The Future of Global Investing.
The Future of Cities.
Two of Several Sessions at CRE’s International Real Estate Forum
In April 2012, the MIT Center for Real Estate (CRE) and its alumni association – together with their media partners, The Real Reporter – hosted a day-long forum on global real estate, featuring prominent leaders of local and international real estate firms.
The meeting included a series of presentations and panel discussions with speakers from as far away as Mexico, Turkey and China, exploring such topics as the increasingly blurry line between developed and developing markets and the leadership challenges that arise when large private real estate firms go public.
A highlight of the event was a panel discussion sponsored by the CRE featuring industry partners and alumni of the Center talking about the important forces impacting today’s global investor and what to expect for the future as the global financial system struggles to stabilize.
Moderated by Dr. Jacques Gordon, global strategist at LaSalle Investment Management, the panel included three leaders from prominent foreign development companies – alumnus Qian Wang (MSRED ’95), CEO of Bosun Development in Shanghai; alumnus Emre Çamlibel (MSCE, ’92), CEO of Soyak Holdings in Istanbul; and Adrian Gonzalez Lozano, CEO and chairman of Stiva Group , Mexico (and father of MSRED ’12 alumnus, Adrian Gonzalez). Rounding out the panel was Peter Lewis, who leads research on America for Towers Watson.
In response to Gordon’s query about what the panelists had learned from the global financial crisis, each had a story to tell. “When things go wrong,” said Lewis, “it may be difficult to solve at home but it’s many times harder when you’re on the other side of the world. Groups that use high levels of leverage find themselves in difficulty. Terms of debt no longer match strategy, necessitating refinancing in the middle of a crisis.”
Qian, whose company had been working on 11 projects in China at the beginning 2008, said all sales dried up by the end of the year and might not have resumed without huge infusions of government stimulus. “We were experiencing too good a thing from 2005 to 2008,” he said. ”The crisis was a wake-up.” He went on to describe how his firm responded to the government’s attempt to reduce speculation by developing financing streams through a subsidiary trading company. ”We expect continued growth,” he said.
The global crisis had a big impact on Turkey. There were price freezes for three years and only in the last two years has the market been growing – four to five percent annually. ”Banking regulations were changed [because of the crisis],” Camilibel said. “The way things were done in Turkey was old-fashioned. A lot of transactions were not very related to capital markets. The typical buyer pays 25 percent down. Today there is a mortgage market. Buyers still have to come up with a big down payment, but prices have been picking up.”
Turkey has huge potential. ”There are cities without one shopping mall yet,” he said. ”There’s a need for housing. We expected the European Union crisis to affect Turkey, but it didn’t. Most investment in Turkey is money. Construction manufacturing is important, but [focused on] consumption from Europe.” he added.
“Mexico suffered much less during the crisis than many other countries,” said Lozano, the next panelist to respond. After enduring some problems in 1994-95, with support from the United States, his company is now heavily focused on the domestic market and creation of micro-cities. “In the last 24 months, we have seen opportunities and invested a lot of our money,” he said, adding that REITs and pension funds have been strong sources of revenue in the past year.
Another main feature of the April event was a presentation by noted urban economist. William Wheaton – a founder and former director of the Center, and current CRE faculty member – on the impact of energy costs on the growth and development of cities. Part of a series exploring important research by the CRE faculty, Wheaton’s presentation examined a trend that is already having an impact on the urban landscape in much of the world: as transportation costs continue to rise, businesses are dispersing to suburbs in order to be closer to workers who are more or less ”stranded” by commuting costs, giving rise to increasingly polycentric cities.
“Historically, as cities have grown and their borders have expanded,” he said, “land price and density gradients have flattened as transportation improved, resulting in urban housing rents that have not risen beyond the overall inflation of the Consumer Price Index.” “But in the coming century,” he went on, “because such transportation improvements are unlikely to be able to keep pace with rising energy costs, the monocentric model will likely continue to decline.”
Other CRE participants in the day-long forum included adjunct faculty Chris Gordon, former COO of Harvard’s multi-billion dollar Allston Campus development, leading a discussion on new technologies, construction methods and innovative concepts that are shaping the future of real estate development and construction; and Lecturer Tod McGrath, President of advisoRE, LLC, leading a discussion of critical legal decisions in real estate, including a brief overview of important cases being considered by US courts and how they could change the rules of development and investment in the future.