Lessons from the PERE New York Summit

Jim Spaeth, executive director of the Wood Center, speaks at the 2014 PERE New York Summit.

Jim Spaeth, executive director of the Wood Center, speaks at the 2014 PERE New York Summit.

I had the privilege of attending the PERE New York Summit alongside two other 2nd year MBA students, professor Jacob Sagi and Wood Center executive director Jim Spaeth. The PERE New York Summit consisted of a series panels and speakers discussing current topics in real estate private equity. The Wood Center for Real Estate Studies sponsored three 2nd year students – Keaton Hurt, Louis Smart and myself. This was a significant gift from the Wood Center that provided us with a unique opportunity to learn from icons of the real estate private equity industry. A few of the prominent panel speakers included Simon Treacy, global CIO and head of U.S. equity at BlackRock Real Estate, Tom Shapiro, president and portfolio manager at GTIS Partners, Sonny Kalsi, founder and partner at GreenOak Real Estate, Phil McAndrews, senior managing director and chief investment officer at TIAA-CREF, and Steven Wolf, senior partner at Ares Management Real Estate Group.

Real Estate industry conferences such as the PERE New York Summit typically offer a chance to learn more about current trends and topics and network among senior professionals and industry leaders. One interesting panel discussed the investment approach for traditional real estate firms versus private equity firms. The private equity side of the panel discussed the advantages of leveraging the broader private equity platform to source deals at the corporate level and use complex capital structures in transactions in order to increase returns and reduce risk. Traditional real estate investment managers argued that utilizing complex capital structures increases risk and encourages inconsistent underwriting. The panel also discussed the potential private equity firms taking REITs private in the next year in cases where REITs are trading at a discount to NAV. Overall, the panel suggested that large private equity firms are currently net sellers in the U.S. and net buyers in Europe, as pricing has increased significantly in core U.S. markets.

The keynote interview provided insight on Middle Eastern capital and its investment preferences. The speaker emphasized that Middle Eastern investors are typically sophisticated investors who have a preference for direct investment rather than funds, sponsors with strong pipelines of deals, and value add and opportunistic investments. Middle Eastern investors also have higher return thresholds than most global capital and typically define core investments by geography (gateway markets such as New York, London, San Francisco, etc.) rather than the type of investment.

Overall, the PERE New York Summit served as a great learning and networking experience for all of us. The conference included mostly executive-level professionals in the real estate private equity industry. This gave us a unique opportunity to meet with several prominent figures in the industry. I would highly encourage all future MBA students to apply for the PERE New York Summit.

By Pritesh Patel (MBA ’15)