Presented by Christopher Lee CEL & Associates, Inc.

“Transformational LeadershipIn The New Age Of Real Estate”

Alabama Center for Real EstateThe University of Alabama

Birmingham, AlabamaFebruary 1, 2013

Presented by Christopher Lee

CEL & Associates, Inc.

TODAY’S PRESENTATION

Future Headlines

Real Estate Industry’s Megashifts

The Psychology of Real Estate

Real Estate Cycles

Transformational Leadership

Predictions


2

FUTURE HEADLINES


3

Tuesday, July 10, 2015 Daily $1.75

Today's

Highlights

NYC Office

eBay Becomes The #1 Source For Selling Real Estate


4

Congress Passes National Building Codes Standards Making It Unlawful To Sell A

Building That Is Non-Compliant!

Monday, February 18, 2015 Daily $1.50

Today's

Highlights

NYC Office


5

Tuesday, July 10, 2018 Daily $1.75

Today's

Highlights

Multifamily

First Apartment BuildingLeased Up Using Social Media


6

Monday, February 18, 2016 Daily $2.50

Today's

Highlights

Office

Facebook Creates First Virtual Office

“Y Generation Declares Office Space Obsolete.”


7

First High Rise Farm Announced “12 Stories Equal To 600 Acres”

Monday, February 18, 2015 Daily 1.25¢

Today's

Highlights

NYC Office


8

REAL ESTATE INDUSTRY’SMEGASHIFTS


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REAL ESTATE INDUSTRY’S

MEGASHIFTS

Category Historical

1970 –1979 Geography Local

Competition Many Competitors

Business Strategy Focus On

Location

Goals Market-Driven

Market Dynamics Fighting Over

Sites

Operational Focus

Collecting

Reputation

Leadership Personality-Based

Organization Few Teams

Brokerage A Representative

Founder An Entrepreneur

Growth Strategy

Growth From Market Dynamics


10


MEGASHIFTS

Category Historical

1970 –1979 1980 – 1989 Geography Local Regional

Competition Many Competitors Some Competitors


Location

Focus On

Design

Goals Market-Driven Capital-Driven


Sites

Fighting Over

Money

Operational Focus

Collecting

Reputation

Collecting

Assets

Leadership Personality-Based Functionally-Based

Organization Few Teams Appearance

Teams

Brokerage A Representative A Broker

Founder An Entrepreneur An Executive

Growth Strategy Growth From Market

Dynamics

Growth From Abundance Of

Capital & Financial Engineering


11


MEGASHIFTS


12

Category Historical

1970 –1979 1980 – 1989 1990 – 1999 Geography Local Regional National

Competition Many Competitors Some Competitors Few Competitors


Location

Focus On

Design

Focus On

Operations

Goals Market-Driven Capital-Driven Performance-Driven


Sites

Fighting Over

Money

Fighting Over

Market-Share

Operational Focus

Collecting

Reputation

Collecting

Assets

Collecting

Competitors

Leadership Personality-Based Functionally-Based Service-Based


Teams Necessity Teams

Brokerage A Representative A Broker A Specialist

Founder An Entrepreneur An Executive A Leader


Dynamics



Growth From Consolidation,

Specialization & Digital Economy


MEGASHIFTS


13

Category Historical

1970 –1979 1980 – 1989 1990 – 1999 2000 – 2009 Geography Local Regional National Global

Competition Many Competitors Some Competitors Few Competitors Strategic

Competitors


Location

Focus On

Design

Focus On

Operations

Focus On

Customers

Goals Market-Driven Capital-Driven Performance-Driven Relationship-Driven


Sites

Fighting Over

Money

Fighting Over

Market-Share

Fighting Over

Talent

Operational Focus

Collecting

Reputation

Collecting

Assets

Collecting

Competitors

Collecting

Clients

Leadership Personality-Based Functionally-Based Service-Based Solutions-Based


Teams Necessity Teams Reoccurring Teams

Brokerage A Representative A Broker A Specialist An Advisor

Founder An Entrepreneur An Executive A Leader A Coach


Dynamics





Growth From Customer

Connectivity, Talent & Capital Shifts


MEGASHIFTS


14

Category Historical Forecast

1970 –1979 1980 – 1989 1990 – 1999 2000 – 2009 2010 – 2019 Geography Local Regional National Global Without Boundaries

