Challenges and Strategies in Real Estate for 2010 Remarks by: David M. Mincberg Chairman and Chief...
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Transcript of Challenges and Strategies in Real Estate for 2010 Remarks by: David M. Mincberg Chairman and Chief...
![Page 1: Challenges and Strategies in Real Estate for 2010 Remarks by: David M. Mincberg Chairman and Chief Executive Officer Flagship Properties Corporation Chairman,](https://reader035.fdocuments.in/reader035/viewer/2022062412/5a4d1b067f8b9ab059988947/html5/thumbnails/1.jpg)
Challenges and Challenges and Strategies in Real Strategies in Real
Estate for 2010Estate for 2010Remarks by:Remarks by:
David M. MincbergDavid M. MincbergChairman and Chief Executive OfficerChairman and Chief Executive Officer
Flagship Properties CorporationFlagship Properties CorporationChairman, Houston Housing AuthorityChairman, Houston Housing Authority
Houston, TexasHouston, Texas
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Real-WorldReal-WorldBackgroundBackgroundThe Real Estate World The Real Estate World Has ChangedHas Changed
Why and HowWhy and How
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Houston by the NumbersHouston by the Numbers City of 2 million peopleCity of 2 million people Metro area of almost 6 million Metro area of almost 6 million
peoplepeople Area of almost 1,500 square milesArea of almost 1,500 square miles Remarkably diverseRemarkably diverse
90 different languages90 different languages Lagging woefully in mass transitLagging woefully in mass transit
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Opportunity!Opportunity!Create a visionCreate a visionCraft a planCraft a planNot encumbered by pastNot encumbered by pastDesign for realityDesign for reality
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Survey TimeSurvey TimeReal estate pricing/values?Real estate pricing/values? Inflation or Deflation?Inflation or Deflation?Déjà vu?Déjà vu?Analogies anyone?Analogies anyone?Bubbles up…bubbles downBubbles up…bubbles downHow long do bubbles last?How long do bubbles last?
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Is it True?Is it True? Did real estate developers really Did real estate developers really
over-leverage?over-leverage?
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What’s Really Out There?What’s Really Out There?
Or said differently…Or said differently…What’s lurking in the What’s lurking in the woods?woods?
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Vacancy Levels Continuing Vacancy Levels Continuing to Rise Sharplyto Rise Sharply
9.5 86
13
7.55
19
1311
0
5
10
15
20
25
30
% Vacant
2000 2006 2010
Office Retail Multifamily
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Monthly CMBS Monthly CMBS DelinquencyDelinquency
$7.0 $8.7$10.8$12.0$13.9
$17.2$18.8
$28.7$25.7
$28.2$31.7$32.6
$37.9
$0
$5
$10
$15
$20
$25
$30
$35
$40
Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09
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$1.5 Trillion of Commercial $1.5 Trillion of Commercial Mortgages are Maturing Between Mortgages are Maturing Between
2009 and 20132009 and 2013
$26$55
$74 $89$44 $55
$99$136
$168
$188
$210
$236
$265
$0
$0
$0
$17
$20
$23
$26$25
$21
$26
$27
050
100150200250300350400
2009 2010 2011 2012 2013 2014 2015 2016
$ in
Billions
CMBS Banks Insurance Co.
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One banker said to the One banker said to the other…other…
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CRE Value TrendsCRE Value Trends Opportunistic funds are down 52% Opportunistic funds are down 52%
according to the NCREIF/Townsend according to the NCREIF/Townsend fund indices.fund indices.
Core funds are down 36.3% from Core funds are down 36.3% from their peak by the end of Q3 2009.their peak by the end of Q3 2009.
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Commercial Real Estate Commercial Real Estate Value TrendsValue Trends
Blackstone marked down its real estate Blackstone marked down its real estate portfolio by 30% in Q4 2008 and another 19% portfolio by 30% in Q4 2008 and another 19% in Q1 2009.—in Q1 2009.—Wall Street Journal 05/07/2009Wall Street Journal 05/07/2009
Goldman Sachs’ biggest private real estate Goldman Sachs’ biggest private real estate equity fund, called Whitehall Street Global equity fund, called Whitehall Street Global Real Estate, L.P., invested $3.7B between Real Estate, L.P., invested $3.7B between May 2007 and August 2008 in a portfolio of May 2007 and August 2008 in a portfolio of casinos, hotels and office buildings. They casinos, hotels and office buildings. They have since written down those assets by have since written down those assets by $2.1B…--$2.1B…--Wall Street Journal 05/15/2009Wall Street Journal 05/15/2009
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CRE Value TrendsCRE Value Trends MIT Transaction-Based Index shows MIT Transaction-Based Index shows
property values have fallen 39.2% from property values have fallen 39.2% from their peak by the end of June, 2009.their peak by the end of June, 2009.
Moody’s/REAL CPPI shows property Moody’s/REAL CPPI shows property values down 40.6% as of the end of values down 40.6% as of the end of August.August.
NACREIF Property Index indicates that it NACREIF Property Index indicates that it has recognized less than two-thirds of the has recognized less than two-thirds of the coming right-downs in property values.coming right-downs in property values.