profile."

Chenavari set-up in London in 2008, and now has more than 40 staff with expertise in corporate, high yield and structured finance debt markets. Chenavari’s Toro 1A fund – which invests in European RMBS, CMBS, CDOs and balance sheet CLOs – has delivered a return of 27.8% over the first six months of 2011 and 338.7% since the fund was launched just over two years ago in June 2009.
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William Procida, President, PROCIDA FUNDING & ADVISORS, LLC

Why the Bloods, Crips and Latin Kings are the key to solving the budget deficit
Monday, July 25 2011 | 12:40 PM
William Procida
President, PROCIDA FUNDING & ADVISORS, LLC

Got your attention? Yes, it's true: America's gangs hold the key to solving the budget deficit and curing many of our country's other problems.

But let's focus on the deficit. It's no secret that other than military spending and over-supporting foreign countries, the biggest drain on our country is all that comes with the despair and poverty in the inner cities. Downtrodden neighborhoods cost more to police to maintain than thriving neighborhoods, and they produce no tax revenue. The expense is staggering.

Back in the 1980s, I was privileged to have been selected by then-Mayor Ed Koch to redevelop the Fort Apache section of the South Bronx - one of, if not the single most dangerous places in the country. Thus, it was one of the most expensive for the city to maintain, produced no tax revenues and was home to plenty of human despair. We built over 2,000 homes, as well as several retail centers.

As a result, the neighborhood became safe, cost less to maintain and started to produce revenues from property and sales taxes. Last but definitely not least, the kids - who grew up in the new South Bronx with clean streets, seeing people going to work and maintaining their homes - have become doctors, lawyers and teachers. For many, it changed the direction of their lives and they now produce tax revenues, as opposed to being jobless and draining the government purses.

I think most folks would agree with the basic premise that if you turn dangerous blighted neighborhoods into thriving ones, it's a net positive economically and sociologically. So where do the Bloods, Crips, Latin Kinds and other gangs fit in, and how can they help?

Since the 1970s when our inner cities became blighted, the government has proven that it can't solve the problem. New York outer-borough rebirth was a result of communities coming together in a massive way, initially with some financial support from the government. There is so much more to do and the government simply does not have the money or human resources to accomplish it all. So who does? All of the aforementioned gangs, of course.

It's a pretty simple premise, convince gang leadership that there is more money to be made redeveloping real estate than from any other gang activity, and you get a hug from people for doing it, versus going to jail. Get rich and hugged, respect and no jail? It's an easy sell. And it's true.

The fact is that gangs have their boots on the ground and they possess the money to renovate these neighborhoods and keep them safe. If we convince them to do it, these neighborhoods will produce increased property taxes and cost less to maintain, not to mention increase the income taxes and produce kids who will hopefully go to college and become productive taxpayers themselves.

Data shows that kids join gangs to be part of a family, not simply to do illegal activities. So all we need to do is redirect that energy. These are smart businessmen who are very organized and everywhere we need them. If you convince the guys at the top they can press a button and turn the worst hood into the safest overnight.

Training them to be real estate developers, contractors, and agents is the easy part. How to let them use their money to revitalize their neighborhoods might be a little trickier, but a simple tax amnesty program might be worth a try. They're not paying their taxes now, so if we let them use their money to renovate a bad neighborhood and pay property and income taxes after, a tax amnesty program it's a no brainier. Especially if they reduce crime and change the entire purpose of the gang culture. Can you imagine gang members 10 years from now being the most respected members of their communities, versus the most loathed and feared? It is possible.

Today's gangs need to learn from gangsters of the past: the original Mafia. The Mafia 1) never called themselves gangs, and instead they were families; 2) they made sure their neighborhoods were safe and clean; 3) they invested in real estate, which is why there are no third-generation gangsters. By that time, they're all businessmen. If you don't believe that crime families can produce productive citizens, just look at the Kennedys.
Leadership on the government's part would be required, but can be done at no cost to the tax payer. The good thing is there are probably only a few dozen gang leaders who are at the highest level, known as the ruling committees. If they buy in, they can press a button and make it happen for everyone.

Imagine if President Obama or Governor Christie would reach out to these leaders personally and say " your country needs you and I can't do it with out you " cost to tax payers ... zero. The gang problem is one of the biggest problems our country faces and substantially contributes to the deficit. If our leaders took this proposal seriously I would work for free forever to try to make it happen. 1) it's doable 2) one day when I'm (hopefully) a grandfather I don't want my grandkids to say "grandpa the country's bankrupt....Why didn't you do something to prevent it?" Words I hope to never have to hear! But the way this country is going I probably will.

Gang summit ... cost to taxpayers ...zero . If we get a few to buy in " home run " !!!!!

If you agree pass it on .
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James Wallace, Finance Editor, COSTAR

Deustche Pfandbriefbank to Lend Up to £2.7bn Against UK Property By End 2013
Monday, July 25 2011 | 09:55 AM
James Wallace
Finance Editor, COSTAR

Deutsche Pfandbriefbank has said it will lend around €18.5bn to €20.5bn against European real estate over the full three years to the end of 2013.

It is expected that DPB will increase its current 9% UK loan book weighting to up to 15% over the full three years to the end of 2013, which would see the German bank lend as much €3.1bn, or around £2.7bn, against UK property. DPF’s “good bank” European loan book is currently €25bn.

"This is an ambitious but potentially do-able target," an expert commentator said.

The lending target disclosure came in an analyst call today following the European Commission’s approval of the conditions attached to the state aid the government-owned bank received at the height of the financial crisis.

As part of a strict series of conditions attached to the aid, Hypo Real Estate, the group out of which the “good bank” Deutsche Pfandbriefbank was formed, was ordered to withdraw from public finance lending.

As a result, DPB’s aggregated lending targets for the next three years need to be reduced by 20%, which reflects the expected proportion of its previously planned public finance lending. On this basis, DPF’s lending target this year is €6.5bn, followed by between €6bn and €8bn in 2012 and a further €6bn in 2013.

An agreed timetable for DPB’s return to the private sector has also been confirmed with the EC but remains undisclosed.

Manuela Better, CEO of Hypo Real Estate Holding AG and Deutsche PfandbriefbankAG, said: “Although the conditions imposed are very extensive, they offer sufficient potential for the success of the realigned pbb Deutsche Pfandbriefbank on the credit and capital markets. The bank has been profitable since the third quarter of 2010, and we also posted a profit for the second quarter of 2011 – as expected.

“Our goal is to prepare pbb Deutsche Pfandbriefbank for reprivatisation – which is also a requirement stipulated by the EU Commission.”
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

food for thought and building your own digital cookbook....
Monday, July 25 2011 | 09:07 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

it¡¦s a sweltering summer throughout most of the country (it'll be 101 in new york today!) but business goes on. years ago, many saw the summer as slow-down time, people are on vacations, leaving early (at least on fridays) and so it became sort of a self-fulfilling prophecy. but i firmly believe that business is almost as intense during the summer as it is during the rest of the year. yes, people take vacations when you¡¦d really like them to be waiting for your call or answering your email. but that doesn¡¦t mean that things come to a standstill....it¡¦s that things require more patience, which, is truly a virtue.

a very interesting report was published this week by egon zehnder international and mckinsey & company. the title: return on leadership. a few morsels:

„X nothing matters more than customer impact
„X understanding the evolving needs of customers in detail
„X customer orientation is a key leadership competency necessary for improvement (along with people development and change leadership)
„X there is no standard skill for success but...
„X the organic revenue growth a company achieves by capitalizing on market growth of existing segments requires
„X outstanding, consistent execution across the organization and, often, across the globe which is driven by...
„X a strong cadre of senior managers (e.g. not the top team) who excel at business and people leadership
„X the senior management of companies with top-quartile portfolio momentum growth excelled in three key leadership competencies...
„X developing organizational capability
„X a systematic focus on developing critical skills throughout the organization
„X team leadership
„X the ability to focus, align and build high-performing teams
„X change leadership
„X the ability to drive large-scale, coordinated change across the entire organization
„X to summarize:
„X competencies for successful growth strategies require:
„X customer impact: continually takes action to add value to the customer
„X market insight: looks beyond current context
„X results orientation: drives uncompromisingly for higher performance
„X change leadership: advocates change
„X team leadership: actively involves team
„X collaboration and influencing: motivates others to work with self
„X strategic orientation: defines strategy for own area

perfect for a busy friday travel day: top 10 pet peeves of usa today's frequent business travelers (i¡¦ve added some of my own comments in bold type). btw, don¡¦t most of these relate to simple common courtesy and common sense?