Competition Many Competitors Some Competitors Few Competitors Strategic

Competitors New Competitors


Location

Focus On

Design

Focus On

Operations

Focus On

Customers

Focus On Customers of

Customers

Goals Market-Driven Capital-Driven Performance-Driven Relationship-Driven Knowledge-Driven


Sites

Fighting Over

Money

Fighting Over

Market-Share

Fighting Over

Talent

Fighting Over

Customer-Share

Operational Focus

Collecting

Reputation

Collecting

Assets

Collecting

Competitors

Collecting

Clients

Collecting

Relationships

Leadership Personality-Based Functionally-Based Service-Based Solutions-Based Strategy-Based


Teams Necessity Teams Reoccurring Teams Virtual Teams

Brokerage A Representative A Broker A Specialist An Advisor A Confidant

Founder An Entrepreneur An Executive A Leader A Coach A Collaborator


Dynamics





Growth From Customer

Connectivity, Talent & Capital Shifts

Growth From Globalization,

Generational Shifts, & Greening

THE PSYCHOLOGY OF

REAL ESTATE


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ATTITUDES IMPACT BEHAVIOR


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32% of Americans now say that they are in the lower class. (Pew Research 9/10/12)

53% of Americans have 3 months or less of savings. (Yahoo Finance 8/29/12)

Only 38% of Americans say that they are better off than a year ago. (Gallup 10/25/12)

54% of Americans expect a recession in 2013. (Rasmussen 12/27/12)

53% of Americans think the economy is getting worse. (Gallup 1/15/13)

50% of Americans believe the best years in America are in the past. (Gallup 1/2/13)

Only 5% of U.S. voters think Congress is doing a good or excellent job. (Rasmussen 12/30/12)

When Attitudes Impact Behavior

What Words Describe The U.S. Consumer?

Uncertain

Hesitant

Worried

Stressed

Unsure

Cautious

Insecure

Dubious

Unsettled

Wavering

Unpredictable

Careful


17

CONSUMER CONFIDENCE CONTINUES TO WAVER

CEL & Associates, Inc.18

THE REAL ESTATE INDUSTRY IS DRIVEN BY

HUMAN BEHAVIOR / NEEDS


19

RobustEconomy

RecessionaryEconomy

RecoveringEconomy

RevitalizedEconomy

Hierarchy of Economic Vitality

Source: CEL & Associates, Inc.




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DiscretionaryReal Estate

Basic/NecessityReal Estate

ProductiveReal Estate

NicheReal Estate

Hierarchy of Real Estate Solutions

RobustEconomy

RecessionaryEconomy

RecoveringEconomy

RevitalizedEconomy






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Malls, Hospitality,Entertainment, Restaurants, Recreational, Lifestyle Retail

Apartments, Grocery, Pharmacy, Healthcare

Office, Industrial, Government, Education

Big Box Retail, Specialized Housing, Single Family,

Corporate BTS

Specific Real EstateOpportunities

DiscretionaryReal Estate

Basic/NecessityReal Estate

ProductiveReal Estate

NicheReal Estate

Hierarchy of Real Estate Solutions

RobustEconomy

RecessionaryEconomy

RecoveringEconomy

RevitalizedEconomy



A PSYCHOLOGICAL PROOF POINT MULTIFAMILY


22

U.S. HOMEOWNERSHIP TO DROP

TO LOW 60s BY 2020


23

HOMEOWNERSHIP RATEAll homeowners & those past

due or in foreclosure


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Source: Census Bureau, Mortgage Bankers Association and A. Gary Shilling & Co.

Last Points 1Q 2012: total 65.4%; ex past due 60.4%.

HOMEOWNERS WHO MAY BECOME RENTERS


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U.S. PERCENTAGE LIVING AT PARENTS’ HOME

vs. HOMEOWNERSHIP RATE


26

Source: Census Bureau and A. Gary Shilling & Co.

