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The World has Changed, noW WhaT do We do?Summit Report

08/03/12

National Association of Real Estate Investment Managers

NatioNal associatioN of Real estate iNvestmeNt maNageRs 1The World has Changed, Now what do we do?

As once explained by the 18th century Irish politician, author, and philosopher Edmund Burke, “You can never plan the future by the past.” Well understood by commercial real estate investors, this truism is prompting leaders to focus their thinking on what is happening now and what could happen in the future, not on what might have worked before. In early June of 2012, a small group of commercial real estate leaders assembled by the National Association of Real Estate Managers (NAREIM) gathered at a small hotel in Chicago for the first annual 2020 Investor Summit to discuss changes, big and small, and explore new ideas about real estate investing.

The investment manager today is confronted by significant changes on all sides – capital, demographics, regulations, operations and technology, as well as shifts in how real estate is used. Institutional capital continues to evolve as defined benefit pension plans give way to defined contribution savings plans. New regulations, accounting rules and calls for transparency are changing how investment managers approach their operations and communications. At the same time, dramatic shifts in demographics, technology and culture are changing how we work today, how we will work in the future and what we will all expect from our office, residential, retail and industrial space.

The following areas were discussed:• Real Estate Usage – technology and demographic shifts are changing how people use

real estate – and will likely make this recovery dramatically different from past recoveries.

• Investment Capital – An exciting new development in defined contribution plans may represent a huge potential source for new real estate investment capital.

• Human Capital – As the economy recovers, fund raising, business continuity, risk and governance all have a significant and challenging human capital aspect to be considered.

• Regulations, Accounting and Transactions – Changes in accounting and structuring of deals will have a meaningful impact on how investment managers need to conduct their business.

• Information, Technology and Process – Is it time now for the real estate investment management firms of today to upgrade their approach by buying process rather than technology?

nareIM 20/20 Investor summitJune 6, 2012

SUMMIT REPORT August 3, 2012

The World has Changed, noW WhaT do We do?

“�You�can�never�plan�the�future�by��the�past”�

- Edmund Burke, Philosopher

Almost four years after the collapse of Lehman Brothers and the beginnings of the most challenging economic recession since the Great Depression, it has become clear that our world has changed. More than a straightforward de-leveraging of the economy or a re-strengthening of the global banking system, (as challenging, painful and seemingly impossible those tasks are), it appears that some assumptions about how the economy works, how to invest successfully, and how to anticipate the future may have to be re-evaluated. The world is unlikely to go back to where it was before. But if that is the case, where is it going and how do we plan for the future?


ThE WoRld hAs ChANgEd, Now what do we do?NatioNal associatioN of Real estate iNvestmeNt maNageRs 2

Real�Estate�UsageNo matter what people do, they will always need space to do it in. That basic fact provides some comfort to real estate investors in times of volatility and change – but it’s important to understand that the way people use space and the kinds of space that command the highest values does change. For example, the near universal adoption of computer, Internet and mobile technology may shrink people’s overall demand for physical space to house books, files and other media. According to the Robert J. Meulmeester of the Royal Institution of Chartered Surveyors, (Revolutionizing Office Demand: Investor be Prepared, 2.24.2011), American companies in the 1970’s allotted 500 to 700 square feet per employee for the typical office. Today, office workers enjoy less than 200 square feet per person on average. Will that space expand once the economy fully recovers? While office space has been steadily shrinking in the last few decades, living space has increased. According to U.S. census data, the average American had 292 of square feet of personal living space in 1950. In 2006, that number was closer to 900 square feet. Work and home have traded space as our work and home lives have become more integrated. With more and more people splitting their work their work between the office, home offices and the road, how much of a demand recovery can be counted on?

So what does that mean for investors? At the moment, it appears that the only office markets to truly recover have been those in the best core markets such as New York, San Francisco and Washington, DC where cap rates have returned to pre-recession levels – and stabilized Class A assets are trading in record territory. But given all the undertow – are those investors paying too much? Is core overpriced?

According to Jeff Havsy, Director Research for NCREIF, “It may very well be that Core is priced just as it should be. The NOI growth according to our records of assets that are less than 10 years old in the top 10 markets has been much higher than all other properties. They justify a premium price – even if they don’t have a stratospheric yield, their downside risk if far less.”

Jim Costello, Managing Director and Head of Investment Consulting and Strategy for CBRE did not disagree, “In core markets – even those outside of New York, when you put these assets into a larger context of other potential investments such as treasuries, the smaller yields don’t seem as small. If you need cash flow, you are much better off with these assets even if there is some rise in interest rates.”

And yet – nothing is certain, even core. Some of the investors in the room had doubts that there wasn’t much room for error in the top assets with a preponderance of institutional money bidding against each other for a smaller and smaller yield. Preston Sargent, Principal of Trail Creek Capital, pointed out that, “At current prices, one has to stretch quite a bit to make it all add up. Investors have to be willing to look more closely at some value-add situations, if only to avoid the pressure of too much money chasing too few deals.”

Is it time then, for value-add, or is development a possibility once again? It depends, and there is plenty call for caution. According to Suzanne Mulvee, a senior real estate strategist at Property & Portfolio Research, “The answer to that question has two parts right now: Apartments and everything else. In strong markets you are seeing apartment development, but in office there isn’t much going on, with the exception of downtown New York and Washington, DC. Therefore, we think there is a case for getting in now – since the demographic math long-term will support the right product – but it won’t be explosive growth, and it will be a much harder living for those who build.”

Jeff Havsy NCREIF

“�It�may�very�well�be�that�Core�is�priced�just�as�it�should�be”

-Jeff Havsy, NCREIF

Preston Sargent Trail Creek Capital

“�At�current�prices...�Investors�have�to�be�willing�to�look�more�closely�at�some�value-add�situations”�

- Preston Sargent, Trail Creek Capital



Jim Costello pointed out that the technological and cultural shifts will warrant watching and it isn’t certain which way everything will go. For example, there is evidence of a demand for more urban living and working, “I’m an urban guy, but I am also a big fan of suburbs. There will be some level of demand going forward. Young people may want to stay in cities, but when they get a little older, they may want to move to the burbs for more room.”

Jeff Havsy interjected, “is it about room? Or is something else driving it, like schools. If we fixed urban schools, they might end up staying.”

Suzanne Mulvee added, “Remember too, that younger people are having children later and later in life – that school question is getting delayed longer to a point where they may have the resources to educate their children in the private school system.”

In the urban vs. suburban discussion, it quickly became apparent that it is not yet clear that one will win and the other lose – and as one considers different suburban markets around the U.S. it becomes increasingly difficult to differentiate a successful suburban market from an urban one. According to Pat Gibson, President of Hunt Realty Investments, “There is opportunity in suburban locations. Consider a market like Dallas – where there are very healthy, very dense suburban markets like Plano, where a critical mass of amenities have created an ‘urbanized’ market.”

Matt Haley of Pearmark Real Estate Partners agreed, “There is a kind of urbanized suburban market – where the actual center of economic activity has moved from the traditional CBD.” This “urbanization” seems to call for a repurposing or repositioning of existing assets in the suburbs, whether they are office or retail, but that may be a bit more difficult than doing so in traditional central business districts. According to Jim Costello, “It may be easier from a design standpoint to repurpose existing buildings in suburban location – as they are relatively simple structures – but from a dollar standpoint, it may not make as much sense. Suburban sites are mostly C-grade stuff with too low a density. In most cases, it makes more sense to bulldoze it and start over.”

George Pandaleon, President of Inland Institutional Partners, concurred. “There have been any number of cases where investors tried and failed to repurpose – repositioning suburban retail is impossible.” Suzanne Mulvee’s take on retail is that it is split between two extremes, “One one end you have the weaker centers that just have to be taken down. At the other side you have the best centers that are doing as well if not better than before the recession…and it makes sense. New supply of retail is practically zero, while consumption is 6% higher than it was four years ago. If productivity is tied to rent, there’s a definite pick up in rents in higher quality centers.”

But all is not certain, even for the highest quality retail. According to Suzanne, “the problem for retail continues to be the Internet – no one knows exactly where it is going. The retailers themselves are profitable with tons of cash on their balance sheet, but there is no growing housing market for them to chase with new locations. Instead there’s the challenge of the Internet. They are taking money out of their real estate and putting it into building online capacity. No one knows what the end-game is going to be.”

One trend to watch may be the retailers that are actively embracing a strategy of e-commerce plus an on-line component. According to Peter Borzak, Principal of Pine Tree Institutional Realty, “Retailers are getting smarter – and it isn’t a classic case anymore of landlords versus tenants. Instead, it should be about coming up with more innovative ways to embrace and enable the technology to market, create community, and try things that create synergy between the on-line and in-store experience.”

Pat Gibson pointed out that Nordstrom is a leader in this area, “Nordstrom is using databases with complete customer purchase histories connected to sales people’s mobile devices. They are able to steer the customer right to brands and items that match up with that history – without even asking a question. They know who you are the instant you walk in.”