1. loud cell phone conversations. (i put earplugs in as soon as i board to try to control my own environment as much as possible).
2. people who disobey the rules and try to carry on too many bags or carry too much liquid through security.
3. people who play music so loudly, even with earplugs or headphones, that others can hear it.
4. disrespect that passengers show to flight attendants and gate personnel.
5. parents who don't try to control their children. (rampant problem. neither flight attendants, nor teachers for that matter, are responsible for either teaching their children manners or disciplining them. that¡¦s a parental job).
6. people who think the "turn-off-all-electronics" message is not for them. (these people did things behind the teachers¡¦ back as well).
7. passengers who carry on and eat messy or smelly food. (smelly is the problem).
8. people who board with multiple or oversize bags and fill the bins in the front of the cabin when they're seated in the rear. (just plain rude but i know many flight attendants watch for this).
9. reclining a seat in a tight coach cabin. (these people are just plain scum.)
10. Leaving a window shade open when everyone else has closed theirs and is trying to sleep.


build your own a la carte digital cookbook! on tuesday, cookstr launched its first collection of ibooks recipes on apple's ibookstore, presenting renowned chef and cookbook author rozanne gold's 1-2-3 collection. fifteen years ago, gold started a revolution around the idea of simplicity in cooking. today, her exciting three-ingredient recipes, available for the first time digitally, are breaking new ground in a format designed for in-kitchen use. each recipe is 140 words or less. there are 250 recipes ($9.99), which can also be purchased separately by theme ($3.99 for 50 recipes) or chapter ($0.99 for 10 recipes). this is extremely cool and, in the spirit of full transparency, I know rozanne and her husband, the highly sought after international restaurant consultant, michael whiteman. but this is just one great use of technology and could even get me to start cooking!

and, just a little more food for thought for the weekend. a friend suggested I read the book ¡§how life imitates chess.¡¨ i went through the book last saturday and pulled some stuff out that i¡¦d like to share with you:

„X you need to be able to identify your mistakes and analyze why you made them.
„X ¡§the man who knows how will always have a job. the man who also knows why will always be his boss.¡¦ ralph waldo emerson
„X having a vision is not enough; if you fail to envision the potential of your creation, it will be left for others to exploit. what you need is a vision and the ability to develop a strategy to achieve it.
„X don¡¦t spend so much time worrying about the other guy that you lose sight of your own goals and your own performance.
„X how much more affective would you become if, at the end of each day, you asked yourself what lessons you had taken away for tomorrow?
„X ¡§if a man has a talent and cannot use it, he has failed.¡¨ thomas wolfe
„X dedicate yourself to making the time, finding a space in which you can think and learn and finding new ideas with which to shock your adversaries. (note: i was out to lunch this week with a good friend at a chinese restaurant in new york that has really smartly priced lunch specials in a very nice setting. the fortune in his cookie was, ¡§always do right-this will gratify some and astonish the rest.¡¨ pretty heavy for lunch i¡¦d say).
„X ¡§what you can do or think you can do, begin it. for boldness has magic, power and genius in it.¡¨ goethe (i first saw this quote when i was a consultant to herb kohler at kohler company. i think it¡¦s one of the most powerful things i¡¦ve ever read. the challenge is to do it!).
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Patrick Blount, President / CEO, BENEWOLF, LLC

Upcoming Distressed Loan Workout Events
Wednesday, July 20 2011 | 11:17 AM
Patrick Blount
President / CEO, BENEWOLF, LLC

After thirty-five (35) years in the commercial real estate business, the past twenty (20) in distressed loan sales, it is fair to say that I have been to a few conferences. I have been on the board of directors for a number of years of both the Risk Management Association (RMA) and of the Turnaround Management Association (TMA) serving as President of the TMA Oklahoma Chapter for 2010 and as such produced and hosted many distressed asset events.

Many of the distressed asset events I attend have a large number of "service providers" and small number of "lenders" represented and typically very few "qualified" bankers in attendance. I attended my first IMN event in February 2011 in Ft. Lauderdale and my next in March in New York. At both events I was pleasantly surprised at the number of executive level bankers in attendance and even more surprised at their interaction.

Although the agenda was quite packed, with most panels sitting less than an hour, the message was on point and the interactivity between the panelists and attendees was not just informative but immediately useful. I could see where an attending seller or a buyer of distressed assets could go back to the office the following day and successfully implement many of the ideas and best practices.

I was impressed enough to commit both Benewolf and my partner Sperry Van Ness to attend, speak and sponsor three (3) more events in 2011. I heard it said at the February IMN event that 2011 is "the year of the loan sale." I began believe it then, I definitely believe it now. Come join us in September in Chicago and Los Angeles and in Dallas in December, you will not be disappointed.

www.imn.org

Bank & Financial Institutions Special Assets Executive Forum on Real Estate Workouts

Chicago, IL - September 12-13

Los Angeles, CA - September 23-27

Dallas, TX - December 5-6
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James Wallace, Finance Editor, COSTAR

Anglo’s $10bn US Loan Sell-off is A Question of The Time Value of Money
Tuesday, July 19 2011 | 03:09 PM
James Wallace
Finance Editor, COSTAR

It is a busy summer ahead for Anglo Irish. Or more acutely, investment bank Eastdil, who four weeks ago was appointed as sales agent for the disposal of Anglo’s mammoth $10bn US commercial property loan portfolio.

Anglo’s decision, of course, will not have been its own. Fully nationalised, the Irish government is the bank’s sole shareholder. A shareholder that is beset by much deeper financial crisis than have the luxury of time to work with the borrowers and manage out the bulk of the 248-strong loan portfolios until maturity.

It is a question of the time value of money. Read all about it here. Contrast this to the strategy employed by the UK semi-nationalised banks, who appear to have time much more on their side.

It took RBS a very long time – somewhere between 12 and 15 months – To sell-off £1.4bn, Eastdil are attempting to sell $10bn for Anglo within 90 days. Of course the massive difference is the two markets in which the product is pitched to.

In Europe, the market so far has been to leverage up debt sales in fund structures – wrapping up loans in special purpose vehicles loaded with new vintage debt to reach the IRR demands, the private equity product-buyers demand. These “Isobel-like” debt fund structures have precedent dating back quite far.

Credit Suisse arranged two such joint ventures in its great €10bn European real estate look book sell-off in recent years: a €2bn loan portfolio sold to Lone Star in September 2009 and a €900m loan portfolio sold to Apollo. Credit Suisse packaged the loans into special purpose vehicles, financed both funds with senior debt, and retained a 49% equity stake in the joint ventures.

Last week, CoStar News revealed that the two of Credit Suisse own bankers are off to Forum Partners, the real estate adviser mandates to manage the equity positions on behalf of the Suiss investment bank.
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Robert Knakal, Chairman, MASSEY KNAKAL

Rent Regulations: the Good, the Bad and the Endlessly Ugly
Monday, July 18 2011 | 10:28 AM
Robert Knakal
Chairman, MASSEY KNAKAL

While the recent extension of New York’s rent-regulation system came as no surprise to the vast majority of participants in our multifamily market, the results were still disappointing and have left many owners concerned that if this is the result obtained with a Republican-controlled Senate, what would occur with Democrats in power? Yes, the renewal terms could have been much worse, but that doesn’t diminish the negative implications this has on our housing market.

Let’s take a look at the terms of Chapter 97 of the Laws of 2011 and their potential impact.


RECENTLY, LEGISLATORS VOTED to extend New York’s rent-regulation system until June 15, 2015. Let me begin by saying that I am an advocate for affordable housing in New York. The diversity of our population is a key ingredient to the vibe of the city, and quality housing for those occupying the full range of the socioeconomic spectrum is critical.

Unfortunately, this piece of legislation is perhaps the most ill-conceived and inefficient public subsidy program Albany has ever enacted. Rent regulation is just that, a public subsidy akin to welfare or food stamps that allows some residents to receive benefits randomly. Distribution of the benefit is based on inertia (and often luck) rather than economic need, as people staying put the longest are the most likely to receive benefits. This system leads to a gross misallocation of our housing stock.

In past Concrete Thoughts columns, I have used the analogy of having the city hand out food stamps randomly to everyone walking out of Grand Central as a better-conceived program for distributing public assistance. The subsidy handed out under rent regulation is, in some cases, enormous and may be given to those who have absolutely no need for it.

Price controls of any type create problems for a marketplace. With regard to rent regulation, the misallocation of housing occurs because, with rent levels artificially depressed, the real estate taxes collected on properties with these controls are artificially less than they should be, creating artificially higher real estate tax burdens on all New York residents who are not rent-regulated.

Additionally, while there are about 3.3 million dwelling units in New York City, about one million are regulated, essentially leaving 2.3 million options for someone looking to move into the city. This constrained supply leads to free-market rents being artificially higher than they would be otherwise. Rent-regulated tenants are reluctant to move, often leaving a family of five cramped in a small two-bedroom apartment and an individual tenant occupying a six-room apartment. In the absence of controls, it would be much easier for these tenants to find appropriately sized units, priced appropriately.



THE MOST SIGNIFICANT changes to the recently renewed law include making it much more difficult to remove units from the subsidy program under both types of luxury decontrol (high rent and high income).

The high-rent decontrol threshold was raised from $2,000 per month to $2,500. Under this rule, vacant apartments with legal rents in excess of $2,500 per month are no longer subject to rent regulation. Notably, any units that were deregulated due to rents being above the old guideline of $2,000 per month are not reregulated if they are currently renting for less than $2,500. This change took effect on June 24 and the threshold will apply even if the next tenant, or any subsequent tenant, pays a rent under $2,500.

With respect to the other form of luxury decontrol, the high-income threshold was increased from $175,000 to $200,000. This threshold applies if that income level is achieved by the tenant for two consecutive years and the legal rent exceeds the $2,500-per-month hurdle. This element of the law is completely backward.

Consider this: Any nonregulated resident of New York is effectively subsidizing all regulated tenants. If an apartment has a free market value of $2,700 per month and a rent-stabilized tenant is paying $2,450 per month, upon lease renewal this tenant’s rent will exceed the $2,500 threshold. If that tenant has earned more than $200,000 for the past two years, that unit will become deregulated. However, the subsidy that all nonregulated residents are paying is about $200 per month.

