Pipeline Newsletter - January 11, 2008

Vol. 3 No. 1

January 11, 2008

Latest News


Letter from the Executive Director

As 2008 begins to unfold, it occurred to me that it would be a good time to address the topics of tunnel vision and peripheral vision. Each year, we have a "core" group of firms, numbering at least 30, that reserve tables for our Annual Real Estate Conference in January. When I noticed that several of those firms had not yet reserved their table for the 12th Annual Real Estate Conference on Jan. 22, I placed calls to their offices. What concerned me were the first two responses I heard: "Actually, I hadn't thought about the conference!"

While I appreciated their candid responses, in both cases followed by, "Of course, we'll be taking a table this year," what concerned me was what I would term their lack of peripheral vision. That is, we all recognize that 2008 is going to be tough sledding not just for residential real estate but also for commercial real estate and the capital markets that fuel commercial real estate investment and development. The dangers of narrowing one's field of vision to zero in on today's risks are two-fold: One, tunnel vision causes us to lose sight of the bigger picture and may lead to even greater risks in the future. Two, we miss out on profit opportunities that lie outside of our narrow, tunnel vision.

The speakers and topics on Jan. 22 are designed to give you the peripheral vision you need to recognize risks, yet also become alert to new profit opportunities as you navigate 2008. Angelo Mozilo, the CEO of Countrywide, with his unique vantage point in the throes of America's home mortgage markets, will share his informed judgments about the depths of the residential recession and prospects for a turnaround. The implications of Mozilo's comments for commercial real estate will be direct and important.

Steve Osgood (Dupont Fabros, Washington D.C.), Janice Sears (Bank of America Securities, San Francisco), and Burl East (Silver Portal Capital, San Diego) will follow Angelo Mozilo with "in the trenches" observations about what capital markets are telling us about commercial real estate prospects. These three dynamic individuals operate in the global capital markets day-to-day. What they have to say will help you mitigate risks and exploit opportunities over the near term.

In a change-of-pace from the problems of real estate, Jay Spivey (CoStar, Atlanta) and Norm Miller (Burnham-Moores Center for Real Estate) next will present conclusive results of the first comprehensive nationwide analysis comparing green office buildings with non-green. Their results indicate that green buildings have higher occupancy rates and lower operating costs, higher rental rates, and higher values, by compelling margins. What is true, and promises to get even better, for office buildings today clearly has implications for a broader range of real estate product types. Keeping sustainable real estate and community development within your peripheral vision could create substantial profit opportunities should you embrace this exciting new field.

The conference concludes with two of America's premier "students" of commercial real estate markets and product types offering their interpretations of the trends they foresee globally as well as for Southern California and the San Diego region. Mary Ludgin (Heitman, Chicago) and Bob White (Real Capital Analytics, New York) will give their expert insights backed by a wealth of experience and data.

In all of life, your peripheral vision is important. I urge you to think about this conference as an outstanding opportunity for you to keep the big picture in view while you navigate the immediate challenges of 2008. Our January conference has enjoyed a great track record for giving value to the time you invest in attending. Join nearly 400 of your closest friends and register today!

Dr. Mark J. Riedy
Executive Director


Residential Real Estate Community Gathers for 2008 Outlook	^back to top

Over 300 people attended the Eighth Annual Residential Real Estate Conference: Outlook 2008, hosted by the Burnham-Moores Center for Real Estate on Dec. 12.

Lenders, developers, builders and Realtors came together at the half-day conference to hear the perspectives of economists, industry professionals and USD MBA students on where the market is headed in 2008 and beyond.

USD associate professor Alan Gin said that while he did not believe San Diego would experience a downturn — the classic definition of a recession — he did think the County would experience a recession "San Diego style."

"A recession San Diego style would entail slower job growth," said Gin, who publishes the monthly San Diego Index of Leading Economic Indicators for the Burnham-Moores Center for Real Estate. "The news in San Diego has been good for so long that a slowing feels like a recession. A lot of metropolitan areas would love to have this economy right now."

Robert Kleinhenz, deputy chief economist for the California Association of Realtors, said that he felt the state as a whole also would be able to "skirt recession" given California's economic and population growth dynamics.

"We are likely to go through the next few years with some bumps and bruises, but the prognosis for the long term is good," said Kleinhenz. "We're in the late stages of an economic expansion, and it's not unusual to hit choppy waters."

