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!

Gearing up for MIPIM 2012

The anticipation has reached its pinnacle, and the Class of 2013 has begun to pack our bags for Cannes, France to attend MIPIM 2012 next week. We’re looking forward to attending a variety of conference sessions and networking events with industry experts from around the globe. The event, which will consist of 4,200+ real estate investors and 19,000+ participants coming together at the Palais des Festivals, will surely be a memorable and invaluable experience for our group of aspiring real estate professionals.

Dean François Ortalo-Magné, who has been a prominent MIPIM speaker and attendee for several years, has already been contributing to the MIPIM buzz with his features on the mipim worldblog. Earlier this month, he was put in the spotlight as a “property influencer” and shared his insight on the market in China, touching on topics such as sector trends, aging population, and sustainable development. Watch his interview here.

Just recently, he was featured in “MIPIM past, present and future…Four questions for Dr. François Ortalo-Magné”. Here, eager readers are able to get his input on what has changed in the global real estate market over the course of 2011, and what is to be expected at MIPIM 2012. “The demand for emerging market investments has yet to find a place to settle. Emerging countries have legal pains in setting up the right institutional environment to welcome foreign investments. The battle is still on for the next serious contender”. Read the full blog post here.

During the conference, students will be actively sharing our experiences and reflections each day, so be sure to stayed tuned for continuing coverage on this year’s MIPIM trip. We'll also be contributing to the official MIPIM blog and reporting on Twitter at @UW_GraaskampCtr.


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.

David Shulman Guest Lectures

On Thursday, February 2nd, Tim Riddiough’s Real Estate Equity Investment class held a special lunchtime session that featured David Shulman as our lecturer. Shulman is currently an adjunct professor and advisor to the Applied Real Estate Investment Track (AREIT) here at the Wisconsin School of Business. His experience can be found in detail on the faculty page for the Graaskamp center, but to sum it up he was a wealth of knowledge from his experiences as Managing Director and Head REIT analyst at Lehman Brothers, as well as his role as both Director of Real Estate Research and Chief Equity Strategist at Salomon Brothers. He was the recipient of the first annual Graaskamp Award for Excellence in Real Estate Research from the Pension Real Estate Association, and has been an invaluable resource for Wisconsin Real Estate students.

As the real estate students begin the endeavor into understanding the world of REIT investment, professor Riddiough felt it would be in our benefit to get a macroeconomic overview from someone as well-informed as Shulman. His main talking points included GDP, employment, inflation, interest rates, and deficits.

First, he gave us a little tip on collecting economic data: “Fred is your friend”. By “Fred” he is referring to Federal Reserve Economic Data which can be accessed at www.stlouisfed.org/fred. I have already found this website to be extremely useful when completing “top-down” analysis for the demand drivers of certain asset classes.

His presentation consisted of a series of graphs that he pulled from FRED. First topic at hand was the ever-looming unemployment issue in the United States. According to Shulman, while there has been drop growth in the recent months, it isn’t enough to make up for the horrendous unemployment rate. He feels that several years of 250,000 jobs/mo growth is necessary to fully recover from the recession. His presentation, keep in mind, was just a day before it was announced that January 2012 say an increase in nearly 250,000 jobs which dropped unemployment to 8.3%, so perhaps we are making the first steps towards this goal.

Amongst other topics, one thing that Shulman spent a bit of time discussing is his “Paradox of Thrift” theory regarding low interest rates. The decision to keep interest rates low is a part of the expansionary monetary policy establish by Bernanke as a means to increase spending and spark economic growth. Americans can save money on their monthly mortgage payments by refinancing their homes, and lenders can afford to loan money at low rates while still earning a decent spread over the risk free rate. It is also helpful for commercial real estate, as underfunded pension funds and other institutional investors are now looking to put money into core commercial assets to produce a higher yield than their previous bond investment strategy. However, Shulman argues that, while there is an upside to this type of monetary policy, there is also a negative aspect that shouldn’t be ignored. More specifically, the effect on the current and prospective retirees, those whose retirement plan never contemplated 2% 10-year notes and who are subject to underfunded pension plans, now have a much stronger reason to save and lower their spending.