Pat Gibson Hunt Realty Investments

Matt Haley Pearmark Real Estate Partners

“�There�is�a�kind�of�urbanized�suburban�market�–�where�the�center�of�economic�activity�has�moved�from�traditional�CBD”�

- Matt Haley, Pearmark Real Estate Partners

Suzanne Mulvee Property & Portfolio Research

“�the�problem�for�retail�continues�to�be�the�internet...�They�are�taking�money�out�of�their�real�estate�and�putting�it�into�building�online�capacity.�No�one�knows�what�the�end-game�is�going�to�be”

- Suzanne Mulvee, Property and Portfolio Research



George Pandaleon questioned where retailer technology may go and how it might impact the landlord, “As the retailers become more sophisticated with their approach to technology and they divert more and more capital to in-store technology like body scanners for clothing and wireless identification of clients and client preferences, how is that going to affect the landlord? Are they going to demand for allowances for us to pay for that technology? I saw that happen in office.”

But according to Peter Borzak, it has become even more complicated, “Internet sales are driving brick and mortar sales but it is hard to measure. Percentage rent clauses are becoming more difficult to measure.”

The difficulty of determining attribution – to bricks or clicks is at the core of this problem. Suzanne Mulvee asked, “How do you attribute an on-line sale to a specific store? How do you then value the store?”

Retailers that master these new technologies are creating a level of sales density never seen before. According to RetailSails, Apple retail stores sell approximately $6,000 per square foot of space every year – while the average for traditional shopping malls is only $341 per square foot. Big-Box retailers are shrinking their footprints – Walmart is developing “urban” stores as small as 27,000 square feet while Best Buy is reducing their typical floor plan from 45,000 to 30,000 square feet. At the same time, pure e-commerce retailers like E-Bay and Amazon are creating physical stores.

Retail’s business model is changing, and the trend appears to be – like office – to create greater density, more flexibility and better connection to new technology. The residential marketplace is facing similar change. For example, owners of multi-family are mining data and using social media at a level never before seen. According to Jeff Havsy, “You will see apartment owners able to differentiate pricing between tenants based on their history, on-line profile and network.”

Connected to the changes occurring in all asset types, industrial and warehouse is seeing it’s own transformation. Suzanne Mulvee pointed out that “warehouse in the gateway port markets benefitted greatly from the offshoring of the last 20 years, but that may be changing a bit as we start to see on-shore or near-shore manufacturing. Faster and smarter logistics seem to be more important than ever as retail changes so much.”

“We also have to pay attention to accelerating functional obsolescence,” Jeff Havsy added. “Warehouse is no longer looking for square feet, they need cubic feet. As they accelerate the movement of stuff and require higher and higher levels of precision and data, those warehouse boxes we have now will have to change considerably.”

Real estate demand is going through a period of rapid transformation, and even though everyone is watching the trends, it may be impossible to account for all the changes, and it would be prudent to acknowledge that we can’t depend on any of the trends discussed to hold fast and true as we see them today. There could be some surprises. Jim Costello explained how the usage trends of the last few years could even reverse course, depending on the changes in energy costs: “Much of the changes in cities and suburbs has been related to the costs of energy and the assumption that those costs will continue to go up. The recent success of “fracking” for extracting unprecedented amounts of natural gas, along with other alternative energies for transportation and manufacturing could reverse much of the change. It may not be the case that we stop driving as much, energy costs may go down, young people could leave the cities again…there could even be a new suburban boom.”

The only certainty in real estate demand is: nothing is certain.

Peter Borzak Pine Tree Institutional Realty

“�Internet�Sales�are�driving�brick�and�mortar�sales�but�it�is�hard�to�measure.�Percentage�rent�clauses�are�becoming�more�difficult�to�measure”�

- Peter Borzak, Pine Tree Institutional Realty

“�You�will�see�apartment�owners�able�to�differentiate�pricing�between�tenants�based�on�their�history�on-line�profile�and�network”

-Jeff Havsy, NCREIF

“�Much�of�the�changes�in�cities�and��suburbs�has�been�related�to�the�costs�of�energy�and�the�assumption�that�those�two�costs�will�continue�to�go�up”�

- Jim Costello, CBRE

Jim Costello CBRE



Investment�CapitalA common question for real estate investment managers over the last decade has been this: If traditional defined benefit pension plans are replaced by defined contribution savings plans – how should an industry funded primarily by pension funds adapt? In the last few decades, private employers have moved from defined benefit plans to defined contribution plans in growing numbers to lower costs and liabilities while private and public pension funds alike are caught in a perfect storm of underfunding and sluggish returns.

At the same time, it has become apparent that individuals are quite often not the best at deciding how to prudently invest their savings to provide for their retirement. Employers are not interested in directing their employees how to invest, due to their potential liability. But now, thanks to the 2006 Pension Protection Act, employers are able to offer employees a default option to place their savings in a diversified portfolio of assets such as a target date fund without being liable.

Target date funds are designed to optimize a balanced portfolio of investment over time. The managers of these funds behave much like traditional pension fund managers allocating investments to balance risk and yield appropriately throughout the life of the investment. According to Lennine Occhino, “Just about every financial institution that has managed pension money in the past, such as Vanguard and Fidelity are deviating from the traditional mutual fund structure to provide these kinds of funds – and they are making allocation decisions much the same way that a traditional pension fund has in the past.”

This is a fast growing defined contribution product. According to estimates reported by Cerulli Associates in 2011, we should expect these plans to grow to $1.5 trillion by 2015. Lennine pointed out that, “like a traditional pension plan hungry for reliable income, the target date fund has a natural affinity for a portfolio that includes direct real estate. A conservative allocation of 5% of those funds is a large enough amount of capital for private fund managers to take heed. Up to now, the lack of liquidity and difficulties with daily valuations have limited investing primarily to publicly traded REIT’s – but that may change soon.”

According to Peter Aitelli, a partner at Morrison & Foerster, “You can assume right now that most, if not all of these fund’s current real estate allocations are in public securities. A strong case can be made, however that any individual looking for reliable income should have core non-public real estate in their portfolio, but the question has always been, how to get that to an individual.”

Lennine responded, “direct investments from individuals are still too difficult, but with a target date fund, just like a pension, there are billions of dollars that are professionally managed for liquidity and diversification. It’s possible for individual investors to invest through that structure much the same way they might invest in a normal mutual fund.” The problem for private real estate, however, remains its valuation. A public security can be valued at any moment based on trading in the market, but how does one value a private fund?

According to Robert Ruggles, President of the Altus Group, “For 20 plus years, this industry has been doing credible valuations on a quarterly basis, it’s really just a question of technology and process to move that to a daily valuation – which we are doing for clients right now. Perhaps more critical right now is educating these Target Date Fund managers about how it can be done, and how to appropriately value a non-liquid investment within the context of their broader portfolio.”

Lennine Occhino Mayer Brown

“�like�a�traditional�pension�plan�hungry�for�reliable�income,�the�target�date�fund�has�a�natural�affinity�for�a�portfolio��that�includes�direct�real�estate”�

- Lennine Occhino, Mayer Brown

“�direct�investments�from�individuals��are�still�too�difficult,�but�with�a�target�date�fund...�It’s�possible�for�individual�investors�to�invest�through�this��structure�much�the�same�way�they�might�invest�in�a�normal�mutual�fund.”

- Lennine Occhino, Mayer Brown

“�For�20�plus�years,�this�industry�has��been�doing�credible�valuations�on�a��quarterly�basis,�it’s�really�just�a�question�of�technology�and�process�to�move��that�to�a�daily�valuation”

- Robert Ruggles, Altus Group

Robert Ruggles Altus Group



Jerry Claeys, the Chairman of Heitman, agreed, “It’s too hard for the individual investor to understand the details, but it is possible to educate the manager. At this point, most of them may not fully understand what our product can do for their portfolios, and we have to help them learn. This is reminiscent of what this industry went through in the 1970’s – when we helped pension funds understand how to use real estate in a mixed portfolio. Some of the managers of these new funds may be the same as those who managed pension funds before, but many will be new and it’s the industry’s responsibility to educate them.”

“The bigger discussion,” asserted Pat Halter, CEO of Principal Real Estate Investors, “is how can investment managers move private real estate as an asset class into a broader distribution channel. We have to educate a broader market than before, but there is no question that this is where we all have to go. With the marketplace going to more of an institutional product like this, the front-end load structures like non-traded REIT’s may fade away.”

George Pandaleon, President of Inland Institutional Capital Partners agreed, “The traditional stock broker model is going away – it’s too costly and too much of a disruption to the individual investor to be dealing with these kinds of decisions on a regular basis.”

“And at the end of the day,” Lennine summarized, “401K’s need to be able to create a reliable annuity stream for participants – Target Date Funds and real estate can help make that happen.”

Pat Halter agreed, “We are selling a solution and so we have to think about real estate as more than an asset class, as something that contributes to a diversified income stream with certain income and risk features.”

This is a topic that will be revisited often by fund managers inside and out of NAREIM, and will likely grow to be a significant new part of the real estate investment management industry.

“�We�are�selling�a�solution�and�so�we��have�to�think�about�real�estate�as��more�than�an�asset�class,�as�something�that�contributes�to�a�diversified��income�stream�with�certain�income��and�risk�features”�

- Pat Halter, Principal Real Estate Advisors

Pat Halter Principal Real Estate Investors

Jerry Claeys Heitman



Human�CapitalSteve Schrenzel, North American CEO of Taplow Executive Search led a provocative discussion on the dynamics of human capital and it’s impact on the future of investment management. According to Steve, “There are four critical issues that keep real estate executives and investors from getting a good night’s sleep: Fund Raising, Business Continuity, Risk and Governance.”

1. Fund Raising – as exit strategies become more difficult to visualize, fund raising requires greater skill and professionalism than ever before. Organizations have to be more proactive in planning how they hire, develop and retain key relationship builders that raised capital through the life cycle of the investment.

