Quick: What did you hear at the Jones Day Real Estate Symposium held in New York City the day before the National Association of Real Estate Investment Trusts Annual Institutional Forum?

First, the panelists:

William Ackman, Pershing Square Capital Management
Tim Bishop, Macquarie Capital (USA) Inc.
Michael Franco, Vornado Realty Trust
Jonathan Gray, the Blackstone Group
Daniel Hurwitz, Developers Diversified Realty Corporation
James Ratner, Forest City Commercial Group

Next, what I heard: 

  • What are you focusing on/what is your investment strategy? “Restructuring debris.” 
  • Are there opportunities in the distressed space? Yes, but the playing field is very competitive, offset somewhat by the fact that more deals (finally) are coming to market. 
  • Name your strategy: Financing distressed assets needing “rescue capital” due to overleveraging. 
  • What skills are required? The ability, and the patience, to work through complexity. 
  • Yes, Virginia, banks are finally selling (distressed assets). 
  • What about land? In general, still too expensive. 
  • What is drawing investors to commercial real estate? Relative value, availability of leverage, hard asset, discount to replacement cost, and inflation protection. 
  • Financing is becoming increasing available, especially for larger players. 
  • Cost of capital can only go up for systemically important institutions and everyone else, too. 
  • With the exception of the gateway markets, investors are (for everywhere else) “waiting for the train to run over them so they can be sure the train is on the tracks.” 
  • What about secondary and tertiary markets? Capital chasing yield. 
  • Retail: “We’re not over-retailed; we’re under–demolished.” 
  • International capital sources remain active at home as well as in foreign markets. 
  • How would you approach secondary markets? Buy the “A” property, the best the market has to offer. 
  • Smaller real estate investment trusts (REITs) will become merger and acquisition/consolidation targets. (This is said at every conference; therefore, it will eventually happen and someone will be proved right.)