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MIPIM 2011 Wrap-up by François Ortalo-Magné
1. MIPIM 2011 Prof. François Ortalo-Magné with the Real Estate MBA students of the Wisconsin School of Business
2. 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
3. How is your business activity this quarter compared to same quarter last year?
5. What is your perspective on your real estate market compared to same time last year?
6. 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
7. 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
8. 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
9. 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”
10. 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
11. 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
13. Strategies for today Emerging markets Balancing strong fundamentals and country risks
14. Strategies for today Emerging markets Balancing strong fundamentals and country risks Mature markets Moving to core plus 200/250 basis points
15. Is now the time to invest beyond core/safe real estate assets?
16. Strategies for today Emerging markets Balancing strong fundamentals and country risks Mature markets Moving to core plus 200/250 basis points Taking advantage of the functional obsolescence of the existing stock
17. 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
18. 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
19. Competition across cities Fierce competition to attract Population Economic activity National public investment Private investment – global!
20. What do you consider the biggest impediment to investment in your city or region?
22. 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
23. Real Estate Investment Post-CrisisWhat have we learned? What next? The value of transparency The value of true leadership
24. 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
25. 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
26. 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
from high unemployment rate, housing double-dip, state/local governments fiscal problems, lack of progress on the federal deficit problem
And so as an outside observer to the real estate industry, to our government process, I feel that out of the sunset brought about by the financial crisis is emerging a bright new day for all of us who work and live in the urban environments that you all create for us. And for this I am most grateful.So thank you for a great MIPIM. I look forward to seeing you if not at MIPIM Asia in Hong Kong in November, at least here in Cannes next year. Have a great year!
