Reporting from MIPIM: Risk Aversion

Reporting from MIPIM:

François Ortalo-Magné, Albert O. Nicholas Dean of the Wisconsin School of Business, gave the keynote wrap-up address at MIPIM this year. Alongside Mark Roberts, Global Head of Research for RREEF, Ortalo-Magné spoke on the key themes heard at MIPIM during the conference.

One of the key points of Ortalo-Magné's talk was that throughout the conference, a general theme of risk aversion, with a focus on stable returns was consistently heard. Cities that were promoting themselves at MIPIM utilized this message in selling themselves as low-risk investment locales. This was a far cry from the dynamism with which cities had previously marketed themselves at MIPIM.

Levels of risk were a dominant theme of conversations in the MIPIM halls. "What has been striking this year at MIPIM is that major cities are using their low-risk credentials as a selling point to international investors," noted Francois Ortalo-Magne, Albert O. Nicholas Dean of Wisconsin School of Business. "It used to be that the cities would sell themselves as exciting and dynamic markets, now the low-risk card is being played to the maximum."

PR Newswire picked up Ortalo-Magné's comments regarding the nature of how cities are pursuing real estate investment and posted on their website.

For the full presentation from the wrap-up keynote, click here.

Reporting from MIPIM: Optimism with a new vocabulary

Reporting from MIPIM: Final thoughts on the wrap-up keynote presentation to end MIPIM 2012 from one of our students:


Here we are, the final day of MIPIM. It seems that the champagne-and-caviar yacht parties have finally taken a toll on the attendees. The crowds have thinned out, my fellow Badger students and I are exhausted but ready to attend the pièce de résistance, the keynote speech by our rock star dean François Ortalo-Magné.

We had spent the previous day conducting a survey measuring the general sentiment of MIPIM attendees. Those findings coupled with the information we've been hearing and sharing during our daily debriefs, we are looking forward to the culmination of this great effort.

We met at the Le Corbusier hall, named after the famed early 20th century French architect Charles-Edouard Jeanneret. François was joined on stage by Mark Roberts from RREEF Real Estate. Mark presented raw global economic data and projections specific to the real estate sector. The graphs clearly indicate and support the idea that core holdings are a safe haven for those funds that are constantly on the hunt for high yields which is a rarity during challenging economic times.

François then amplified the buzz words we've been hearing all week which are "transparency," "alignment" and "like mindedness" of investors; this type of vocabulary seems to be a new phenomenon here at MIPM. However, they are concepts that make sense in the context of increased joint ventures which are the most secure frameworks for investors where both risk and reward are shared equally. François also highlighted the prominence and importance of sustainability and green design and mentioned the Qatari initiative as a model to be emulated. He echoed the importance of core assets in a portfolio but also suggested the premise that "core periphery assets" are a viable alternative class to hold.

Finally, the data that we compiled was presented, drum roll! It seems that the majority of attendees are more optimistic about the future. There is also little variance of sentiment data from 2011. The majority appear to be open to the idea that non-core assets are a legitimate option. Investors are split down the middle on the question regarding debt markets and whether the current state constitutes an opportunity rather than an impediment.

Today our MIPIM immersion ends, and we pass the torch to the future Graaskamp Center students. My advice to you is to enjoy and exploit every minute of your time here, it is truly a once in a lifetime experience. The day has ended; I take my last stroll on the Boulevard de la Croisette as the sun sets. As if on cue I hear the music of Edith Piaf playing in the background to bid me a proper French farewell. I’m leaving Cannes with a heavy heart because it is so easy to fall in love with the romanticism of this city. Au revoir, Cannes, au revoir. I promise to come back to see you again.

Bashar Elayyan is a first-year MBA student in the James A. Graaskamp Center for Real Estate. As an architect based in Chicago, he was involved in the design and execution of numerous complex large scale projects in the U.S., Mideast and Chinese markets. His career aspirations lie within the domains of REIT management or real estate finance and investment banking.

Reporting from MIPIM: Final wrap-up keynote presentation

Prof. François Ortalo-Magné, Albert O. Nicholas Dean of the Wisconsin School of Business, presented the findings of a survey of participants at MIPIM 2012. He and Mark Roberts, Global Head of Research at RREEF, discussed the major themes and takeaways from the week in Cannes.

For more visit, the MIPIM World blog.

Reporting from MIPIM: Day 3: A Political Perspective on the Euro Crisis

The Wisconsin School of Business is proud to partner with MIPIM World to bring you updates and developments from the show. Bashar Elayyan (MBA '13) reports on the official blog on his experiences and takeaways from Day 3.

