COPING WITH CHOICE

How many choices do you think you make every day? 25, 50, 100, 200, 500, 1,000, 2000?. If you are reading this and did not hit "delete", your answer is probably closer to 2,000 and maybe more. Just managing emails - say 300 incoming a day and maybe 150 outgoing - adds up very quickly. So how do you cope with choice and manage the burden of determining what to delete, read, write, say and do?

How do you leverage your time to be better and more efficient at what you do personally and professionally?

Coming off a few weeks of extensive traveling, meeting with CRE investors and managers across all capital segments, including Colliers Skiminar in Vail this past weekend where we hosted over 250 clients for a few great days of fantastic skiing, great food and way too much drink, I asked several clients and friends about how they cope with choice and carve through the clutter amidst sensory saturation.

Does all of this information make us any smarter or better at what we do?

Universally everyone - from CEOs to senior executives, from middle managers and salespersons to all levels and staff - all confessed to often being exasperated by the volume of decisions that had to be made and the contagion of fear that comes not so much from failing to make a good decision, but from worrying about making a bad decision. One natural defense mechanism is to copy everyone so there are multiple sets of eyes, and accordingly, multiple accountability, for many choices. While this makes a lot of sense for important decisions, it exponentially increases email traffic, and with it the number of decisions associated with a particular matter.

Based on this limited and admittedly narrow focus group, we have come up with a few tips that we hope will help and can be shared to help you and your teams accelerate your success in 2012. We welcome your input and thoughts and will continue to share them in our quarterly feature "CRE Hive", which will be all about sharing thoughts and technology ideas and of course the latest great apps (and some tricks in how to use them) to help you learn more ways to make your life a bit easier.

The top 10 ideas for coping with choice:

1. Wait before responding. Many emails and issues take care of themselves.
2. Let go! Delegate viciously below your pay grade.
3. Pick up the phone. Three minutes on the phone can avoid 15 emails.
4. Get proficient. Learn how to search, group and file emails.
5. Clean out the mailbox. If it's two weeks old, it's probably old news.
6. Box your junk. Rather than delete, file junk and have an assistant go through it once a week and unsubscribe to the junk.
7. Make it personal and friendly. It's a relationship business.
8. Play to your strengths with thoughtfulness and focus.
9. Be a giver. "Love is the killer app." In giving, you build loyalty and win support.
10. Read, learn, try, execute, adjust. The world of communication is changing at an accelerated pace. You have to keep up or be road kill.

We are off to an incredible start to 2012 with over 25 new assignments so far in January alone for CISG Southern California. We see this shaping up to be a banner year for Colliers and wish you the best in your 2012 endeavors as you manage choices, challenges, and opportunities.

CHECKMATE!

The game of chess is centuries old. In this day of technology and nanosecond gratification provided by game companies like Electronic Arts and Zynga, it is hardly a favorite among the techno savvy and relationship starved who spend real money on fictional tractors. But the word "checkmate" resounds with everyone nonetheless for its certainty of resolution and impending doom.

The appointment of Tom Hoenig as vice chairman of the FDIC could be putting the banks and all the systematically important financial institutions ("SIFI's") clearly in "check". While not exactly checkmate, it's definitely game on and the Obama administration is making a an aggressive move to send a clear message that they intend to turn back the clock on the top 20% financial services enterprises which have grown from 14% of GDP in 30 years to over 80% today.

While many people, which probably includes the "Occupy Whatever/Wherever" gang, advocate breaking them up like Standard Oil (1911) and AT&T (1982) just because they believe that big/concentration is bad, Mr. Hoenig, seems to want to take a different, perhaps more thoughtful and rational approach, which is also more consistent with legal history, and simply make them accountable for the real risks they take. 

Welcome back, Glass-Steagall -- Check.

Good-bye government support for money market accounts -- Check. 

Good-bye public bailouts for derivative investing -- Check. 

And say hello to Dodd-Frank -- Checkmate!

Why is this important to investors and service providers in the commercial real estate industry? The possible implication is that interest rates may finally rise as the pricing of risk is recalibrated across all classes of investment grade assets, from AAA to Junk. It might begin with bonds, swaps, derivatives and commercial paper, then work it's way into lending terms, spreads and ultimately rates. The result would seem to be that the era of cheap debt is about to end.Coupled with what can be at best described as a moribund recovery and you have the making of a price adjustment that is only just getting started.