2. Business Continuity – as an example, Steve mentioned a recent press release about the closing of a new fund with a projected 10 year life span. At the same time, the same company announced that they had signed 7 year deals with the key executives. “This begs the question: ‘who is going to be there in year 10 to land the plane?’”

3. Risk – What is risk and how best to approach it are questions to be reconsidered right now, and the answers are more important to investors than ever before. The lessons to be learned from the experience of the last ten years are numerous and experience will count more than ever. It is particularly challenging that the average age of this industry is edging ever closer to retirement age. How will organizations pass the experience on to a new group of executives?

4. Governance – Who gets to make the decisions and is there a systematic process in place? Clients are asking for a higher level of transparency than ever before.

These four issues will continue to disrupt executives’ sleep for some time to come. As Steve put it, “With institutional investors expecting longer holding periods and seeking out a higher level of transparency, better controls and less risk, the nature of your management team – and the early career people coming up to replace them – is only becoming more critical. Are you taking the right steps to develop the team? Are you putting the right processes in place? If this is a long-term business, what is the long-term picture?”

Those are difficult questions for any business to answer, and it’s important for every firm to engage in a serious dialogue early and often. The challenge for real estate investment manager may be particularly acute for a few reasons. According to Jonas Bordo, SVP of Corporate Resources at Bentall Kennedy, “Investors are increasingly interested in what the long-term structure of an organization is and what is behind the ‘key men’. In some ways, we are in the professional services business, but we don’t know it yet. We have to build the systems, the institutional intelligence and succession planning that create the right level of continuity.”

Jonas Bordo Bentall Kennedy

“�Investors�are�increasingly�interested��in�what�the�long-term�structure�of�an�organization�is�and�what�is�behind��the�‘key�men’.”�

- Jonas Bordo, Bentall Kennedy

George Pandaleon Inland Institutional Partners



It’s almost as if investment management is entering a new stage, where the markers of success go beyond the intelligence and abilities of a few entrepreneurial executives to the operational excellence of an entire organization. Steve Schrenzel proposed that, “we need to be more thoughtful about this, develop meaningful continuity and stop having fire drills.” But in many ways, real estate as an entire sector may be at a disadvantage. “With fewer people coming into this business for the last 10 or 20 years, it should come as no surprise that many organizations have become rather top heavy – with senior executives now doing much of what early career people should be doing as they learn the business.”

According to Jerry Claeys, Chairman of Heitman, “In the late 1980’s, real estate was really attractive and we were able to acquire some of the best and the brightest. But then there was a recession and then the run-up of wall street and explosion of technology firms – and far fewer people came into the industry. If we are going to grow, we need to actively recruit and develop at the earliest stages.” The competition for talent is unlikely to abate either, as young talent is drawn to technology or alternative energy – or even oversees. Mark Kingston, President of Argus noted that, “We are seeing a lot of good talent absorbed by Asian economies.” Peter Borzak, Principal of Pine Tree Commercial Realty echoed Mark’s comment by saying, “Real estate classes at our universities include a huge percentage of students from India and Southeast Asia…and many are unable to stay in the U.S. when they graduate. We are losing a lot of valuable talent educated in the U.S. every year.”

Despite the challenges and the dearth of younger people in the industry today, the onus is ultimately on real estate organizations to develop talent. According to Steve Schrenzel, “The few firms that make the effort to develop talent are doing well. But if new graduates can’t see examples of where people can be after 2, 3 or 5 years, it’s exceedingly tough to recruit. Our industry is hobbled by a gap of ten years, where there are few concrete examples of career progress, of a path to executive leadership, or of diversity. We all need to aggressively make up for lost time”

Jeff Barclay, Managing Director of Goldman Sachs Asset Management Real Estate Investment Group summarized the discussion when he said, “Talent management is extremely important. It’s expensive and it’s hard work, but it is not impossible – and the results are tangible. When the process is done right, it’s amazing how enlightening it is for everyone.”

Discussions on how to better reach out to a new generation of commercial real estate leaders will continue amongst NAREIM members in the months ahead as this issue becomes more critical over the next decade.

“�With�fewer�people�coming�into�this��business�for�the�last�10�or�20�years,��it�should�come�as�no�surprise�that��many�organizations�have�become��rather�top�heavy”�

- Steve Schrenzel, Taplow Executive Search

Steve Schrenzel Taplow Executive Search

Jeff Barclay Goldman Sachs Asset Management Real Estate Investment Group

“�Talent�management�is�extremely��important.�It’s�expensive�and�it’s�hard�work,�but�it�is�not�impossible”�

- Jeff Barclay, Goldman Sachs



Regulations,�Accounting�and�TransactionsPeter Aitelli, a Partner of Morrison & Foerster and Alvin Wade, Industry Managing Partner, Construction, Real Estate, and Hospitality at Grant Thornton, had quite a bit to discuss about the changing nature of transactions and accounting, and the potential impacts on the investment management sector. No one issue was overwhelming, but taken in aggregate, the impact is significant and worth keeping a close eye on.

Here’s a list of eight changes afoot in the industry likely to have a significant impact or real estate investors:

1. Greater Investor Control According to Peter Aitelli, “Institutional clients providing capital are more willing to step into management when issues arise than in the past. In the past, they would do a deal and, if issues arose, would refrain to the extent possible from assuming a management or decision-making role, often to avoid additional risks or liabilities. Now they are willing to take over management under a variety of conditions and, in joint venture structures, often negotiate from the outset aggressive performance hurdles that, if not met by a developer-partner or a co-venturer, allow the institutional member to assume greater management control. In a time of increased volatility and tighter margins this is to be expected. Peter observed that, “I don’t think that institutional investors view this as adversarial. They are simply saying that in 90 – 10 deals they want access to the capital.”

2. More Focus on the Exit According to Peter, “In joint ventures and other equity sharing arrangements, there is a lot more negotiation around the issues of dispute resolution. There are much heavier call provisions, and more of an emphasis on exit mechanisms.” The parties are focused on how to get divorced easily if things do not go as expected. Preston Sargent, Principal of Trail Creek Capital agreed, “What used to be a simple agreement between partners has become much more heavily negotiated.”

3. Changes in Title Insurance Industry “Title insurance companies have been pulling back the insurance they will provide to owners and lenders –in 2009, they stopped offering coverage for creditors’ rights-related risks and they subsequently became unwilling to cover many mechanisms’ lien risks, especially in the construction and development context…this insurance is essentially unavailable now. At the same time, it is much more difficult for an insured to submit and prosecute a claim. Prior to the recession, the submission claims was relatively straightforward and easily resolved. Now, every claim is resisted tooth and nail.”

4. Mineral Rights are Important Peter brought up an issue that until recently was not on the radar for many investors, but is proving now to be more important. “In many parts of the country, mineral rights are increasing in value, and investors are focusing on them to a greater degree than in the past. Sellers will often dispose of properties but seeks to retain the mineral rights. Buyers, meanwhile, are focusing more attention on the ownership of the rights. In a lot of cases, it’s hard to tell who owns the mineral rights in the first place Pat Halter, CEO of Principal Real Estate Investors, agreed, “Dur-ing the depression, Principal’s predecessor, Bankers Life, took ownership of ranches in places like Oklahoma and Texas as they defaulted on their loans. Foreclosure at that time included the mineral rights – and now, 70 or 80 years later, Principal is receiving payments for oil and gas from those lands.”

Peter Aitelli Morrison & Foerster



5. More to negotiate, less time to do it Peter pointed out that, “It used to be the standard that after you signed a contract, you had 30 days for due diligence and then 30 days to close. Now in more active markets, it’s 15 days for due diligence and 5 or 10 to close.”

6. Convergence of Accounting Standards According to Alvin Wade, “Accounting standards in the U.S. are presently more rules based, while international standards tend to be more principles based. With the convergence to a single set of standards, it is likely the U.S. will move to more to the international, principles-based system. One of the items currently being considered in the U.S. is the expansion of the requirement to report real estate on a fair value basis rather than on a historical costs basis. However, the determination of fair value can vary significantly based upon the assumptions utilized in arriving at the fair value. Therefore, the onus is on you to be transparent about your assumptions and how you supported them. If you use third parties to value assets, you must understand the methodology and assumptions they used to arrive at the fair market value of the asset. As management, you are ultimately responsible for the valuation and must be able to document and demonstrate your understanding to your auditors. There will be expanded disclosures required as to key assumptions and used in order to create greater transparency. It is essential that you understand and can explain the processes and controls – even if it is done by a third party.”

7. Expanded audit procedures for public companies are on the near horizon and will possibly filter down to private companies. According to Alvin, “you should expect an expanded scope of work for audits going forward which will result in higher audit fees. These expanded procedures are in response to the results of the PCAOB’s inspection of public company engagements. It is possible that these expanded procedures will ultimately filter down to private company audits as well. Requirements for mandatory rotation of audit firms is being evaluated, but is not receiving broad support at this time.

8. Revenue recognition likely to change. Proposed changes to US GAAP will significantly impact the criteria used to evaluate and recognize revenue. Within the real estate industry, the historical benchmark of adequate down payments and continued involvement to recognize a sale of real estate will no longer exist. If a sale occurs, the amount of revenue to be recognized will be based on the amount that an entity is reasonably assured is collectable based on past experiences with similar transactions and an evaluation of the buyers ability to pay. Discussion during the meeting ranged from still changing rules on lease accounting, to the recognition of condominium sales. Suffice it to say that the current regulatory environment is one of change – and frought with challenges. NAREIM discussions on the details of these changes will continue in depth in the months to come.