During his presentation on the 2008 forecast for the North County Coastal region, USD MBA student Craig Choisser quipped that: "This might be one of the few times when a flat line is actually good news." Jin Luo, another student in Professor Joan Anderson's economic forecasting class, advised in her presentation that: "If you can survive in 2008, then I think you can survive."

A panel of industry representatives provided their own view on how to ride out the tide in the coming months. Joe Anfuso, president of Florsheim Homes, advised attendees to take a hard look at the bottom line. "I'm looking at cash every day," he said. "If you're not looking at cash, you're not doing the right thing in this market."

Dan Holbrook, president of real estate consulting firm Protivity, said that real estate professionals need to "increase the bandwidth of solutions" to the current challenges the industry faces and consider employing solutions used in other industries, such as trading in used cars for newer ones.

"This will be a problem-solving year," he said. If you solve someone else's problem, you solve yours."

Attendees logged their own view of the prognosis for the region's real estate market during the next year by participating in a live interactive survey during the conference. When asked if the area median price for a single-family home throughout San Diego would stay the same, increase or decrease in 2008, a whopping 96 percent of attendees said decrease.


Center Offers New Course on Real Estate in Mexico	^back to top

The Burnham-Moores Center for Real Estate will begin offering its first-ever educational opportunities related to cross-border real estate this spring through a new course in the center's Certificate in Finance, Investments and Development program. The course, "Introduction and Opportunities in the Mexico Real Estate Market," will be offered as an elective in the continuing education certificate program, beginning May 3 for four weeks. It was developed by a task force comprised of industry executives from both sides of the border.

"We are excited about this first major step toward internationalizing our lifelong learning opportunities," says Mark Riedy, executive director of the center. "We welcome expressions of interest in getting involved in our cross-border initiatives by our friends in San Diego." Riedy said that the center also plans to host a major conference focusing on best practices in real estate in Mexico during the summer of 2008.

The certificate program is a comprehensive, professional education program designed for real estate and building industry professionals who want to enhance their knowledge and skill levels in finance, investments and development; increase job effectiveness; obtain practical and proven techniques from successful industry professionals; broaden contacts with industry peers and other professionals; and increase promotion opportunities.


Burnham-Moores Center Welcomes New Instructor	^back to top

By: Meghan Bokath, Communications Coordinator




	Sherry Tehrani, Esq.

Sherry Tehrani, Esq., will join the Burnham-Moores Center for Real Estate as a new adjunct instructor beginning in the spring semester. Tehrani will begin teaching Principles of Real Estate at the undergraduate level and Real Estate Law for the MBA program.

Tehrani received her bachelor's degree in economics from the University of California, Berkeley and her J.D. and Master of Real Estate Development in a dual degree program from the University of Southern California. During her time in graduate school, Tehrani contributed to the "California Condominium and Planned Development Practice" book published by the Continuing Education of the Bar and worked at the USC Law School Domestic Violence Clinic and the Santa Monica City Attorney's office. Tehrani was also an advocate for victims of child abuse at the Children's Law Center in Monterey Park, Calif., where she took a special interest in motivating young people to make education a priority. Upon completion of graduate school in August of 2004, Tehrani clerked at the Los Angeles County District Attorney's office. Tehrani says these combined experiences uncovered her passion for teaching.

Her exposure to her family's work in real estate influenced her decision to pursue real estate as a specialty, which she did for two years in Los Angeles as a transactional real estate attorney. The daughter of a real estate developer and computer engineer/real estate broker, Tehrani was exposed to the industry at an early age. She often accompanied her father to his development sites as a child, and later helped her mother evaluate properties and redraft documents. It wasn't until law school, however, that she realized she had a knack for the subject. "When I was in law school, I discovered my passion for real estate," she says. "I took a real estate transactions course, and I saw that I had the aptitude as well as the interest in it."

Tehrani says she is excited to join USD's "growing and popular real estate program" and combine her two areas of interest, teaching and real estate. As a new San Diego resident, Tehrani says she is also looking forward to enjoying "a San Diego lifestyle and the best weather in the world."


Alumni Profile MSRE Alum Finds Opportunities in Market Challenges	^back to top

By: Meghan Bokath, Communications Coordinator




Dan Berkus

Three years ago, Dan Berkus was writing papers, studying for finals and doing homework to earn his Master of Science in Real Estate (MSRE) degree at USD. These days, he is wheeling and dealing as an investment manager for Paragon Real Estate Investments, which he joined in 2006.

