Thursday, March 14, 2013

Update from MIPIM

The class of 2014 arrived in Cannes, France on Monday to attend MIPIM 2013. My fellow students and I have already immersed ourselves in a variety of conference sessions and networking events with industry experts from around the world.

The Private Equity Real Estate session included a terrific conversation about markets across the globe. As the biggest private equity player, the United States was discussed first and throughout, mainly by Morgan Stanley's Michael Levy. Levy cited strong fundamentals in the United States as a preferred area for investment. AEW Europe's Russell Jewell, head of private equity, stated that his company is raising a United States opportunistic fund, and that his American partners are still nervous about leverage from the recent financial crisis. Francois Trausch, CEO of GE Real Estate's Asia Pacific division, stated that there is a long, deep trend of increasing Asian money into United States and Europe, especially Koreans entering the core/core+ markets at fair value.
Focused on the Eurozone, Jewell is finding value-add assets to turn them into core assets for institutional investors. He cites liquidity as an important factor, and that it must be present when one goes to sell assets. Additionally, investors are searching for real estate practitioners, not financial engineers, and, in the same vein, he very much pictures a pure leverage play as much less preferable than a real estate fundamental play.
Speaking about Asia, Trausch offered that it should not be viewed as one market, and that China will eventually have to clean up distressed assets, but won't today.
As far as the general private equity world, Jewell focuses on capital raising and not fund raising as a more flexible approach, with managerial discretion as essential. Morgan Stanley is focused on an ability to underwrite individual properties within loan pools.
Speaking about debt funds, the speakers were largely in agreement that investors have more and more appetite, but lending is focusing on all of the same assets, with banks also coming for these same opportunities. There are more senior debt funds, but not replacing the bank financing. Mezzanine funds are believed to be going deeper into the capital structure than they probably should.

Jonathan Brown comes to Madison from Washington, DC, where he managed downtown Class A office buildings for Tishman Speyer. Jonathan plans to leverage his prior experience with financial and analytic tools gained during the MBA program to eventually start his own real estate investment firm. 


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