“There’s never been a bad day with that team,” remarked Stephen Furnary, in reference to a $5.5 billion industrial portfolio and team he had acquired from Trammel Crow Company as Chairman and CEO of Clarion Partners. Clarion had no previous industrial properties, but with one big deal, they had assumed the ownership of 85 million square feet of it, and the top-notch management team that came with it. Furnary’s bet paid-off, adding that “if you don’t have experience managing a type of property, then invest in ones that come with people who do.” Such were the stories and insights shared at the Deal-Making Panel on October 10th at the 32nd Annual Cornell Real Estate Conference in New York City.
In addition to Furnary, the panel featured Jim Heistand, President and CEO of Parkway Properties, Michael Franco, EVP and Co-Head of Acquisitions & Capital Markets for Vornado Realty Trust, and Russ Bernard, Managing Principal of Westport Capital Partners as moderator. Bernard opened the session by generating a discussion about past deals and lessons to be learnt from them, to which Franco made a few important points: “never financially-engineer a return, and never over-finance land.” Franco agreed with Furnary’s sentiment, that “you shouldn’t invest in something you don’t know or understand, or is a less-liquid investment. Be a value-player, and have a specific value-add skill set in order to drive growth in returns,” echoing Vornado’s high street value-add retail plays in New York City.
As head of a major REIT, Heistand stated that it’s tough to find the balance between selling assets versus keeping assets that pay operating business. “You have to look at sub-markets, not overall markets to make those decisions,” adding that “as a net buyer, you have to find investments where you can create value within the timeframe of your holding period.” In addition, paying attention to the markets surrounding each investment is important. “Think how disruption in real estate affects your investments,” said Franco, and in reference to having good intelligence about those disruptions, you must “find the right people at the right time.”
“With greater technology, we’ve seen a sea-change in real estate in just the last five years,” said Furnary. Real estate is not left out of the big data effect, but with the proliferation of so much information, analyst and investment team research has become increasingly complex. Furnary pointed out that “it’s no longer ‘do I have better information,’ but quite often, it’s having the right judgment on that data: that’s the value-add in the business today,” but the fundamentals remain largely the same, as Heistand concluded. “Be prepared to take that risk, make it work, and have enough successes so that people want to give you money.”
Each year, the Cornell Real Estate Conference hosts a series of panels with real estate professionals who share their knowledge and experience with students in the Baker Program in Real Estate, a specialized two-year Master’s Program offered by Cornell University.
