Nick Jopling, Head of Residential at CB Richard Ellis
When did you last get invited to a 'Smoker'? Yes, I thought so.......never.
I ask because Chris and I were invited to two Smokers last night, which is essentially an invitation to come and sit or stand around after supper and smoke a cigar. These are hugely popular events and very social despite all the cigar smoke, and makes an ideal networking opportunity after a good dinner.
Waking up this morning, I remembered why I gave up smoking. It was extremely difficult to keep to my January 'on the wagon' pledge, but as they say what happens on tour stays on tour! The Americans don’t slack, so yet again I found myself back in the CBRE suite at 8am for two meetings; one with a huge developer manager that has been restructured after going into administration, and another with a public (non-traded REIT) that is investing Dutch money alongside retail funds. Both meetings are as energetic as those earlier in the week, despite everyone 'smoking' till midnight.
We then dashed to the conference hall to sit in on an hour long debate chaired by CBRE’s Peter Donovan between Republican Karl Rove and Democrat Governor Howard Dean. Peter took over as Chair of the National Multi Housing Council yesterday and is Head of CBRE's Multi Family business, which is the second largest CBRE capital market business in the world.
Peter has become a friend over the last 18 months, as I have zigzagged across the US exploring the sector. He has been instrumental in organising our introductions this week and is hugely supportive of our efforts to bring the model across the water to the UK.
The debate was impressive and very lively with a little bit of posturing from both sides. The political chasm between the two politicians was obvious and Peter had to intervene a number of times to make sure they didn't speak over each other.
The debate covered many subjects, including the healthcare reform and the future of Fannie and Freddie. It’s difficult to say what would happen if either left the market; every deal and valuation is underwritten (another term that has a different meaning in the US) by their terms and essentially their presence in the market.
Our final afternoon will be spent having lunch by the beach at the home of a client who understands the UK story; a great way to end a fascinating, hugely informative and enjoyable week before heading back to Miami International airport for the Red Eye home.
Monday, 18 January 2010
Friday, 15 January 2010
We may be divided by a common language but the debate is a global one
Nick Jopling, Head of Residential at CB Richard Ellis:
I was up at 5am this morning to put the finishing touches to my afternoon presentation. I am speaking on a 90 minute panel session on overseas residential investment opportunities; each speaker has been allocated 10 minutes to present their market and then field questions from the moderator and the audience. It's quite a challenge to explain the UK opportunity in 10 minutes, so I have decided to work on the basis of taking 15.
In the meantime, more meetings to discuss multi-family housing have been set up with the first one scheduled for 8.00am this morning. Bagels and coffee are all to hand and off we go again sitting in a meeting that has plenty of badinage between the CBRE brokers and the client. This is interspersed with very direct questions and answers about business strategies, targets and funding that I suspect principals and clients in the UK would not be so open about.
There is no doubting the optimism at the conference; everyone seems to be a buyer and there are very few sellers. In the main hall a show of hands on who is planning on selling this year, two hands went up. On the follow up of who's buying, you could feel the air rush as hundreds of hands went up. Cap rates have to be squeezed in that scenario and will be.
As ever when doing business in the US, despite the shared language, there are a number of words that we use that mean very little to Americans. For example, the words planning and valuation don't have any place in the world of property in the USA and you need to use the word entitlement and appraisal. It’s also worth noting that any reference to a scheme, such as development scheme, suggests something very dodgy more suited to a Grisham novel than a business opportunity.
The speech went well. I shared the platform with Stan Harrelson the CEO of Pinnacle, who talked about the opportunities in Asia focussing in particular on China, Japan and South Korea. Greg Kalil, Managing Partner of Brookfield Financial, covered the Canadian market and Thomas Koller, CEO of TVO Europe, talked about the CEE market. That's a large part of the world, but needless to say there were still questions about South America and Australia too.
I was up at 5am this morning to put the finishing touches to my afternoon presentation. I am speaking on a 90 minute panel session on overseas residential investment opportunities; each speaker has been allocated 10 minutes to present their market and then field questions from the moderator and the audience. It's quite a challenge to explain the UK opportunity in 10 minutes, so I have decided to work on the basis of taking 15.
In the meantime, more meetings to discuss multi-family housing have been set up with the first one scheduled for 8.00am this morning. Bagels and coffee are all to hand and off we go again sitting in a meeting that has plenty of badinage between the CBRE brokers and the client. This is interspersed with very direct questions and answers about business strategies, targets and funding that I suspect principals and clients in the UK would not be so open about.
