On Wednesday, June 22nd, the Cornell Real Estate Council (CREC), New York City Chapter congregated at the offices of First American Title for a panel discussion: Looking Backward to Lead Forward. Moderated by CREC-NYC Executive Board Member, Firas Turkmani (SHA ’14 and Associate at Ackman-Ziff), the Cornell community experienced a lively discussion on the current market cycle, the evolving landscape, and future prospects from the following real estate leaders:
Paul Fine: Principal of Kohlberg Kravis Roberts & Co. (KKR – Real Estate Group), a global investment firm that manages investments across multiple asset classes, including private equity, energy, infrastructure, real estate, credit strategies and hedge funds. Previously, he was a director at CCRE, a commercial real estate finance affiliate of Cantor Fitzgerald, where he was responsible for loan originations. Before that, he worked at Credit Suisse in the Real Estate Finance Group. Paul holds a B.S. in Applied Economics and Management from Cornell University.
Simon Ziff: President of Ackman-Ziff, a real estate capital advisory firm overseeing more than $50 billion of debt, equity and mezzanine financing annually for some of the nation’s foremost real estate developers and owners. Simon holds a B.S. in Finance from Pennsylvania State University and an M.S. in Real Estate Finance from New York University (NYU). In May 2002, NYU awarded Simon its second ever distinguished Real Estate Alumni Recognition Award.
David Perlman: Vice President at Natixis, the international corporate, investment, insurance, and financial services division of Group BPCE. With over 12 years of experience in the debt and equity industry, he co-leads the Floating Rate Balance Sheet Desk at Natixis. David and his team have conducted over $2 billion in lending, while syndicating over $700 million to banks and other investment companies. He previously worked for Brickman, Citigroup Property and Fitch Ratings. He holds a B.S.B.A. from Washington University in St. Louis.
Discussion Topics
The Federal Reserve and Interest Rates
Firas Turkmani initiated the discussion by inquiring about the impact of interest rates on businesses based on the FOMC statement released June 15, 2016. Affecting all divisions of business, interest rates affect borrowing costs, economic activity, and market prices. Acknowledging interest rate impacts, the panelists were not concerned about the recent decision to maintain rates. Paul Fine stressed the importance of LIBOR rates with respect to his division of KKR. Simon Ziff discussed the impossibility of controlling or predicting interest rates, stating that “I don’t try to predict changes in interest rates. Even economists can’t get it right – and that’s their job!”
Volatile Capital Markets
The discussion transitioned to the volatility of capital markets. Firas asked the panelists how they plan to manage client expectations through a tumultuous period. Simon Ziff discussed his company’s unique approach informing potential clients of the possibility that interest rates may change prior to the close of a transaction. Although this conservative approach has occasionally resulted in a loss of business, Ackman-Ziff clients aptly understand the risks and rewards of their investments. Furthermore, he maintained, managing expectations honestly and early builds trust between Ackman-Ziff and their clients, establishing long-term, successful business relationships.
Asset Markets and Classes
The discussion closed out with Firas Turkmani asking each panelist which asset class or geographic market they are currently most interested in. David Perlman responded that he favors tertiary markets at the moment, noting that Natixis lacks current Manhattan assets in its pipeline. On the other hand, Simon Ziff and Paul Fine have more interest in primary and secondary markets. With a few projects in Brooklyn, ranging from hotel to residential, Simon Ziff noted that industrial is the one asset class he is unlikely to invest in currently. However, Simon did leave the proverbial door open, stating that “anything is possible” if a project has a “really good story” and a well-known developer.
Q&A
The conference ended with a short Q&A session. One of the most interesting questions regarded the use of big data within the real estate industry. All three panelists expressed a general desire to make better use of big data – noting the possibility of superior decision making with access to real-time data. Although market data analysis has improved, the panelists have concerns regarding the real estate industry’s lack of urgency to change and update best practices. Closing on a positive note, the panelists articulated a hope for the future improvement of big data analysis and the potential it has to modernize the real estate industry.
