20/20 Investor Summit 2015

National Association of Real Estate Investment Managers

NAREIM 20/20 Investor Summit June 2015

What is Real Estate Investment Management Becoming? “One does not discover new lands without consenting to lose sight of the shore for a very long time.” – André Gide

The real estate investment management industry stands at an interesting point in its history. After a couple of decades’ success putting the aggregated capital of pension plans, endowments, family offices & sovereign wealth funds to work in commercial real estate investments, many of the assumptions that established this sector are evolving. The economy, capital, risks, tenants, technology, and process are moving in new and unfamiliar ways. This may transform real estate investment management…but it is still difficult to clearly understand what we are about to become. As André Gide observed so eloquently, we will discover it—but only if we dare to sail away of our assumptions. Amidst this time of uncertainty, change, and commensurate anxiety, the 2015 NAREIM 20/20 Investor Summit engaged over fifty thought leaders from across real estate and investment management to engage in four discussions over the span of twenty-four hours. Whether considering the state of the market, risk, operations or new technology, each discussion was designed to provoke thought and introduce new ideas about where we are going and how best to lead the future of real estate investment management.

National Association of Real Estate Investment Managers

Discussion One:

State of the Market – Real Estate, Capital, and the Economy. Where are we, where are we going, and what might happen in the second half of 2015? It would be difficult to argue that the first half of 2015 was anything other than a good time for real estate investors. Many markets have eclipsed 2007 values and velocity, while an unprecedented level of capital is chasing a not-unlimited pool of available real estate. These are “good times” for real estate—so why is the emotional pitch at every gathering of investors so anxious? “Is anyone else feeling a little nervous?”

Jon Dishell American Real Estate Partners

What are we worried about? Jon Dishell of American Real Estate Partners started the discussion off with a few industry stress points. The top of everyone’s fears may very well be the prices assets are trading at now—in some markets at historically high levels. He pointed out that there have been five Manhattan office buildings in 2015 that have traded from more than a billion dollars. Dishell asked the room, “Is anyone else feeling a little nervous?” With capital expectations so high, the asset level realities eventually have to exert some sobering restraint. According to Dishell:

“The economy continues to move in a Dickensian fashion whereby the “best of times” is represented by the equities markets’ continual rise virtually irrespective of a “worst of times” contrast in the form of anemic financial, job, income and, most relevant for us, rent growth. Real estate continues to be a darling for domestic and international capital, both institutional and private, with equity continuing to flow into the asset class unabated by the obvious concerns about the duration of this cycle, and qualifying where we are in it, interest rates and the timing of their inevitable rise, and the aforementioned lack of real rent growth in most submarkets and product types. These issues pose for us the questions of how to best underwrite, structure and finance our acquisitions—and time our dispositions—to maximize the interests of our investor-partners and ourselves, while at the same time continue to be as competitive as possible, all while attempting to make the fewest mistakes.”

Dishell’s thoughts hung in the air as Spencer Levy, head of Americas Research for CBRE stood up to lead a discussion of our real estate markets and the changing prospects for the future. “I believe I disagree with one of the sources of many people’s anxiety,” Levy declared, “at this point it’s still possible for cap rates to get lower—and they should. Today there are so many core assets owned by “permanent capital—investors who won’t sell assets anytime soon—that there is a persistent and pervasive scarcity of core assets. The cost for core is high, and may even rise because of that scarcity—perhaps even despite a rise in interest rates.”

Chatham Financial Corporation

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Levy’s view of the US commercial real estate landscape in general is very strong. As he put it, “Our GDP growth looks better than everyone else in western world with an expected 2.5% growth rate. Europe may hit 2% growth this year. Fundamentally the picture is good.” According to Levy, there are other issues we should look at as the problems of the next few years are not likely to come from the usual suspects. Here’s what he’s watching now:

“I believe I disagree with one of the sources of many people’s anxiety. At this point it’s still possible for cap rates to get lower— and they should.”