Last Points 2011: at parents’ 14.2%; homeowners 37.8%.

MULTIFAMILY CONSTRUCTION – U.S.

2008 – 2017


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APARTMENT FORECASTU.S. SUPPLY / DEMAND &

VACANCY

CEL & Associates, Inc.28

Source: CBRE-EA and RREEF Real Estate.As of March 2012.

REAL ESTATE CYCLES


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REAL ESTATE CYCLE PHASES

Transition Phase

Growth Phase

Plateau Phase

Crisis Phase

Transition Phase

10 Years12.5 Years

4 Years

Source: CEL & Associates, Inc. CEL & Associates, Inc.

30

REAL ESTATE CYCLES . . .

Generally last 10 years.

Growth period starts on the number “3.”

Cycle generally ends on the number “8.”

Can be altered by government intervention.

Are not geographically uniform.

Are not consistent with property types.

All real estate cycles have names.Source: CEL & Associates, Inc. CEL & Associates, Inc.

31

REAL ESTATE CYCLES HAVE NAMES

Time Period Cycle

1983 - 1988 Age of Awakening Boomers & Entrepreneurism


32


Time Period Cycle


1993 - 1998 Age of Technology & Start-Ups


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Time Period Cycle



2003 - 2008 Age of Exuberance & Debt


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Time Period Cycle




2013 - 2018 Age of Consequence & Restructuring


35


Time Period Cycle




2013 - 2018 Age of Consequence & Restructuring

2023 - 2028 Age of Globalization & Knowledge

Source: CEL & Associates., Inc.


36

THE GROWTH PHASE

PERIOD OF OPPORTUNITY

Transition Phase

GrowthPhase

PlateauPhase

CrisisPhase

Transition Phase

10 Years12.5 Years

Period Of Opportunity

Rising Occupancy Levels

Rising Rents

Growing NOIs

Increasing Asset Values

Accelerated Development

Activity

Readily Available Capital

New Competitors/Firms

Emerge


37

THE PLATEAU PHASE

PERIOD OF DECISIONS

Transition Phase

GrowthPhase

PlateauPhase

CrisisPhase

Transition Phase

10 Years12.5 Years

Period Of Decisions

Supply/Demand

Imbalance

Optimistic Underwriting

Generous TIs/Rent

Concessions

Unrealistic Asset Values

Protracted Negotiations

Blind Entrepreneurism

High Investment Sales

Activity


38

THE CRISIS PHASE

Transition Phase

GrowthPhase

PlateauPhase

CrisisPhase

Transition Phase

10 Years12.5 Years

Period Of Change

Declining

Rents/Occupancies

Declining Asset Values

Little/No Development

Activity

Workouts/Restructuring

Limited Access To

Credit

Entity Downsizing

De-Leveraging

PERIOD OF CHANGE


39

THE TRANSITION PHASE

PERIOD OF REINVENTION

Transition Phase

GrowthPhase

PlateauPhase

CrisisPhase

Transition Phase

10 Years12.5 Years

Period Of Reinvention

New Business Models

Emerge

Recapitalization/Cash Is

King

Diversification Of Risk

Focus On Fundamentals

Next Generation

Leaders Emerge

Renewed Customer

Focus

Consolidation

Accelerates


40

Cycle Growth Period Primary Drivers Of The Real Estate Cycle

1983-1988 Growth from an abundance of capital, financial engineering and tax incentives.

1993-1998 Growth from industry consolidation, securitization, and the digital economy.

2003-2008 Growth from an abundance of inexpensive debt, unprecedented consumer spending and a “bull” stock market.

2013-2018 Growth from recapitalization, generational shifts, global restructuring, “green” technologies, education, public infrastructure, knowledge-centered industries, energy, data storage, healthcare and rental-based society.

2023-2028 Growth from life sciences, bio-technology, Gen Y shifts, globalization of artificial intelligence, alternative energy, robotics, research, micro-farming and water reclamation.



