Meet the GREM Students

Pictured from left: Wentao Cai, Jue Shen, Fares Bou Atme, Thomas Sukno

Now in its third year, the Global Real Estate Masters program partners the Wisconsin School of Business real estate program with HEC Paris, Hong Kong UST, INCAE, and Shanghai Advanced Institute of Finance (SAIF), to provide top ranked international business schools access to Wisconsin’s renowned real estate expertise. Currently, four students are living and studying here in Madison.  I sat down with them to learn more about why they pursued the GREM program and see how they are enjoying their time in Madison.

What did you choose the GREM program and what do you hope to get out of it?

Jue Shen (SAIF): With eight years of experience in various capacities in corporate finance at the Industrial and Commercial Bank of China, I wanted to obtain top notch real estate education as the industry becomes increasingly important in China. Also, gaining understanding between China and the United States markets is a passion of mine, as I wish to help U.S. investors access the Chinese real estate market more effectively.

Wentao Cai (SAIF): Given my current job as an advisor to a firm specializing in new project developments and urban planning in China, I needed a real estate-based educational framework to effectively apply my knowledge on the ground.

Fares Bou Atme (HEC Paris): After graduating from the American University in Beirut with a degree in civil and environmental engineering, and several years working in sustainable structural design, I knew I wanted to pursue a career in real estate. I found HEC Paris attractive, especially when paired with the real estate coursework at Wisconsin. GREM provides a comprehensive global view of real estate, much more than any other program that I researched.

Thomas Sukno (HEC Paris): I was initially attracted by an advertisement at HEC Paris and after a bit of research realized that this was such a highly rated program. My hope for the program is that it will broaden my horizons into real estate finance. So far so good!

What do you like most about the real estate profession?

Jue: I like the finance side of the business, specifically helping small investors gain access to real estate capital. The GREM program has also opened my eyes to the REIT structure and I find it quite interesting.

Fares: I have a passion for the built environment, and a career in real estate provides the best combination of my various interests in architecture, civil engineering, urban planning, finance, entrepreneurship, among others.

Thomas: I appreciate its multi-functional diversity. In real estate, you are not pigeonholed into one function, but can find a job you like whether it be in capital markets, construction, appraisal, development, and so on.

Where do you see yourself in five years?

Jue: I picture myself working with an asset management company, along with having a family with a cute kid hopefully!

Fares: Short term, I want to work for a development firm in the Middle East given the region has huge room for growth, and eventually I would like to start my own real estate firm.

Thomas: I will work for a Parisian investment banking firm starting in July that specializes in equity capital markets mainly in Western Europe with some global reach. I hope to leverage that experience with my entrepreneurial spirit to start my own company.

What is your impression of Madison?

Wentao: Madison is the only city I have visited in America so it’s tough to compare to other cities, but I can say that it is very livable.

Thomas: It was different than how I pictured a typical American city. The sense of community is striking and really sets it apart from other cities.

Jue: The people and community here are great. Madison is a very suitable place to live. The winter months are interesting to say the least. I am amazed by both the amount of snow and the fact that people sit in the middle of a frozen lake to ice fish!

Thank you to each student for answering our questions and it certainly has been great getting to know them this semester!

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.

À Bientôt, MIPIM

Here’s to the real estate MBA Class of 2014 knowing much more about international real estate and global capital flow than we did before! The 2013 MIPIM trip was a whirlwind of meetings with diversely talented individuals, panel sessions about the real estate environment across the globe, debrief sessions with Dean François Ortalo-Magné, and the occasional yacht party. Overall, we were able to derive a comprehensive snapshot of the global real estate market in time, and better understand how macroeconomic events steer capital markets within the real estate industry.

Key MIPIM 2013 Themes:

1.       An unprecedented and growing yield gap between core and perceived non-core assets

2.       Institutional investors are seeking managerial control through direct investments

3.       Employers desire real estate experts instead of merely financial engineers

4.       Participants are largely bullish towards Asia & America, and cautious towards Europe

Our special thanks to company representatives during the trip who lent their time for the advancement of our students: Deustche Bank, Park Hill Group, BNP Paribas, Lazard Freres, Real Capital Analytics, IPD, Atlantic Partners, DTZ-UGL, USAA Real Estate Company, Heitman, DLA Piper, Metzler, DREA(m) LLC, Amstar, Bjarke Ingels Group, and all others involved with us during our time there.

One final thank you to the Graaskamp Center for Real Estate, for without it we would not have been able to partake in this wonderful experience. I’m left with one lingering thought: how can I convince the organizers of the need for a 2^nd year MBA consultant on next year’s trip!

Real estate MBA students and faculty pictured with Dean Ortalo-Magné and Rose-Noëlle Pritchard, Conference Manager for Reed MIDEM

A Day in the Life: A Wisconsin MBA at MIPIM

Real Estate MBAs took their annual trip to the world’s largest property conference, MIPIM, during the week of March 11, 2013. The group was led by faculty associate Joe Walsh and faculty member Erwan Quintin and joined by Wisconsin School of Business Dean François Ortalo-Magné. Situated along the Côte d'Azur (or French Riviera), the Palais des Festivals hosted over 20,000 real estate practitioners from around the globe. This post will give you a flavor of a typical day in Cannes, and hopefully will not inspire too much envy:

Wednesday morning started with a bus ride from our hotel in Cannes La Bocca into the city of Cannes to meet with Hans Vrenson, Global Head of Research of DTZ. Hans met with MBA students via video conference back in February, when he presented DTZ's 2013 economic forecast. On the steps of the Grand Auditorium, Hans explained the European CMBS market and how it differs from its American counterpart, mainly through the use of shorter maturities and floating rates, and how maturity mismatches were an issue for European borrowers. He also described the continued diversification of lending from mainly European banks, which originally issued over 75% of total loans. 