Spencer Levy CBRE

1.  China may be headed to a hard landing thanks to a slowdown in growth and a terrible governmental debt picture—worse even than Japan. From a real estate perspective, they clearly have a problem with over-building. At the same time, rising consumer spending is taking money out of China—“What happens if the personal savings rate in China (now at 40%) becomes more like the US savings rate of 5%?” 2.  Labor Shortages in the U.S. Believe it or not, there seems to be a growing shortage of workers for traditional blue-collar jobs. What happens when there isn’t enough truck drivers, factory, and construction workers? We are starting to see wage increases—and that is likely to continue. Construction materials aren’t going down in price either. 3.  Interest Rates: Rise or Fall? Despite the promise of rising interest rates, it hasn’t happened yet. But even if they do rise in the near term, there’s a good chance it will have limited impact. During the “taper tantrum” last year, despite volatility in the markets there was little impact on cap rates…perhaps a little movement in net lease and multifamily but for the most part it was minimal. Could it be that there is more equity and less leverage in the market today—dampening the potential impact from any 100 basis point movement in rates? Luxury Retail Threatened: The US import-export ratio is out of balance. The amount of 4.  imports are up 33% this year with exports down 22% on top of the trade imbalance. At the same time, the Chinese are pulling back on luxury spending. According to Levy, “It is difficult to imagine luxury retail continuing to do well in the emerging environment.”

5. Core Scarcity: Investors are getting forced into secondary assets in secondary markets. Debt in those markets is the same low cost as anywhere else, and on a cash-on-cash basis, those investments start to make real sense. The danger, of course, is in treating secondary markets as similar to core—and they are most definitely not. 6.  Changing Office User Demands: It’s not just square feet anymore—but what kind of square feet are you able to provide. The good news is that there may be room for a higher per square foot rent—if one provides for tenants actual needs, not just what we think it should be. A survey of the Fortune 50 companies asked what their top 8 issues were. Items 1 through 6 were about talent, workplace, change management, and employee happiness. Number 7 was cost of occupancy. As Levy pointed out, “the top 50 companies don’t really care what the cost of their space is—as long as they can attract and retain the right talent.” This assertion was not universally accepted by all in attendance, however. A few comments included: “That may be the case with a high profile headquarters office, but what happens to the rest of a company’s footprint?” “I’m an advocate of open office format—but what about the cost? It may cost less per employee but the overall cost is more. How many companies beyond the Fortune 50 will bear that kind of increase?” Open office format may be a bit more nuanced than a binary either/or discussion. Robert Byron of Blue Vista Capital Partners pointed out, “When we surveyed the millennials in our firm, we were surprised to discover that they wanted more private space.” This certainly counters the prevailing opinions of millennial “experts”. “Open office is not for everybody, but perhaps it needs to be part of your plan. Especially when you get above 65 people, a need for normal office may emerge. As you start to scale, you revert to an ‘old school’ design.” What is the right balance? Which office investments are better prepared for the evolving office environment? These questions may not be resolved for some time to come.

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Lucy Fletcher, Managing Director of JLL’s International Capital Group and Americas Capital Markets, had yet another area of concern that she is watching, the rise of global capital in the US and its impact on domestic investors. Despite any friction caused by FIRPTA, capital from China, Canada, Korea and Australia is more than replacing any pullback of global oil based capital from the Middle East or Norway. To a great extent, there is a shortage of institutional quality investments in these investment capital rich countries and it needs to be placed… preferably in a less volatile and less liquid asset class like real estate.

“If you consider China all by itself, you can see their fast growing impact on markets. In 2012, they put $3.39 billion into global real estate. In 2014, that number grew $18.3 billion and halfway through 2015, they may have already approached that number.”

Lucy Fletcher JLL

As Fletcher pointed out, “If you consider China all by itself, you can see their fast growing impact on markets. In 2012, they put $3.39 billion into global real estate. In 2014, that number grew $18.3 billion and halfway through 2015, they may have already approached that number. 9 to 11% of U.S. investments are now made by non-US investors. This is definitely affecting pricing, especially in core gateway markets—foreign investors pay an average 20% premium over domestic bidders.” But what would happen if FIRPTA went away? There was no consensus, but Fletcher pointed out, “The non-US investor is holding for a longer term, keeping new supply low and driving cap rates down in gateway markets. I would argue that a removal of FIRPTA would drive those trends farther.” Essentially, the foreign investor is underwriting their investments differently than their domestic competition. They are not investing in order to trade for 7 years—but rather for 20 years or longer. They are not looking to make money—but rather, preserve or lose less of it than they would if they didn’t invest in US assets. Fortunately, 90% of acquisitions go to domestic investors—but the extra-long time horizons of the 10% inevitably force all of us to examine our assumptions. Real estate, appropriately, is usually described as a local business, but there is no way to deny that those localities are getting buffeted by global forces. Is that cause enough for anxiety?