Alvin Wade Grant Thornton

“�In�the�U.S.,�we�are�moving�to�the��international,�principles-based�system.�The�SEC�has�expressed�concern�about�the�difference�that�exist�between�these�two�systems�in�terms�of�valuation”�

- Alvin Wade, Grant Thornton



Information,�Technology�and�ProcessFacing the challenges of the next ten years may take more than harder work, it may require smarter work – and in particular, smarter work process. That was the core of the discussion led by Robert Ruggles, President of the Altus Group, Mark Kingston, President of Argus Software, Chris Acevedo, Vice President of Genpact and Joe Beggins CEO of GEMSA Loan Services. If investors are demanding more transparency, more accurate and more frequent valuation; if the market is rewarding only those investors with the best intelligence and ability to anticipate and act upon risk and opportunity; if fees and margins are compressed and likely to stay that way; if investment platforms are expanding with new investors, new markets and a more global supply of investors and assets – then the work process used by investment managers today may be due for an upgrade.

Joe Beggins asked the question this way, “Is there a competitive advantage for you in process? What could you do if you had no limits on your process and no labor constraints? What if process could open up your business – not slow it down?”

Technology always promises to make things easier, but there’s more to an improved process than software. Argus, for example, has long been a leader in the tracking of lease level information, but over the last two decades, they have progressively moved into a much broader range of process issues including lease management, transaction management, appraisal & valuation, asset management, market data, and budgeting. In effect, they are solving a business need for transparency, accuracy, and scaleability by combining software with process.

According to Mark Kingston, “You never want to hang your hat on a single software solution. Software engineers rarely think in terms of solving business problems, so you want to start by optimizing the process – then source the software tools to make it work. That’s why we created an agnostic architecture that could allow us to bridge between best-in-class software – and solve the business problem.”

Part of the solution to many process issues is people – but not necessarily investment professionals. Altus, Argus, GEMSA and Genpact all talked about the advantage of people on the ground, able to operate business processes ranging from inspections, data processing, reporting and accounting. What if, instead of buying a program to help build a better process inside an investment management firm, once could simply buy the outcome from a professional process shop? That’s the question that all four firms are actively answering right now.

According to Mark Kingston, “If you have an “always-on” field of people monitoring assets, not only do you lower operational risk, you are able to create a more transparent level of reporting all the way up to investors in real time and without taking your asset managers and acquisitions folks off-line all the time. Sure, there’s plenty of software involved in this, but it’s more about having a robust process with people attached.”

Chris Acevedo’s company, Genpact, knows a bit about scalable process and people on the ground, “We have approximately 55,000 people operating in 58 countries – running operations for real estate companies, banking, lending, technology. What we focus on here is the breaking down of process and getting it done with a team optimized for that process – not just the particular industry they are operating in. We have seen this approach prove itself out across the globe at an incredible range of scale.”

“�You�never�want�to�hang�your�hat�on��a�single�software�solution...�That’s�why�we�created�an�agnostic�architecture�that�allows�us�to�bridge�between��best-in-class�software�–�and�solve��the�business�problem”

- Mark Kingston, Argus Software

Mark Kingston Argus

Chris Acevedo Genpact

“�What�we�focus�on�here�is�the�breaking�down�of�process�and�getting�it�done��with�a�team�optimized�for�that�process�–��not�just�the�particular�industry�they��are�operating�in”

- Chris Acevedo, GEMSA



Not only is this approach potentially more scalable, it is more accurate, and able to produce more timely information. According to Joe Beggins, “If you start with better data integrity, you can start thinking in an entirely different way. The possibilities become very interesting.” In some ways, much of the data that investment managers currently use isn’t as accurate or as timely as it should be.

As an example, George Pandaleon of Inland discussed an existential challenge of property management, “I’m a nut for keeping track of square footage. If you are negotiating based on square footage, you should know what it is – and yet, any given property manager has many different ways to determine the amount. We would never allow this level of inaccuracy on the dollar side of our business.” Building data process management becomes more important with every square foot “lost” to a lack of standards. Solving these kinds of problems – of translating between different properties and different systems becomes possible when a “process company” is applied.

With a full process platform approach, it’s possible for companies like Altus to provide daily valuations of portfolios – essential for a shift to defined contribution investors. It’s possible to think about staffing and development in a different way, and with a higher level of data clarity, it’s possible to find less obvious opportunities. And this is not just for the larger firms to explore. According to Soh Har Pang, Managing Director from Argus in the Asia Pacific Region, “The value of a good process and the ability to look forward into your business is no less important for a small firm than a large one.”

That sentiment was echoed by Joe Beggins, “This kind of “Equity Servicing”, as we like to call it, allows for clients to start at a smaller scale with one process at a time, then expand as they see fit.” Buying process, unlike buying software can be on an “as needed” basis – and can grow as a company’s business grows. This approach not only free up resources, allow for scaleability, and improve data – but it can provide for a better, higher level of communication and intelligence. With a more robust level of information, it becomes possible to better understand WHY one should make an investment, HOW to improve the quality of assets under management, HOW to understand, communicate and manage risk, and WHAT might be the next opportunity.

The questions of process – how to improve it, how to scale it, how to leverage it – will likely continue to challenge many investment managers this year and next as they explore new approaches to optimizing their operations.

The�Summit�ConcludesAfter a full day of discussion, the first annual NAREIM investor summit concluded. Although there remains many issues to discuss and challenge, it was made abundantly clear: change is happening, the improbable might become possible, and we all continue to learn from each other as we explore a new landscape of recovery and renewal.

The NAREIM executives present at this meeting were grateful for the insights and ideas presented by the sponsors and guests of the meeting, and all look forward to an exciting summit next year when they reconvene in June of 2013.

Soh Har Pang Argus

Joe Beggins GEMSA Loan Services

“�If�you�start�with�better�data�integrity,��you�can�start�thinking�in�an�entirely��different�way.�The�possibilities�become�very�interesting”

-Joe Beggins, Genpact

Gunnar Branson NAREIM



Sponsor�ProfilesArgus�Software�For over 25 years, ARGUS® Software has been the leading global provider of software and solutions for analysis and management of commercial real estate investments. ARGUS products are the industry standard and provide a complete solution for managing and growing a commercial real estate portfolio. More than 4,600 of the real estate industry’s leading owners, managers, financial institutions, brokerages and REITs, in 45 countries and on five continents use ARGUS solutions to improve the visibility and flow of information throughout their critical business processes. These solutions include asset management, asset valuation, portfolio management, budgeting, forecasting, reporting, knowledge management and leasing management. As a subsidiary of Altus Group Limited, ARGUS continues to provide up to date and relevant solutions to our clients. For further information, visit www.argussoftware.com.

Altus�Group�U.S.�Inc.Altus Group U.S. Inc. is a wholly-owned subsidiary of Altus Group Limited, a public company listed on the Toronto Stock Exchange with 2011 revenues exceeding $300 million. Altus Group was formed in May 2005, the result of the merger of three of Canada’s leading real estate consulting companies. With a staff of 1,700, Altus Group has a network of 70 offices in 14 countries worldwide, including United States, Canada, United Kingdom, Australia, Asia and Latin America.

On July 31, 2010, the Valuation Advisory Practice of PricewaterhouseCoopers LLP, which is now a part of Altus Group U.S. Inc., was acquired and integrated into Altus Group. In 2011, Altus Group acquired Realm Solutions Inc. which was the owner of ARGUS Software. ARGUS is a global brand leader in software solutions for analysis and management of commercial real estate investments. More than 4,600 world-class companies depend on ARGUS as the go-to product to support critical business processes, including asset management, asset valuation, portfolio management, budgeting, forecasting, reporting and lease management.

Altus strives to be the leading multi-disciplinary provider of independent value-added real estate consulting, professional advisory, and knowledge management services.

The company performs Research, Valuation and Advisory (RVA) services that provide annual property/portfolio acquisition and disposition strategy; financial due diligence; market information and perspective; economic consulting; and debt and real property valuations. It is also responsible for the development of feasibility studies and cost analysis. Realty Tax Consulting provides assessment appeals (including expert witness) and on-going property tax management and budgeting for commercial and institutional clients. Finally, Altus has the capability to perform Geomatics which is a comprehensive land surveying, mapping, orthophotography, 3D scanning and environmental and forestry services for the oil, gas and forestry industries.



Mayer�BrownMayer Brown is one of the largest law firms in the world, with more than 1,600 lawyers in the Americas, Asia and Europe. We have an extensive global Private Investment Funds practice involving more than 100 lawyers from across the firm’s worldwide practice areas. Our lawyers’ broad market experience enables fund sponsor, adviser and investor clients to structure funds and investments creatively and efficiently to maximize fund-raising flexibility and opportunities.

Mayer Brown provides comprehensive, commercially-focused legal advice to both sponsors and investors on structuring, marketing, formation and operation of real estate funds. Working as international counsel we have helped many of the leading global names in private equity real estate raise funds with institutional, retail and private investors across the Americas, Asia and Europe. Our international network of investment fund lawyers enables us to provide a combination of global market knowledge and local legal, regulatory and tax expertise in key jurisdictions. Our fundraising practice is also supported by a leading real estate transactions group.