As far as a quick synopsis on each commercial sector, Shulman had the following to add:

Multifamily: Currently experiencing a boom related to the collapse in the home ownership rate and the changing psychology regarding single-family home ownership. Even for those who have previously owned a home, and even with record low mortgage rates, renting may currently be a better option financially for several Americans, and rental apartments are benefitting.

Office: Suffering from the lackluster job market. The suburban office market has also been heavily impacted by the drop in home ownership, since a high volume of the buildings are occupied by financial service companies tied to housing (banks, brokers, title companies).

Retail: E-commerce is certainly having its impact on big box retailers. As Shulman put it “Best Buy is basically acting as a showroom for the things people end up buying on Amazon”. Also, a bifurcation in customers is developing noticeably; that is, customers are beginning to trend more to either the high end or low end of retail shopping, and middle group players such as Sears and JCPenney are hurting.

Industrial: Demand is slowly recovering from the massive inventory liquidation that took place during the recession. Imports have been rising steadily, which is a good sign as much of what is held in storage is imported goods. The upcoming plan to widen the Panama Canal, scheduled for 2014, will negatively impact West Coast ports that serve as a ship-to-rail link for Asian exporters.

These topics only brush the surface of the knowledge that Shulman was able to share with us during his 90 minute lecture, which included ample time for Q&A with the room. As an AREIT candidate, I very much look forward to having the opportunity to work with David more in the future and utilizing him as a guide to mastering REIT investment theory and practice.

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.

Doug Frye of Colliers International Accepts Innovator Award

On February 9, 2012 on the UW-Madison campus, the UW Real Estate Club and the Graaskamp Center for Real Estate presented the Innovator Award, which recognizes innovative contributions to the real estate industry. This spring’s recipient is Doug Frye, President and Chief Executive Officer of Colliers International.

Frye was selected for leading transformational change within Colliers from a network that once consisted of independent firms to a much more powerful global enterprise. He led this change with great empathy and has helped unify great individual performers across this global enterprise. His success in doing this is especially profound because his management style embraced the individualism of a broker, while uniting the company under a common vision. Frye has served as the President and Chief Executive Officer of Colliers International since 2004. He also serves as the chairman of the Colliers International Governing Committee, which oversees the Colliers International brand on a global scale. From 2007 to 2010, there has been a 450% growth in revenue at Colliers, which translates to revenue growth from $187 million to over $1 billion.

Joined by a full audience of more than 100 MBA and undergraduate students, Frye started off his presentation by taking the audience through his career progression. His story started in 1971, with his family’s move from Detroit to California in their Ford Fairlane. His parents purchased a house that was two blocks from the beach for $15,000. Frye and his family quickly set to renovating the property themselves and months later, the family sold the house for more than double the purchase price. Next, he mentioned his time as a member of the wait staff at Denny’s. Frye was very intentional with this inclusion, as he said, “You need to appreciate the job that you are doing because all these skills will come back and be useful.” He cited the need to multi-task as a waiter and how important it can be in the marketplace.

Following obtaining his BA in Marketing and Finance from the University of South Florida, Frye took a job as a real estate analyst. As he was reviewing a closing statement, he saw that the broker would receive a big commission on the deal and decided that was the route for him. He landed a job as a broker with Grubb and Ellis. There, he bought a 70-pound “portable” IBM computer for $5,000 and learned how to compute discounted cash flows. He was the only person at that office who could do a discounted cash flow on a computer, and he was consistently brought into meetings to “work his magic” on the computer. Frye emphasized the importance of having a skill that differentiates you in the workplace. He said, “I figured out what that was going to be, and I worked at it.”