Chatham Financial Corporation

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Discussion Two:

Risks Considered at the Fund and Asset Level With the room of investment management leaders now focused on the many challenges and opportunities presented by a thriving economy, an abundance of competitive capital, and changing fundamental dynamics, Peter DiCorpo of CBRE Global Investors initiated a second discussion. “Risk may be the most talked about issue in our business, but it is also perhaps the least understood. Many of our discussions recently have been and continue to be around how we define risk, how we quantify it, and how we manage it. The answers to questions raised in these discussions are both important to find and incredibly unclear.” “It wasn’t long ago when securing capital was a real challenge and it may not be too long before it’s hard to come by again. So the question for many fund managers logically becomes, ‘how can we hold on to the capital longer?’”

Peter DiCorpo CBRE Global Investors

DiCorpo reflected a bit on evolving fund strategies to manage the changing capital and real estate landscapes, “It wasn’t long ago when securing capital was a real challenge and it may not be too long before it’s hard to come by again. So the question for many fund managers logically becomes, ‘how can we hold on to the capital longer?’ Some of us have bought great assets that will perform well beyond the term of a typical closed ended fund—better than we could replicate by buying another asset at today’s pricing. Why not structure for the long-term hold? That’s where the open ended fund comes in—but with a different structure, there comes some very real risks that have to be dealt with.” Jeff Kiley and Paul Ryan, partners at PwC’s real estate group spent some time discussing, open-ended funds from a tax and accounting perspective. The open fund structure has real appeal not just to the investment managers, but to investors, but the nature of open fund structures, plus the diversity of investors participating, from foundations and pensions to group trusts, individuals, family offices and non-US investors creates complexity and executional risk. According to Kiley, “Complex structures always come about for a good reason, but every level of complexity you add creates more opportunities for things to go wrong.” Three things in particular that Kiley and Ryan have observed that create challenges include: 1. Charging a variable management fee rate based on the size of your investment in a fund may make sense as an incentive to attract large fund investors—but it creates challenges that need to be addressed up front that range from carefully crafted unit value calculations to tax structuring challenges when employing REITs in the fund structure.

“Complex structures always come about for a good reason, but every level of complexity you add creates more opportunities for things to go wrong.”

Jeff Kiley PwC

Chatham Financial Corporation

2. What happens when a fund’s assets appreciate before a new investor comes in—but is recognized soon thereafter? Does the new investor have to pay taxes on that gain? Ryan cautioned, “Make sure that all that stuff gets well thought out from beginning to end, how it’s going to trade, tax implications, etc.” 3. Non-US investors like being able to invest in a fund with multiple investors avoiding FIRPTA issues and be able to redeem out of that fund without paying tax. But what happens if during the life of that fund and the span of their investments you sell individual assets? Any gain is taxable to your investors—making things more complex for anyone outside the US—requiring all sorts of blocks and feeder structures. Ryan pointed out, “The structure we’re seeing, and of course it’s not universal for every deal—if it’s a large asset core, and if you have more than 50% of the capital from US investors, it still makes sense to create a single asset REIT.”

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Open-end fund structures have quite a bit of advantages, and may make sense for the market today and in the next cycle, but it is essential to think through the mechanics of the investors’ involvement in great detail. This is a more complex structure by nature than the typical closedended fund—and that complexity adds significant execution risk. Another area of risk emerging for open-ended funds is that of debt valuation. According to Matt Henry, Managing Director at Chatham Financial, “Investors do not want to simply see debt marked at par; they care about debt portfolio’s maturity ladder, its leverage level and the weighted average interest rate.”

Matt Henry Chatham Financial

“As open-ended fund investors become more sophisticated, they have more questions on a firm’s debt valuation framework. Investors do not want to simply see debt marked at par; they care about debt portfolio’s maturity ladder, its leverage level and the weighted average interest rate. As investors go in and out of a fund based on the net asset valuation, the range of interpretations of debts valuation methodologies can impact an investor’s returns. Historically, firms used standard bond math to value their real estate debt, but increasingly when we observe market transactions, debt values don’t match the bond math model.”