Mayer Brown currently represents 11 of the top 20 largest real estate investment managers in the world. We also represent some of the largest fund investors in their review of prospective investments in funds, which gives us a broader insight into emerging trends and developments in the real estate fund environment. Our Global Investment Funds practice is consistently ranked among the top firms in the list of the “most active law firms by number of funds” in the Dow Jones Private Equity Analyst survey.

Taplow�Executive�SearchEstablished in 2002, Taplow Executive Search (formerly trading as The Governance Group) is perhaps the only truly global executive search firm offering single point of contact project management for local, regional and global services. The Taplow team speaks your language. We know real estate and investment management. Taplow’s U.S operations along with partners in Europe, Latin America and Asia offer highly differentiated outcome oriented executive search services. The firm’s approach is based on confidentiality, extensive research, robust assessment and effective due diligence.

As a global firm we haven’t lost our entrepreneurial passion. Taplow’s dedication, methodology and intimate knowledge of local markets makes it a leader in fulfilling the human capital needs of the financial service sector, including real estate, as well as professional services, energy, industrial and technology sectors.

Taplow’s mission is to help successfully grow profitable and sustainable organizations. Executive search is a tool to that end. While past success and accomplishments are a customary indicator of future success, Taplow extends their assessment process to assess the issues and thinking of key executives related to the continuing development of a business. Not just what they have done, but what they think they should be doing to anticipate client needs in the future.

Taplow has exceptional success in completing searches in a timely fashion, a very low level of attrition and a commitment to diversity.



Equity�Servicing�Program�(ESP)The Equity Servicing Program is built around a simple yet powerful concept – if you apply a disciplined process framework that overlays all commercial real estate investment activities from property management oversight through accounting, reporting and data analytics, you will yield greater returns, investment intelligence and risk management for the investors in commercial real estate funds.

The Equity Servicing Program (ESP) was created by 3 premier service providers in the commercial real estate industry working in coordination to deliver a robust suite of process disciplines for the commercial real estate investment manager:

Genpact is a global leader in business process and technology management offering a wide range of accounting and property management administration services. Genpact’s proprietary Smart Enterprise Processes (SEPSM) framework employs the science of process combined with deep domain expertise in multiple industry verticals to deliver superior business outcomes. Genpact, established in 1997, has over 56,000 employees worldwide and serves a diverse client base in Financial Services, Manufacturing, Healthcare, Accounting and Technology.

RR Donnelley Real Estate Services provides on-the-ground field services for the Equity Servicing Program. For more than two decades, RR Donnelley real estate services division continues to deliver a wide variety of solutions for the commercial real estate industry including Asset Management, Due Diligence, Collateral Assessment, Credit Analysis, Servicing support and Document Management.

GEMSA Loan Services is an expert in commercial real estate debt. GEMSA is one of the largest commercial mortgage servicers in the country servicing over $100 billion in assets collateralized by over 18,000 commercial properties. GEMSA’s processes include Cash and Accounting, Loan Compliance, Tax and Insurance tracking and Financial and Physical Analysis of the properties underlying the loans it services. The company is a joint venture between GE Capital Real Estate and CBRE Capital Markets.

The ESP providers are not engaged in traditional property management, leasing, brokerage or investment and thereby provide a neutral suite of processes that do not infringe upon the business of real estate. This approach solves many of the investment managers’ issues in avoiding sole-source real estate providers. The companies have the resources and scale to provide the true heavy-lifting, back-office infrastructure needed to create and maintain process excellence for the real estate investment manager, either on a project basis or as a working partner to provide a robust infrastructure of technology and process discipline.

NAREIMThe National Association of Real Estate Investment Managers (NAREIM) is the leading association for Companies engaged in real estate investment management business. NAREIM members manage investment capital on behalf of third party investors in commercial real estate assets. Investment sectors include office, retail, multi-family, industrial and hotels. NAREIM members serve the investment goals of public and corporate pension funds, foundations, endowments, insurance companies and individuals-domestic and foreign. Collectively, they manage more than $1 trillion of real estate investment assets around the world. For more information on NAREIM, and to read research and points of view on the industry, go to www.nareim.org.

EquityServicingProgram

ESP

GEMSA • GENPACT • RR Donnelley



Peter Aitelli represents domestic and foreign clients in a wide range of commercial real estate equity and debt transactions, including acquisitions and sales; financing (including permanent, construction and participating mortgage loans and other forms of “hybrid” debt); leasing; and the structuring and formation of joint ventures and other investment vehicles for the development, ownership, and operation of all major property types, such as office buildings, shopping centers, multifamily projects and hotels. Mr. Aitelli represents institutional lenders and CMBS special servicers in loan workouts, judicial and nonjudicial foreclosures, receiverships and REO dispositions.

Mr. Aitelli is the Chair of the California State Bar Real Property Law Section, a member of the American College of Real Estate Lawyers (ACREL) and the Chair of the Leasing Committee of ACREL, and a member of the Pension Real Estate Association (PREA). He served as the Chair of the 2011 annual Real Property Law Retreat for the California State Bar.

Christopher AcevedoGenpact Vice President

Attendee�Profiles�Genpact Role: VP, Vertical Leader for Commercial Lending, Banking and Real Estate in N. America. Chris is leading the market and business development agenda for Genpact advisory, processing and technology solutions focused on the commercial lending, real estate and finance market segments.

With 20+ years in global banking, BPO, consulting and technology services in the financial services industry, Chris has held executive roles with Bank of America, Citibank, ABN AMRO and RBS in which he has managed a diverse set of businesses and product and sales organizations. Prior to joining Genpact, Chris led ABN AMRO’s Financial Institutions Outsourcing Sales and Customer Consulting activities.

Peter AitelliMorrison & Foerster Partner

Jeffrey Barclay Goldman Sachs Asset Management’s Real Estate Investment Group Managing Director and CIO

Jeffrey is responsible for a new business unit within the Investment Management Division that invests in core and core plus real estate assets in the United States on behalf of Goldman Sachs Asset Management and Private Wealth Management clients. He has over 25 years of real estate investing experience. Jeffrey joined Goldman Sachs as a managing director in November 2010.

Prior to joining the firm, Jeffrey was responsible for leading real estate investment activity, including both direct investments and joint ventures, throughout the United States for ING Clarion Partners a wholly owned subsidiary of the ING Group. He served on the firm’s Executive Board, Operating Committee and led its Investment Committee.

Jeffrey is vice chairman of the Board of Directors of the National Association of Real Estate Investment Managers (NAREIM), chairman of the IOPC Gold Council of the Urban Land Institute (ULI), and member of the board of the Pension Real Estate Association (PREA). He has also served as an adjunct professor in the MBA program at Columbia Business School since 2004.



Joseph Beggins GEMSA Loan ServicesChief Executive Officer

Paul BernardWalker & Dunlop Vice President

Joseph Beggins has been active in the commercial mortgage and commercial real estate business since 1992. He is responsible for the operation of GEMSA Loan Services, L.P. servicing over $110 billion in commercial mortgage loans. GEMSA is one of the country’s largest and most diverse commercial mortgage servicing companies. GEMSA Loan Services provides servicing for commercial mortgage backed securities (CMBS), interim servicing for loan originators, outsourcing services for Life Insurance companies, multifamily agency servicing (Fannie Mae and Freddie Mac) and servicing for institutional clients internationally. Mr. Beggins’ background includes commercial real estate brokerage and management with national real estate management firms. GEMSA Loan Services, L.P. is headquartered in Houston, Texas and is a limited partnership between GE Real Estate and CBRE Capital Markets, a CB Richard Ellis company.

Paul Bernard is a qualified investment representative with over twenty years of commercial real estate development and project finance experience. He joined Walker & Dunlop in 2008 as a Senior Vice President and heads the Principal Investment and Investment Advisory practice. Prior to joining W&D, Mr. Bernard was a principal at MMA Realty Capital responsible for capital formation and fund management, managing the growth and operations for approximately $1.0 billion in institutional capital resources, including three commingled funds and four separate accounts. In past years, Mr. Bernard held senior positions at City of Detroit, where he was appointed by Mayor Dennis Archer as a Member of the Economic Development Cabinet, and at Public Financial Management, where he was financial advisor for federal, state and local municipalities and public authorities on traditional and alternative financing initiatives.

Jonas Bordo is Senior Vice President, Corporate Resources at Bentall Kennedy. He leads the Human Resources, Corporate Communication and Marketing teams. Prior to joining the company in March 2012, Jonas was a Senior Director with FPL Associates, where he led the Management Consulting practice, serving companies across the commercial real estate industry. On behalf of his clients, Jonas led a broad range of management consulting projects on topics that included strategic planning, enterprise transactions, organizational design and succession planning. Previously, Jonas was with the Boston Consulting Group in New York and Chicago, where he served a wide variety of clients on projects pertaining to business expansion, organizational redesign, strategic repositioning and mergers and acquisitions.

Jonas Bordo Bentall KennedySenior Vice President, Corporate Resources

Peter BorzakPine Tree Institutional Realty, LLC Principal

Peter began his career at The Balcor Company in 1984 after graduating from George Washington University. Peter also spent time at First Dearborn Properties, a Chicago-based real estate investment company, as Vice President of Acquisitions, and Plymouth Court Properties as co-founder.