Already core pricing has pulled back at least 10% across all product types in all but the very strongest markets (Seattle, San Francisco, Silicon Valley and Silicon Beach) and up to 20% or more in Secondary and Tertiary markets. San Diego is about to see an office tower trade at a 9.25% cap rate that would have traded at a 7.5% cap in a more "normal" market. No place is really immune. Even the Big Apple, New York City, is impacted. Transactions are being pulled due to a lack of price alignment between buyers and sellers as underwriting by buyers becomes more conservative in the wake of growing weakness in the financial services industry which is quickly reducing its massive excess capacity in anticipation of the new/old world order described above where profits, and now also losses, are shared equally by private enterprise instead of the taxpayer. There was never a QE III, Ocean Liner, and there is likely insufficient support to allow the FED to bring along QE III to juice the economy again. Nor is it really necessary or would it be effective. That card has been played. Like a narcotic, it might make some feel good for a short while, but the withdrawals will be painful. So, why not just get it over with and hit the reset button so we can clear the bad debt and recapitalize assets?

Economic Armageddon was averted with QE I and QE II. Greece and Italy notwithstanding, it is unlikely that their imminent defaults will result in contagion that will necessitate the launching of QE III in America. American Banks will take a big hit, but survive. The Gang of 12 cannot get a responsible budget passed, so, the stock markets take another dive. Trading on fundamentals is long gone. This market moves on the political winds of capriciousness and recalcitrance. So, if you own a lot of real estate or provide services to those who do, the dual specter of a very slow recovery and a financial services industry that is going to be under severe capital pressure and regulatory control for many years to come suggests a major price reset could be nigh. Certainly the risk seems much more weighted on the downside than the upside.

Given this pessimistic outlook, what do you do? As Jeremy Irons (Mr. Todd) said to Kevin Spacey (Sam) in Margin Call (highly recommended): "It's not panicking if you are the first one out the door..." and survive to invest another day, "...it's just money". 

Three words might help as a guide: "Predict" - Anticipate a very bumpy road; "Protect" - Deleverage and sell assets with "at risk" NOI's; and, "Perform" -  Invest cautiously with a focus on strong job markets and exit where you can either take heady profits from buyers who want to pay a crazy cap rate or where there is protracted distress.

Notwithstanding the fact that the fear of European contagion and the inability of lawmakers in Washington to resolve the U.S. deficit, keeping pricing on the 10-year Treasury at historic lows, once the fear abates, the risk of a rebound in rates precipitated by the Bobby Fischers of the capital markets (aka Mr. Hoenig) could be significant and swift.

The banks and loan aggregators are not panicking, but they are not waiting around for someone to yell "fire" either, and certainly are not waiting for Mr. Hoeing to say, "Checkmate!"

Carpe Diem!

SIRI SAYS: Lessons CRE Can Learn from Apple and Google - Give Control to Your Customers and Get Out of the Way

"Siri, open the pod bay doors please." 

Space travel may still be science fiction, but for those of you who have the new iPhone and have asked Siri how to find a gas station, what the weather's like in Amsterdam, or to boot up your workout mix, you by now know that this phone and those to follow are the latest "game changers" in the world of technology. This is not science fiction - it's the brave new world.

For those who have only read about it in the WSJ it's no wonder that it is the hottest selling phone in history after only a week. An amazing tribute to the late Steve Jobs who ten years ago ushered in a new era of enlightenment and unlimited possibilities. Where thought, creativity, passion, perseverance and commitment become the new currencies and the barriers to integration dissolve into "the cloud". Where the mass aggregation of niches becomes the new world order of business, communities and perhaps government.

Far from perfect and considered by some to be rather a ruthless and demanding CEO, Steve Jobs not only changed the way we live in so many ways, but he changed the way we all think now. He untethered individuality and creativity. He enabled the creation of platforms of desire, looking only for new modern day explorers to manifest its power and promise. And so we have Google, Facebook, and of course, Apple that in the past 10 years have become some of the most powerful companies on earth. Not simply for their market caps, but more importantly for their idea caps. They have empowered each of us to be more than we ever thought we could be.

In his book, What Would Google Do, which is highly recommended reading if you don't want to be business (or CRE for that matter) road kill, Jeff Jarvis, challenges us all to rethink our business models to create platforms for our customers and clients as opposed to serving up what we think they want. Build a platform, keep it simple, give control to your customers and get out of the way. Apple, Google, Facebook, LinkedIn are changing CRE. A year ago at the Colliers National conference in Nashville there was at best a 5% penetration of iPads. Two weeks ago in Chicago, there was a 75%+ penetration level. Adapt or die! Where there we few CRE apps a year ago, there are now dozens with more coming each day.