Without a well-defined industry standard, it is entirely possible to decide on the valuation that is most beneficial—but not necessarily the most accurate. As a group, the industry would like standardization and seems to be moving towards a standard that debt is worth whatever someone willing to pay for it. In an environment where investors can move in and out of a fund—and where daily valuations are expected—the valuation standards that served the public companies and closed-ended world of yesterday may not be sufficient. Calculating value is a very real risk for managers if it is not handled clearly, transparently and accurately. Whatever the method, investors will continue to demand valuations that reflect an agreed to “reality”. Of course, risks do not only dwell at the fund level—perhaps the greatest concerns for any real estate investor lie at the asset level. According to Sean Bezark, a partner with Greenberg Traurig, “Significant risk arises when the amount of your investment is not related to the environmental risk. It is possible to lose far more money than the asset value itself. Too few investors pay enough attention to this area, and when it goes wrong, there can be catastrophic outcomes.” Bezark told the story of an acquisition of a shopping center with a dry cleaner on the site. There was some contamination, but it was estimated by their environmental vendor that it would cost $300,000 to clean up the site. Based on that assessment, the investors purchased the asset for $30 million. However, contamination was not contained, and the liability for clean up to the new investor ended up becoming $110 million. Bezark explained, “What many don’t realize is that most environmental vendor proposals and contracts limit any liability to the cost of the job. In this case, the investor had purchased a $110 million liability for $30 million and there was no recourse.” How many investors look closely at the environmental vendor proposals? How many problems could be ameliorated by asking for higher liability limits?

Chatham Financial Corporation

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With awareness of environmental threats only increasing, the liability of property owners for vapor intrusion, contaminated ground water, and other toxic problems seems to be almost limitless, but there are things that Bezark recommends that every investment team do in addition to reading the environmental vendor contracts: 1.  Don’t skimp on due diligence. …even in a competitive market. When acquisition teams worry about the risk of losing a deal, they cut corners on environmental due diligence. Don’t skimp even if it’s an asset that’s been traded several times…just because it traded doesn’t guarantee that all problems have been discovered and examined. “Significant risk arises when the amount of your investment is not related to the environmental risk.”

Sean Bezark Greenberg Traurig

2.  Re-do environmental due diligence regularly. Just because you found no issues 2 years ago doesn’t mean you are safe. New issues arise sometimes just because inspectors have better technology or new regulations have decreed that something that was deemed harmless two years ago is now an issue. Don’t take environmental insurance for granted. Quite often, investors are not getting 3.  the protections they think they are paying for. Never sign a proposal without reading and negotiating it. Everything should be clearly stated in writing and whether the insurance is for $50,000 or many times that—always negotiate. Never lower your standards and don’t put your head in the sand. According to Bezark, 4.  “I’ve seen so many people just use older reports or trust that everything is in order. You can work to find things or work to NOT find things. A creative seller can design a report to NOT find things. Don’t cut corners.”

5. Use insurance. 5-10 years ago it was too expensive. Now extremely useful. You can ensure the entire fund and assets that come in later or release others. It’s not just risk transfer…but also market expense…make your business and lenders happy. 6.  Remember having no further action letters on file isn’t a full-fledged failsafe. Some believe that if you have ‘No further action letters’ in your file, you are protected. That is not always the case. For example, with vapor intrusion, many states have identified new problems with it, so they are re-opening NFR letter cases. Take environmental risk seriously. It matters. A lot. One final risk discussed at the 20/20 Investor Summit related to a fundamental aspect of the real estate business—tenants. As Peter DiCorpo put it, “all of us in the last decade have seen the impact of a single large tenant bankruptcy on the value of an asset or even a whole portfolio. Can we do a better job of foreseeing, understanding, and perhaps even mitigating that very real threat to a real estate business of any kind?”

Chatham Financial Corporation

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Narendra Srivatsa, Director of Product Development at Verisk Commercial Real Estate led a discussion with the group about how we might change our use of data tools to better understand the threats to rental income. According to Srivatsa, too much of our decision making is driven by the deal itself and we are not availing ourselves of data tools that can lead to better decisions. “Retail and office is largely occupied by private companies. 86% of companies are private and they can all go belly-up without warning. We’ve all seen this many times and it affects value and income, but it is possible to understand, track and predict how well a company is doing if you know where to look.”