41

REAL ESTATE CYCLESPAST, PRESENT & FUTURE

Industries Serving Seniors Food Distribution Logistics Software Development Waste Management Healthcare Emerging Technologies Life Sciences/Biotech Colleges/Universities/Education Technology Legal/Accounting Government/Government Related Science Defense/Security Green Industries/Clean Tech Communications Pharmaceutical Trade/Logistics F.I.R.E. Data Centers Entertainment Research & Development Energy & Alternative Energy Full Service Grocery Internet-Based Entities Personnel Management Food Service/Agricultural Consulting Computer Programming Electronic Media Nonprofits Wireless Technology Medical Devices Nanotechnology Network Security

GROWING INDUSTRY SECTORS


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REAL ESTATE INVESTMENT MATRIX

2012 - 2016

Source: CEL & Associates, Inc.CEL & Associates, Inc.

43

Low Risk

· High Street Retail

· BTS Office

· Necessity Retail

· Self-Storage

· Multifamily - Urban

· Industrial

· Investment Sales

· Performing Loans

· “B” Value Add Acq.

· Property Management

· Core Acq.

· Affordable Housing

· Warehouse

· Office - Core

· Medical Office

· Mortgage Brokerage

· BTS Warehouse

· Multifamily - Suburban

· Spec Development

· Distressed Debt

· Lodging

· Entertainment

· Recreation

· “A” Value Add Acq.

· Lifestyle Retail

· Land Development

· Mixed Use – Urban

· Timber Land

· New Single Family Dev.

· 2nd Homes

· Construction Management

· Regional Malls

· General Brokerage

· Auctions

· Senior Housing

· Student Housing

· Office – Suburban / Non-Core

High

Hig

hR

etu

rns

Low

REAL ESTATE CYCLE

PROOF POINTS


44

SALES VOLUME – COMBINED2001 - 2012


45

SALES VOLUME – OFFICE2001 - 2012


46

SALES VOLUME – INDUSTRIAL2001 - 2012


47

SALES VOLUME – RETAIL2001 - 2012


48

SALES VOLUME – APARTMENTS2001 - 2012


49

TOTAL CONSTRUCTION ACTIVITY IN THE U.S.

IS EXPECTED TO GROW


50

COMMERCIAL / MULTIFAMILY LOAN ORIGINATIONS INDEX


51

So…What Core Strategy Do You Need To Embrace

To Capitalize On The Emerging Opportunities?


52

TRANSFORMATIONAL

LEADERSHIP !


53

The Real Estate Industry Is…

Shifting from a Founder- to a Successor-based industry.

60% of today’s CEOs will be gone by 2020.

Consolidating.

By 2020 there will be 30% fewer firms than in 2000.

Becoming very specialized.

Only 20% of Building Owners consider their service provider to be Best-In-Class.

Facing $1.7 trillion in loan maturities during the period 2012 – 2016.

29% are considered underwater.

Facing a talent shortage.

There could be a shortage of 15,000 or more professionals by 2015.

Compensation and succession are becoming top priorities.

TRANSFORMATIONAL TRENDS


54

77%

74%

70%

65%

63%

60%

54%

47%

43%

40%

2013 TRANSFORMATIONAL LEADERS PRIORITIES


Human Capital

Customer Relationships

Brand Management

Business Model Innovation

Growth Strategy Execution

Capital Access/Formation

Controlling Costs

Managing Corp. G & A

Successor Planning

Greening


55

TRANSFORMATIONAL STRATEGIES FOR SUCCESS Set Your Vision & Reset Your Priorities.


56

Set Your Vision & Reset Your Priorities.

Implement A Collaborative Business Model.


57

TRANSFORMATIONAL STRATEGIES FOR SUCCESS



Strengthen Your Brand & Differentiating Story.


58





Become Customer-Centric & Knowledge-Driven.


59






Improve Internal Systems & Processes.


60







Take Advantage Of Competitor Difficulties.


61








Recognize Opportunities & Pursue Them Aggressively.


62









Expand Your Service Lines & Product Specialization.


63










Strengthen Your Capital Base.


64










Strengthen Your Capital Base.

Protect Your Most Valuable Asset…Your People.


65


REAL ESTATE

PREDICTIONS


66

OFFICE PREDICTIONS 2020

“Will function more like Marriott and operate like Sabre.”

