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By J.C. Hay ’19 and Mandy Yeung ’18
On November 30th, 2017, the Paul Millstein Center hosted the latest edition of its Real Estate Career Series, which highlights different careers in real estate by featuring panels led by prominent industry leaders.
The panel was moderated by Columbia Business School Professor, and President of the Minot Group, Brian Lancaster, and focused on real estate debt. The panel featured four leading practitioners:
Catherin Chen '10, Principal, Apollo Global Real Estate
Jacob Feingold '14, VP of Acquisitions, Canyon Partners
Mark Levine, Director, Securitized Assets Investment Team, BlackRock
Jonathan More '09, Managing Director, Mission Capital Advisors
Professor Lancaster kicked off the session with a discussion on regulation in the real estate business and the potential for deregulation of the market under President Trump’s administration. The common opinion of the panelists was that the increased regulation has improved underwriting quality and the quality of loans made by banks. It has also resulted in paring back of the loan-to-values for which banks are comfortable extending these loans. This has spurred alternative lenders to fill the resulting lending gap. In fact, just over the last two years, we have seen the number of real estate debt funds increased by over 50%.
The conversation then transitioned to a discussion of where we are in the commercial real estate cycle today. While most of the panelists agreed that we are in the later stage of the cycle, they also agreed that there weren’t any obvious warning signs to indicate that we are nearing the end of the cycle any time soon. While cap rates are very low in many markets, we still see a much wider spread over treasuries than in 2007- when the spread actually inverted. Low cap rates have led to higher property prices, but the panelists said there is still a lot of money from investors in the market to be put to work; indicating that we could continue to see upward movement in property prices. It was pointed out by the panelists, however, that investors are now providing a good amount of pushback and/or selectivity in types of deals and properties they want to participate in. Additionally, at least one panelist believed that the last couple of years of suppressed growth in the United States may mean that this cycle might be more of an “18-inning game” instead of the traditional 9-innings.
The panel then turned its focus to a discussion on retail. The consensus among the group was that retail is going to continue to be challenging going forward. There was a feeling by the participants that the United States is over-retailed and that we could see a reduction of 20-30% in regional shopping malls over the next 5-10 years as there is an increasing focus on regional demographics. This feeling has manifested itself in the CMBS markets, as one of the practitioners pointed out, banks are being even more cautious about the percentages of retail in their CMBS deals. Deals with too high of a percentage of retail have struggled to be profitable offerings for banks.
Finally, the panel provided the attendees with some career advice for those looking to get into the real estate debt business:
- Be flexible – do something that might not be your immediate dream job, if it helps you develop the right skills for your dream job.
- Real estate is a very long business – need to get as many great experiences as possible to build a successful career over the long term.
- Try to see as many deals as possible – repetition and exposure is key to learning how to underwrite credit.
- Network, network, network.
On behalf of the Paul Milstein Center for Real Estate and the Real Estate Association at Columbia Business School, many thanks to Professor Lancaster and the esteemed panel of industry experts for taking time out of their busy schedules to engage with the packed room of first and second year MBA students.
J.C. Hay ’19 is the AVP of Alumni and Mentorship for the Real Estate Association. Prior to Columbia Business School, he spent 7 years at JPMorgan’s Private Bank, where he advised high net worth families on their investment, credit and banking needs. He graduated from the College of William and Mary with a degree in Economics.
Mandy Yeung ’18 received her Bachelor’s degree in Civil Engineering from the University of Southern California in 2010. Prior to Columbia Business School, she spent 5 years as a Project Engineer at Turner Construction. This past summer, Mandy worked in the real estate development group of DDG Partners, a vertically integrated real estate investment company in NYC.