“There is more data available than most people realize, and it can be used to create an overall risk score for tenancy to be monitored in real time.”

Narendra Srivatsa Verisk Commercial Real Estate

For example, it is important to understand the stability of a tenant’s income. Even if they are private, it is possible to look at data that tells us how well they are doing. For example, if we can gain access to a firm’s purchasing information, we can see whenever they are increasing or decreasing their spending…a very good indicator of overall stability of income. Rent checks tend to be the last thing a floundering company will stop paying, by the time they stop paying rent, the end is certainly close at hand. But by monitoring all payment records through payment and buying scores, we can project a company’s demise as much as a year in advance. A year’s advance warning of a tenant problem can be invaluable. Data tools can go beyond commercial and even help with multi-family tenant risk. It’s possible to aggregate data such as age profiles, and debt/income ratios and even credit scores at an address level. If you knew the credit rating of an entire apartment building, how would that influence acquisitions or dispositions? According to Srivatsa, “There is more data available than most people realize, and it can be used to create an overall risk score for tenancy to be monitored in real time. We should be using data to discover what the true risks of this business are, whether we are looking the right way, and how we can make our assets more successful.” “There is data out there. Let’s use it correctly.” At the end of the risk discussion, Peter DiCorpo reflected, “there’s a lot here to think about here. Right now risk is coming into focus for many of us—but so is the pressure of competition. We have a considerable challenge navigating those two opposed pressures, especially in the months ahead.”

Chatham Financial Corporation

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Discussion Three:

Operations – Are we built the way we should be? Chris McEldowney, Managing Director at NY Life Real Estate Investors started the third discussion by reflecting on outsourcing and investment management. “In real estate investment management, we are all about outsourcing: property management, leasing, construction, legal, human resources, compliance, appraisals, IT, you name it. But there’s plenty of reason for that.” “There is another area for outsourcing that we should all take some time to consider, especially as the industry is becoming more complex: accounting and fund reporting.” “There is another area for outsourcing that we should all take some time to consider, especially as the industry is becoming more complex: accounting and fund reporting.”

Chris McEldowney NY Life Real Estate

John D’Angelo, Managing Director with Real Foundations agreed. He asked the group think through outsourcing as a strategy—and provided a framework for how to evaluate what is core and strategic vs. non-core but necessary. “There is a broad spectrum of how investment managers are organizing themselves to do the work. Some of you are pared down to the absolute minimum, with few people inside the company that do nothing other than raise capital, determine strategy, acquire and manage assets. Everyone else is outsourced.” “At the other end are companies that have every service, every system, every process in house. But very quickly, the question becomes, ‘How do you provide career paths in functions that really aren’t core to driving returns?’ Are you going to attract people that are just OK, and do you really want to do that? Is your in-house team able to keep up with new technologies, new approaches and new requirements? How well can your team deal with a dramatic change in scale—perhaps the start up a new fund, or the closing down of an old one.” “What surprises me is how seldom anyone takes a step back and think about what is really essential to running a business. We need to ask the question: what are the critical functions?” D’Angelo shared an exercise with each table of executives to do just that. The responses were varied, but they allowed all the participants to think through and question whatever assumptions they might have had about how to best run their business. Some notable initial comments from that discussion included: “Outsourcing can be a way to move a functional area to a place where they have expertise, and proves a different level of efficiency. The danger for small firms is that everybody is a control freak, and efficiently conceding that control to someone outside is hard.”

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“If you are a small shop, outsourcing accounting and reporting is a necessity because you can’t afford it. If you can do it though, does that give you a best in class capability?” “If you have the capability for reporting and accounting in the word of increased SEC scrutiny, is it a value-add? Is it as a marketable asset? Or could it actually be a risk to do it yourself?” Amos Rogers and Barry Johnson, Managing Directors at State Street Corporation, shared their thoughts on the opportunity presented by outsourcing and why a firm should consider it. Specifically, they pointed out four reasons: “At the end of the day, you don’t do this for cost reduction—you do it to create real capability.”