There is no doubting the optimism at the conference; everyone seems to be a buyer and there are very few sellers. In the main hall a show of hands on who is planning on selling this year, two hands went up. On the follow up of who's buying, you could feel the air rush as hundreds of hands went up. Cap rates have to be squeezed in that scenario and will be.
As ever when doing business in the US, despite the shared language, there are a number of words that we use that mean very little to Americans. For example, the words planning and valuation don't have any place in the world of property in the USA and you need to use the word entitlement and appraisal. It’s also worth noting that any reference to a scheme, such as development scheme, suggests something very dodgy more suited to a Grisham novel than a business opportunity.
The speech went well. I shared the platform with Stan Harrelson the CEO of Pinnacle, who talked about the opportunities in Asia focussing in particular on China, Japan and South Korea. Greg Kalil, Managing Partner of Brookfield Financial, covered the Canadian market and Thomas Koller, CEO of TVO Europe, talked about the CEE market. That's a large part of the world, but needless to say there were still questions about South America and Australia too.
An early start but it's worth the effort
Nick Jopling, Head of Residential at CB Richard Ellis
Wednesday at Boca Raton started early, which was a bit disappointing as I had been given an upgrade to the beach resort after yesterday’s lift incident and a mix-up with my reservation - 'please accept our apologies, Mr Jopling, and an upgrade' is now one of my favourite sayings !
Unfortunately lying in bed was not an option, as I had registered for the 'Strategic Apartments' conference that runs alongside the main event and the network breakfast started at 7.15am!
The programme started with an economic outlook and a view of the trends in the apartment markets. In fact, the whole day was spent in a series of high powered panels debating the impact of the economy on said market. There is no doubt that the housing market in the US has suffered worse than our own.
One would have thought that the apartment (rental) market would have been all right with all the foreclosures (repossessions) and the overall loss of confidence in home ownership. It’s true that home ownership, boosted by sub-prime mortgages, reached 71% in 2007, but that's now down to about 68% today and falling. Surely, all these ex-homeowners would enter the rental market?
This was the case to begin with, but as the recession gathered pace by the end of 2008, Americans were losing their jobs at a rate of 700,000 a month. In the 24 months to the end of 2009, 7.2m Americans had lost their job and this has impacted not just on the owner-occupied market, but on the apartment market as well. There has been a noticeable increase in people doubling/tripling up or returning to live with Mum and Dad. Worst hit have been Florida, California, Michigan, Oregon and Nevada.
This naturally put downward pressure on rents, although the consensus of opinion and some really credible data sets suggest that the worst is over. In most markets, it is anticipated that rents will stabilise and in some cities, principally in the North East and other major gateways, they are expected to show some growth in 2010. The cities the conference was the most bearish about were Atlanta, Phoenix and cities in the Mid-West (excluding Chicago).
There were two very impressive features of the day, firstly the quality of the data and detail of the information that was shared. The second thing was the candour and willingness to share thoughts and views on individual markets by very senior executives of well-known businesses that anyone working in real estate would have heard of.
This huge conference is like a large club; everyone (apart from Chris and I) seems to know a huge number of other delegates. Everyone is approachable and there is a genuine feeling of camaraderie. We have attended numerous meetings co-ordinated by our CBRE US colleagues - all of these were interesting, informative, intelligent and bizarrely almost always like a meeting of friends.
Wednesday at Boca Raton started early, which was a bit disappointing as I had been given an upgrade to the beach resort after yesterday’s lift incident and a mix-up with my reservation - 'please accept our apologies, Mr Jopling, and an upgrade' is now one of my favourite sayings !
Unfortunately lying in bed was not an option, as I had registered for the 'Strategic Apartments' conference that runs alongside the main event and the network breakfast started at 7.15am!
The programme started with an economic outlook and a view of the trends in the apartment markets. In fact, the whole day was spent in a series of high powered panels debating the impact of the economy on said market. There is no doubt that the housing market in the US has suffered worse than our own.
One would have thought that the apartment (rental) market would have been all right with all the foreclosures (repossessions) and the overall loss of confidence in home ownership. It’s true that home ownership, boosted by sub-prime mortgages, reached 71% in 2007, but that's now down to about 68% today and falling. Surely, all these ex-homeowners would enter the rental market?