In 2002, after four years at Grubb and Ellis, Frye was offered the job as President and CEO at Colliers. Frye took the job and began a much bigger “renovation” than he and his family had overseen on their property in California. He wanted Colliers to take on the role as the leader in the experience field of real estate brokerage. He recognized that there were already strong players in the other brokerage specialization areas and felt that Colliers could make a strong play by focusing on providing a great experience for their clientele. Frye stated that when your business is seen as a commodity, how you deliver the product has a heightened importance. He used Starbucks as an example and detailed how Starbucks decided that they were going to make the play to not just serve great coffee, but to become the third meeting place that people frequent (home and office being the other two).

Frye refocused the company’s core values to more closely align with the company’s new trajectory. Those values are:

• Service – to provide memorable service
• Expertise – to be great at something
• Community – to commit to being active around the globe
• Fun – to celebrate successes

As Frye closed his talk, he took on a different tone – one of inspiration and challenge for the students. He discussed how Colliers is the only financial services firm that signed PACI (an anti-corruption initiative) with World Economic Forum, and he then challenged the students by saying that in order to change the world with innovation, we need to have the mindset of innovation. Frye followed this by showcasing the Everyone Gives global social giving campaign that Colliers is launching on February 22, 2012. In this campaign, donors contribute money via the Everyone Gives platform and designate which charity they want to support. Then everyone invites two of their friends to give, and they invite friends, and so on, thus compounding the amount of people and the contributions. To kick start this challenge, Frye passed out a few Visa gift cards to the students, encouraging them to support their own causes and to tell their friends.

The inspiration for the Innovator Series Award was derived from the paper "Tradition and Innovation," written by Professor Stephen Malpezzi, chair of the Real Estate Department at UW-Madison. The paper's central theme is that a rich history cannot be established without continually implementing innovation. Previous recipients of the award include Michael Ashner of Winthrop Realty, Nick Billotti of Turner Construction, Laurence Geller of Strategic Hotels and Resorts, David Brain of Entertainment Properties Trust, and Hersch Klaff of Klaff Realty.

Jordan Denzer comes to Madison from Dallas, TX (it is often joked that he is one of the international students). Previously, Jordan managed corporate flexible spending accounts, but decided that he wanted to get into real estate development, which initiated the move to Madison. Currently, Jordan is interested in getting into historic redevelopment and/or mixed-use development projects.

UW-Madison Ranked in Top Ten Best Values

The University of Wisconsin-Madison was ranked fifth among public universities and colleges by the Princeton Review in their 150 Best Value Colleges in 2012 report. The rankings were comprised of 75 public institutions and 75 private institutions. Criteria for the selections were excellence in academics, a relatively low cost of attendance and/or generous financial aid programs.

"Offering a high-quality public education at an affordable price is one of the bedrock principles of UW-Madison," says UW-Madison Provost Paul M. DeLuca Jr. "But even with the success of such efforts as the Madison Initiative for Undergraduates to deliver additional need-based aid, we will strive to make a UW-Madison education possible for all students."

The guide was developed for students and parents seeking the best value for their money – somewhat of a Consumer Reports on universities.

Stats for the University of Wisconsin-Madison are as follows:

• In-State Costs: $21,772 (includes room, board, books and fees)
• Out-of-State Costs: $37,521 (includes room, board, books and fees)
• Avg Debt at Graduation: $22,837
• Avg Need Based Grants: $6,456
• Avg Need Based Loans: $3,917
• 48% of students borrowed
• 22.5 of freshman receive grants that do not have to be repaid
• Avg High School GPA: 3.69

The Princeton Review used cost, academics and financial aid data from surveys of school administrators, as well as student assessments of professors and financial aid awards, to compile the list.

The University of North-Carolina at Chapel Hill was named the nation's best value among public colleges and universities, while Williams College was the top private college. UW-Eau Claire and Beloit College also made the list. UW-Madison was the only Big Ten institution among the top 10 public universities.

Brad Olsen Visits Real Estate Club

Brad Olsen of Atlantic Partners spoke at the Real Estate Club meeting to kick of the spring semester and help prepare the students for the upcoming Real Estate Club job fair. Olsen is a longtime friend of the Real Estate program and has been coming to speak since 1983. In an effort to date his start with the program, he cited an early talk he gave as being the impetus for now retired Senior Lecturer Rod Matthews’ efforts to transform UW into a hub for international real estate. He asked for a show of hands from the 100+ students and staff in attendance as to who possessed a passport. All but three had a passport, whereas at the beginning of Olsen’s relationship with UW, only two individuals had possessed passports. In no uncertain terms, Olsen made it clear how broad-ranging the scope of the program has come.