If, however, a tenant earning over $200,000 per year is paying only $700 per month, the subsidy all nonregulated residents are contributing toward is $2,000 per month, a much more burdensome figure. This is why if a tenant is making over $200,000 per year (and some may be making millions per year) he or she should be deregulated if his or her rent is under $2,500 per month, not over $2,500 per month. Does anyone really need public assistance if they are making over $200,000 per year?

Additionally, manipulation of income to skirt this aspect of the law is quite easy and is the reason why a three-year income-averaging approach should be used. I had a client once who sold over $7 million of investment properties in one year and delayed the closing of an additional $5 million of properties the following year until after Jan. 1 simply to protect his $1,200 three-bedroom on 74th Street off Park Avenue. Obviously, this is an extreme example, but you get the point.

This new high-income threshold kicked in on July 1. The old hurdles of $2,000 per month and $175,000 of income will still apply for all proceedings commenced prior to July 1 of this year.

Why shouldn’t all rent-regulated tenants be required to prove eligibility to receive this public subsidy? After all, I don’t think anyone wants to see a protected tenant with modest income get displaced, or to see grandma on fixed income get kicked to the curb by Mr. Potter. Means testing would eliminate many of the inefficiencies within the system and eliminate much of the litigation that regularly occurs between owners and tenants, making for a more harmonious relationship between the two.

Tenant advocates claim that means testing is “too cumbersome” to implement. That’s crazy. Any tenants receiving Section 8 benefits must prove their eligibility. So, too, must residents within the 20 percent component of 80/20 buildings. Most residents file New York State tax returns, making this process relatively easy. Placing the burden of proof on the tenant would eliminate much of the alleged “harassment” that occurs when an owner initiates litigation to determine the tenant’s income. While advocates see this as harassment, there is really no other way for an owner to determine a tenant’s income.



AN ADDITIONAL TANGIBLE change to the law impacts the mechanism related to Individual Apartment Improvements. For buildings containing fewer than 35 units, the I.A.I. guideline remains at 1/40th of the improvement cost as a monthly adjustment to the rent. In buildings with more than 35 units, the passthrough has been lowered to 1/60th. This change takes effect on Sept. 24, 2011, but the language in the law is unclear and will undoubtedly be subject to interpretation by the state Division of Housing and Community Renewal or, perhaps, the courts.

The timing of the change is linked to the Sept. 24 date “where such adjustment takes effect.” Presumably, this means a time no sooner than the date of completion of the work, but does it mean when the work is indeed completed? The date the lease is signed? The date the tenant moves in?

The biggest problem with the new 1/60th rule is that it erodes an underlying incentive to encourage the private sector to upgrade the quality of the housing stock. After hundreds of buildings were abandoned or burned during the 1970s, I.A.I. and the Major Capital Improvements increases motivated private owners to pump billions of their dollars into multifamily properties, which led to the generally excellent quality of today’s housing stock.

Fortunately, the M.C.I. passthrough was not altered as proposed by a bill passed by the New York State Assembly, which would have reduced the M.C.I. increase to a subsidy that would evaporate after repayment. That would have been devastating for the market.



THE RENT GUIDELINES BOARD recently passed a 3.75 percent one-year increase and a 7.25 percent two-year increase for leases beginning in September. The sublet allowance was maintained at 10 percent. Additionally, the vacancy allowance remained at 20 percent; however, it can be used only once in any calendar year. It is unclear whether any other increases are possible within that calendar year if the vacancy bonus is utilized.

The rules regarding preferential rents remained unchanged as it was confirmed that preferential rents are only for the period of the lease in question.

Two other items the industry was hoping would be part of this extension would address the 421-a and J-51 programs. The 421-a was extended, with certain limitations, provided that any eligible development must apply to the city for a Preliminary Certificate of Eligibility before June 23, 2012. Unfortunately, the uncertainty regarding the fate of J-51 buildings was not addressed. This would have been a perfect time for a legislative solution to the quagmire created by the Roberts decision. A judicial solution will likely take years, leaving the fate of thousands of units unclear.



OUR RENT-REGULATION system provides protections for hundreds of thousands of people who need and deserve the protection. Unfortunately, there are probably hundreds of thousands of others who do not need this subsidy, and that leads to adverse conditions for all nonregulated New Yorkers. Why not ask that recipients of this subsidy demonstrate that they qualify for this benefit?

A combination of higher rents and higher taxes burdens the system unnecessarily. As property values dropped during this recession, real estate taxes continued to increase substantially each year, leaving an increasing percentage of multifamily property owners feeling like they are working a lot harder for a lot less.

The adverse components of rent-regulation renewal add to the frustration felt by owners. A combination of these dynamics had resulted in a growing number of investors with substantial holdings here looking to purchase properties outside of New York. This is not a good trend for our marketplace or our city.


COURTESY OF THE NEW YORK OBSERVER
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Investing, Suggesting, WTC, Hiring, Interviewing, Meditating
Monday, July 18 2011 | 09:16 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Some real estate tidbits I’ve recently heard about investing in commercial real estate today:
- Things have bottomed.
- Occupancy is increasing.
- Net effective rents increasing.
- More clarity in the market.
- Lenders forcing borrowers into action.
- Best opportunities may be outside the U.S.
- Banks dumping assets.
- Retail just doesn’t jump off the page.
- There aren’t good or bad assets; there are good or bad prices.
- We’re not underwriting to price perfection, we’re underwriting to value.
- What is the price for liquidity?
As we rapidly approach the 10th Anniversary of the World Trade Center, Pentagon and Shanksville, PA terrorist attacks, my friend, and real estate columnist for The New York Post, Lois Weiss, wrote this in her column this week:

The World Trade Center site is humming with activity. On Monday, we walked across the site and rode the construction hoist up at Silverstein Properties' 4 World Trade Center as the north Memorial pool was being tested.The nearly one-acre square pools have water that cascades down the sides and flows into another dark square. Each pool is rimmed with the names of the victims, which will glow at night.

All the plaza's white swamp oaks are growing in nicely, with more being added all the time. The Greenwich Street cut through the site is just starting to be filled in as an actual road, slicing off 2 WTC, the Calatrava PATH station, 3 WTC and 4 WTC from the western half of the site with the Memorial area and 1 WTC.

Four WTC has asking rents in the $80s a foot. New York City and the Port Authority have already leased space there. The lobby area feels cocooned from the outside, yet its polished black granite walls will reflect the area through its 65-foot-tall windows.

The largest of the buildings, 1 World Trade Center, where Condé Nast just signed its 1.1 million-square-foot lease, is only halfway to its 1,776 feet but is starting to become visible from all over.


I’ve picked out some of the responses from an interview with Jack Dangermond, founder and president of Esri, which offers geographic information systems, that I thought you might find compelling:
- I have four priorities.
- The first one is to focus on what customers need and want.
- And, second, make my company a really great place to work. So when we hire somebody, we have in mind finding a person who really fits so well that they realize their life’s work with us.
- The third is to make sure we’re a very strong business that supports the first two priorities.
- Interviews? I’ll ask provocative questions that help me quickly get a sense of someone, like, “What’s the worst thing that’s ever happened to you?” In their professional life, the issues they bring up are often associated with challenges like laying people off. I learn a lot about people’s values and their judgment about things based on how they act in those situations. I’m just trying to figure out who they are.
- Other questions? “What do you like to do?” It’s an open-ended question. A lot of people start off saying. “I like to go skiing” or “I like to go on vacations.” This is always nice, but I’m interested in people who have a passion for the work I want them to do.
- I am hunting for people who would be a good colleague or a teammate, not someone who works for me.
- I like to hire responsible people who really see their life’s work meshing with the goals of our business.
- Writing is a key skill. That’s usually another question I ask: “How good of a writer are you on a scale of 1 to 10?” I also actually ask a lot of skill-related questions like, “How good of a software engineer are you?” or “How good are you at public presentations?

“If I talk a lot, it must mean I’m smart.” I learned that this is a style of some students in graduate school programs. But I also witnessed it recently first hand where one guy in particular in a group setting continually rambled on and on, trying to impress the group with how much he knew. But in taking a pulse of the body language of many of the group members, I don’t think this guy was winning any points with them.

Friend and fellow blogger, Ann Oliveri, offers something very interesting in her post this week:

How do you vet candidates for key positions?
The New York Times reported this week on a method being deployed in medical school admissions processes that test for people skills, the multiple mini interview or MMI. It's "the admissions equivalent of speed-dating: nine brief interviews that forced candidates to show they had the social skills to navigate a health care system in which good communication has become critical." Each round is eight minutes and features a different ethical dilemma. "The most important part of the interviews are not a candidate's initial responses--there are no right or wrong answers--but how well they respond when someone disagrees with them... Candidates, who jump to improper conclusions, fail to listen or are overly opinionated fare poorly because such behavior undermines teams. Those who respond appropriately to the emotional tenor of the interviewer or ask for more information do well..." The goal is to find those with the ability to work collaboratively with colleagues and establish trust with patients. And, "candidate scores on multiple mini interviews have proved highly predictive of scores on medical licensing exams three to five years later that test doctors' decision-making, patient interactions and cultural competency."
I find this approach fascinating.