What an amazing month it has been, filled with travel and closings. The Colliers National Convention in Chicago, Tucson for UofA parent day, a climb to the top of  Mount Whitney in one day, and a trip to Purdue where my sister, Dr. France Córdova will be retiring this year as President made for a busy month. We were also fortunate to close several transactions including Challenger Medical Center, 7500 Melrose Avenue and Genesee Executive Plaza. In addition, we are seeing a renewed interest in servicers and lenders moving product through the pipeline as disposition volume has increased significantly. The great recapitalization of debt this time around is having a profound effect on the CRE services landscape with the processing of the CMBS bad debt and resultant birth of new service line competitors from the CMBS space, including LNR, C-III, CW and others.

Click here to read the latest third quarter submarket reports for Greater Los Angeles, as well as a link to Colliers reports on dozens of markets around the country and several selected pieces for reading that are chock full of interesting information and what is happening in the CRE capital and investment markets around the country. The quick report on GLA is continued leasing strength on the west side (Silicon Beach) and stabilization in most of the other markets, i.e. it's not getting better, but neither is it getting much worse. Sale transactions are tepid. 

The Eurocrisis is causing an even greater focus on core and what is truly core. Read this month’s Pulse for a quick round up of what we see happening across the capital markets spectrum for people, product, place, pricing and performance. While greed was the market driver in the first half of 2011, fear is back as offerings with any "hair" on them in all but the strongest markets are being repriced substantially causing some transactions to be pulled. Rent spike are gone from underwriting. In order for buyers to achieve desired yields, cap rates must go up. Buying "on the come" is done. On the other hand, debt is still very plentiful and abundant for certain transactions and sponsors, particularly for NNN retail and Multi-family which are experience irrationally exuberant investor demand.

Fred Córdova at the summit!

In closing, on a personal note, if you ever get the chance, I highly recommend the Mt. Whitney in a day climb. Leaving at 3am we traveled 22 miles roundtrip, 15 hours, over 6,000 vertical feet to 14,497 feet. I came away enthused and exhilarated. Running the last 3 Miles, I felt like I was in college again celebrating life, happiness and health. As they say life is measured not by how many breaths you take but by how many moments take your breath away.

Oh yes, we are now on Twitter and will be using it to keep you updated on a more timely basis. Please check us out and let us hear from you.

THE NEW, NEW DEAL: A Tale of the Capital Markets, CRE, and the State of the Economy in One Act

"Warren? It's Barry. Can we talk?"

Lights up. In the middle of a well-appointed office, Warren Buffett sits at his desk, eating a sandwich  and perusing a copy of “Extreme Bridge Player Monthly”. The phone rings. Washing down his bite with a swig of milk, Buffett answers.

Warren Buffett: Hello?

Voice: Hello Warren, this is Barack. How are you today?

Buffett: Fine, Mr. President, what can I do for you?

Obama: Warren, I need your help. You see, we have another problem with one of our country's largest banks.

Buffett: Bank of America?

Obama: Warren, they need capital, but the government can't come in and bail them out again. The public hates bankers. No one has been held accountable for the financial crisis and the public will just not take kindly to the government handing billions over to bankers again.

Buffett: So, what can I do?

Obama: Well, we were thinking that if you, The Oracle of Omaha, were to invest say, $5 billion into the bank, the public would see it as a sign of strength and the shorts would back off the bank and give it some room to fix this latest mess.

Buffett: So, you want me to throw away $5 billion of my shareholders’ money for a company that's a mess with little end in sight?

Obama: Well, yes, but you will get paid well. You will get assets worth $7 billion and options for a whole lot more. The stock will shoot up immediately by 25%, so on Day One you make 50%+ on your money, not to mention the fact that your own stock will pop.

Buffett: So, the Fed’s out of bullets and you have no juice on the Hill to do anything yourself, and you need my brand to rescue Bank of America?

Obama: That's about right, yes.

Buffett: Will Moynihan accept it?

Obama: He will if he wants to keep his job.

Buffett: Let me think about it, Mr. President.

Obama: Thank you, Warren. You're a great American and a patriot.

Buffett: I did not say I would, but you're welcome. Good night, Mr. President.

Obama: Good night, Warren.

Fin.

* * * * * * *

So, that about sums up where we are with the capital markets, state of the economy and commercial real estate. The Fed has no bullets, the government has no creativity or ingenuity or guts to use fiscal policy to turn things around, and "failure" is not an option.