Berkus (MSRE '05) is currently in the midst of the most ambitious projects of his young career. He is contributing to an endeavor at Paragon to obtain $150 million in joint venture equity from a major institutional group to acquire existing multi-family properties in Hispanic markets throughout the Western United States. Over the next few years, Berkus hopes to leverage that equity into half a billion dollars of multi-family acquisitions for Paragon.

"It's extremely exciting here, considering I head up all acquisitions for Paragon, and we'd be more than doubling our current real estate portfolio," he says. "Paragon would be going from $350 million in holdings to $800 or $900 million." In addition to his acquisitions role at Paragon, Berkus also oversees the entitlement of a 160-acre industrial development project in Otay Mesa.

The joint financing venture comes as a welcome change-of-pace for Berkus, who, in a previous acquisitions role, had been stopped cold by the recent downturn in the market, which has changed markedly since he entered it after graduating in 2005. "My job went from being exciting and dynamic to a standstill, and just not being able to buy anything," he says. "All of a sudden, no deals worked, no landowners wanted to sell. It just made my job so tough."

Berkus believes that experiencing such an extreme dip in the market so early in his career will help him in the long run. "Real estate is a cyclical industry, and I think the earlier you become exposed to the downturn of a cycle, the better understanding you will have of the market," he says. Berkus also remains optimistic about the industry. "With that cycle comes opportunity," he says. "Even during the down times, there are still opportunities to make a lot of money."

In addition to his work at Paragon, Berkus is also actively involved in the USD Real Estate Alumni Association as the co-founder and current vice-chair of the organization. Over the past two years, he has seen the association's numbers swell to over 100 members, and he has been involved in planning the association's social networking, fundraising and educational events. Berkus believes networking connections to be a priceless commodity in the real estate industry and plans to tap into his USD connections to help him in the sourcing of multi-family deals over the next few years.


Ryan Companies Named NAIOP's National Developer of the Year	^back to top

Congratulations to the Ryan Companies, which was named NAIOP's 2007 National Developer of the Year, a prestigious industry honor.

Presented annually to one member-developer company that best exemplifies leadership and innovation in the commercial real estate industry, the Developer of the Year award is determined by a five-member selection committee of industry peers that uses six criteria to evaluate entries: industry and business leadership; involvement in NAIOP; quality of products and services; financial consistency and stability; ability to adapt to market conditions; and social consciousness.

Ryan is a leading national commercial integrated design-builder, developer and real estate manager headquartered in Minneapolis. The firm has made a major internal commitment to integrating sustainable real estate throughout its staff's work. The company has offices in nine cities, including San Diego, where Matt Reid serves as vice president of development. Reid is an active member of the Burnham-Moores Center's Policy Advisory Board Commercial Real Estate Committee.


In the News	^back to top

Norm Miller, director of academic programs, wrote the article, "Reality check for housing: Is it an investment or consumption?" which appeared in the special real estate section of The Daily Transcript Dec. 12. Miller also wrote the article, "Commercial Real Estate Mentors Needed," which appeared in the same special section.

The Burnham-Moores Center for Real Estate's Eighth Annual Residential Real Estate Conference: Outlook 2008 was covered in the Dec. 13 editions of the San Diego Union-Tribune and the North County Times.

Alan Gin, an affiliated faculty member of the Burnham-Moores Center, was quoted on San Diego's housing slump in the Dec. 13 edition of the San Diego Union-Tribune.

Mark Riedy, executive director, appeared in a segment on the San Diego housing prices slump on KUSI News Dec. 18.

John Ferber, director of commercial real estate, and Lauren Lukens, student and alumni services manager, were interviewed on real estate industry mentorship by Mandy Jackson of the California Real Estate Journal.

Calendar


SAVE THE DATES . . .	^back to top

12th Annual Real Estate Conference
· Tuesday, January 22, 2008, 7:30 a.m. to Noon, San Diego Marriott Hotel & Marina
· Register Online

Legal Aspects of Real Estate
· Classes start Wednesday, Feb. 6, 2008
· To register, contact Jodi Waterhouse, or register online
For more information about the Certificate in Real Estate Finance, Investments and Development, go here

Visit us online at www.USDRealEstate.com

The Burnham-Moores Center for Real Estate is committed to delivering outstanding education, industry outreach, career placement, and research services to advance socially responsible leadership in real estate.

University of San Diego, 5998 Alcal� Park, San Diego, CA 92110-2492