After meditating twice a day for about two years I stopped doing it but not because I didn't see that it made a difference-it did. So why did I stop? Beats me but my brother has been encouraging me to start again and I am going to. Interestingly there's an article in the Spring 2011 issue of Ode magazine called, "Management as meditation." It presents a compelling argument for meditation, in the workplace:
- How you deal with your emotions and thoughts as a leader has a direct effect on employees and organization.
- By meditating, you learn how to deal with stress and take your mind off things. It has to do with discovering consciousness and performing activities, such as meetings or listening, with more attention, whereby you function less on automatic pilot.
- A Detroit chemical manufacturer instituted regular meditation sessions in 1983. Within three years, absenteeism fell by 85%, productivity rose by 120%, injuries dropped by 70%, sick days fell by 16%-and profit soared by 250 percent! "People enjoyed their work; they were more creative and more productive. If you do this you'll get a return on your investment in one year."
- Before a meeting, if managers first take a couple of minutes to be still and focus on what is most important to them, they will get results faster."
- The entire effect of meditation relies on willingness and openness. To relax, we need patience, trust and time. Whoever thinks that meditation is a waste of time will never have patience for it.
I am going to start meditating again tomorrow.

This past Wednesday, July 13th, was the 26th anniversary of a huge music event, Live Aid. The great thing about it is that it was the idea of just one man, Bob Geldorf. One person can make a difference!




Photo: The 3-legged chair in Geneva looms opposite the "Palais des Nations". Standing 12 metres (39.37 feet) high, The Broken Chair is a reminder of the tragedy caused to human lives and limbs by land mines.

Restaurant of the week. Nishimura, 8684 Melrose Avenue, W. Hollywood, CA(310.659.4770). Danger: this is very serious sushi. A little tricky to find but worth it.

On the road...

July 18-22: New York
July 25-Aug. 14: Northern California
Aug. 15-19: New York
Aug. 23-Sept. 6: Vacation
Sept. 12-16: New York

These are my views and not that of my employer.
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Robert Knakal, Chairman, MASSEY KNAKAL

Lessons Learned and Earned, Part II
Thursday, July 14 2011 | 02:27 PM
Robert Knakal
Chairman, MASSEY KNAKAL

Last week, I began reviewing notes from a speech I made before the members of the local chapter of CCIM here in New York City in late April.

The subject of the talk was the lessons I have learned over the years building a brokerage company and selling properties in the most competitive market in the United States.

This week we continue the recap of those lessons.


It is important to note that I am not implying that the platform we implement is the best one out there. It is clearly the one that works best for us, but we realize that other platforms have their merits as well. I am merely trying to convey the thought process behind our systems and pass along the lessons we have learned along the way.

At Massey Knakal, we implement a strategy of breaking up the massive New York metro area market into small “territories” in which our agents focus, specialize and become market experts. This territory system is one of the most misunderstood platforms in the business as many people believe our agents are allowed to work only within the territory they are assigned, thus limiting their potential. This couldn’t be further from the truth. The fact is that while each of our agents does indeed focus on a specific geographical territory, they are free to originate business, and earn commissions, anywhere they can. Often, our top agents have a commanding market share within their territory and, additionally, are participating in sale transactions all over the metro area.

One of the reasons we decided to implement this platform is because this city is far too large for anyone to know everything about every neighborhood. By focusing on small territories, each agent really gets to know these areas as well as, or better than, anyone else. Each agent knows who is buying, who is selling, what properties have sold and all the details of those sales; what zoning changes have been adopted or are proposed; and what new developments are under construction or are in the planning stages. This focus does a number of things, not least of which is to enable us to accurately determine property value. This is a key to brokerage in a city like this, where identical buildings may have very different values depending upon which side of the street they are on.

The importance of all of the factors mentioned in the previous paragraph was recognized by Paul Massey and I immediately when we began our careers. This led us to a fundamental realization and to the main reason we utilize the territory system: We are not in the real estate business; we are in the information business. Bricks and mortar are merely the medium for the information. Understanding that the quality of the information we have is the most important thing we bring to the table convinced us that a territory approach made the most sense for us. So …

Lesson 11:
Know what business you are actually in.
_______________
The Massey Knakal platform, in addition to using a territory system, is highly specialized. In our investment sales practice, we represent only sellers and will work only on exclusive listings. We believe we are the only firm in New York that works this way.

We believe that representing only sellers eliminates potential conflicts of interest and allows us to be indifferent when we are dealing with buyers who are trying to purchase one of our exclusive listings. Buyers know that whether we have known them 25 years or 25 minutes, they have an equal opportunity to purchase the property and they will be treated fairly. It is very clear that our main objective is to maximize the result for our client, the seller.

The territory system also eliminates conflicts of interest within the office as it is very clear whose territory a property is located in. These aspects of our platform have been part of our corporate plan since the early days. So …

Lesson 12:
Have a game plan.
______________
Other benefits of our platform include the ability for brokers, without a tremendous amount of experience, to quickly demonstrate expertise in a neighborhood. Within several months of working in a territory, the agent probably knows as much as anyone about what is happening there and, after brokering a few sales in the area, is likely to have as good a track record in the area as brokers who have been working for years but have not had a specialized focus. As the agent’s career grows and develops, this track record in the local market becomes tangibly better.

This focus provides an agent with the ability to differentiate his or her capabilities from others by demonstrating a command of the dynamics within the territory. So …

Lesson 13:
Be able to differentiate yourself from others in the marketplace.
______________

After achieving the ability to differentiate yourself from others, it is important to create a competitive advantage. There is no doubt that our platform requires discipline to implement, both from a management perspective and from the brokers themselves.

Often in our business, a brokerage firm is a group of individuals who are essentially working independently but all under the same roof. There are several examples of brokerage teams that work very well together and achieve great results. It is rarer to see several of these teams working collaboratively at a firm to produce a mutually beneficial environment.

We try to achieve this by getting our agents to realize that they are part of an integrated platform that promotes their individual achievement but also provides open access to the vast resources and the potential of other professionals within the firm to enhance their personal performance.

It occurred to us that there are three potential cultures a brokerage business can have. The first is the “dependent culture,” which is the culture of “you.” Here, there is almost an entitlement psychology so that agents feel like, you should take care of me; you must come through for me; you didn’t do enough for me; you are responsible for my success or failure—I blame you! This culture is certainly not one for fostering a successful collection of agents. After all, this is a business in which you effectively eat what you kill, and, for the most part, you must put in tremendous effort on your own behalf and are primarily responsible for the relative level of your success or failure.

The second of these cultures is the “independent culture,” which is the culture of “I.” Here, everything revolves around the individual: I can make it happen; I am responsible for my own success or failure; I am self-reliant; I can decide how best to use my time. There are many brokers in our business who operate with this mind-set and several of them are very successful. Often we see several of these brokers working within a firm, and, collectively, they do a good job but may not be maximizing their true potential by being completely independent.

The third type of culture, which is the one we try to promote, is the “interdependent culture,” which is the culture of “we.” Those who are part of this culture believe that their greatest successes can be achieved by exerting maximum personal effort and augmenting this effort with the efforts of others. Here, the psychology reflects a knowledge that teamwork works best: we can do it; we can combine our talents for the greater good; we can cooperate with each other; working collaboratively, we can create something better together. It is important to realize that all things in nature are interdependent and this interdependence leads to a balance that provides maximum results. Independent people who do not have the ability or the desire to think interdependently may be good individual producers, but they are not typically good team players.

If a collection of interdependent people can pool their abilities and resources and work cohesively, an environment can be created that is difficult to compete with because it is so rare to find this type of environment. As we continue to strive for a fully interdependent culture, our brokers are afforded an advantage. So …

Lesson 14:
Do what you can to create a competitive advantage.
______________

The Massey Knakal territory system and operating platform have pros and cons. The pros are numerous and include unparalleled market knowledge and incomparable transactional implementation. There are no conflicts of interest internally, and no conflicts of interest between the firm’s interactions with buyers and sellers. It creates a competitive advantage and the ability to differentiate our services in a very tangible way. Colleagues are completely accountable to each other. Most important, all of these aspects of the platform allow for the focus on the client’s best interests at all times.

On the con side, brokers must pay a “tax” to other agents on transactions they originate outside of their assigned territories. Also, they must be extremely disciplined and comfortable with being fully accountable to others within the firm. Additionally, as the operating platform is so unique, growth must be achieved organically as brokers from other companies generally find it too difficult to adapt to such an abstract and disciplined method of operating. This last point is what makes it virtually impossible for an existing platform without such guidelines to morph into a similar system. Because of this, Massey Knakal will always be a net producer of agents to the industry rather than a receiver. You will likely never see that we have hired a team of brokers from another firm to join us.

While there are clearly pros and cons to our system, the important point is not endorsing one approach versus another, but simply fully understanding these pros and cons. So …

Lesson 15:
Know your strengths and weaknesses.
______________

As I wrote last week, Massey Knakal was founded in 1988. People often ask why Paul and I chose that time to start the firm as it had been only about a year since the stock market crash of 1987. The fact is the real estate sales market continued to perform well in 1988. Many principals and brokers who were active in the market at that time remember that even though the stock market crashed in October 1987, the building sales market in New York remained strong in 1988 and even into 1989. In 1990, however, the building sales market came to screeching halt. The volume of sales dropped to the lowest level we had seen since 1984, when Paul and I had started brokering building sales at Coldwell Banker Commercial (now CBRE).