In 1995, Peter and Barry Herring co-founded Pine Tree Commercial Realty, LLC to develop and provide services to retail properties primarily in the Midwestern United States. In 2006 Pine Tree Institutional Realty, LLC was formed to invest in retail assets across the risk spectrum on behalf of institutional joint venture partners throughout the United States. Peter has also been active with George Washington University Alumni Association, Big Brothers/Big Sisters of Chicago (as a 25 year mentor), YPO (Real Estate Network Chair 2012-2014), and has served as a member of the board of directors for the Deerfield Park Foundation, Harold Eisenberg Foundation, Big Brothers Big Sisters of Chicago, and the Standard Club of Chicago. Peter also serves on the Illinois State Committee for the International Council of Shopping Centers.



Mr. Branson is the President & CEO of the National Association of Real Estate Investment Managers (NAREIM), an association of companies engaged in the real estate investment management business in the United States. Before joining NAREIM in 2011, Mr. Branson worked for over 25 years in commercial real estate, professional services sales, product innovation and marketing. He has transformed businesses and accelerated growth as a leader, strategist, business developer and innovator. In addition to holding leadership roles at companies such as GE Capital Real Estate and Heller Financial, as a consultant he worked with companies such as Jones Lang LaSalle, Wells Fargo and Fidelity to develop new markets and new products. His consulting practice centered on change acceleration and practical innovation. Some of his writings on innovation, finance and commercial real estate can be found at www.bransonpowers.com.

Douglas Callantine has over 35 years of experience in the real estate investment industry. He retired from Grosvenor Fund Management in 2011 as its President and CEO of the United States operations after 29 years with Grosvenor and its predecessor companies. In that role, Mr. Callantine was responsible for strategic direction, new business development, client relations, investment activity and overall business management. He served on the Board of Grosvenor Fund Management, chaired its US Executive Management Committee and its US Investment Committee. He has served on several Corporate or Advisory Boards for both public and private companies or organizations including a current term on the Board of the National Association of Real Estate Investment Managers (NAREIM).

Gunnar BransonNAREIM President & CEO

Jerry is the Non-Executive Chairman of Heitman and an equity owner of the firm. He started his career at White, Weld & Company as a member of the corporate finance department, concentrating in real estate finance and raising capital for developers, operating companies and the early REITs. In 1978, he became co-head of acquisitions for JMB Realty. Jerry was named Chairman of JMB Institutional in 1990. In 1994, JMB Institutional Realty merged with Heitman and Jerry became head of the advisory business of the newly formed investment advisory entity. In 1999, he was named Chairman and CEO of Heitman. Jerry is a member of the firm’s Investment Committee. He is a member of Pension Real Estate Association (PREA) and served a six-year term as a member of the Board.

Douglas S. Callantine President & CEO

Jerry Claeys III Heitman Non-Executive Chairman

David J. Congdon Hines Senior Vice President

David Congdon is the Fund Manager of the Hines U. S. Office Value Added Funds I and II, discretionary investment vehicles with over $1 billion of equity capital to acquire office buildings with opportunities to renovate, improve occupancy and management. Mr. Congdon joined Hines in 1998. Prior to the formation of HUSVAF I and II, Mr. Congdon was instrumental in executing the investment strategy of National Office Partners Limited Partnership (“NOP”), a venture Hines formed in 1998 with an institutional investor. He helped develop and implement NOP’s investment strategy, which led to the commitment of over $2 billion of equity in both acquisitions and developments between 1998 and 2001. Prior to joining Hines, he was an Executive Vice President with Lend Lease Real Estate Investments and worked in the real estate investment banking group of Credit Suisse First Boston and the real estate lending group of JP Morgan Chase.



James Costello joined CBRE in 1995 with economic and real estate research experience developed through work with government agencies in the Chicago area. In his 17 years of experience at CBRE, Jim has worked with the Global Corporate Services team in Chicago, the Econometric Advisors (EA) team in Boston and now the America’s Research team. In his time with EA, Jim managed the office and industrial models and broadened EA’s analytical capability by integrating the forecast results into more direct applications related to investor questions on asset values.

Mr. Costello currently manages the Investment Consulting and Strategy team within America’s Research. This group delivers investment opinions and insights to institutional investors with the aim of helping them develop a “house view” on the investment opportunities presented by commercial real estate. Mr. Costello has authored many opinion and technical articles for EA, as well as articles for academic journals and publications in the business press.

Michael J. Curran is a Senior Managing Director of Centerline Capital Group (Centerline), a subsidiary of Centerline Holding Company. He leads the Asset Management Group,which comprises the Portfolio Management, Performing Assets, Special Asset Management, and Construction Risk Management divisions. Mr. Curran is also a member of the Centerline Executive Committee responsible for strategic planning and growth initiatives. He joined Centerline in 2010 after many years in real estate advisory positions, most recently at Kalorama Realty Capital. He was principal and chief operating officer at Crossbeam Capital, and helped that firm raise capital for the development and acquisition of multifamily housing properties. Prior to Crossbeam Capital, he was president and chief executive officer of The Enterprise Social Investment Corporation (ESIC), a national for-profit subsidiary of the Enterprise Foundation, where he specialized in the financing and development of market-rate and affordable housing, and managed a housing portfolio of 900 properties valued at more than $4 billion.

As President of Hunt Realty Investments, Inc., Patricia Gibson, CFA is responsible for the overall operations and strategic direction of the company, as well as its interaction and investment relationships with other Hunt entities. Patricia joined Hunt Realty Investments, Inc. in April 1997 as Senior Vice President with responsibility for the firm’s acquisition, investment management and capital markets activities.

Prior to joining Hunt Realty Investments, Patricia served for three years as Senior Vice President and Director of Structured Finance at Archon Group, a subsidiary of Goldman, Sachs and Company. At Archon, she oversaw the institutional and capital market efforts for over $1 billion in commercial mortgage backed securitizations and portfolio financings. Before joining Archon, Patricia spent nine years at The Travelers Realty Investment Company where her responsibilities included loan origination, new business development, and the management and restructuring of debt and equity portfolios in excess of $500 million.

James M. Costello CBRE, Inc. Managing Director and Head of Investment Consulting and Strategy

Michael Curran Centerline Capital Group Senior Managing Director

Patricia L. Gibson Hunt Realty Investments, Inc President



As Executive Vice President and Chief Financial Officer, Wm. Roger Gregory, is primarily responsible for capital markets and originating and structuring real estate investments. He is a member of PMRG’s Investment Committee and he leads all financial, accounting and information technology activities. Mr. Gregory came to PMRG after an eight year career with Arthur Andersen LLP. At Andersen, Mr. Gregory was a Senior Manager in their Commercial Services Group. He managed a portfolio of clients, primarily focusing on the real estate and services sectors. He spent the majority of his career at Andersen on the Hines engagement, a Houston based real estate company.

J. Matthew Haley is a Managing Director of Pearlmark Real Estate Partners. Mr. Haley is responsible for portfolio management activities, dispositions, and office and industrial acquisitions throughout the Midwest and Southwest regions. He also serves on the firm’s management committee and the Aslan IV investment committee. Mr. Haley has been involved in over $4 billion in transactions during his tenure with Pearlmark. Prior to joining the firm in 1996, Mr. Haley developed his wide range of industry experience with LaSalle Partners, JMB Realty Corporation and KPMG Peat Marwick. He was involved in a variety of portfolio, asset management, and transaction roles and has more than 20 years of experience in the real estate industry.

Pat Halter is the Chief Executive Officer of Principal Real Estate Investors, the dedicated real estate unit of Principal Global Investors. As head of real estate, he is responsible for overall global real estate strategy, new business development, and business management, including oversight of staff professionals located in the United States, Europe, Asia and Australia.

As a twenty-seven year veteran in commercial real estate, Pat’s expertise includes product and fund design, new business development, portfolio strategy and investment management. He also has substantial transaction experience originating and approving over $25 billion in investments for Principal and its clients. Pat chairs the board of Principal Real Estate Investors. He is also an Executive Director of Principal Global Investors. Pat joined the firm in 1984. He has held various positions within the real estate group.

Pat is Chairman of the Board of the National Association of Real Estate Investment Managers (NAREIM). He is a member of the Real Estate Roundtable and serves on the REPAC Steering Committee. Pat is also a member of the Pension and Real Estate Association (PREA), the Association of Foreign Investors in Real Estate (AFIRE) and serves on the Board of the Graaskamp Center for Real Estate at the University of Wisconsin.

Wm. Roger Gregory PMRG Executive Vice President and Chief Financial Officer

J. Matthew Haley Pearlmark Real Estate Partners Managing Director

Patrick Halter Principal Real Estate Investors Chief Executive Officer

Jeffrey Havsy, is the Director of Research at National Council of Real Estate Investment Fiduciaries (NCREIF). At NCREIF he oversees the creation of new data products and indi-ces, helps produce and promote the existing data products and information and works to educate the membership and the broader industry on real estate related topics.

He was formerly the Global Strategist at PPR, responsible for U.S. office market coverage and helping design real estate derivatives and build PPR’s research capabilities in Europe and Asia. Before that he was Vice President-Strategic Research at Equity Office Properties, where he spearheaded long-term research projects for the company’s holdings. This included market and submarket analysis of EOP’s Strategic Markets, special studies, coverage of international real estate markets, and potential expansion markets.

He has done work and written on real estate and futures markets and real estate’s role in a multi-asset portfolio. Research papers he co-authored include “The Case for Real Estate”; “Derivatives Markets: How far does real estate have to go?” and “The Use of Leverage by Institutional Investors: Pros, Cons and Implementation Considerations.”