Bonjour from Cannes!

Day three of MIPM is nearly over, and it remains a beehive of activity in what is currently the de facto center of the real estate universe. I had more time to walk about the booths today and I can inform you that it is a dazzling carnival of renderings, animations, techie pavilions and shiny models. You are enveloped and bombarded by a mosaic of competing ambitious projects screaming for your attention. Your eyes simply can’t have enough of this feast of monumental aspirations that radiate national pride.

Read more at MIPIM World.

For more coverage check in with us on the Viewpoint or follow @UW_GraaskampCtr on Twitter.

Reporting from MIPIM: Who will "win" in distressed investing in Europe?

Reporting from MIPIM on Wednesday's session on Private Equity: European Distressed Investing

The latest European credit crisis has created an interesting scenario involving apprehensive real estate private equity investors and deleveraging commercial banks. The facts are clear: large European commercial banks will be forced soon to unload billions of dollars of real estate debt from their books due to tightening regulations (Basel, Solvency, etc.) in the near future. There is enormous pent-up demand among investors for these assets, with current fundraising in the tens of billions of dollars.

This would seem to represent a significant opportunity but so far, European banks have been reluctant to shed real estate assets at “fire sale” prices. Will supply loosen up to meet this demand? And what will it take?

In the heat of the crisis, European investors fled to core assets. The investment focus was on gateway cities such as London, Paris, and Frankfurt. Now, many feel core assets in these locations are over-valued, reaching yields as low as 3-4%. So this area does not currently present significant opportunities in Europe.

An interesting side note to this situation is the relative outlook by European vs. U.S. investors. U.S. investors seem to be far more pessimistic on the future of Europe than are European investors. European optimism is based in knowledge of the history of their markets, and confidence in the structures in place to fix the current crisis. So does that mean American investors may miss out on deals on distressed assets?


For more coverage of discussions and developments at MIPIM, check our blog and visit the official MIPIM blog. And follow us on Twitter (@UW_GraaskampCtr) and on Facebook.

Reporting from MIPIM: Day 2 with a Middle Eastern theme

Reporting from MIPIM: First-year students in the Real Estate MBA program at Wisconsin are in Cannes this week attending MIPIM. It's a great opportunity for them to be immersed in the international real estate scene, to see classroom principles in action, and of course to network. One of our students, Bashar Elayyan, shares his experiences from Day 2.

It’s the start of a beautiful sunny day; the air is crisp and heavy with the salty smell of the Mediterranean. The suits are immaculate and sharply pressed, and the caffeine fueled real estate global community converges on the Palais for another exciting eventful day at MIPM.

My day so far has had a Middle Eastern theme as I attended a seminar entitled MENA: Opportunities and Challenges. The Middle East and North Africa remain to be active regions and the hall was packed with professionals eager to hear the state of the real estate sector in this important part of the world. The topic on everyone’s minds is the real estate meltdown in hotspots such as Dubai. Security, in the context of the Arab Spring, was discussed extensively. The lack of a legal framework that regulates and protects parties involved in the sector has also been a challenge to entry. Despite the obstacles facing MENA, it remains to be an attractive region with great potential for investors.

My next stop was to the Qatari pavilion which has generated a lot of buzz this year. Qatar has been dubbed the new Dubai but so far has progressed in a subdued and controlled manner. Doha’s skyline has changed and new cities are emerging out of the sand dunes. I attended a lecture by one of the architects responsible for the design of Lusail City. The topic of preserving national culture and heritage was extensively covered. The world is under threat of turning into a massive homogeneous landscape where national identity is lost in the name of modernity. Lusail City is an example where contemporary design was implemented in a way that conformed to the language and essence of the local culture within a theme of sustainability and green design.

That’s it for today, tomorrow I will be attending a lecture by the former foreign minister of Germany which will cover the state of politics and economics within the European continent.


Bashar Elayyan is a first-year MBA student in the James A. Graaskamp Center for Real Estate. As an architect based in Chicago, he was involved in the design and execution of numerous complex large scale projects in the U.S., Mideast and Chinese markets. His career aspirations lie within the domains of REIT management or real estate finance and investment banking.

Photo courtesy of MIPIM_World

Reporting from MIPIM: A "perfect storm" for investment in the U.S.?

Reporting from MIPIM:

The U.S. is poised at a "perfect storm" of factors aligned to drive investment in the country. Factors including the US dollar which remains the world's default currency, the continued appetite of U.S. businesses for new opportunities and American consumers' continued reign as the top worldwide consumers of goods and services.