Olsen did his undergrad work at Princeton and received his JD from Harvard. Following six years in law, he moved into the real estate arena, where he helped Richard Ellis to raise money for investment into real estate funds. In 1994, Olsen got tired of living in Chicago, so he left Richard Ellis and moved to Florida, where he subsequently played 66 rounds of golf in three months. He and his wife eventually landed in Raleigh, North Carolina, where he formed Atlantic Partners.

At Atlantic Partners, Olsen works to link global capital with US real estate. Most recently, he’s been working with USAA to raise money in Europe for a fund that is buying government-leased office buildings. As Olsen describes it, “I’m eHarmony for real estate investors. I’m in the business of relationships.” Olsen spends 70% of his time raising capital and 30% advising European investors on US Assets.

Following his history and current dealings, Olsen began coaching the students on how to best prepare for the upcoming job fair. He first asked the students for a show of hands of who had reviewed his website when they learned that he was coming to speak. He used this to transition into the importance of reviewing the 30+ employers coming to the career fair and honing in on those in which you’re interested. He then advised students to be looking for a connection point with the potential employers. He cited the ability it gives you to differentiate yourself in the eyes of recruiters from other candidates. As a follow up he advised students to always send a thank you email and to not be afraid to follow up periodically, but to be sure that the follow up is substantive as opposed to simply a “tickler” email. He recommended that if a student found an online article which he thought would be of particular interest to a person, to email that article to their contact along with a brief note. Olsen closed by citing the overall strength of the Wisconsin Real Estate Alumni Association, and its spot as one of the top alumni associations in the US. He urged students to join and to utilize that tool.

The next morning, Olsen met with the 1^st year MBA students to discuss strategy for their upcoming visit to the MIPIM conference in Cannes France, at which Dean François Ortalo-Magné will be giving the wrap-up keynote address (click here to see our past coverage of MIPIM). Then the Global Real Estate Masters (GREM) students joined in the second hour and Olsen dialogued on international topics such as German life insurance groups’ movement into investing in real estate debt.

The University of Wisconsin Real Estate program was honored to have Brad Olsen come and invest his time and is perpetually thankful for his selfless commitment to the program.

Jordan Denzer comes to Madison from Dallas, TX (it is often joked that he is one of the international students). Previously, Jordan managed corporate flexible spending accounts, but decided that he wanted to get into real estate development, which initiated the move to Madison. Currently, Jordan is interested in getting into historic redevelopment and/or mixed-use development projects.

MBA Global Trip: South Africa

As part of our Meet Our Current Students series, first-year real estate MBA student Andrew Toby reports on student real estate activities and life in general. Also, news stories such as this are available in our monthly newsletter, which you can sign up to receive via Constant Contact.

Each year, the Wisconsin School of Business provides students the opportunity to take an international business class that focuses on a specific country. In this class, the economy and business environment of the particular country are researched and discussed in anticipation of actually traveling to the country and visiting local businesses.

I, along with fellow Real Estate student Jay Jambor, joined 8 other WSoB students in one of this year’s International Business courses: South Africa. Each week in October and November we met for an hour and took turns educating each other on the pressing issues that the South African economy currently faces: post-apartheid racial segregation, unemployment, educational barriers and disparity, distribution of wealth, crime, AIDS epidemic and other healthcare issues, etc. These classes enabled us to having a better foundation of knowledge prior to visiting local companies and allowed us to ask more pertinent, focused questions during the presentations.