Jeffrey Havsy NCREIF Director of Research



Don Henry is the Chief Real Estate Officer for Wells Real Estate. Mr. Henry oversees the acquisitions, finance, dispositions, asset management, leasing, and property management functions for Wells’ real estate group. Wells currently manages over $6 billion in real estate on behalf of over 140,000 investors.

Prior to being named to his current post as Chief Real Estate Officer, Mr. Henry was managing director of the asset management department. In this capacity, Mr. Henry supervised a group whose responsibilities included performing due diligence on acquisition targets, developing and implementing long-term investment strategies for each property, executing value-added strategies, and positioning properties for sale. Prior to joining Wells in 2002, Mr. Henry was a Principal, Portfolio Management, with Lend Lease Real Estate Investments Inc., where he was responsible for public and corporate pension funds with $800 million in managed assets. In this capacity, he designed and implemented investment and leverage strategies based on client investment objectives and capital/real estate market fundamentals.

Mr. Kanne leads National and serves as the Chairman of National’s Real Estate Investment Committee. National, with over $1.5 billion under management focuses on development stage investing through its Build-to-Core investment strategy. With investments in such developments as New York by Gehry, the tallest residential tower in the Western Hemi-sphere.

Mr. Kanne has broad and diverse experience in the real estate investment and development process, with particular insight into legal, finance and construction aspects. Mr. Kanne spent several years at the Washington, D.C. law firm of Arnold & Porter. While there, he was involved in multi-billion dollar international debt restructurings, as well as complex real estate transactions, with a focus on the development projects of non-profit groups and universities. After forming the law firm of Counts & Kanne Chartered in the late ‘70’s, Mr. Kanne was intimately involved in structuring numerous complex investments in real estate development projects nationwide for institutional clients.

Mr. Kanne serves on several Boards of Directors. He is licensed to practice law in the District of Columbia and Maryland and is a member of the Order of Coif, a legal academic honor society.

As the President of ARGUS Software and Chief Knowledge Officer of Altus Group, Mark is responsible for growing revenues, identifying market opportunities, and strengthening the company’s brand and customer relationships. Mark joined ARGUS Software in 2003 as Vice President and General Manager of ARGUS Software. In 2004, he assumed additional responsibilities including the management of strategy and operations for ARGUS Software’s industry-leading financial analysis products, including ARGUS Valuation – DCF, ARGUS Asset Management and ARGUS Property Budget.

Prior to ARGUS Software, Mark served in sales, marketing, operations and executive management positions for Johnson & Johnson, Procter & Gamble, Physicians Resource Group, Izoic, EC Outlook.

Don Henry, CFA Wells Real Estate Chief Real Estate Officer

Jeffrey J. Kanne National Real Estate Advisors President and Chief Executive Officer

Mark Kingston ARGUS Software and Altus Group President and Chief Knowledge Officer



Mr. Klugherz most recently served as principal and chief operating officer of MacFarlane Partners, a real estate investment management firm based in San Francisco that focuses on investments in major national markets. Responsible for the day-to-day operations of the firm’s real estate investment management programs for urban properties, he directly oversaw its portfolio management, asset management and construction services functions. Prior to joining MacFarlane Partners, Mr. Klugherz was managing director of BlackRock Realty, an institutional real estate management firm, where he led corporate strategic initiatives and served on both the management and investment committees.

He is a member of the Urban Land Institute and has been active in the National Association of Real Estate Investment Managers and the Pension Real Estate Association during his career. In 2011, Mr. Klugherz served as the Interim President of the National Association of Real Estate Investment Managers during their search for their next President.

In his role as the Executive Vice President at Altus Group, Sung Lee brings over 13 years of real estate and finance experience, working for some of the largest institutional real estate investors in the world. Sung joined PricewaterhouseCoopers in April 1999, with a prior stint as an analyst within a multi-national import and export company. Sung is actively involved in the oversight of the valuation management process for multiple real estate funds in the United States and Mexico. Mr. Lee was part of the group that oversaw the creating and testing of Altus’ proprietary web-based database management system for commercial real estate assets. His experience also includes acquisition due diligence, market analysis, credit analysis, legal document review, third party report review, and presentation of credit/loan review to loan officer and credit committees.

Sung holds the CRE, FRICS and MAI designation, and has been actively involved in the Metro New Jersey Appraisal Institute chapter, acting as the keynote speaker for the 76th Annual Princeton Conference.

Thomas C. Klugherz MacFarlane Partners Principal and Chief Operating Officer

Sung Lee Altus Group Executive Vice President, Research, Valuation & Advisory

Demetrios Louziotis ARGUS Global Real Estate Solutions Group Managing Director, Global Solutions & Strategy

In his role as the Managing Director of the ARGUS Global Real Estate Solutions Group, Demetrios brings over 25 years of real estate and finance experience, nearly half of which is in global markets. Prior to joining ARGUS, he was a director with Credit Suisse in New York and Tokyo. During his tenure with Credit Suisse, Demetrios founded the firm’s International Real Estate Pricing Group, and went on to manage the Domestic Real Estate Pricing Group as well. The groups were responsible for analyzing the bank’s existing debt and equity real estate investments. He was also a global member of Credit Suisse’s real estate investment and new business committees, and founded the Global Private Equity Pricing Group. Demetrios joined Credit Suisse from Price Waterhouse’s Valuation and Advisory Services Group where he was a manager and involved in a wide range of consulting, transaction support and corporate real estate engagements. Demetrios holds the CRE, FRICS and MAI designation and was an adjunct faculty member in New York University’s real estate masters program for ten years.



As Heitman’s Internal Human Resources Consultant, Mariann’s focus is on employee program and policy evaluation, design, implementation, and administration for key HR initiatives. She has an extensive background as an advisor on global HR matters including compensation, performance management, on-boarding, learning, employee relations, immigration, and organizational initiatives. Prior to joining Heitman in 2007, Mariann has served in human resources manager and compensation consulting roles at Deloitte Consulting and Arthur Andersen. In those roles, she gained expertise in compensation program design, implementation, and administration, including employee and executive pay, total rewards, attraction/retention, job evaluation, and incentive plan design. She is an active member of the NAREIM HR Council, World@Work Association, Society for Human Resources Management and the Human Resources Management Association of Chicago.

Mary K. Ludgin Heitman Managing Director

Mary Ludgin is Director of Global Investment Research for Heitman. She joined the firm in 1990. Since then, her responsibilities have included serving as Chief Operating Officer for Heitman’s U.S. Private Equity division. She was that group’s CEO for eight years. She is now in charge of global strategy for Heitman. Mary is the author of numerous articles and research studies related to real estate market conditions, portfolio diversification, and investment strategy. She is the editor and a principal author of articles in Heitman’s Perspectives series. Mary is a member of Heitman’s Board of Managers and she has a seat on the firm’s Investment Committee. Prior to joining Heitman, Mary was an urban planner and worked in retail site location.

Mary is a trustee of the Urban Land Institute. She serves as both Chairman of the Board of the Pension Real Estate Association and as President of the National Council of Real Estate Investment Fiduciaries. She was made a fellow of the Homer Hoyt Institute for Real Estate Research in 2000 and has been a member of Lambda Alpha since 1988. Mary is a docent for the Chicago Architecture Foundation and she served two terms on its board. She is also a member of the board of the Metropolitan Planning Council of Chicago. She chaired the Land Use and Economic Development Task Force for the City of Chicago Central Area Action Plan and she is member of the boards of the Downtown Oak Park Association and the Oak Park Development Corporation.

Mr. McAndrews is currently the Head of Global Real Estate Transactions and Joint Venture team where he supervises teams responsible for mortgage origination, acquisitions, sales, and separate account joint venture relationships. During Mr. McAndrews’ twenty year career at TIAA-CREF he has served in several other senior real estate investment positions including the Head of Global Real Estate Portfolio Management, managing a staff responsible for $25 Billion in proprietary and third party funds, and as the Portfolio Manager of the TIAA Real Estate Account, a $12 Billion publicly registered, non-traded real estate fund. He is currently a member of PREA, NCREIF and NAIOP and has served on the Board of Directors of the National Multi Housing Counsel.

Mariann Madden Heitman Human Resources Consultant

Philip J. McAndrews TIAA-CREF Managing Director Head of Global Real Estate Transactions and Joint Ventures



Suzanne Mulvee Property and Portfolio Research Senior Real Estate Strategist

Suzanne Mulvee, CFA, Senior Real Estate Strategist, designs strategies for investing across the U.S. apartment, office, retail, and warehouse property markets. She works to customize PPR’s core research to suit specific investment criteria and helps clients to communicate portfolio performance and forward-looking strategies to stakeholders. Mulvee specializes in research and forecasting of the performance of retail assets across the United States.

Since joining PPR, she has written a handful of white papers and numerous articles for publications, including Commercial Investment Real Estate, MBA Newslink, CMBS World, CREFC, and NCREIF’s Real Estate Performance Report. She is often cited by the national media as well as industry news journals for opinions on real estate investment performance. She holds the CFA designation and is a member of Urban Land Institute, Boston Security Analysts Society, and ICSC.

John Noell is a corporate and transactional attorney. In the course of his practice, John represents issuers in private placements of partnership interests, debt and common stock and sponsors of real estate investment funds for investment by institutional and other investors. In addition, he negotiates and structures joint-venture arrangements, and he represents buyers and sellers in stock and asset acquisitions and mergers. He joined Mayer Brown in 1985, later leaving the firm to accept positions as General Counsel with JMB Institutional Realty Corporation (1990–1994) and, subsequently, with the Heitman Capital Management Corporation (1994–1997). John returned to Mayer Brown as a partner of the firm in 1997.