This was the case to begin with, but as the recession gathered pace by the end of 2008, Americans were losing their jobs at a rate of 700,000 a month. In the 24 months to the end of 2009, 7.2m Americans had lost their job and this has impacted not just on the owner-occupied market, but on the apartment market as well. There has been a noticeable increase in people doubling/tripling up or returning to live with Mum and Dad. Worst hit have been Florida, California, Michigan, Oregon and Nevada.
This naturally put downward pressure on rents, although the consensus of opinion and some really credible data sets suggest that the worst is over. In most markets, it is anticipated that rents will stabilise and in some cities, principally in the North East and other major gateways, they are expected to show some growth in 2010. The cities the conference was the most bearish about were Atlanta, Phoenix and cities in the Mid-West (excluding Chicago).
There were two very impressive features of the day, firstly the quality of the data and detail of the information that was shared. The second thing was the candour and willingness to share thoughts and views on individual markets by very senior executives of well-known businesses that anyone working in real estate would have heard of.
This huge conference is like a large club; everyone (apart from Chris and I) seems to know a huge number of other delegates. Everyone is approachable and there is a genuine feeling of camaraderie. We have attended numerous meetings co-ordinated by our CBRE US colleagues - all of these were interesting, informative, intelligent and bizarrely almost always like a meeting of friends.
Thursday, 14 January 2010
Hitting the ground running
Nick Jopling, Head of Residential at CB Richard Ellis:
The first day of the NMHC conference was actually the day before formal proceedings commenced, when most delegates arrive. Needless to say there is no rest for the wicked and our first meeting was at 7.30am. By 8.15am, I was on my feet explaining the aim of our visit to the 20 members of the CB Richard Ellis Multi Family Housing Executive team based in the US. The rest of the day was spent moving from one introduction or meeting to another.
There are over 1,500 people attending the conference with the delegation list capped at around 900, which ensures companies only send their most senior staff. About 500 delegates attend the CB Richard Ellis cocktails and dinner, and this seems to be the starting gun for the whole event. My colleagues in London will be quietly pleased to hear that it is unusually cold in Florida this winter, the local news headline featured frozen fish ponds that have killed thousands of tropical fish; the dinner was therefore moved inside.
In fact the warmest place I found yesterday was the lift of a 27-storey building that I got stuck in with eight others. It took over 35 minutes to release us and by the end it was pretty warm. It was interesting to note different people’s reactions to this event; everyone remained calm, but there were a few who were clearly living through a nightmare and I suspect will be using the stairs for the rest of the week.
The conference is a focused event, which allows for easy conversation with anyone you meet or are introduced to. The US rental market is made up of approximately 35m households of which around 15m are estimated to be apartments with the rest being single family homes. Of the 15m apartments, it is thought that about one third are institutional grade i.e. in blocks of more than 50 units (in fact the average is about 170) and in single ownership. It is the owners and operators of this stock that are in Miami this week.
At the peak of the market in 2007, nearly $100bn of this type of property was traded or refinanced. The guys I met from CBRE oversaw between 20-25% of that activity. Last year, it is thought total activity dropped to around $14bn with CBRE still supporting the same share. It is this experience that my colleague and Head of UK Development Chris Lacey and I have been able to draw on to get a forensic understanding of how the sector works and what we believe is transportable across five time zones east, i.e. the UK.
The topic that seems to be on many lips on the eve of the conference is where are interest rates going? The yield on the ten-year note has moved up over 50 basis points in the last two months to 3.79%. Fifty economists collectively reported in the Wall Street Journal this month that they thought rates would be at 4.25% by December 2010. When you add 200 basis points to any loan rate that Fannie and Freddie offer it is understandable why the subject is so topical.
Fannie Mae and Freddie Mac are almost the only lenders in town, and of course they are in town all week. They lend only on investment product, not on development, so even if we could transport them to London it wouldn't be any good as we have no suitable investment product that could be called multi-family housing - we have to build it first.
The debates over the next few days will be interesting and with Newt Gingrich (Republican) and Howard Dean (Democrat) closing the conference on Friday I am looking forward to learning so much more.
The first day of the NMHC conference was actually the day before formal proceedings commenced, when most delegates arrive. Needless to say there is no rest for the wicked and our first meeting was at 7.30am. By 8.15am, I was on my feet explaining the aim of our visit to the 20 members of the CB Richard Ellis Multi Family Housing Executive team based in the US. The rest of the day was spent moving from one introduction or meeting to another.