The amount of office space per worker could shrink to 50sf – 75sf, and 25% of workers will be “Club” employees.

Office buildings will shift from 8 to 6 to 24/7 activity centers.

“My Place” will replace “My Space” as workers seek opportunities to create virtual offices, connective portals and “swarming” venues.

Office space will be leased by units of consumption rather than square footage.

Future leasing decisions will be made by the Director of Human Resources to reduce growing generational conflicts and enhance worker productivity.

Moveable, “intelligent” walls will replace fixed offices. Windows will have electro-chromic glass which turn them into multi-touch screens.

“Pop-Up” workplace cubicles, exercise and/or ergonomic office furniture and pink noise systems will be commonplace.


67

INDUSTRIAL PREDICTIONS 2020

“Will look like Amazon.com and operate like FedEx.”

Greater use of RFID or Smart Tags. TSA and U.S. Customs will move to the point-of-origin instead of the point-of-destination.

Will employ more technology specialists than laborers. Improved robotics will continue to accelerate on-shoring. Manufacturing is back!

The 2014 completion for the widening of the Panama Canal will shift port activity away from the west coast.

Industrial buildings will be valued on building efficiency ratings or turnaround time.

Growth around airports and major transportation hubs will continue as new regional distribution centers populate growth markets.


68

RETAIL PREDICTIONS 2020

“Will look more like Disneyland and feel more like eBay.”

Grocery stores will become a “community resource” for healthcare meetings, learning, banking, personal services and social interaction (e.g. the “Grocery Mall”).

U.S. consumers will shift and become digital or device shoppers. There will be a proliferation of “identity” products.

Retail design will feature smaller, adaptable and interactive elements to engage. An “Age Zone” of floor space will emerge.

Organic and “buy local” initiatives will abound. Lifestyle retail will spur an underground economy.

“Sharing” retailers will occupy many centers.

Amazon will become the #1 grocer in America. Will money be relevant?


69

APARTMENT PREDICTIONS 2020

“Will look more like a home but feel like a village.”

Smaller units (400 square feet), common area amenities and green features will dominate design and development activities.

Custom options for interior finishes and features…“design-your-own” will be commonplace.

Cohabitation will increase by 35% - 45%.

Over 50% of apartments will be smoke-free, and 20% could be “celebrity branded.”

Over 35% of apartment buildings will be identified with a local charity or community service.

Watch for transferrable leases and pre-fab construction.

Watch for the acquisition of major national and/or regional apartment portfolios/companies by lodging enterprises.

Dedicated parking spaces for ZipCar-like providers and community bicycles for resident use. CEL & Associates, Inc.

70

REAL ESTATE SERVICE COMPANY

PREDICTIONS 2020“Will look more like NASA but feel more like a partnership.”

Real estate assets for sale will have Standard Underwriting packages prepared by Certified Underwriters.

Investment Sales activity will increase 12% - 14% per annum through 2018.

An abundance of capital will likely keep cap rates low through 2017.

Watch for the Federal government to enact “Greening” legislation requiring buyers of real estate assets to escrow monies for energy efficient improvements.

Emergence of an e-Bay or MLS-like listing service for commercial assets.

50% of the Brokers employed today will be replaced by collaborative Analysts and Advisors.


71

The number of public real estate firms will decline by 35% - 45%.

Of the regional/local real estate service firms which existed in 2012…30% will disappear by 2020. There will be 3 Global real estate providers.

Today’s functional titles will be replaced by contemporary monikers. The titles of “Property Manager” or “Facility Manager” will disappear.

Bilingual requirements will be mandatory among service providers.

Every service provider will have at least one Certification or approved Designation.

There will be a public market for individual asset investing.


72

REAL ESTATE SERVICE COMPANY

PREDICTIONS 2020

“Transformational LeadershipIn The New Age Of Real Estate”

Alabama Center for Real EstateThe University of Alabama

Birmingham, AlabamaFebruary 1, 2013

Presented by Christopher Lee


Presented by Christopher Lee CEL & Associates, Inc.

Documents

Transcript of Presented by Christopher Lee CEL & Associates, Inc.