Lennine Occhino is the Global Coordinating Leader of Mayer Brown’s Private Investment Fund Industry Group and a member of the ERISA practice. Since joining the firm in 1988, Lennine has concentrated exclusively in the pension investment area, advising on the structuring and offering of alternative investment vehicles of all types to ERISA and government plans and other institutional investors, including onshore and offshore hedge funds, private equity funds, real estate funds, infrastructure funds, group trusts, bank collective trusts, insurance company separate accounts, REMICs and REITs. Lennine also advises plan sponsors, trustees, investment managers, and other fiduciaries with respect to their fiduciary obligations and compliance procedures. She has extensive experience representing clients in connection with Department of Labor prohibited transaction exemption and advisory opinion requests, as well as audits and enforcement actions brought by the Department of Labor.

Lennine Occhino Mayer Brown Partner

John W. Noell Mayer Brown Partner

Scott G. Onufrey Kimco Realty Senior Vice President

Kimco Realty is a publicly traded Real Estate Investment Trust (REIT) with an equity market capitalization of approximately $8.0 billion that specializes in the ownership of neighborhood & community shopping centers. Mr. Onufrey’s responsibilities include managing Kimco’s acquisitions group and investment management business. The Company has approximately $10 billion of assets under management and acquired shopping center assets totaling $500 million in 2011. Prior to his current role with Kimco, Mr. Onufrey served as the investor relations officer for Kimco since 1999. From 1995 through 1999, Mr. Onufrey was a Vice President responsible for client portfolio management and portfolio controller in JP Morgan Investment Management’s real estate advisory business. Mr. Onufrey began his career with Price Waterhouse in 1992. He is a Certified Public Accountant and is a member of the International Council of Shopping Centers.



As President, Mr. Pandaleon is responsible for the growth and performance of Inland Institutional Capital Partners whch specializes in raising private equity and identifying large scale investment opportunities for the real estate companies and REITs that are part of The Inland Real Estate Group of Companies, Inc. Prior to joining Inland, Mr. Pandaleon was Executive Managing Director of the Institutional Investment Group at Grubb & Ellis, where he led a team of real estate investment professionals focused on serving large institutional clients. Mr. Pandaleon’s 25 years of broad-based real estate investment experience includes portfolio and asset management, leasing, acquisitions, dispositions, public and private real estate equities, and capital markets.

He currently serves on the Board of the National Association of Real Estate Investment Managers, and is an active member of the Pension Real Estate Association, the International Council of Shopping Centers, and the Urban Land Institute. He has also served the City of Lake Forest, Illinois for more than 17 years as past Chairman of the city’s Plan Commission, Zoning Board of Appeals. He is currently an Alderman on Lake Forest’s City Council and is Chairman of its Finance Committee.

Soh Har Pang is tasked with the growth, operations and development of the Asia-Pacific region. She manages the activities in this region from ARGUS Software’s offices in Singapore. During her tenure with the company, Soh Har has served in product and project management, operations and sales, and project engineering positions for the Asia region. She has led the charge to develop a significant foothold in the local commercial real estate industry.

Bob is currently President of the Altus Group U.S., Inc. He has been actively engaged in all phases of real estate analysis for the past thirty years. Responsible for the origination and implementation of counseling and consulting assignments, development of Altus Group U.S., Inc.’s Valuation Advisory Business and oversight of narrative type appraisals for portfolio accounting/strategic analysis, equity purchases, mortgage financing, litigation, and other purposes, highest and best use, feasibility, and land use studies. Analyses performed have encompassed projects across the globe ranging from major institutional portfolios, involving complex multi-use properties, to single commercial and industrial buildings. Specialized areas of expertise include property valuations, transactions, litigation and management and strategic use of the valuation process. Bob began his career at L.W. Ellwood & Company rising to Principal and ultimately selling the Firm to Price Waterhouse Coopers. At Price Waterhouse Coopers, Bob was the Partner responsible for the Real Estate Valuation Practice through July 2010.

George Pandaleon Inland Institutional Capital Partners President

Soh Har Pang ARGUS Managing Director, Asia Pacific

Robert K. Ruggles, III, CRE, MAI, FRICS Altus Group U.S., Inc. President

Preston Sargent has been in the real estate investment advisory business for 29 years. From September 2000 through March 2011 he was a Principal at Kennedy Associates in Seattle. He left Kennedy prior to its June 2011 merger with Bentall Capital. At that time, Preston was an Executive Vice President of Portfolio Management, and a member of Kennedy’s Executive and Investment Committees. Preston started at Kennedy as Director of Asset Management. Prior to Kennedy, from 1991 until 2000, Preston was a Vice President at GE Asset Management (GEAM) in Stamford, Connecticut responsible for all investment activity (equity acquisitions and joint ventures) and portfolio/asset management of GEAM’s real estate in the central third of the US. At GEAM, Preston completed acquisitions, financings, re-capitalizations, and/or dispositions of over $2.5 BN of real estate (all asset types) in 20 different markets.

Preston is active in the Urban Land Institute and the National Association of Real Estate Investment Managers. He has been a frequent speaker, moderator, and panelist at industry conferences, and an instructor at the graduate programs of University of Washington and Columbia University.

Preston Sargent Trail Creek Capital Founding Principal



Steve is a career professional in the financial services, real estate and investment management business. His early career was product focused including institutional and HNW distribution and client servicing roles. Moving from the product side to the plan sponsor side he was involved in structuring investment decision making for several large corporate plans including adding the first real asset allocations to major defined benefit plans. During his corporate tenure, Steve was heavily involved in various efforts to reform and clarify US pension and benefits laws.

He is a co-founder of The Governance Group, a human resources consultancy providing organizational enhancement services to domestic and global corporations. Practice areas include performance and rewards, organizational effectiveness and assistance in complex acquisitions and other corporate transactions.

Steve helped create Taplow Group in 2002 and ultimately Taplow Executive Search, perhaps the only truly global executive search firm offering single point of contact local, regional and global services. Currently co-heading the Financial Services and Real Estate Practice for Taplow along with partners in Europe and Asia,

Bleecker P. Seaman, CEO of Lowe Enterprises Investors (LEI) with shared responsibility for oversight and management of the firm’s investment management business. He is chairman of LEI’s Investment Committee and is actively involved in investment strategy, portfolio management and client servicing on behalf of the firm’s clients. Mr. Seaman previously served as COO for LEI and has held positions as CFO and as an Acquisition Officer in Lowe’s hospitality subsidiary. Previously, Mr. Seaman served as Assistant Director of Real Estate Investments for the Pennsylvania State Employees’ Retirement System, and was a real estate Loan Officer for First Union National Bank. He is a member of the Pension Real Estate Association, Urban Land Institute and the National Association of Real Estate Investment Managers, for which he is a Board Member.

Steve N. Schrenzel The Governance Group, Inc. and Taplow Executive Search CEO, North America

Bleecker P. Seaman Lowe Enterprises Investors Chief Executive Officer

Alvin Wade is a partner in Grant Thornton’s Dallas office and has more than 34 years of experience working with construction, real estate and hospitality companies. Alvin leads one of Grant Thornton’s oldest industry practices, which serves home builders, contractors, architectural firms, engineering, real estate, REITs, restaurants, lodging, entertainment and gaming entities. In addition, he has significant experience in advising an array of public and private companies.

Prior to joining Grant Thornton, he was an audit partner at KPMG and Arthur Andersen. His clients have included Centex Corp., Thousand Trails, Inc., ClubCorp, Inc., Amreit, Omni Hotels, Trammell Crow Holdings, Hall Financial Group, Olympus Real Estate, Lincoln Property Company, Invesco, and Hillwood Development. Alvin often serves as a guest speaker at industry and university seminars. Alvin is also the Audit Practice Leader for the Central Region.

Alvin Wade Grant ThorntonNational Managing Partner Construction, Real Estate, and Hospitality Practice



After eight years as a senior member of Jones Lang LaSalle’s Property Management and Leasing company, Mr. Woodrow was appointed as Director of Portfolio Management for the firm’s Investment Management business, where he remained for 6 years. Subsequently, he became Global Chief Operating officer in 1998. During his tenure in this role, Mr. Woodrow oversaw the expansion of the company from being just U.S. based to being a global enterprise, with major offices established in 20 cities spread across 16 countries in North America, Asia and Europe. During this expansion phase between 1998 until today, Mr. Woodrow has had global responsibility for finance, human resources, organizational strategy, IT, legal and compliance, tax, facilities management, and client accounting and reporting.

Kimball C. WoodrowLaSalle Investment Management, Inc Global Chief Operating Officer

Kurt WassenarING Investment ManagementVice President

Kurt is Vice President of ING Investment Management, Americas Region in Atlanta, Georgia. Kurt is head of the Portfolio Management and Analytics function for the Real Estate Finance Group with responsibility for portfolio re-underwriting, the mortgage loan Quality Rating System, workouts and investor reporting. Current priorities also include maximization of risk based capital efficiency, commercial mortgage systems and technology, regulatory compliance and development of IIM’s third party separate account platform. Kurt also manages the Borrower Request team that analyzes and approves issues related to ongoing borrower needs. Previously, he was functional Head of Real Estate Investments for IIM’s Latin American operations. Kurt has been working with ING and its predecessor companies for over 20 years, including 11 years in New York with ING Capital and related affiliates before relocating to Atlanta in 1998.

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