Barry Johnson State Street

• Scalability: The modern investment management firm requires more scalability than ever before with funds winding down but never going away completely from a reporting standpoint and new funds starting up and growing on a regular basis. How can you staff a need that changes so dramatically?

• Talent: The best accounting and reporting talent you need does not have a future inside an investment management firm—They won’t have access to their peers, will not be rewarded the same way and will not have many opportunities to advance their career inside your firm. Does this incentivize the right kind of talent for a best-in-class platform?



• New product strategies: When you branch out into a new product, strategy or even capital source, you are adding a high degree of accounting and reporting complexity. If you are entering open-ended funds as we discussed earlier—how are your existing people and technology platform going to adjust to the exponentially greater demands?



• Technology Platform: This is going to cost a lot to do it right—and the capital expenditures will not end as there will be constant refinement and upgrading required in the future. Is this the place for an investment management firm to spend their capital? Can one firm ever invest enough to stay ahead?

Some wondered if there was any cost savings to be had by outsourcing. Johnson answered, “It depends. If you are a new fund manager, it’s less about savings and more about cost avoidance. If you are an existing fund, and the outsourcer is lifting out your team, there is typically no short term savings, but if efficiencies are created through the expanded platform, there may be some immediate savings. But at the end of the day, you don’t do this for cost reduction—you do it to create real capability.” Some asked if the cost of outsourced accounting might be passed on to the fund investors. According to Rogers, “This is still being worked out. Certainly on an existing closed ended fund there is little opportunity to add another fee. With an existing open-ended funds there have been different approaches. Some keep it as a manager cost, some charge the fund. Cost may be an investment manager’s concern but the key driver of outsourcing is coming from the demands of the investors. They want ever more transparency and want more and more real time information. The traditional 90 day waiting period is long gone. Final share prices and flash reports are expected in 3-5 business days at the end of the quarter. Investment management platforms are being pushed to the limit, and the demands for more will not diminish. Investment management firms simply need more accounting fire power. However, throwing more bodies isn’t a solution—neither is passing the buck onto a third-party. As both Rogers and Johnson pointed out, however, outsourcing the work does not mean you can do without a strong oversight model. According to Johnson, “You can outsource the work, but not the fiduciary obligation.” Management firms need to have key people in place that interact directly with the outsourced team.

Chatham Financial Corporation

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That line of thought was expanded upon by Brad Peterson, a partner at Mayer Brown, who spoke more in detail about the risks of outsourcing and the importance of learning to manage in this different environment. Referring to an industry that has had far more experience with outsourcing, Peterson told the story about how technology became an outsourced service 50 years ago. “A fellow by the name of Ross Perot looked how companies handled data when he worked as a salesman at IBM in 1962 and thought, ‘I should be able to do better’. He formed his own company, Electronic Data Systems (EDS) and was rejected by 77 companies to take over their IT. The federal government, however, hired him to computerize Medicare Records and by 1968 EDS went public and in days went from $16 a share to $160. Outsourcing of IT had officially begun.” “Fortunately, in some ways real estate is late to the outsourcing game. That is good news, because we can learn from a lot of the mistakes that have already been made by others.”

Brad Peterson Mayer Brown

Outsourcing, however, was not easy to master, and there were quite a few lessons learned by Mr. Perot’s clients in those early days: • Loss of Control: With IT, there used to be data centers where one could go down the hall and talk to someone about what was going on. It was possible to know the person managing the data, to hear what was going on, and ultimately, to manage and control them. The moment one outsources, control cannot be exerted through relationships and must exert control through contracts.

• Potential loss of business due to the loss of control and unexpected business events.



• Without the outsourcer, there is trouble People learned that if Ross Perot disappeared, their business followed.



• Leaving the outsourcer if it doesn’t work out is very difficult.

“…but it was all ok, because Ross is better at IT than you. His people are motivated and doing a good job for you. But that’s a lot of trusting Ross Perot if you don’t have an appropriate oversight process,” observed Peterson. For many, the process of outsourcing IT went well, and soon businesses began to outsource other processes. But there continued to be challenges:

• Data and Confidentiality Risk—who is looking at the data and what happens if it leaks?

• Compliance —is the outsourcer performing according to regulations?

