Real Estate Luminaries Look Abroad as Market Improves

May 09, 2011

Georgetown’s McDonough School of Business and the National Association of Real Estate Investment Trusts hosted “Commercial Real Estate: Moving from Recovery to Expansion” as part of the Real Estate Luminaries Series. The May 3 event in Lohrfink Auditorium was divided into two hour-long discussions.

The first panel featured Thomas Carr of Federal Capital Partners; Martin Cohen, co-chairman and co-CEO of Cohen & Steers Inc.; and Wesley Edens, a founder and co-chairman of Fortress Investment Group LLC, on the topic of moving from recovery to expansion in commercial real estate.

In looking at new opportunities in real estate, Edens highlighted China. He said that China has virtually no senior housing, and given China’s one child-policy and aging population, there will be large demand for such housing in the future. The key though, Edens said, is getting in at a decent price.

Cohen said the money in real estate will continue to be in the three financial capitals of the world: London, New York, and Hong Kong. He also was bullish on real estate as a whole, saying that investors want to own hard assets. “There is no asset more real than real estate,” he said.

In response to a question from the audience on the topic of commercial real estate in China, Cohen said that his company has chosen to invest in Hong Kong companies where Cohen & Steers has been close to the managers. Those companies were safer and more developed in Hong Kong, he said. Edens echoed this, saying that great partners are key because doing business in China alone is very complex.

On inflation, Cohen said that in highly inflationary times, short leases are preferred. Edens said that inflation has a high impact in construction, where commodities costs can dramatically change the cost of a project and even swing it from profit to loss.

The second discussion, titled “A Conversation with David Simon” featured remarks from David Simon, chairman and CEO of Simon Property Group, the largest publicly traded real estate investment company in the world. It was moderated by Martin Cicco, senior managing director of Evercore Partners, and Steven Wechsler, CEO and president of NAREIT.

Simon discussed his career and his business, which mainly owns and operates retail shopping centers. He told the audience that one of the biggest challenges facing his business was the Internet. He specifically mentioned sites like as a real problem to his business because they do not charge sales tax. Additionally, Simon said that his company is working to take the shopping experience they offer in their regional malls to another level, making the mall “smart.”