We are now into the fourth year of our own version of the lost decade and tracking along the same path as Japan did with no end in sight. Awash in capital with no product to buy, pricing for core properties, particularly Multifamily, urban office and triple net retail continues to run at historically unsustainably high levels, while anything with even a little bit of peach fuzz on it is beat up mercilessly on pricing. Except for Multifamily, near term rents spikes are gone. Underwriting has become more conservative. Equity is recalibrating as it adjusts to a languishing economy where jobs are scarce, gas is expensive, and consumer sentiment is lower than a snake's belly in a wagon rut.

After the mad gyrations in the stock market a few weeks ago, it is no wonder that despite the S & P downgrade, the 10-year dropped below 2%. What better way for a rating agency to slit its wrists and confirm its inability to properly assess the quality of sovereign debt?

FEAR is back! And it is ruling the investment world. The choices of where to invest money safely are very few. Hence, gold, treasuries, and core real estate have become the safe investment vehicles of choice – besides putting it under the mattress, that is – rather than back into the bank. If you think back to just 2009 though, this is the exact moment when those brave investors who purchased properties made a pile of money in less than 2 years. Again citing Mr. Buffet, the time to buy is when everyone is running scared.

There has been a lot of news about a grand plan that Obama is working on: "The New, New Deal" will be unveiled today. When your back is to the wall, your approval rating in the tank and your time is running out and you are backed into a corner, you do what every general would say to do - ATTACK! Congress will fight any plan proposed, so why not go large, very large? It will be interesting to see what is proposed, but here are a few ideas that might have some traction to create jobs, get companies to start spending and invest in America, and maybe resuscitate commercial real estate in the process:

1.     Impose term limits on senators and congressmen.

2.     Mandate a balanced budget.

3.     Eliminate corporate income tax.

4.     Impose a retained earnings tax on companies who hoard cash.

5.     Raise personal income tax rates for the top 5% of income earners (see this Warren Buffet NYT Op Ed article).

6.     Reduce payroll taxes and provided tax incentives for hiring long-term unemployed.

7.     Spend some money on fixing our infrastructure (roads, dams, bridges).

8.     Provide tax incentives for companies that lower the average distance to work of employees.

9.     Provide tax incentives for companies that raise the IQ, or test scores of employees.

10.   Establish a national innovation incubator and provide tax benefits and awards to companies that achieve results with major policy objectives like a safe car that gets 100 miles per gallon, a commercially viable hover craft, a new battery that can charge a cell phone for a week. Basically, goals that create jobs and new ideas, new products and innovation so America can be the technology and innovation world leader that imports talents because of opportunity.

Please send us your own thoughts and ideas by commenting below.

One thing is for sure, unless "we the people" take a stand and responsibility for fixing America, it will never be fixed and the economy will languish. "We the people" is one of the most famous phrases in our American culture. It was a call to duty and action written in capital letters at the beginning of our American Constitution, not a call to Warren Buffett or a scream for help. We allow 545 people to run our lives (see this article). Unless we hit the reset button and restore some sanity to the way our government operates, we have no one to blame but ourselves. Perhaps the most salient contribution of Facebook will not be connecting with old high school friends, but the re-democratization of America as these ideas spread and take hold. It worked in Egypt and Libya. Why not America as well?

CONTAGIOUS INDECISION: As D.C. Wrings Its Hands Over the Debt Ceiling, Capital Markets Develop a Case of Anxiety

As we look back on the first half of 2011 and consider where we expected we might be in the recovery, albeit wishfully, it’s interesting to note that some economists (see attached report from Beacon Economics) believe that the recovery is proceeding along as expected and should accelerate in the second half of the year. As this is written, the stock market seems to think so. It’s rebounded some 400 points in two days on strong earnings reports and the seemingly insatiable worldwide appetite for iPads and iPhones (no disrespect to the Android smart phones).

On the other hand, while Beacon is prognosticating sunny days ahead, the G-20 (see attached report) and Federal Reserve (see attached report) presents a far cloudier view in recognition of the risks in the capital markets and inability of developed and developing economies alike to reign in their respective economies from exposure to potential financial contagions or beta / shock risks from tsunamis, earthquakes, political unrest, chronic unemployment, etc.