• Outsourcer Performance —is the outsourcer actually performing the process at the level I require. What are they doing all day, anyway?

“Fortunately, in some ways real estate is late to the outsourcing game. That is good news, because we can learn from a lot of the mistakes that have already been made by others,” noted Peterson. He pointed out three key areas for consideration when talking outsourcing:

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1.  Selection: there can be good people, good technology and no competency. You can’t discover competency from the brochure. But, there are consultants that can help you vet them out. 2.  Keys to Making the Contract Work: Commitments, options, incentives and understanding.

a. C  ommitment to provide services you need, at quality levels that you find acceptable, at a reasonable price, in compliance with your legal and contractual obligations.



b. O  ptions to increase, decrease and eliminate services when you need to do it at a reasonable price.

“You want to retain Judgment. Where there is any judgment c. Incentives: construct incentives for the outsourcer to put your priorities first. Whether it’s incentives for low error rates, for investor data privacy, for reporting, for speed—make call to be made—you want sure your priorities are their priorities with incentives. Tie your success to their success. to make sure you didn’t outsource that.” d. Understanding: Make sure the contract clearly explains how they will perform

John D’Angelo RealFoundations

the work you require. Oversight: Your business process is still a mission critical function even though you 3.  have outsourced it. Always consider spending 5-10% of the contract internally to watch, communicate with and manage the outsourcer. A recent Vantage Partners Survey estimates that 30% of value lost in outsourcing is due to inadequate supplier management. Somewhere around 5–10% of the team you had in place previously should continue to work inside your firm—and perform this important oversight function.

D’Angelo contributed to the oversight discussion by explaining, “you want to retain judgment. When there is any judgement call to be made—you want to make sure you didn’t outsource that.” Johnson agreed with D’Angelo, “You have to make sure you meet the people that are doing the work—not just the sales team or executives. Make sure they have the skills and experience to deliver on what is promised. Make sure they understand you as well.” Real estate investment managers will all have to examine their processes in the next few years and many of them will decide to outsource a variety of functions. The takeaways from this summit suggest that we can learn from other industries’ experience, and we can improve capabilities and communications with clients, but there are no easy paths to successful outsourcing. Those firms that methodically work through the issues discussed above will likely have a far better experience than those who don’t.

Chatham Financial Corporation

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Discussion Four:

New Tech, New Approaches, New Opportunities Tom Goodwin, an executive at Havas Media in an essay he published on March 3rd in Techcrunch.com, wrote, “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.” Disruptive businesses and technologies are upending long held assumptions about how business succeed—and in the process are laying waste to existing businesses and not using a lot of real estate. How worried should we be? “What we view as potential disruption to our industry today may or may not happen, but we have to keep asking what could potentially change our business.”

Christopher Merrill Harrison Street Real Estate Capital

How long before someone disrupts how we run our businesses? Christopher Merrill, CEO of Harrison Street Real Estate Capital introduced the final set of discussions by commenting, “what we view as potential disruption to our industry today may or may not happen, but we have to keep asking what could potentially change our business. An investor once asked me, ‘Tell me what you don’t want to read in the paper tomorrow morning.’” There’s any number of technologies and change that could disrupt real estate. At the 20/20 Investor Summit, we examined just a few. Marc Bourdages, Technical Director at Partner Engineering & Science started off by examining the risks and opportunities presented by a technology not often directly associated with real estate, but could have profound effects on every investment manager’s portfolio over the next ten years: driverless cars. “Driverless cars are coming faster than many think,” declared Bourdages, “For the most part, the technology is already here. If you are driving a 2014 Mercedes S Class or Tesla Model S— you may actually already have semi- or fully-autonomous vehicle capability. Elon Musk of Tesla has announced that full autonomous driving is only a software upgrade away, while Google has logged over a million miles in their driverless cars. The technology is here—the only question is how long before it is allowed and adopted by most people.” According to Bourdages, “Most experts are predicting mass adoption of driverless cars within the next 10 to 15 years.” So what does that have to do with real estate?

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Just as the development of low cost personal cars and the building of highways in the mid-20th century dramatically reshaped the real estate industry, with dramatic changes in use and valuations for urban, suburban and exurban real estate, autonomous vehicles have a similar potential to change real estate in this century. Three implications were considered and discussed:

“Most experts are predicting mass adoption of driverless cars within the next 10 to 15 years. So what does that have to do with real estate?”