The trip to South Africa (“SA”) began in Johannesburg. During our 3 days in SA’s largest city, our company visits included Eskon (the dominant electricity provider for the country), Munich RE, the American Chamber of Commerce, and the Johannesburg Stock Exchange. Each organization began with a comprehensive overview of their operations as a preface to the most pertinent question: what are the challenges of doing business in SA? We found it very insightful to hear the opinions of the executives that we spoke with (which included both men and women of different ethnic backgrounds). In fact, most of these viewpoints on the pros and cons of their country’s economy were drastically different from one executive to the next. While opinions on certain issues remained consistent (the fact that near 40% unemployment is unhealthy and the AIDS presence is overwhelming are facts that are pretty easy to agree upon), other topics brought on entirely different perspectives.

This however, in reality, doesn’t come as a surprise. As time passed in Johannesburg, I became more and more acutely aware of how divided the population is. Joburg seemed to function as a relatively normal city would (with perhaps an even greater amount of expensive cars on the highways – another thing I discovered is that the South Africans opt to display their wealth in the form of a BMW or Audi). However, when traveling to the nearby town of Soweto to visit Nelson Mandella’s old home, we were amidst a sea of shanty towns, a level of poverty beyond anything I had seen. Our driver put it into perspective when he said this: “Take this man here [pointing to a black man sitting in the back of a pickup truck driving down the street]. I know nothing of this man’s life, his background. I have no idea what he does to operate in this country, to make a living for himself, but I can be almost certain that the way he operates in this country and the way that I operate are entirely different, even though we live in the same city. We speak different languages. We both exist here, but we exist separately”. A fact to consider here is that South Africa has 11 official languages, which doesn’t even include a plethora of local dialect differences. This, coupled with decades of legal racial segregation that just ended in 1994, create a divide that makes it no wonder why the population disagrees on political issues.

Johannesburg served as an extreme juxtaposition to our next destination within the country: Cape Town. In between cities, however, we made a quick weekend trip to a game reserve in Kruger Nation Park, or “The Bush” as it is known locally. I suppose a trip to Africa isn’t complete without seeing the “Big 5” - the elephant, leopard, lion, rhino, and buffalo. Our adventures out on the jeep provided us with up close interactions with all of these animals and many more.

With its stunning beaches, beautiful landscape, and expanding vineyards, Cape Town easily draws tourists from around the globe despite its remote location. Although too far for many to have a weekend getaway home, we found that many of the rich and famous of the world opt to buy a second home in the spectacular Clifton area of the city (pictured). I asked around to get an idea of what some of the prime pieces of real estate cost in that location, and was given the answer of about R30-R40 million (The “R” stands for Rand, the local currency which trades at about 8:1 with the US dollar currently). Still pretty pricey, but given the fact that the cost of living is far cheaper that in America, I can see how it is an appealing option for those who can afford it.

Our main company visit in Cape Town was Lomold, the largest plastic recycler in the country. While plastic recycling may not seem all that interesting, what sets this company apart is what they are doing with the recycled plastic. They’ve spent over a decade pumping their earnings into the research and development of a machine that will create complex long-fiber plastic palettes. The longer the fiber, the stronger the plastic, and according to the company founder, Lomold is the first company to be able to produce such a strong plastic in a complex form (that is, rather than just sheets of plastic or other basic molds). It will be interesting to continue to follow this company as it hits the global markets with its revolutionary product.

Further highlighting our stay in Cape Town was a boat trip out to Robben Island, where Nelson Mandella was imprisoned for about 27 years. Similar to Alcatraz but on a larger scale, Robben Island imprisoned the individuals whom threatened or otherwise spoke out against the Apartheid government.

Adding in some leisure time for beach lounging, wine tasting, fine dining, and even a cage dive with great white sharks, the trip really rounded out to be an amazing experience both personally and professionally. A big shout out goes to our class advisor, Assistant Dean Blair Sanford, whose steadfast leadership kept us organized and was key in the trip’s success.

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.

Wisconsin full-time MBA ranks in top 25 in new survey

In case you missed this item last month from the Wisconsin MBA program, here is some good news from a new survey of U.S. MBA programs:

The Wisconsin School of Business placed 24th in Poets and Quants’ MBA rankings for 2011. Last year, the school held 30th place. This six-point gain was the most notable increase in the list's Top 25.