Our overhead at that time was about $15,000 per month and, by late 1990, we were down to our last $15,000 in the bank. We thought about how to deal with this predicament. Should we pay $5,000 in essential bills for each of the next three months? Should we pay 100 percent of the next month’s bills and see what happens? We even seriously thought about going to Atlantic City and putting it all on black.

What we decided to do was to go to every bank we saw and apply for as many credit cards as possible. We were able to obtain a total of $60,000 in credit card lines and took down cash advances on these cards to get us through this period. As a few transactions closed, we were able to pay off these balances and were lucky to have been able to finance our operation in this manner. So …

Lesson 16:
Always maintain a good credit profile.
______________

By late 1991, the sales market had really not improved all that much. We were not prepared for such a poor market for such a long period of time. We had to take cash advances on the credit cards and when they were maxed out, we were coming up short once again. We approached a client of ours, who was very wealthy, looking for a $75,000 loan to keep the lights on. The client said he would be happy to provide the loan, but he wanted 50 percent of the stock in our firm in exchange for the loan. Paul and I left that meeting with our tails between our legs. We were not prepared for a response like that.

We believed that we would be able to come up with the money, so we approached another individual for the loan, agreeing to give 25 percent of the stock in our firm in exchange. Paul set up a meeting for us with John Holler, a very successful mortgage broker he knew. John agreed to give us the loan, but, to our great surprise, he said, “Guys, I don’t want the equity in your firm. Someday you will be very successful and you will regret that you gave me that equity.” We were completely unprepared for this act of generosity. Since that time, one of our top company awards is named after Mr. Holler as a small token of appreciation for what he did for us. So …

Lesson 17:
Be prepared for the unexpected.
______________

These trying times after the savings and loan crisis forced us to look brutal reality squarely in the face. There is something called the “Stockdale Paradox,” which derives from the actions of Admiral Jim Stockdale. He was the highest-ranking military P.O.W. during the Vietnam War. He was held captive from 1965 to 1973 and was tortured 28 times. He survived by confronting his reality head on and holding a staunch belief that eventually he would be released. He did not delude himself with unrealistic expectations or blind optimism, but instead maintained a clear focus on his reality and conviction that he would prevail.

During the early 1990’s, we had to face an ugly reality but always believed that we needed to do whatever it was we had to because, ultimately, things would work out. So …

Lessons 18 and 19:
Confront brutal reality directly and honestly; and have unwavering faith that you will succeed.
______________

During these difficult times, it would have been easy to simply worry about getting the next transaction closed as our economic viability was seemingly dependent upon it. It was a time when property values had plummeted and, for owners who did not have to sell, it was not a good time to be putting assets on the market. As difficult as it was, we advised many clients not to sell at that particular time. This paid off well for us as most of those potential sellers came back to us years later when they wanted to sell, remembering that we gave them the proper advice. So …

Lesson 20:
Regardless of the circumstances, always keep the client’s best interests in mind.

We will conclude this three-part series next week. Stay tuned.


COURTESY OF THE NEW YORK OBSERVER
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Robert Knakal, Chairman, MASSEY KNAKAL

Lessons Learned and Earned, Part I
Monday, July 11 2011 | 02:50 PM
Robert Knakal
Chairman, MASSEY KNAKAL

A couple of months ago, Al Holloman, a broker in our Queens office and a member of the local chapter of CCIM, asked me if I would speak at the upcoming CCIM luncheon in late April. I accepted, but was surprised by the topic the folks at CCIM wanted me to address. Most of the time when I speak in public, I am talking about the investment sales market or some aspect of the trends between buyers and sellers of properties in the New York metro area.

The topic for this speech was to be my experiences in the brokerage business and the lessons that I learned along the way. Preparing was more difficult than I imagined, as it took me on a trip down memory lane back to my early days in real estate. We are often so caught up in our day-to-day activities that we fail to take a step back and observe things from a macro perspective. This engagement would force me to do that.

Certainly, I am very proud of what Massey Knakal Realty Services has become over the years. Since 1988, we have sold over 4,000 investment properties having a market value in excess of $15 billion. Since 2001, when CoStar began tracking the market, we have sold over 2,200 properties in New York City, nearly four times the number of our closest competitor, which has sold fewer than 600. Putting my speech together made me think about how we got here. I think I can sum it up by saying it took a lot of hard work and a lot of luck (not necessarily in that order). Paul Massey and I have made hundreds of mistakes over the years, especially in the early days, but fortunately haven¡¯t made many of them more than once. Today, we have fantastic partners and a senior management staff that helps keep us moving in the right direction. From the mistakes we have made and the experiences that we have had, there have been many lessons learned. When I finished preparing my notes for the CCIM speech, I had come up with 30 lessons learned and, interestingly, none of them were real estate-specific. Most of them are applicable to any service business and some are even more far-reaching.

In this week¡¯s column, I would like to begin sharing those lessons with you. First, a little background.

My career in real estate started by accident. In 1981, I was a freshman at the Wharton School at the University of Pennsylvania. Like most Wharton students then, I wanted to be the next great Wall Street trader. In order to get into one of the big investment banking firms after college, I thought a r¨¦sum¨¦ showing a strong track record of summer work would be helpful. During spring break of that year, I drove around Bergen County, N.J. (where I grew up), dropping off my r¨¦sum¨¦ at every commercial and investment bank that I saw. I was coming out of a Paine Webber office in Hackensack and across the hall I saw ¡°Coldwell Banker.¡± I entered the office and dropped off a r¨¦sum¨¦ thinking it was another bank.

Later that day, I received a call from someone at CB wanting to set up an interview the next day for a summer job. Prior to the interview, I went to the library to look up this ¡°bank¡± so I would look knowledgeable in the interview (remember, no Internet in 1981). When I discovered that Coldwell Banker was a real estate company, I almost did not go to the interview. Who wanted to get into the commercial real estate business? Not me!

As it turned out, it was the only summer position I was offered. I took the job and loved it from my first day. I went back my next two summers and started my full-time career with CB after graduating in 1984. So ¡­


Lesson 1:

Keep an open mind and think outside the box.

_______________


After that first summer at CB, I took as many real estate and related courses as I could at Wharton. One of those was entrepreneurial management.

One day we had a guest speaker who was a Wharton alum. He told us that when he was in school, he wanted to be an investment banker like everyone else. As it turned out, he entered the pet food business and found that he loved it. He said that whenever he ran into his old Wharton buddies, who were mostly working on Wall Street, they would often look down their noses at him because he sold dog food for a living. He quickly got over feeling like a second-class citizen as he was making millions a year and was incredibly happy doing what he loved.

This taught me that enjoying what you do is one of the most important things there is. People who do a particular job simply for the money often get burned out and are generally not as happy as people who do what they are really driven to do. If you have passion for your work, you can achieve great things and it may not seem like you are struggling to make things happen.

So ¡­


Lesson 2:
Be passionate about what you do.

_______________


I was very lucky to have met Paul my first day on the job. He had spent a year in CB¡¯s ¡°wheel program,¡± where he spent a few months in different divisions of the company learning about all of the different services the company was offering. He decided he wanted to get into the investment sales area, which is the sector of the business I was attracted to.

On my first day, the boss told me to follow Paul around. At the time, CB had about 50 brokers leasing office space and four brokers specializing in sales. Paul was one of those four and the other three each had at least 20 years of experience and couldn¡¯t be bothered with the two youngsters fresh out of college.

On my second day on the job, Paul and I decided to become partners and work on all of our transactions together. A year later, we were made the co-directors of the investment sales division (it felt kind of strange being the bosses of the more experienced guys). We grew that capability within the firm and left there in 1988 to form our company. I have been partners with Paul since 1984 and feel so fortunate that our partnership has worked as well as it has for so long.

People often ask what the secret to a lasting partnership is. I¡¯m not sure I know the answer, generally, but for us it has worked because of an equal passion for the business and an equal work ethic. If we logged the hours worked over the past 27 years, I would imagine that our totals would be extraordinarily close.

So ¡­


Lesson 3:

Your partner(s) must have a similar passion and work ethic.

_______________


One of the secrets to Massey Knakal¡¯s success has been our territory system, where each agent is assigned a specific neighborhood in which to specialize. This platform requires a system of rules and guidelines to dictate parameters pursuant to which business is done. A clear understanding of these rules and guidelines and their strict implementation by management is required to give the platform integrity.

At CB in the mid-1980¡äs, they attempted to implement a similar system but, unfortunately, the rules were not applicable to everyone equally. The minute the system appears to be-or is-inequitable, it breaks down.

In our platform today, everyone is treated equally. A new broker who joins the firm has the same exact protections as does a 20-year veteran. No one is ¡°more equal¡± than anyone else.

So ¡­


Lesson 4:

Rules must apply to everyone equally.

_______________


Paul and I first decided we wanted to start our own firm in 1986. We figured we needed about $300,000 to make that happen. We confidently went to Chemical Bank, where we had been banking for two years, and asked to speak to someone about a new business loan to start the company. We did not expect any problems-we were successful brokers, had good balances and always went out of our way to say hello to the branch manager.

To our chagrin, we were told to go start the business and once we established a successful three-year track record, we could apply for what would be a modest business loan. Leaving the bank with our tails between our legs, we came up with a two-year plan to save the money that we needed to start the business. Each morning, as Paul and I had breakfast (something we did together every day for about 15 years), he would pull out his pen and, on the back of a napkin, write down how we were coming along with our plan, what transactions were scheduled to close and how much money we would put aside from each sale to meet our objectives.

