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. 

Wisconsin MBAs Travel Far to Explore Chinese Real Estate Markets

Over the winter break, ten second-year Real Estate MBAs from the Wisconsin School of Business traveled to China, following an intense itinerary through Shanghai, Hangzhou, Hong Kong, Shenzhen and Macau.  Students met with brokers, planning authorities, money managers, developers, investors, lenders, attorneys and alumni to gain first-hand insight into these growing real estate markets.  The 10-day tour included a dizzying array of company presentations, property tours and speakers. 

Students prepared for the trip by performing market research and compiling a briefing book for their peers.  Students also conducted presentations of their analysis, which focused on understanding key industry players, legal structures, the political environment and cultural differences.  Once on the ground, the students were able to visualize the enormous transformation occurring in the world’s most populous country. 

“Chinese cities are experiencing growth and development on a scale never before seen,” said Travis Carter (MBA ‘13).  “It is almost impossible to wrap your mind around it.  Shenzhen was a small fishing village inhabited by a few thousand people in 1979 and today it is a sprawling metropolis of more than 15 million people.”

Viewpoint from Hysan Place, a newly opened enclosed shopping mall and Class A office building constructed over an MTR subway station in the Causeway Bay neighborhood of Hong Kong.  The visit included a tour by the architectural firm KPF and led to a discussion on the structural and financial aspects of the building.

Students met with large international institutions such as Jones Lang LaSalle and JP Morgan, as well as, key domestic players such as China Vanke, Shui On and Zendai Properties.  The trip included an extensive tour of a notable Tishman Speyer development, The Springs, located on the outskirts of Shanghai.  The mixed-use project is being developed on a former military airfield and nears ten million square feet in total.  Students were amazed, counting 11 cranes in the sky and estimating another 7-10 cranes not visible from their vantage point.

“For someone who has never been to China, I don't think it is possible to adequately describe the size and scope of the residential projects currently being developed,” reflected Phil Natkins (MBA ‘13).  “In the U.S. these wouldn't be considered residential developments, but would be more aptly named, ‘New City Developments.’  To see it, is the only way to believe it.”

Scale model of Shanghai at the Shanghai Urban Planning Exhibition Center. The detailed 3-D model provided a bird's eye view of the city and highlighted how the development of real estate has been molded around the ever-growing metro transit system.

Now back in the United States, participants of the international study trip have to apply the knowledge gained during the trip.  The students will prepare an investment memorandum and presentation targeting potential private equity investors interested in deploying capital in a foreign market.   Students will present their proposal in a 10-15 minute presentation to their peers, instructors and faculty.

Faculty Lecturer Arif Qureshi (BS ‘94, MS ‘04) led the trip, with support from MBA alum Chris Jillings (BS ‘99, MBA ‘10).  Both Qureshi and Jillings emphasized the important role alumni and friends of the program played in making this year's trip through China an outstanding success.  Special thanks to Raymond Lo (BBA ‘75), CIC Capital Management Limited’s Founder and Fred Cooper, Senior Vice President at Toll Brothers, for providing guidance and contacts for many of the meetings in China; Sir C.K Chow Chairman of Hong Kong Stock Exchange for meeting with students about HKEx and MTR; and Xi (Ada) Chen (MBA ‘10), Wei (Isabella) Qiu (MS ‘11) and Qiujin (Jack) Li (MS ‘12) for planning networking dinners in Shanghai and Hong Kong. 

Real Estate MBAs displaying their Badger pride at Po Lin Monastery in Hong Kong.