P&Q’s list is a composite of the rankings done by Bloomberg BusinessWeek, The Economist, The Financial Times, Forbes, and U.S. News & World Report. These rankings, in turn, rely on surveys of recruiters, graduates, and deans - as well as other qualitative and quantitative data.

Poets and Quants is headed by John A. Byrne, former BusinessWeek.com editor-in-chief and creator of BusinessWeek’s rankings of business schools.

This is the first time the Wisconsin School of Business has placed among P&Q’s Top 25. Click here to see the Top 100 U.S. MBA Programs of 2011.

Click here to visit the Newsroom at the Wisconsin School of Business.

What's next for the economy?

The Graaskamp Center publishes a monthly newsletter on issues and events in the real estate industry and UW real estate community. The January 2012 issue includes this look at the year ahead by members of our faculty and executive Board of Advisors.


With 2012 upon us and a presidential election fast approaching, many of us are trying to make sense of economic news and data that alternately points to a potential stabilization and recovery or to a double-dip recession and a global debt crisis. What should the next administration do about to support economic growth? And how will the spill over from the debt crisis in Europe impact the U.S. economy now and in the future?

To get a better idea of what to expect, we asked a panel of Graaskamp Center board members and our own faculty experts to share their insights and wisdom on these important topics.

David Neithercut, President and Chief Executive Officer (CEO) and a Trustee of Equity Residential, assumed the CEO title on January 1, 2006 and has served as President since May of 2005. From January 2004 to May 2005 he served as Executive Vice President of Corporate Strategy, leading the company's Transactions, Portfolio Management, Development, Condominium and Research groups. From 1995 until August 2004, he served as Equity Residential's Chief Financial Officer. In this role he was responsible for all of the company's capital market activities and participated in debt and equity offerings as well as merger and acquisition activity with a combined value in excess of $10 billion. Mr. Neithercut is a member of the Board of Directors of General Growth Properties (NYSE: GGP), a leading owner and operator of shopping malls.

Timothy Riddiough is the E.J. Plesko Chair of Real Estate and Urban Land Economics, Director of the Applied Real Estate Investment Track (AREIT), and Professor of Real Estate at the Wisconsin School of Business. He teaches courses in Real Estate Finance, Real Estate Capital Markets, and Microeconomics and is best known for his research on real options, mortgage pricing and strategy, and land use regulation. Professor Riddiough is best known for his work on credit risk in mortgage lending, mortgage securitization, real options, REIT investment and corporate finance, and land use regulation.

Michael Robb is Executive Vice President for the Real Estate Division of Pacific Life Insurance. He joined Pacific Life in 1976 and after holding a variety of executive positions with the company, Mr. Robb was elevated to his current position of Executive Vice President of Real Estate Investments in January of 1995. He is responsible for managing a real estate portfolio of commercial mortgage loans, commercial mortgage backed securities, unsecured REIT debt, equity real estate, and servicing portfolios of over $19 billion dollars.

David Shulman is Adjunct Professor and Advisor to the Applied Real Estate Investment Track (ARIET) for the Graaskamp Center for Real Estate. He is also Managing Member of David Shulman, LLC. Shulman was formerly a REIT analyst and managing director at Lehman and was employed by Salomon Brothers, Inc. in various capacities. Professor Shulman has been widely quoted in the national media and coined the terms "Goldilocks Economy" and "New Paradigm Economy." In 1990, he won the first annual Graaskamp Award for Excellence in Real Estate Research from the Pension Real Estate Association.


Question: Since becoming President, Barack Obama and his administration have implemented many fiscal/economic programs and initiatives to jumpstart the U.S. economy. In your opinion, what were the actual results of these programs? Have they helped or hurt the economy?

Neithercut: I think that much of what took place at the onset of the financial crisis was necessary to avoid a total collapse of the global financial system. The government did what it needed to do to stop the problem. From that point forward, I think the government's programs have not harmed nor helped but have been totally ineffective and is a pretty clear example of the government impeding the market's ability to right itself.

