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Views From the Top

In case you didn’t attend the “Views From the Top” event on Tuesday (sponsored by REIAC and GSU Real Estate Alums), here are my notes:

Mitchell Brannen received the Georgia State Distinguished Alumni award from the director of the department at GSU. Any of you who know Mitchell know that he is highly deserving of the recognition and is just a great man in our business. So, congrats again to Mitchell.

The next act was Dr. Rajeev Dhawan of G State to give an economic forecast.

For anyone unfamiliar with these types of presentations, economists are somewhat infamous for having dry material and presentation and relying too much on data a graphs. I thought Dr. Dhawan, however, presented very well. He had enough good information and data to validate his claims, but didn’t glue himself to a podium and and stare at his notes for 30 minutes.

A few highlights from his comments:

You should care about the turmoil in Egypt. Ignoring the humanitarian and philosophical reasons, you need to understand that Egypt is a crucial ally because of its control of the Suez Canal. 15% of the oil that goes to Europe runs through the Suez. If that transport is disrupted or discontinued, then the turmoil will spread to Europe and subsequently the U.S.

China is taking a proportionally larger share of the world’s oil even though global demand has remained relatively constant for the least several years. Because this seems to be a continuing trend, plan on $90 per barrel going forward.

No employer seems to want to be the first to ramp up hiring. everyone is waiting on someone else to take the first move and then others will do so as well.

Home prices are still 20% above the historic growth rate, but are also 20% below the regression mean (aka, values are still uncertain).

Keep an eye on US Treasuries because China has historically been our largest buyer of Tbills and they have been decreasing their volume every year for a few years.

The biggest red flag over the Chinese economy is the fact that 50-60% of their GDP is concentrated in construction. Once that bubble bursts, no one knows how the Chinese economy will respond.

After Dr. Dhawan, the group got to listen to a group of three panelists about global trends in CRE into and out of Atlanta. The panelists were Ambrish Baisiwala of Portman Holdings, Jorge Fernandez of the Metro Chamber of Commerce, and Greg Michaud of ING Investment Management. The Moderator was Mark Elliot of Troutman.

Mark asked them a series of questions about business inflow and outflow regarding Atlanta.

Each had several interesting comments, but I will summarize the most interesting here:

Ambrish: RE fundamentals are still the same and each company needs to have renewed emphasis on due diligence. Portman tries to JV with a local player for their market knowledge whenever they embark on a new project. Each opportunity is unique and should be treated so. Portman is very comfortable with China (particularly housing) where others have been slightly gun-shy.

Jorge: Compared with other gateway cities, Atlanta is under-marketed. Europeans tend to like NYC and Chicago, Latin Americans like Miami, and Asians like LA and San Fran. Western Europe and Japan seem to have the most interest in expanding into Atlanta and our main issue in landing new companies is infrastructure.

Greg: Atlanta is still scary to outsiders because of lackluster job growth numbers. Most people want to have a presence in Atlanta but it tends to fall short in relative comparison to other gateway cities. If you are investing internationally, scale matters. If you have a large sum of cash you will be pushed into office investment for the returns. It may not always be possible to buy and entire building abroad. Some economies lend themselves to condo-style office space. Many Europeans still blame Americans for the global recession due to failures in the CMBS market. So, US CRE investment doesn’t have the luster it once did.

Overall, I thought this was a worthwhile event and I would go again next year. It was held on the 20th floor of Phipps Tower, which was a little odd considering there was no buildout of any kind in the space. The view was great, but sitting in a cold, dark shell office space talking about Atlanta’s relative value in the CRE world was a tasty piece of irony.

Enjoy your weekend.

-Duke

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