So ¡­


Lesson 5:

If you are starting a business, don¡¯t expect bank financing for a while.

_______________


Right from the start of the firm, we knew what we wanted to do and how we wanted to be perceived by the marketplace. Early on, we came up with the first of our company mission statements:

¡°Massey Knakal Realty Services is a place of purpose, order and meaning. A place in which being human is a prerequisite but acting human is essential. A place where discipline and will are prized for what they are: the backbone of enterprise and action, of being what you are intentionally instead of accidentally. We are committed to building a tradition of exclusively representing sellers with integrity and respect, providing the highest level of professionalism and ethics to achieve maximum results.¡±

While our mission statement has changed over the years, the words above still guide our core values and principles.

So ¡­


Lesson 6:

Know exactly what it is that you want to do (and how you want to be perceived by participants in the market).

___________________


The brokerage business requires the proper mind-set. After all, we are simply intermediaries representing the best interests of our clients. The need to produce today is today¡¯s reality-and current financial obligations are dependent upon this-but the real mantra of success is sustainability and growth. This is true with respect to our attitudes toward our clients as well as all other market participants, particularly other brokers with whom we compete.

Regarding other brokers, you can either take the position that the pie of potential business is finite, and every piece that someone else gets is one fewer piece for you; or you can take the attitude that the market is very large and there is more than enough business to go around. The latter provides more comfort and allows one to keep things in better perspective and also provides a basis for forming mutually beneficial relationships with your competitors.

Paul and I have always had this perspective and we feel fortunate that we count among our good friends many of the top building sales brokers in New York. Many observers of the market may be surprised by that, but the friendships we have formed are long-lasting and are an integral part of the happiness we get out of our careers.

It has been said that this business is a marathon, not a sprint. Having this perspective allows you to do what is in the best interest of your client, not what is in the best interest of the transaction. This is a key to sustained success.

So ¡­


Lesson 7:

Have a long-term perspective on your business.

___________________


When we started Massey Knakal, Paul was 28 years old and I was 26. We ran the business initially by trial and error and made more than our share mistakes. We had a secretary keeping our books who couldn¡¯t balance her own checkbook, never realized that the letterhead stock we actually received was much thinner than the stock we ordered and paid for, and didn¡¯t think to ask for our first report covers to be laminated after printing, leaving black ink all over the reader¡¯s hands. These were just the tip of the iceberg when it came to the mistakes we made.

Fortunately, we learned from our mistakes and applied what we learned. It is said that ¡°To learn and not to do, is not to learn,¡± and ¡°To know and not to do, is really not to know.¡± These words could not be more true.

Unfortunately, we did not take the time to seek out senior people who could serve as mentors for us back in those days. Today, we have an advisory board made up of some of the most respected professionals in our industry and we rely on their counsel constantly.

So ¡­


Lessons 8 and 9:

Seek out and ask senior people for advice; and making mistakes is O.K.-just don¡¯t make the same mistake twice.



___________________


Many people say that they¡¯d rather be lucky than good. While I believe that luck plays a role in all of our lives, I believe that the harder you work the luckier you get.

Over the years we have seen it time and time again. The brokers who are in at 7 a.m. and leave after 7 p.m. (or any combination of the 12-hour day that is required) always seem to make more commission dollars than those who work less. These folks are also the ones who will be in the office on the weekends, getting prepared for the weeks ahead. I am often asked what it is that brokers do before 9 a.m. or after 5 p.m. that makes the difference and I really don¡¯t exactly know. Perhaps it is more planning or getting paperwork done so they can spend more time on the phone during ¡°traditional business hours.¡± Perhaps they read more or study comparable sales more closely.

I am not sure exactly what it is but the results are undeniable: those who work harder are generally the most successful.

So ¡­


Lesson 10:

Hard work is essential.



___________________


More lessons to follow next week ¡­ Stay tuned.


COURTESY OF THE NEW YORK OBSERVER
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

The future?, New jobs, Knish-Nos
Monday, July 11 2011 | 09:38 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

So, welcome to the future, aka the third quarter of 2011. First of all, can you believe the passage of time? But I'll leave that for another day. Because we're in an industry that measures a lot of performance and activity by quarter, I thought I'd talk about that for a minute. Real Capital Analytics (RCA) had this to say at the end of May in their U.S. Big Picture Report:

May marked an important benchmark as sales achieved their highest monthly total so far in 2011, rising to $15.6b and notching a remarkable 124% gain over the year-earlier month. The growth trend was broad, as every property type registered its most active month this year and both pending deals and new offerings point to a strong June. Still, wide variances in momentum persist both among and within property sectors. CBD office, garden apartments, and full-service hotels continue to drive growth at present, although regional malls are quickly gaining currency, as evident not only in recent transactions but also in a spate of new offerings, including Westfield’s 17-property US portfolio. Suburban office sales remain lackluster, but surprising strength is emerging in secondary and tertiary markets for retail and apartment properties as yield-seeking investors scour markets for more.

This is a very encouraging report but then there's the debt side to any deal as only a few cultures has enough to pay cash for buildings these days. Talking to some commercial lenders recently they told me that, yes, they are lending, still selectively but with a bit more aggressiveness (can you say compromises in underwriting, maybe?). And, talking about the infamous "Lessons Learned" from the 'last down so low it looks like up to me cycle' I'm still concerned about the flood of institutional money chasing core deals and driving prices up and cap rates down, way down. Hey, we're now in that time where we're creating the next cycle and, just like trying to call the bottom of the market, we won't know what this cycle will look like until the next one.


Congratulations to, Jeff Gandel and his colleagues who have successfully lifted out their team from Fidelity and have formed Long Wharf Real Estate Partners in Boston.

The other interesting things occurring are the continued moves of some senior people to different firms...seems like a lot of this is in Asia but in Europe as well. The "Asian" market seems to be more and more the topic of discussion of global players but there are also excellent opportunities closer to home, wherever your home might be.


Knish-Nosh has been in Forest Hills, NY since 1952. My friends and I have been eating their knishes for a long time. Serendipitously I was walking through Central Park in New York last Monday. At the sailboat pond there’s a little concession stand that I’ve walked by hundreds of times, always thinking that one day I’ll stop there, sit and relax and have a coffee like I’ve seen many people do (often with their dogs which I admire for being able to behave off-leash). Anyway, it was a holiday and I wasn’t going anywhere so I stopped for coffee and a bagel and I see something on a high shelf that says Knish-Nosh. As I return my tray I see a guy there and ask him if this place is run by Knish-Nosh. He says yes and I tell him about growing up in Forest Hills, blah, blah, blah. He says that that type of thing happens twice a day. He also tells me that they’re moving locations in Forest Hills and will be next to the Midway Theatre (also an old haunt of ours). In addition, he tells me that they ship knishes (mostly to people who can put the sizable shipping cost on their corporate expense statement). But, the most important part of this story is that they’re going to start distributing Knish-Nosh Knishes through places like Costco on a nationwide basis (well, maybe not nationwide as I’m not sure that knishes would ‘play’ in some markets). Anyway, watch out for them in your neighborhood Costco soon.


Congratulations to, Tim Shine, who has recently joined Parmenter Realty Partners.


YouTube of the week: I didn’t know that Daryl Hall wrote, “Every time you go away”. I always liked that song but here it is played the way I think he envisioned it when he wrote it.

Congratulations to the folks at Pearlmark Real Estate Partners (formerly Transwestern Investment Company) on their snazzy new name.

Restaurant of the week. Tatra restaurant, 24 Goldhawk Road, London. Disclaimer: I have not yet visited this restaurant. I met the husband and wife team that own and operate the restaurant at my friends’ wedding last week. I just have a good feel that this is excellent Mediterranean food.

Photo: Recently discovered: my mother swimming with her father at a resort in New Jersey (August 17, 1936)


Congratulations to Chris Gerra, who has just made an internal move and joined Thomson Reuters Tax and Accounting division.

On the road....(taking it a little easy over the summer):

July 10-12: Beverly Hills for the NMS Real Estate/Real Assets Roundtable
July 18-22: New York
August 8-12: New York
Sept. 20-21: Amsterdam to moderate a panel at the PERE Global Forum
Nov. 2-5: Washington, DC to attend the CRE Annual Convention and perform with the CREatures of Havoc Band
Nov. 9-10: New York to moderate a panel at the PERE Forum-New York
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James Wallace, Finance Editor, COSTAR

CLS £29.4m Unsecured Bonds Start Trading Today
Tuesday, July 05 2011 | 10:53 AM
James Wallace
Finance Editor, COSTAR

CLS Holdings has closed SEK 300m (£29.4m) worth of unsecured, unrated five-year bonds.

The bond investors, which can be secondary traded from today following their listing on the NASDAQ OMX Stockholm Stock Exchange, comprise a mix of Swedish insurance companies, pension funds and family trusts.

The total cost of debt was around 5.15%, comprised of a floating rate coupon of 3.75% above three months’ STIBOR, at circa 2.4%, payable quarterly in arrears.

It is thought the UK-listed commercial property investment company sought a private placement in Sweden because terms offered by the UK banking market were uncompetitive, with lenders requesting security, a rating and a higher total cost of debt – at around 7%.