Riddiough: At the macro level, results have been mixed at best. Let me focus on one of his particular initiatives, as it illustrates what I believe has been Obama's biggest problem with managing the economy. His whole approach to addressing the foreclosure crisis, although well intentioned, has been confusing and inconsistent. Worse, it has been ineffective and has created additional uncertainty in housing and banking markets. Ineffective and inconsistent policies have created additional uncertainty in an already very uncertain economy.

Robb: I have seen no result whatsoever. There is the Canadian shale fracking project "shovel ready" which would create thousands of jobs which he and the environmentalists won't approve. The housing fix or lack thereof is a joke and he still does nothing but blame the Republicans for the mess we are in.

Shulman: The initial stimulus marginally helped, but the whole notion of "timely, temporary and targeted," is very difficult to implement. Moreover too much of the spending represented the accumulated wish list of the House Democrats. Indeed the support for state and local government probably hurt because it delayed the ultimate restructuring that has to take place. The biggest failure is that "reform" is the enemy of economic growth in the short run. As a result the healthcare legislation likely slowed the economy along with all of the uncertainty associated with the energy bill that failed in the Senate.


Question: Given the current state of politics and the economy, what should Obama or the next administration do to improve and stabilize the economy? In other words, where do we go from here, and how do we avoid making the same mistakes in the future? Please outline three or four points that you feel are most pertinent to you as a real estate professional or to the real estate industry in general.

Neithercut: The answer to our problems can be found in economic growth. We can't tax our way out of it and we can't spend our way out of it. Growth is the answer and I think that growth has been hampered by uncertainty on tax policy, etc. Real estate needs growth to prosper--growth in jobs, growth in income and spending, etc. Economic growth is not evil but is the means by which all else is possible. We need to facilitate credit to small business and have a tax policy that is consistent and fairly applied.

Riddiough:This is a hard question to answer because there is a big difference between what should be done in theory and what will actually get done in the current political environment. Given that the U.S. economy does not slip back into another recession, I do not expect that Obama will be able to get much done until after the next election (should he be reelected). I anticipate that only the Fed will execute policy initiatives over the next year in an attempt to improve and stabilize the economy.

Robb: Approve the Canadian shale project. Spend money to retrain factory workers for 21st century job skills. Do away with ALL tax deductions, including mortgage interest , and only keep ones that actually create jobs and finally, go to a 3 or 4 simple tax rate structure, again with virtually no deductions and exempt from taxes anyone making less than $50,000, but force people off the welfare rolls by getting them the under $50,000 jobs. A lot to ask for but would stimulate both individuals and corporations.

Shulman: Policy is trapped because we probably live in world of "Ricardian Equivalence" which means that deficits today mean tax increases and/or program cuts in the future. A new administration should be supportive of domestic energy and the Keystone XL Pipeline should go forward. A real program would include a major infrastucture expansion that would waive or fast track environmental approval and waive the prevailing wage requirements of the Davis-Bacon Act.


Question: Do you think the Europe and United States are headed toward a debt crisis? If so, how will this affect the real estate markets?

Neithercut: Is there anyone who doesn't think that Europe has a debt crisis?!? And we will have one soon if we are not awfully careful. To not learn from the mistakes in western Europe would be criminal. A debt crisis will inhibit growth and that will be very bad for the real estate markets.

Riddiough: There is already a debt crisis, and it has already shut down the CMBS market after that market had reemerged over a year ago. All very bad news. Be aware of the coming crisis in refinancing a mountain of commercial real estate mortgage debt coming due over the next five to six years.

Robb: They are not headed towards a debt crisis; they are IN ONE. Will only hurt real estate if rates go way up-right now, in this artificial low rate environment, it is actually helping commercial real estate.

Shulman: Europe is in a recession. The U.S. will escape its worst effects providing the Euro crisis does not morph into a banking crisis. Obviously a banking crisis would bring back memories of the Lehman crisis in 2008.


The Graaskamp Center's newsletter The Real Estate Connection is published monthly. You can subscribe (via Constant Contact) here.