Nate Beeler/The Washington Examiner

The impact of these dichotomous views on CRE activity and demand for investment opportunities seems to be high anxiety over which way to play the game. Buy (go long) or sell (harvest) while pricing seems nutty. The prevailing CRE themes continue to be focused on how to invest capital with a fair risk adjusted return in light of so much uncertainty and supply / demand imbalance:  

•        There’s too much capital - courtesy the Fed QE I and II

•        There’s not enough product - courtesy congress giving lenders free ride

•        Capital Markets are very apprehensive - concern over budget and debt debate

•        The risk / yield curve is very steep - invest, but don't lose money

•        Financial engineering is back - Debt is abundant and accretive to pricing

•        Government action / inaction is driving pricing – fundamentals are disconnected to pricing when the 10 Year T is at 3%.

So how does this all play out?

For one, CRE investors are reaching for deals that they would normally pass on in a more normalized market; especially Core and Core+ investors who have many billions to place and few places to invest it. The result is that value investors are getting squeezed as property prices are bid up for the better offerings.

There is a lot of frustration over lack of product and apprehension about the reaction of the capital markets to the budget debate. This is causing buyers to be very cautious and focus only on transactions where there is a very high degree of comfort that they can win and execute. Anything with short term risk (weak rent roll, weak submarket, a lot of deferred capital costs) is getting punished on pricing.

Nevertheless, investors are casting a wider net due to lack of supply. While Core is king and will attract a stampede of buyers, Core + is as much in demand due to lack of product, and underwriting is similar. Value Add is in high demand but very short supply as owners, lenders, servicers are taking a very slow and methodical approach and still kicking the can down the road if they can, hoping that the economy will come to the rescue even as the mountain of rolling debt continues to rise to Everest proportions making the threat of a catastrophic event more perilous.

From a product perspective, multi-family continues to be the darling across all investment levels with cap rates for some core assets coming in below 4.0%. However, due to the scarcity of large multi-family offerings, from a dollar volume perspective, office has stepped up to a dominant position in the stronger “catalytic” markets with solid employment projections. Likewise, core industrial in the port and coastal markets saw strong demand in Q2, and well positioned retail seems to defy logic in underweighting tenant and demographic risks. All together, volume is up by over 50% from Q2 2010.

Meanwhile, the really big elephants - the capital allocators / opportunity / hedge funds - are going after massive note or stock purchases; e.g. Charter Hall, Anglo Irish Bank. Only a few can play that game and interestingly, the real challenge in winning the bid is not aggregating the capital, which is several billions of dollars, but aggregating the knowledge to understand the assets. Who do you hire to provide property level intelligence when there are only three real national CRE service providers in the country that have the capacity, scope and products available to turn this information around in a short time frame?

Core and Core+ money continues to focus on the Catalytic Markets - New York, Washington, San Francisco head the list, with Boston, Chicago, Houston, parts of Los Angeles and Seattle also seeing strong interest. Secondary and tertiary markets are trying to clear some assets that are impaired but struggling to find pricing as the only buyers in these markets are private capital buyers looking for yield and willing to move up the risk curve to find it.

Value add buyers are still looking hard at the peripheries of some of these markets and second tier cities, examples include Orange County and San Diego on the west coast where employment growth is expected to recover more quickly and there has been an uptick in absorption. They are also buying / gambling on longer term views on distressed cities that have historically recovered well even if the visibility to this recovery is clouded - like Phoenix, Sacramento, and Portland.

The steepness of the risk curve and cautiousness of debt underwriting in these markets with challenging fundamentals and recovery prospects is acting as a governor to price recovery and causing many properties to be pulled from the market.

No matter where you are in the investment spectrum, cash talks and will win the day. If buyers are considering debt, it is always placed after the fact. Sellers want surety of close and quick timing due to supply of capital and minimal supply of product. This drives terms even on complicated assets to 21 day DD, with 5-15 day closings all cash. We are not yet seeing non refundable on execution of PSA, but we would not be surprised to see it start to happen for some very strong core transactions. Serious buyers, regardless of where they are on the risk curve must be able to marshal capital and resources very quickly to be successful.

Debt is being underwritten to provide lift in yield and therefore is very important as a price driver but its ability to play this role is highly dependent on the location of the property, the submarket fundamentals, the investment profile and most importantly, the sponsorship.

All eyes are on government sector and the decisions on the budget which will impact the risk profiles of CRE and hence capital flows as yield requirements react to the cost and supply of capital.

We expect more of the status quo in the coming months with continued focus on the catalytic markets on the part of the core and core plus capital. Submarket fundamentals and employment growth will be key indicator of long term risk profile and continue to triage buyers. Activity will continue to improve slowly as more sellers take advantage of this temporary aberration in pricing that is pushing asset inflation. We do not see any significant event that will push transactional velocity but do expect a steady increase in volume as we expect interest rates to remain low.

