MIPIM 2011 Wrap-up by François Ortalo-Magné

MIPIM 2011
Prof. François Ortalo-Magné with the Real Estate MBA students of the Wisconsin School of Business

Last year’s wrap-up keynote
Investors: Focus on the real estate
Work above the NOI line, the cash flows
Transparency toward investors
Cities – Regions: Looking forward to a new reality
Sustainability beyond CO2 emissions
Public Private Partnerships no longer a dirty word
We could see the sun rising

How is your business activity this quarter compared to same quarter last year?

How has MIPIM changed your outlook?

What is your perspective on your real estate market compared to same time last year?

2011: Already high noon in core markets
The wall of money is back
Chasing safety
Chasing yield from core-plus assets
Macro strategies
UK, US, France, or rather
Washington D.C., New York City, London, Paris,
 Betting on the US gvt and the global economy
Moving to Germany – history of stable yield

Or is it already past noon in core markets?
Sub 5 cap rates
But what were we saying in 2009?
Strong history of German yields
But what about the history of negative growth?
Weary of macro – momentum strategies
But capital must be deployed
 Tough execution environment

Roubini’s keynote: half full
Accelerating global economic recovery
Lower risk of major shocks: deflation, double-dip recession, break-up of EMU
Strong corporate performance
Growing emerging economies provide diversification of sources of growth
The worst of the real estate/housing bust in many economies is behind us
Risk is on, and risk aversion is lower now

Roubini’s keynote: half empty
Painful deleveraging in mature markets
High and rising budget deficits and public debt
Serious chronic problems of the Eurozone periphery
Risk of a double-dip in the US
Food, oil, and commodity inflation in emerging world
North-Africa/Middle-East turmoil
“It is a G-Zero World rather than a G-20 World”

And the risks you told us about
Real estate debt markets
Political risks in mature economies
Regulatory risks:
Solvency II, Basel III, AIFM, EMIR, UCITS
Commercial real estate as a tax target
Inflation risk

Strategies for today
Emerging markets
Continued growth in appetite for Asia
Growing awareness of the diversity of Asia
Many markets beyond the BRICs at MIPIM, including North African countries

Which emerging market would you consider first for investment?

Emerging markets
Balancing strong fundamentals and country risks

Emerging markets
Mature markets
Moving to core plus 200/250 basis points

Is now the time to invest beyond core/safe real estate assets?

Emerging markets
Mature markets
Moving to core plus 200/250 basis points
Taking advantage of the functional obsolescence of the existing stock

Functional obsolescence
The greening of real estate
Fast technological progress leading to lower costs
No longer an option (exit strategy concerns)
Strong dissatisfaction with the standards
The “brown discount”
And the next wave…
When human resources talk to corporate real estate

Boris Johnson’s keynote
Cities are the single most brilliant invention
People live longer
Better educational outcomes
Better productivity
Less pollution per capita
Greater opportunities for reproduction
His secret: keep putting the village back into the city
Sense of trust and neighborliness

Competition across cities
Fierce competition to attract
Population
Economic activity
National public investment
Private investment – global!

What do you consider the biggest impediment to investment in your city or region?

What competitive advantage did you emphasize here at MIPIM to make your city attractive to investors?

Moving forward requires new strategies
Cooperating with nearby cities
To compete against the large metro areas
To compete for private public funds
Reaching across national borders
In policy-making and regulatory processes
Success of MIPIM’s Mayor Think Tank
Innovations to capture the windfall profits from public investments and zoning changes
 A major change for the developers

Real Estate Investment Post-CrisisWhat have we learned? What next?
The value of transparency
The value of true leadership

Lesson 1: Transparency
2010: Driven by the investment community
2011: Reaching further
To learn from each other
To overcome history of corruption
Supported by the increased availability of data (Private providers working with public authorities)
Supported by the expansion of professional accreditation organizations

Lesson 2: Leadership
Long term thinking
Developers and investors: smart building designs to preserve market value over time
Cities and regions: smart communities to maintain attractiveness and vibrancy of urban environment
Educating our partners
National governments: regulation/funding
Voters to see beyond the election cycles
Private sector ↔ Public sector

Lesson 2: Leadership
Beyond financial carrots and sticks
Toward new financial/regulatory relationships
Toward new processes for interactions
Toward developing a shared visions, and
fostering synergies from our diversity
Both in the private and the public sector,and in the way we engage the broader community

A bright new day for the city!

MIPIM 2011 Wrap-up by François Ortalo-Magné

by MIPIMWorld

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