UM’s Real Estate Impact Conference Focuses on Threats and Opportunities in U.S. and Global Markets

March 02, 2020

By Richard Westlund

Hospitality services are playing an increasingly important role throughout the commercial real estate market, as employers seek to recruit and retain talented workers.  Another emerging trend is the growing demand for medical office properties and senior housing driven by the aging of the U.S. population. However, the global spread of the novel coronavirus COVID-19 poses a threat to financial assets as well as national economies.

Those insights were among the key takeaways from expert participants at the ninth annual University of Miami Real Estate Impact Conference, hosted by the School of Architecture and Miami Herbert Business School on February 28 at the Four Seasons Hotel with support from presenting sponsors Douglas Elliman Real Estate, Kislak, and Witkoff.

More than 650 University of Miami students and alumni, including many South Florida commercial real estate and finance professionals, discussed both threats and opportunities in the market at the multidisciplinary conference, attended by John Quelch, dean of Miami Herbert Business School, Rodolphe el-Khoury, dean of the School of Architecture, and Tony Varona, dean of the School of Law.

“Bringing together faculty and students from our schools of architecture, business and law is an important step in tackling today’s complex problems,” said University of Miami President Julio Frenk. “This conference is an excellent example, because real estate is essential to Miami’s economy with an impact around the world.”

David Martin, vice president of retail at Swire Properties, welcomed UM’s Swire Scholar students to the opening luncheon, where they had an opportunity to discuss their studies and career plans with UM’s Real Estate Advisory Board members. 

For MBA student Jack Shelgren, the Swire Scholars luncheon provided valuable learning and networking opportunities. “As an intern, I did research and financial analysis, learning about multifamily, office and retail asset types,” he said. “Now, I’m an associate at Freedom Property Group, gaining an entrepreneurial perspective, while working on acquisitions for our clients.”

Andrea Heuson, professor of finance and academic director of Miami Herbert Business School’s real estate programs, noted the importance of developing face-to-face professional relationships at the conference. “We have built an incredible network here, including our many generous sponsors,” she said.  “That support has allowed us to offer our program on impact investing in real estate, as well as a summer program introducing high school students to our industry, and opening the door for the next generation of professionals.”

The Impact of the Coronavirus
Without question, the novel coronavirus COVID-19 will impact real estate markets around the world, according to Matthew Cherwin, treasurer and chief investment officer, JP Morgan Chase & Co.

“Several weeks ago, I would have said the coronavirus is no different than the seasonal flu,” said Cherwin, who discussed “Macro Trends and Opportunities in Global Markets” with Steve Witkoff, chairman and CEO, Witkoff. “But to see how the virus is affecting our economy, just look around. A lot of travel-related spending, for instance, will go away and never come back.”

Commercial real estate has been considered a stable, inflation-protected asset, Cherwin added. “Now, we have to look at what happens to demand for space, as well as interest rates, borrowing costs and the availability of capital.”

In terms of economic impact, Cherwin said the virus could create a “U” – however, the upward slope will not be as steep as the downturn.  “Hopefully, medicine and science can mitigate this in the near term, but there will be a continuing impact on corporate revenues and costs,” he said.

Witkoff

The Silver Tsunami
The aging of America is opening the door to new real estate opportunities in senior housing and medical office properties, according to two experts in these fields. Patricia Will, founder and CEO, Belmont Village, a senior living company, interviewed Debra A. Cafaro, chairman and CEO, Ventas, Inc, a public REIT, in an afternoon discussion on “Riding the Silver Tsunami.”

“We believe in the senior living business,” said Cafaro. “There is tremendous demand from people age 85 and up, and that’s our customer base now. But there is oversupply in many U.S. markets with declines in occupancies and net operating income (NOI) over the past couple of years.”

But Cafaro said senior housing starts in 4Q of 2019 were dramatically lower than at the peak of the market cycle and that might help to balance the supply-demand equation in the future.

Medical office continues to be a growth market, Cafaro added. “Our office buildings cater to the over 65 population, who spend more on healthcare and visit doctors far more often. We are also investing in life sciences properties, building labs for genetic research and other studies.”

Finally, Cafaro talked about the importance of sustainability in real estate development and investment. “We care about maximizing shareholder value but we also want to make our buildings more sustainable and be good contributors to our communities,” she said.

Debra Cafaro

New Development Opportunities
Three members of the Hines organization took part in a discussion on “Development Opportunities Here at Home and Around the World.” Founded in 1957 by Gerald Hines, who is still active at age 94, the commercial development, investment and management company now has 4,400 employees in 24 countries.

Alfonso Munk, chief investment officer, Americas, moderated a conversation with Jeff Hines, president and CEO, and his daughter Laura Hines-Pierce, senior managing director, Office of the CEO. “We have evolved from a U.S. CBD office building developer in the 1990s to be an investment manager, bringing our development and property management skill sets to a wider range of product types and locations,” said Hines. “We view real estate as a long term business and can make investments that public firms would have trouble justifying on a quarterly basis.”

Hines-Pierce said the company has recently gotten involved in multifamily property management. “We are using data to understand what today’s tenants want, and that will drive what we design, develop and buy in the future,” she said.

Hines Panel

One of the key trends is that hospitality is pressing into all asset classes, from office and multifamily to industrial, said Hines-Pierce. “Regardless of the product type, employers want to keep their employees engaged and coming to work.”

Another trend comes from mining “big data,” added Hines. “We are just at the beginning of figuring out how to use the vast data in our systems to improve building performance and operations. We also think about how technology is changing the market, from driverless cars to the growth of the remote work sector.”

Sustainability has been a core aspect of Hines since its founding, according to the panelists. ‘Now, we are looking at how we can develop net-zero buildings,” said Hines-Pierce. “After all, our built environment is a big part of the carbon outlay of the world, and we have a responsibility to address that issue.”

 

To view photos from the event, click here.

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