Nevertheless, any shock to the system that causes rates to spike and push the 10 Year T to over 4.0% could be a game changer and result in a major price reset.

Please Don't Double Dip

It is musical chairs time again in CRE as the economy begins to recover and the survivors start to hire while those less fortunate lose key business drivers to competition. Colliers, particularly in Southern California has been on the receiving side of this trend with over 24 brokers coming over in 2010 and 2011 including industry veterans Mark Tarczynski, Chris and Dave Maling, Steve Algermissen, Jeff Smart, Scott Miller, Ian Britton, and Bob Caudill  to name a few. We are excited to welcome this terrific talent to the Colliers team to enhance our service platform.

Click to see George get caught in a double dip

On a related bittersweet note, we say good-bye to the editor of The Aggregate, my daughter, Kimberlee, who came aboard three years ago almost to the day and is now leaving to pursue her MFA in San Francisco. She came to work with almost zero knowledge of commercial real estate other than that it was her father's passion and had something to do with the purchase and sale of buildings. Despite her lack of industry knowledge, her smarts, organizational and communication skills and incredible creativity enabled her to establish a personal brand and reputation that would make any father proud. Indeed I am not sure we would have survived this downturn without her amazing effort and commitment to raising the bar for everyone at Colliers.

For those of you devoted followers and fans, please know that we have secured Kim's replacement, Suzy Foster, a friend of Kim's, who is equally talented and creative. So look for more creativity and fun and of course, insight into CRE and the capital markets to help you make the decisions that will drive your business to greater success.

The Dreaded Double Dip

As we move into summer 2011, everyone is talking about the prospect of the dreaded "double dip" recession. With the DOW down for five weeks in a row, employment flat lined, QE II coming into port, several European economies on the ropes, and the budget battle raging in Washington, the “expedient recovery” is now referred to as the "glacial" and "unpredictable" recovery.

As the uncertainty in the global and national economies drive investors to the relatively secure world of treasuries and high grade corporate bonds, pushing the 10 year T down over 75 BP in the last 2 months, CRE investors continue to bifurcate the market with no end in sight. Pricing for core assets in great locations with strong, sustainable NOI's continues to be extremely strong, tracking the compression in BBB bond pricing. Multi-family pricing continues to lead the way with cap rates as low as 4% for the best product, followed by, industrial at 4.5% - 5.5%, retail at 5.0%-6.0% and office at 5.5%-6.5%. As risk levels are adjusted for submarket fundamentals and tenant turnover, these spreads widen quickly, tracking junk bond yields, increasing by 100-300 BP's depending on the level of perceived risk.

The good news is that truly distressed product in high impact submarkets which previously could not achieve price discovery are finally beginning to do so as sellers are letting go of hope that the recovery will rescue property values much, less equity. The great "reset" has begun and will accelerate at the data points facilitate price discovery.

Whether it’s the sale of assets at 25%-50% of replacement costs or auctions like LNR's successful $1B auction of almost 50 loans in Las Vegas (and they are lining up a repeat in Arizona) investors are stepping up and underwriting the risk. Certain submarkets like San Diego are seeing a flood of new office product hit the market.

Amidst the turmoil of this bifurcated market two product types are gaining new value consideration for their focused execution and exceptional long term demand drivers: student housing and medical office buildings or "MOB's".

The housing stock at most universities around the country is under supplied, antiquated and inefficient. As student enrollment continues to soar, many colleges and universities lack sufficient funding to address the housing needs of their students. The result is a increasing shortage of supply met with increasingly stronger demand.

Despite being at the opposite end of the personal life cycle the medical office story is ironically similar. As noted on the attached ULI report, the existing stock is woefully under supplied, inefficient and outdated to meet the pending surge in demand for medical services by the aging baby boomer population. This brings us to our featured offering. Genesee Executive Plaza: an Office and MOB building in the San Diego UTC submarket, which is one of the strongest medical office submarkets in the country. The opportunity to reposition this office campus Into "Genesee Plaza - The Premier Health and Professional Services Center in UTC" provides a tremendous value ad opportunity for investors (call for offers is June 21st).

At any time in the CRE cycle there is opportunity. However, as the business matures and transactions become more transparent, and information becomes more readily available, value opportunities become harder to find. We recommend looking into markets and product with strong fundamentals that others have overlooked. Right now, Student Housing and Medical Office seem to provide plenty of lift for intrepid investors looking for strong value ad opportunities.