Friday, March 16, 2012

MIPIM: Reflections and Takeaways

The MIPIM experience is hard to describe. I know this because we had several prep meetings prior to the conference, and while they were all very informative and useful, they still didn’t really paint a picture as to how the massive spectacle would really unfold. Much of the time it felt like we were drinking from a fire hydrant, just trying to take in as much as we could. The magnitude of the event, the amount of money put into each “booth”, the sheer volume of exotic cars and multimillion dollar yachts…it’s truly a demonstration of how large a role real estate plays in global wealth.

For a young professional at the forefront of his attempt to break into the industry, I found the opportunity to be immersed in such a vast congregation of knowledge and experience that it was invaluable. Our itinerary included scheduled meetings with industry professionals that are friends of the Real Estate program at UW, as well as two summits (investor and mayor) that allowed the students to sit at round tables and listen in on the conversations being held. I was one of the few students that was lucky enough to attend both summits. At the summits we were tasked with scribing the conversation that occurred at our tables, then submitting a condensed version of our notes to go towards a final MIPIM white paper for that event.

My main take away from the investor summit is that it seems that “passive” investing is out the window. Too many institutional investors got burned in the recession, and it seems that gone are the days of sitting back and trusting the fund manager to execute a define investment strategy. Our separate talk with Choy-Soon Chua of SEB Asset Management confirmed this notion. Chua described that, now possibly more than ever, investors are looking for transparency and track record when choosing a fund manager. This is why Blackstone, with its impeccable history of success, is still able to raise $10 billion in funds while other firms struggle to find cash. This is also an opportunity for smaller, lesser known funds to draw attention. As investors are looking to shake up their portfolio and find a safe haven for their money, smaller funds that are adjusting to cater to the desires of these investors (e.g. transparency, communication, defined strategy) can prove themselves an attractive option.

One thing that surprised me at MIPIM is the presence of cities themselves on display for investors. I was previously under the impression that development projects were presented on a project by project basis in hopes of attracting investors. However, some of the largest cities in the Europe – Paris, London, Munich, Stockholm, Copenhagen – as well as other lesser known cities around the world would have large booth areas that promoted their city as a whole. This concept ties back to my experience at the mayor summit and the discussion of funding of infrastructure investments. What I learned is that there is an endless demand for cash to fund infrastructure development and improvements in major metropolitan areas. The mayors at my table discussed the hardship of prioritizing and allocating the little funds that were available. With this in mind, it makes sense that each city is attempting to portray itself as an ideal opportunity for investment, since the need for cash is not necessarily limited to any single development. One interesting note of differentiation regarding how cities were selling themselves this year, versus in previous years, is that there was a decided shift from "opportunity and growth" to "safety and stability". This goes to reflect the consistent theme of secure and stable returns that resonated throughout the conference.

The overall sentiment at the conference was positive. It was actually surprisingly positive, considering that Europe is in the middle of a recession and that some predict the worst has yet to begin. However, multiple individuals countered this negativity with this statement: “If we weren’t optimistic, we wouldn’t be in this business.” The business, of course, is investment and development in real estate, and the conference was filled with individuals who think that money put into real estate is money well spent. I realized that it’s important to keep this in perspective when listening to speakers and networking with other conference participants. While there is plenty to learn for the sources, they are also inherently biased and might not have the most pragmatic viewpoint on their situation.

Other takeaways:
  • Bring sunglasses and comfortable shoes.
  • Drink wine. It’s cheaper than water in the South of France.
  • Spend time wandering around and taking in all the commotion. Sometimes it can be useful just to witness how professionals from different countries interact and engage with one another.
  • Don't get your schedule so booked that you don't have time to wander the booths and strike up conversations organically - sometimes your best leads come when you're not expecting them.
  • Don’t be discouraged if you come across someone who isn’t interested in speaking with you. There are thousands of other people at MIPIM who are.
  • There is such a thing as a free lunch at MIPIM. You just have to know where to look - try the German booths.
  • The bus drivers for the conference have an hour every night for dinner, so you may end up choosing to walk home one night (see first takeaway).
  • If you're a student asking participants to fill out a survey, then the Asian and English attendees are your best starting point.
  • Speak slowly and clearly when conversing with other participants. English is not the first language of the majority of people there.
  • Give it everything you have. The days are busy and the nights are long. Sleep is limited. Be prepared to fight through any lethargy and take advantage of the opportunity.

Andrew Toby is a first-year MBA student in the James A. Graaskamp Center for Real Estate. A CPA from California, Andrew hopes to utilize both his accounting background and the knowledge gained in the MBA program to pursue a career in private equity investments in real estate.

Photo courtesy of MIPIM_World

1 comment:

  1. Points to Andrew for a nice discussion of MIPIM, and for his comments on institutional investors' changing investment strategy. From my perspective at SWIB he is exactly correct to note that "institutional investors got burned during the recession", however I would change "many" to "virtually all". I would not say that we are looking for a safe haven for new capital, rather I would say that we, as many investors, are looking for solidly underwritten income in place, with low leverage. Leverage was a huge problem for many investments during the Great Recession, and we consider leverage to be an under-appreciated(albeit extremely obvious, and extraordinary source of active risk in a real estate portfolio.
    Chuck Carpenter