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2018 WREAA Biennial Recap

Posted By David A. Walsh, Wednesday, October 3, 2018
Updated: Thursday, October 4, 2018

 


This September 13-15th, over 500 alumni and friends of the UW-Madison Real Estate program converged on Madison to attend the 2018 Biennial Wisconsin Real Estate Reunion and Conference. Together we heard from industry leaders, presented awards, got an update on the UW Real Estate program, saw old friends, met new ones, and pushed ourselves to consider this year’s theme, “Where are We Now? Continued Growth or Reaching Peak.”

 

Returning to the newly renovated Memorial Union, this year's reunion was full of great events, generously made possible by sponsors and the hard work of many individuals, including the conference co-chairs Katie Johnson Bergen and Michael Zelin. Following are a few highlights of the event, but certainly not all. We hope that if you attended, you enjoyed your time and found it valuable. If you couldn’t join us this year, we hope to see you at our next conference, the Trends Conference, in Chicago on September 25th and 26th, 2019!

 

 


Thursday Highlights

The Conference kicked off when a full field of Badgers and friends teed off at University Ridge on Thursday morning in a scramble format, with the winning foursome shooting -12. Congratulations to Dan Flattery, Stew Cedarleaf, Max Kaminsky and Dan Price!  By late afternoon, a Women’s Networking Event was underway at the Edgewater Hotel, bringing together women in the real estate industry who share common ties to the Wisconsin Real Estate Program. The Student Speed Networking session followed, where students were provided a platform to make new connections with alumni.

 

   

 

Alumni Banquet and 5th Quarter Cocktails on the Plaza

The Alumni Banquet, hosted at The Edgewater Hotel, was informative and entertaining. This year, mentalist Oz Pearlman shocked the crowd in an after-dinner program which included an array of mind reading tricks. In addition, the Distinguished Real Estate Alumni Award was presented to David Lenz of the North Central Group and the Dianne Orbison Memorial Scholarship Award was presented to Alison Petrick. Following outgoing WREAA President Andrew Weir’s remarks, he was presented with the President’s Award. To cap off the program, the UW Marching Band made an appearance and played everybody’s favorite Badger classics including Varsity. After dinner, participants made their way outside to enjoy cocktails and conversation in the new post banquet 5th Quarter event.

 

     


Geopolitical Strategist Peter Zeihan

Friday morning commenced with an extremely engaging presentation from Peter Zeihan, a geopolitical strategist, global energy, demographic and security expert. Peter covered a wide range of topics including the history of international trade and security alliances, upcoming trends of available capital, the Trump administration’s staff turnover and relationships with other heads of state and an economic outlook for many industrialized nations.

 

On economic strength in the short to mid-term future, Peter cautions us that the cost of capital will quadruple. This is driven, he argues, by the baby boomers changing investment needs. He said, “Baby boomers made our economy capital rich, but that will change as they shift to saving.” Peter also claims that millennial consumption is a major reason we’re not currently in a recession. Looking forward to when a correction does come, Peter showed the audience the consumption patterns and investment needs of major countries. Using graphics to convey average ages of populations, Peter discussed how these ages affect the spending in each country. Peter explained that China is the most over credited country in history. He said, “Think Enron in every sector of China, and double in agriculture. It’s all going to crash at the same time.”

 

Peter also focused on foreign capital flowing into the United States, acknowledging that it’s driving up prices in gateway cities. He’s very optimistic about the strength of the dollar, arguing that there is no true competition to the USD. One example is that trade within the Eurozone is frequently done in USD already. The strength of the USD, Peter claims, will lead to continued deficit spending in the coming decades.

 

Fireside Chat with Matthew Bronfman, Principal and CEO of Jamestown Properties. Moderated by Dr. Mark Eppli, Director of the Graaskamp Center for Real Estate

Matthew Bronfman spoke on his experience with Jamestown Properties, including their tradition of sourcing capital from Germany. He says that even with poor relations between President Trump and Angela Merkel, capital continues to flow into the US, driven by high returns. He also spoke about owning Chelsea Market, where they started leasing space at $10/sf and grew it to $300/sf. Keys to success with non-commodity assets such as Chelsea Market and Ghirardelli Square, Bronfman suggests, are making the tenant sticky through branding the space within the firm and always seeking a value-add component to drive up net income.

 

Bronfman likes and wants to work in some secondary markets but is almost exclusively in Tier 1 markets because of deal size. Secondary markets, he explains, offer smaller deals and these smaller deals have the same pursuit and due diligence costs of the large deals. To effectively deploy their large amount of capital, scale is needed. He argues that the best market and asset class for dry powder these days are Washington, D.C. and multifamily. This is because D.C. hasn’t fully recovered from the recession and hasn’t created a tech/creative hub yet, and because we need to solve the affordability crisis in housing.

 

Two major signs that caused Bronfman to sell a majority of his core assts just before the GFC are not present today. These include losing bids to 90-95% leverage and underwriting unrealistic rates for vacant space. An interesting story he shared was that when selling a mixed-use property, he was advised not to sign a tenant into the commercial space because prospective buyers would underwrite the space more aggressively than current market rate.

 

Looking forward, Dr. Eppli asked Bronfman for his opinion on cap rate trends. Bronfman replied that he believes cap rates have already increased about 50 bps on large assets. However, he does not believe cap rates will increase much more as a result of the sufficient supply of capital. On a related note, he is noticing more competition and bidding wars on large scale assets because of the need to deploy large amounts of capital.

 

     


Concurrent Sessions: “What’s in Store for Retail” and “Debt, Equity, Alternative Financing and the Evolution of the Capital Stack”

The future of retail is a hot topic in real estate circles today and was discussed at length by members of CBRE and Brixmor Property Group Inc., moderated by Scott Crowe, the Chief Investment Strategist at CenterSquare Investment Management. Main takeaways were that selling a commodity isn’t enough because the internet made it simple, experiences including food and beverage are today’s strongest anchor tenants, tenants want shorter term leases and the fitness industry is demonstrating high growth.

 

A great turnout packed the room for a discussion on alternative financing methods, and attendees were impressed by the discussion between very qualified representatives from CBRE, Mesa West Capital and Northwood Investors LLC.


   


Alumni Luncheon

The luncheon this year set the stage for an update on the UW Madison Real Estate Program. The newly appointed Real Estate Department Chair, Tim Riddiough, shared with alums an update on new initiatives within the Program.  He announced that they will be bringing back the international real estate course, including a student trip, led by Instructor Joe Walsh.  The department is also working on plans to offer the MS program in 2019 and is exploring plans to organize a PE fund to be managed by MBA students, similar to the AREIT program currently offered.  Following the update on the Program, the Wisconsin Award was presented to Michael Shannon, Chairman of KSL Capital Partners.

 

   


Stories and Insights from Veteran Real Estate Entrepreneurs

A panel of four real estate entrepreneurs shared their experiences in the final session of the conference. Topics discussed included why each panel member decided to start their own firm, navigating capital raising and partnerships.


Motivations for starting their own firm were different for each panel member.  The panel also discussed how they went about raising the first round of capital for their business. They mentioned needing to give concessions to get that first round and have full discretion of where to place it as well as putting down hard personal money to tie up a deal to buy more time to raise funds. An echoed point from panel members was that partnerships in the business benefited from complementary skillsets.

 

Conference Closing

After the final session with veteran entrepreneurs, attendees networked on the Memorial Union Terrace. Many attendees also stayed on campus Saturday for the Wisconsin vs BYU football game. A packed two days of events lead to a beneficial and enjoyable conference for all who attended.

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