There are over 1,500 people attending the conference with the delegation list capped at around 900, which ensures companies only send their most senior staff. About 500 delegates attend the CB Richard Ellis cocktails and dinner, and this seems to be the starting gun for the whole event. My colleagues in London will be quietly pleased to hear that it is unusually cold in Florida this winter, the local news headline featured frozen fish ponds that have killed thousands of tropical fish; the dinner was therefore moved inside.
In fact the warmest place I found yesterday was the lift of a 27-storey building that I got stuck in with eight others. It took over 35 minutes to release us and by the end it was pretty warm. It was interesting to note different people’s reactions to this event; everyone remained calm, but there were a few who were clearly living through a nightmare and I suspect will be using the stairs for the rest of the week.
The conference is a focused event, which allows for easy conversation with anyone you meet or are introduced to. The US rental market is made up of approximately 35m households of which around 15m are estimated to be apartments with the rest being single family homes. Of the 15m apartments, it is thought that about one third are institutional grade i.e. in blocks of more than 50 units (in fact the average is about 170) and in single ownership. It is the owners and operators of this stock that are in Miami this week.
At the peak of the market in 2007, nearly $100bn of this type of property was traded or refinanced. The guys I met from CBRE oversaw between 20-25% of that activity. Last year, it is thought total activity dropped to around $14bn with CBRE still supporting the same share. It is this experience that my colleague and Head of UK Development Chris Lacey and I have been able to draw on to get a forensic understanding of how the sector works and what we believe is transportable across five time zones east, i.e. the UK.
The topic that seems to be on many lips on the eve of the conference is where are interest rates going? The yield on the ten-year note has moved up over 50 basis points in the last two months to 3.79%. Fifty economists collectively reported in the Wall Street Journal this month that they thought rates would be at 4.25% by December 2010. When you add 200 basis points to any loan rate that Fannie and Freddie offer it is understandable why the subject is so topical.
Fannie Mae and Freddie Mac are almost the only lenders in town, and of course they are in town all week. They lend only on investment product, not on development, so even if we could transport them to London it wouldn't be any good as we have no suitable investment product that could be called multi-family housing - we have to build it first.
The debates over the next few days will be interesting and with Newt Gingrich (Republican) and Howard Dean (Democrat) closing the conference on Friday I am looking forward to learning so much more.
Multi Housing is just the tip of the iceberg
Nick Jopling, Head of Residential at CB Richard Ellis:
I have been looking forward to attending the National Multi Housing Council Conference in Boca Raton Florida ever since the invitation to speak at the event arrived on my desk in September. Given that the idea of being in Florida in January would probably appeal to all of us, there was little sympathy from colleagues or clients for the gruelling schedule that my fellow Director Chris Lacey and I would be following over the next four days.
The NMHC conference is probably the largest gathering in the world of major players in the residential capital markets industry and the event is almost entirely focussed on the US multi-family housing market - think of an institutionally owned private rented sector. The panel I will be speaking on is entitled 'Opportunities in a Global Market’, which follows a session on why foreign capital is looking to invest in the US residential rented sector.
As anyone who has read some of my scribbles in the last three years will know, I am a passionate believer that it is time to bring the US multi-family housing model to the UK. Building purpose built residential stock will create a private rental offer in the UK that is built on scale and customer service, which is long overdue. We are talking a concierge who knows your name, drops and delivers your laundry to your door, in a building designed for its occupants. I do not accept that the service culture, so in bred in America, cannot work in the UK, let me explain how it feels.
Last night, we arrived at a heaving Miami International Terminal an hour late after every passenger from Heathrow had to endure a second security inspection that included the individual inspection of every item in our carry-on bags. We knew that we had to walk fast to catch the last train to Boca Raton, but where was the station?
We spotted an information stand close to an exit manned by Alfred, an elderly local, who informed us we had ten minutes to get to the station, which was four minutes away on the shuttle bus. The only problem was that the shuttle bus had just left and the next one would not arrive for another five minutes – ‘That's tight’ he said. Alfred decided it was too tight, so he abandoned his post to take us to the blue cab rank that serviced the airport. However, there were no blue cabs in sight - seven minutes to go.
In a scene reminiscent of the closing sequence of the Italian job, Alfred 'had an idea'. Before we could ask what this idea was, Alfred had flagged down a rental car shuttle bus and was asking the driver if he would take these two Englishmen to the station so that they didn't miss their train. 'Sure' said Danny with a voice that could spot a good tip at a 100 yards, and off we went - six minutes to go.
Thanks to Alfred, Danny and that American service culture we made the train with one minute to spare - now wouldn't it be nice if we could bring a bit of that experience to London?
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