“The London financing market is failing in its primary duty of offering competitive debt financing for borrowers,” a source said.

This is another example of UK property companies seeking cheaper funding sources to the traditional banking market, including British Land and Great Portland Estates recent US private placements and Derwent London’s UK convertible bonds.

After two years, CLS will have the right to redeem all outstanding bonds together with accrued interest subject to an early redemption premium to the nominal value.

Carnegie Investment Bank AB in Sweden acted as sole lead manager and bookrunner.

Yesterday, CLS confirmed it had completed the refinancing of 19 French loans with an aggregate value of €128m raising an additional €35m. In aggregate, this extra £60m brings to over £225m the liquid resources, in cash, corporate bonds and undrawn facilities, now available. CLS is thought to be pursuing an active pipeline across the UK, Sweden, France and Germany.

Landesbank Saar financed 15 loans, €100.6m, with maturities of between five and seven years, while Société Générale provided four seven-year loans worth an aggregate €28.0m, with a weighted average loan-to-value of 70% and a margin of 1.5% above EURIBOR.

Separately, CLS has signed a revolving credit facility – also outside London – with Danske Bank for SEK 300m for working capital purposes.

Sten Mortstedt, executive chairman of CLS, said: “We are delighted to have secured these loans and facilities on attractive terms to the Group. They reflect our continuing excellent relationships with Société Générale and Danske Bank, and we are pleased to welcome Saar LB as an important addition to our stable of 20 banks. It is testament to the strength of the Group’s portfolio and track record, that we are able to arrange these facilities in the current credit markets and economic climate. They give the group additional flexibility and firepower going forward.”
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Steve Felix, Partner, FELIX / WEINER CONSULTING GROUP

Embracing differences, Playing the game?, Charles Angoff
Tuesday, July 05 2011 | 09:18 AM
Steve Felix
Partner, FELIX / WEINER CONSULTING GROUP

Ok, so this morning a random driver, arranged by the hotel, drove me to the airport. As I had adopted from Gerald Hines many years ago, I sat in the front passenger seat with the driver. He was from Pakistan, about the same age as me and we had a lively conversation. His name is Abdul. We talked about a lot and found that we agreed on many things. He used two good sayings and I thought I’d relate them to you. One, in regard to the massive amount of debt that people in developed countries have taken on, he said (and maybe he didn’t originate these but I hadn’t heard them before): “I don’t agree with the philosophy of ‘buy now, pay later.’ I believe many people have adopted the attitude of ‘buy now, pay in the next life.’ And the other one, in relation to the sub-prime mortgage situation (how about the news this week that Bank of America is setting aside $12Bn to pay fines!) he said, “When the ship is going down, I’m going to look out for myself. For all I care, the captain can go down with his ship.”

One of the wonderful things about leading a serendipitous life is experiencing random interactions of this type. But, you also have to be open to them. I’ve long believed that while I don’t believe that the world will ever experience ‘peace on earth’ (for reasons that I’d rather not discuss here) we can bring the world closer together, one person at a time, by taking time to engage people. We can learn from each other and, like with Abdul this morning, we can appreciate that we are all members of the human race and value and respect our differences.

Most of my career has been spent working for entrepreneurial type companies. A couple of times I have worked for larger firms like A&P supermarkets & Midlantic Bank. But I have been a real estate consultant rather than an employee to more larger firms such as (you’ll excuse the reference to some long gone) Chase Manhattan Bank, Bankers’ Trust, Chemical Bank, Mass Mutual, John Hancock, Kohler Co., Merrill Lynch Smith Barney, The New York Urban Development Corporation. I have also had the privilege of being, for lack of a better term, the ‘industry shrink’ to a number of real estate investment management firms, which, in some ways, would read like a who’s who of that industry. And, as an independent trusted advisor I was brought into the inner workings of a company to provide consulting and coaching services (I forgot if I wrote this to you recently but a friend of mine educated me on the differences between coaching and consulting. A consultant provides ideas and solutions; a coach asks questions…it’s up to you to find your own way. When she told me that I simply shook my head in agreement. I may be getting a little off the path here but that’s nothing new, right?

When I worked for Herb Kohler in Kohler (next door to Sheboygan, Wisconsin) I was brought in to provide consulting services on one project but as time went on I was ‘dragged’ deeper and deeper into the company and sometimes the politics started taking a toll on my ability to perform my services. On a number of occasions during my two year engagement I went downstairs in the Kohler Design Center to watch a multi-media presentation about the history and future of Kohler (the company and the town) and it helped me remember that a lot of what was being done there was working towards the realization of a visionary, Herb Kohler, and didn’t necessarily need to make economic sense. And, on two occasions I went to visit the man himself. After he asked me how things were going (I used to see him monthly in the real estate committee meetings as well) he asked me why I was there. I told him that I was being dragged into departmental politics and it was both draining and distracting. He simply told me, “Steve, one of the reasons I wanted you here was that you can keep yourself distant from those things; you aren’t an employee and you can operate on a different plane. Don’t let them suck you in.” I left those brief meetings both energized and with more reinforcement of my involvement and how I could help Herb, in some small ways, achieve his dream. That was probably the deepest corporate political doo-doo that I’ve ever experienced. But many large companies (large being relative) seem to suffer from the drain of bureaucracy, politics, insecurity, fear and jealousy. And having been both a coach and consultant to firms in North America, Europe and to a small degree Asia I can validate the negative impact that those things have on a company, on the morale of the people and on the price of gaining desired results. The amount of time wasted, the games played, the failure to stay focused on the mission but rather on keeping your job (or doing your darndest to help someone fail at theirs and watch them pack up their stuff in a box and walk out the door.) As Bill Withers sang, “We all need someone we can lean on and baby you can lean on me.” I have found that to be more and more true as time goes on and am grateful for the friends and colleagues I have that I can lean on from time.

When I started college, at Fairleigh Dickinson University (FDU)in Rutherford, NJ, I was fortunate enough to be assigned to a freshman English class with a professor named Charles Angoff. Our FDU campus was close to Manhattan and was able to attract teachers of a higher quality, who lived in NY, than you might expect from a relatively obscure (except in New Jersey) university. Angoff was one of those special ones. He was an accomplished author and editor. I don’t know what got me thinking about him recently but I bought a book written by someone who knew him well: The Man From The Mercury: A Charles Angoff Memorial Reader. Edited and with an Introduction by Thomas Yoseloff. Among other stuff it contains one Angoff short story titled, “The Tone of the Twenties” (as in 1920’s). There are a bunch of quotable and notable things but the one that struck me and that I want to share with you is this: “Times of vital leaping imagination are not times of unalloyed happiness. No happiness is ever unalloyed. The sense of fleeting time and the apparent purposelessness of the entire scheme of things surround all calm and all joy with an inaudible sigh. This seems to be the divine plan.”

Heavy eh?

Congratulations to Richard Lowe, new editor of IPE Real Estate.
Congratulations also to Martin Hurst who has assumed the COO role at IPE.
Congratulations to Mike Stratta who has joined the Aviva Investors Real Estate Multi-Manager group.



To all Americans, enjoy the Independence Day weekend. To everybody else, enjoy your weekend.


On the road….

July 1-7: Northern California
July 14: Bistro Jeanty,Yountville, CA to celebrate Bastille Day. A friend of mine plays the accordion to add to the festivities. Sounds like it'll be a fun time.
July 18-21: New York
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James Wallace, Finance Editor, COSTAR

Apollo closes in on €400m acquisition of WestImmo
Monday, June 27 2011 | 02:29 PM
James Wallace
Finance Editor, COSTAR

Apollo Global Management, the US opportunity fund manager, is expected to complete its circa €400m purchase of Westdeutsche ImmobilienBank, the German property lending bank, within weeks.

The sale by West LB, the German government-owned bank which owns WestImmo, will transfer a commercial property loan book of around €12bn to €15bn, comprising predominantly performing loans and a smaller non-performing loan portfolio secured against a diverse mix of European and US property.

Apollo has two strategic options with its acquisition of WestImmo: the first is to buy the bank’s loan book at a discount to book value, break it up and sell the loans on – piecemeal – at a premium to the negotiated discount, although in the current market Apollo would be unable to sell on even the performing loans at par.

The second strategy, which Apollo is expected to adopt, is to run the bank as an ongoing European commercial property lender, which will require sustainable, long-term funding. WestImmo is a pfandbrief-funded bank, which allows it to lend against commercial property and sell on its loans as pfandbrief bonds, similar to the covered bond market in the UK, to recycle its capital.

Apollo recruited Bernd Knobloch, former CEO and chairman of the board of managing directors of Eurohypo and member of the supervisory board of Hypo Real Estate, now Deutsche Pfandbriefbank, in autumn 2009 and has been advising Apollo on its WestImmo acquisition since the US opportunity fund manager’s interest has been firm which was when the sale process was launched in February 2010.

The day-to-day management will likely continue under current WestImmo chief executive, known as speaker of the board, Peter Knopp, while Knobloch is expected to get a role on the superadvisory board, under Apollo’s ownership. Apollo’s MD for Germany, Manfred Puffer, a former West LB board member, has led the acquisition of WestImmo.

Knobloch and Puffer have worked closely on assessing the viability of WestImmo’s ability to use the pfandbrief market as a continued funding source.