On Tuesday afternoon, presenters from the Association of Foreign Investors in Real Estate (AFIRE), CBRE, the Paramount Group and Metzler Real Estate spoke on what many analysts foresee as an influx of investment capital coming into the U.S. over the next five years. This confluence of factors points to the U.S. as a safe haven.

Primary points from the discussion included the continued dominance (some would say stranglehold?) that the U.S. has as an investment destination and as the best option for capital appreciation. U.S. cities make up three out of the top four cities for global investment: New York, London, Washington DC and Sao Paolo. Additionally, total U.S. transaction volume has reached its 2004 volume, there are downward sloping unemployment numbers in the US, the return on real estate is 500 basis points over that of bonds, and foreign investors and pension funds are currently buying U.S. REITs: More elements of a "perfect storm," even in the face of anticipated uncertainty in market confidence from November's U.S. presidential election.


For more on investment trends for 2012, read more about the survey conducted annually by the Graaskamp Center of members of AFIRE: New York, DC and Then...Sao Paulo? The 5 Top Cities for Investors

And for more coverage of discussions and developments at MIPIM, check our blog and visit the official MIPIM blog.

Reporting from MIPIM: What happens to "brown" properties in a "green" world?

Reporting from MIPIM 2012:

Have we truly turned a corner on sustainable building practices, no longer focused on whether or not it's feasible to embrace these new techniques but shifting instead to the challenges faced by the structures that don't (or can't) go "green"?

It appears that the question of whether sustainable building is a positive net present value investment has been answered and the industry has now turned to the difficult task of large scale implementation. That was the conclusion of this morning's session at MIPIM "Sustainable Property Investment: Does Good Mean Good Value?"

Sustainable buildings have been proven to outperform conventional buildings in a variety of value metrics. Demand is building for standardized data collection and the creation of a "green" index. This would allow for greater transparency regarding green benefits and allow buyers and sellers to make more informed decisions. Although state governments and market observers have sought to gather data about the performance of sustainable buildings, finding a way to share this data has proved to be quite difficult. The ability to provide accurate and applicable data regarding green buildings is the greatest challenge that the field faces in the near future.

The next phase of the transition to sustainability is the functional obsolescence that will accumulate to non-green buildings in the future. These so-called 'brown discounts' were estimated to be substantial and will only grow. Conventional buildings will lose their competitive position and owners of these properties should anticipate major re-positioning or decreases in value. There is no timeline or magnitude of brown discounts yet, but this prospect is certainly one of the most troubling threats (or is it an opportunity?) in real estate today.


For more coverage of discussions and developments at MIPIM, check our blog and visit the official MIPIM blog.

Reporting from MIPIM: Surprising outlook on European retail

The Wisconsin Real Estate Program is participating in MIPIM for the seventh year running. Attending the international property conference is an important dimension to the global perspective that students gain from the program. During the week, we'll be reporting on key takeaways from the panel sessions.

The surprising outlook from the morning session "Markets, malls and main streets: Where is the future of European retail investment?" is that retail is outperforming office and industrial sectors. While panelists admitted that volatility is a factor, with retail more ups-and-downs than office, but they judged it to be less variable than industrial.

Panelists discussed three reasons to invest in this sector-- (1) diversity of cash flow, (2) limited supply due to regulations, (3) high barriers to entry due to the management intensive nature of the sector--with some caveats. Investors should target properties that have proven track records; shopping centers with 100-200 retailers are preferred over a "big box" store. While some investors fear competition from online sales or the risk of cannibalization, they could think of it as a complement to a brick and mortar shop. And for mixed use projects, a specialist in residential development can be an important partner for success.

Given the state of the economy and its fragile recovery, do you share this outlook for retail?


For all of our coverage from MIPIM, click here.

Excitement is building up to the kickoff of MIPIM 2012

Check out our post at the official MIPIM blog where we will be contributing next week during the show.

Excitement is building up to the kickoff of MIPIM 2012. Public sector leaders and private sector investors will converge on Cannes, France, next week to take the industry’s temperature, to get a glimpse into the near future, to ask questions (and hopefully find some answers), and to make valuable connections. Students in the real estate MBA program at the Wisconsin School of Business will be there as well.

This is the seventh year that a delegation of Wisconsin Real Estate MBA students will be attending the show. Students and faculty are leaving today and tomorrow for Cannes, still doing research into the topics that will be discussed and the questions that they want to ask.

For a look back at our previous MIPIM coverage, click on the posts labelled MIPIM. And be sure to visit our blog next week for more reporting on the panel sessions, plus Dean François Ortalo-Magné's remarks on Friday. His keynote is the perfect way to wrap-up the meeting, with the major takeaways and trends. Don't miss it!