A debrief with our Dean Ortalo-Magné followed in the Palais' Press Room, where he gathered information from our participant surveys about the conference's overarching themes for his Friday wrap-up speech. The survey results have revealed a recurring theme of higher investment risk appetite through value-add, direct investments that provide investors with a high degree of control. This is clearly a result of the financial crisis when many investors were burned by more indirect investing in pooled funds. 

Back on the Palais steps, the group met with Don Wise, CEO of Metzler Real Estate, who described the acquisition and asset management services he supplies for his German clients. Specifically, he spoke about the acquisition of 555 Mission Street from Tishman Speyer, a gorgeous trophy office building in San Francisco. Up next, several of us attended the best panel yet on Private Equity Real Estate with representatives across the globe from Morgan Stanley, AEW Europe, and GE Real Estate Asia Pacific. A special moment came when I walked out with panelist Michael Levy, Managing Director of Morgan Stanley, and discussed his global investment strategy and his aversion to Africa. He noted the political uncertainty in Africa leads to concerns of government expropriation of property during the hold period and a general lack of regulatory transparency. 

Anthony Huerta and Conor McCahill (both MBA 2014)

We headed over to the Heitman yacht party for a cocktail, and met some interesting people including Steve Williams, Executive Managing Director of Real Capital Analytics, who sits on the Global Real Estate Master board of advisors. After catching up on work and attending a panel on US real estate with representatives from USAA, AFIRE, and CBRE, we had a great evening with cocktails and German fare at the Berlin stand overlooking a lineup of luxury yachts. Several of us grabbed Kebob Frites at a local family restaurant in Cannes La Bocca while watching the Arsenal/Bayern Munich soccer match. Who could ever complain about a day like that?

View from the Berlin Party

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.

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. 

Co-Founders Michael Brennan and Robert Vanecko Talk about Mega Deal One and Two

 Real estate students at the Wisconsin School of Business received an educational visit from a leading player in the industrial real estate arena, Brennan Investment Group (BIG), on Friday, Dec 7. Chairman and Managing Principal Michael Brennan, who also serves as the Executive Director of the James A. Graaskamp Center for Real Estate, was joined by Managing Principal and Co-Founder Robert Vanecko to discuss a deal that proved James Graaskamp’s time honored adage: “The successful real estate deal is nothing more than a series of crises tied together by a critical path.”

 “All deals are sagas,” was Brennan’s lead comment as he opened the discussion of Brennan Investment Group’s (BIG) two recent mega-deals, the acquisition of a 20 property, $155M portfolio and a 19 property, $178M industrial portfolio. The presentation “Start to Finish: The Acquisition of Two Major Industrial Portfolios” was a detailed look into the creation of Brennan’s company, how his team sourced the capital necessary for the two “mega-deals”, the unique structure of the deal, and the successful closing of one of the largest industrial acquisition portfolios in 2012.

Creation of Brennan Investment Group

Before discussing the transaction, Brennan spoke about the creation of BIG, “without which, we would never have closed an acquisition of this scale” said Brennan. After the expiration of Brennan’s non-compete restriction from First Industrial in 2010, Brennan assembled a team of largely ex-First Industrial professionals. “Each partner had unique skills, and each partner came from a critical region in the U.S.” Within nine months, Brennan set up five offices in LA, Houston, Chicago, Tampa and D.C. Brennan described his company as an “eat-what-you-kill deal shop” where partners risks are high, but reward is as well.

The Unique Qualities of the United States Industrial Portfolio (USIP) Deal

Robert Vanecko explained his firms focus is on transactions that can create value for all investors in the deal. An interesting methodology used by Brennan is something Vanecko referred to as the “STP Matrix”. The matrix sorts and ranks acquisitions by seller circumstance, transactional complexity, and property level attributes. In this deal, Vanecko cited transactional complexity as the factor driving the “value-add” component. Because of its sheer size and inherent complications, there was a limited pool of buyers, hence limited competition.

The USIP deal also employed a fairly complex and unique equity financing scheme. The  L.P. equity was provided via a sharia compliant equity partner know as Gatehouse, located in London. Sharia compliant financing must employ different legal structures to avoid direct payment of interest. As well, the investment cannot lease space to tenants involved in usury, gambling, munitions, or pork products.

Successful Closing

Vanecko joked that if Graaskamp were alive today his famous adage on the critical path of deals might be revised to read “A successful real estate deal is nothing more than a game of ‘whack-a-mole’”. Vanecko emphasized that in every deal, there will be three or four things that will arise that have the potential to kill a deal. In USIP I and II, there were “dozens of rounds of ‘whack-a-mole’ we had to win in order to close.”

Given the young audience, Brennan offered great tips regarding start-up operations including “start-ups have to starve”, and discussed his firm’s critical ability to manage start-up and pursuit costs without being left ‘holding the bag,’ if you cannot come up with the equity or the desired properties. Brennan also placed great emphasis on the importance of relationships in this industry. On behalf of the students here, we would like to thank Mike and Bob for sharing their knowledge and experience with us!