“Pfandbrief bonds are secured obligations. Investors should be confident on the quality of the assets in the covered pool and also the strict process in terms of eligibility, leverage of the underlying loans securing the pfandbrief,” explained one expert.

When the ownership of WestImmo is transferred to Apollo, Europe’s rating agencies will review their ratings of WestImmo on a stand-alone basis; that is, when it returns to private ownership and outside the guarantee of West LB group.

West LB hived off €77bn of commercial property loans into a “bad bank” in June 2010, which WestImmo’s rating subsequently benefits from. Apollo will have to inject equity into WestImmo’s balance sheet to reach an adequate rating to maintain its ability to issue pfandbrief bonds.

“The question is what will be the standalone rating of WestImmo; sufficient to be able to issue AAA/Aaa pfandbrief? While pfandbrief are secured obligations with a defined pool of collateral, rating agencies are more and more focusing on support rating and rating of the issuing bank,” continued the expert.

But there is precedent for this. US private equity firm, Lone Star, acquired Corealcredit Bank, formerly Allgemeine Hypothekenbank Rheinboden, through its Lone Star Fund 5 German Investments fund in late 2005, completing on January 2, 2006.

Lone Star, which now 100% owns Corealcredit Bank, has completed an extensive restructuring programme with new management and has refocused its lending solely on commercial real estate lending in Germany and has subsequently issued pdandbrief bonds.

“There should be investors in new pfandbrief paper by WestImmo under Apollo, but the pricing will most likely reflect the loss of direct government backing.”

West LB was forced to sell WestImmo, by the European Commission, after it requested €5.4bn in emergency funding in October 2008 to shore up its balance sheet. West LB subsequently appealed to the EC against its required sale of WestImmo in autumn 2010, which was immediately rejected, with the EC ordering West LB to implement a full scale sale by February 15 and propose a wholesale restructuring of West LB, which the EC is now considering.

West LB attempted to reduce the size of the performing loans sold onto Apollo, importing some loans onto its own balance sheet, although West LB has only had modest success at this. This jostling between West LB and Apollo is thought to be behind the delayed final acquisition by Apollo.

Apollo Global Management declined to comment.
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James Wallace, Finance Editor, COSTAR

Glory Days Return for US CMBS
Monday, June 27 2011 | 02:28 PM
James Wallace
Finance Editor, COSTAR

Four commercial mortgage backed securities (CMBS) have been issued in the US this week, worth an aggregate $3.24bn, in a frenzy of activity reminiscent of the pre-crash heydays.

According to CoStar Group US news service, new players are jumping into the arena for the first time, while loan-to-values are returning to their old highs, with low debt service coverage and interest-only loans.

The mood across Europe in commercial real estate finance markets, and at last week’s Global ABS 2011 conference in Brussels was much more sedate.

The largest of the deal is issued by Deutsche Mortgage & Asset Receiving Corp, DBUBS 2011-LC2, and is one of the largest issued in the last 12 months. The trust balance is a whopping $2.14bn, according to CoStar Group’s report, and is backed by loans originated by German American Capital Corp., UBS Real Estate Securities, and Ladder Capital Finance.

All of the loans were originated within the past 12 months. All loans make debt service payments at a fixed rate with a weighted average interest rate of 5.522%. Interest rates range from 4.258% to 6.643%.

The pool consists of 67 loans secured by 132 commercial properties. The largest loan is $219.8m or 10.3% of the pool balance, and the 10 largest loans represent 56.6% of the pool balance. The average loan size is $32.0m (1.5% of the pool balance).
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Patrick Blount, President / CEO, BENEWOLF, LLC

FDIC Posts Q1 2010 Results - Yee Haw!
Monday, June 27 2011 | 02:27 PM
Patrick Blount
President / CEO, BENEWOLF, LLC

According to today's FDIC Press Release the number of institutions on the FDIC "Problem List" rose to 775 in Q1 up from 700 at the end of 2009.The total assets of these "problem" institutions rose to$431B up from $403B at the end of 2009. Only 41 institutions failed in Q1 (but we have added an addition 33 for Q2 to date).Sounding like a Jon Stewart quote Shelia Bair noted that "the vast majority of "problem" institutions did not fail." To me this is a little like saying that "the earthquake in Haiti did not kill everyone, so things aren't as bad as you think."On a brighter note the release said that the Deposit Insurance Fund (DIF) "improved" from a "negative" -$20.9B to only a negative -$20.7B. Happy days are here again!Further they reported that the FDIC's Liquid Resources stood at $63B a decline from $66B at the end of 2009. So let's do the math : $63B Liquid Resources minus $431B problem institutions equal -$368B add the -$20.7B in the DIF deficit and you get a rosy negative -$388.7B or about half of the original TARP total for all banks, AIG, Auto Industry and Fannie & Freddie. (This number is just for the FDIC)More good news, they reported the number of non current loans rose from 5.38% to 5.45% the highest level in the 27 years that institutions have reported these numbers.Direct Quote for the PRess Release:Chairman Bair concluded by stating, "There will be more failures, to be sure. The banking system still has many problems to work through, and we cannot ignore the possibility of more financial market volatility. But the positive signs I've outlined today suggest that the trends continue to move in the right direction." Oh, in that case please re-read the numbers above and double check my math.So let me end on a truly positive note. The FDIC reported that the nations 7,932 reported a collective Q1 profit of $18B. Of course that includes income from such famed banking institutions as Goldman Sachs, JP Morgan, Citi and BofA who all posted perfect games in Q1 trading whereby they made money each day for 61 consecutive trading days totaling well in excess of the $18B reported by the FDIC. But I'm not an accountant only and interested reader with a calculator.
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Robert Knakal, Chairman, MASSEY KNAKAL

Investment Sales Market Trends Not as Clear as Participants Would Like
Monday, June 27 2011 | 02:27 PM
Robert Knakal
Chairman, MASSEY KNAKAL

The building sales market continues to bounce along the bottom as the volume of sales trends and value trends fail to show consistent performance.

With regard to sales volume, we had seen 6 consecutive quarters of volume increases in the New York market through the second quarter of 2010. While our 3Q10 statistics are not completed yet, it appears that this trend will not continue.

Generally, in New York City, volume trends have been positive. Beginning at the start of 2009, we saw the volume of sales, both in terms of number of properties sold and the dollar volume, increasing. The Manhattan and Northern Manhattan markets led the way, turning positive prior to the outer boroughs. In 2Q10, we finally saw Queens and Brooklyn turn positive and we had been expecting the Bronx to turn in 3Q10. The 3Q10 numbers thus far appear that they may show these positive trends have taken a step backwards.

Given the relative strength of markets like New York and Washington D.C., if we are seeing volume trends like this here, it is easy to surmise that volume is squishy across the nation.

Value trends have not experienced the same consistency, over the past 6 quarters, as we have seen in volume. After we hit what appeared to be a bottom, approximately 32% below the peak, value appears to be bouncing along the bottom as for some product types in some sub-markets values are up slightly, and for some product types in other sub-markets values continue to slide. This volatility is representative of a market which is trying to find its natural bottom.

As we move forward, we expect continued volatility in both of these important market metrics. On the volume side, we have seen the supply of available properties pick up as distressed sellers continue to put assets on the market with greater frequency. We are seeing banks and special servicers move aggressively to clean up balance sheets by monetizing sub-performing assets. These sellers are being joined by discretionary sellers who have been sitting on the sidelines for too long, creating pent up selling demand, and those who wish to sell in order to take advantage of this year’s advantageous capital gains rates. Most market participants believe that capital gains rates will be higher next year. If the existing tax rates are allowed to sunset, the gains rate will go from 15% to at least 20% on a federal level. Many participants also believe local capital gains taxes will increase as well as municipalities struggle to bridge budget gaps.

The sellers who are trying to beat the gains tax increase will accelerate some transaction volume, effectively “stealing” activity from 2011. We saw this same dynamic with the cash-for-clunkers program and the first-time-home-buyers tax credit which accelerated volume in the auto and home sales markets. After these programs expired, volume dropped like a stone. For these reasons, we believe transaction volume will be higher than usual in the second half of 2010 (particularly in 4Q10) with a drop in volume as we enter 2011.

Total volume in 2011 will be dependent upon several factors. Increased capital gains taxes will exert downward pressure on volume while continued pace in the distressed asset market should exert upward pressure. The majority of submerged assets (properties where the debt amount is higher than the value – “under water”) have debt which was placed in 2006 and 2007 when values and loan-to-value ratios were their highest. Most of this debt is maturing in 2011 and 2012 and, due to extremely advantageous mortgage terms, many of these loans are still performing although they possess significant negative equity positions. As these loans mature, these assets will have to be recycled as refinancing will not be possible unless the owner has the ability, and is willing, to inject additional equity into the property.

An additional factor to consider is that the inheritance tax is scheduled to go to 55% in 2011. Surprisingly, an overwhelming percentage of real estate investors are not well diversified as most of their wealth is in real estate investments. As these investors pass away, estates may find no option other than being forced to sell properties in order to pay these taxes. This dynamic should exert upward pressure on sales volume.

This data demonstrates that we have not seen a clear trend and that our real estate recovery has a lot more work to do before we can all feel comfortable that things are tangibly better and that a recovery can be sustained.

Mr. Knakal is the Chairman and Founding Partner of Massey Knakal Realty Services in New York City and has brokered the sale of nearly 1,100 properties having a market value in excess of $6.8 billion.
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