Marc Bourdages Partner Engineering & Science

Parking. The number of available parking stalls will no longer be a critical component •  to development criteria. Anyone who uses an autonomous vehicle won’t require onsite parking—as the car can simply drop them off, then drive off to a remote location or even pick up other passengers as part of a non-exclusive, mass transportation system. Private car ownership will be viewed as optional, even in car-centric locations like Los Angeles. An Uber service without drivers could prove to be more convenient and cost effective than private auto ownership in most urban and suburban locations. Bourdages asked, “Will people embrace this kind of change? Well, given that Uber has grown to a $40 billion dollar valuation in less than six years, and that (according to Certify) an average of 46 percent of all total paid car rides in major U.S. markets in the first quarter of this year were made through Uber, there is a good chance that they will.” Enormous redevelopment opportunities would be presented from the conversion of permanently obsolete parking spaces everywhere.

•  Tenancy. An estimated 10 million jobs are directly associated with auto industry. How many square feet of space would be negatively impacted by the disruption of this industry sector? Do you have tenants at risk? •  Urban/Suburban. Driverless cars will likely impact urban and suburban migration because it will change what we perceive as viable areas to live and work. The commute could be included as a productive part of the workday. Neighborhoods that don’t work well today due to proximity to urban centers or a lack of parking or mass transit could benefit. Planned ‘satellite’ communities predicated on access to abundant parking and mass public transit may be reinvented as independent, higher density urban centers, along with the addition of all the amenities required to support this higher density. As investment timelines intersect with the timelines of driverless car implementations, this is a disruption that deserves attention—and consideration for future investments. Changes are not always as dramatic or futuristic as cars that drive themselves. The technologies we use every day to run investment management firms are changing as well. Greg Fuhrman, a national sales executive at Yardi pointed out, “In real estate we’ve been stressing Excel to the limit. Can we do better than that?” “Ten years ago there was no other option—and now whole businesses are run through an awkward combination of spreadsheets on individual desktops and massive teams of people keeping them up to date. The potential now is there to automate much of the tracking and reporting through a database system.” According to Fuhrman, as firms implement these kinds of systems, not only are they able to spend fewer resources just keeping it together, they are able to use the data as business intelligence, to make better decisions, and to find better opportunities. He estimates that 10% to 15% of firms have deployed some automation solution,

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It is a challenge to implement these kinds of solutions. One participant mentioned that it took his firm 3 years to decide to go forward with this and a year to implement it—in great part because there was a lot of old data that had to be moved into the system. But it’s worth doing if we consider that Excel can be dysfunctional. Every fund has any number of manual spreadsheets that have to be updated every time there’s a change. The opportunities for error increase exponentially with each new spreadsheet—and oversight of calculations, or data input and maintenance, and data security are monumental tasks. How much longer before database automation is a requirement? But it’s not just your accounting that may have to change. New firms that are focused on “In real estate we’ve been the leasing and asset management functions of our business are starting to create new and stressing Excel to the limit. Can we do better than that?” interesting tools. Nick Romito & Ryan Masiello, Co-Founders of VTS (formerly View the Space), Greg Fuhrman Yardi

spent some time with the group to discuss how their approach to data management can help transform companies as well. Over 5,000 owners and brokers are using the VTS system to track 1.2 Billion square feet of real estate. In just a few years, this system is having a major impact on how data on leasing is kept, acquired, managed, and used—and they are creating some interesting efficiencies. Romito and Masiello used examples of other technologies to explain why this database has been so effective.

Efficiency – just like Uber uses information to help drivers use their time more efficiently—

this system delivers information to 3rd party teams or asset brokers so that, instead of spending their time pulling information together, they are able to quickly collect and deliver the reporting they need to do their jobs, and report to you. “When we started two years ago, it would take brokers as much as 20 days to update spreadsheets, now it’s less than a day on average,” noted Masiello.  Health – just like FitBit, where you are able to track health metrics all day, at any given point in time, with a click a button you always know how you are doing vs. budget. “When we started two years ago, it would take brokers as much as 20 days to update spreadsheets, now it’s less than a day on average.”

Ryan Masiello VTS

Chatham Financial Corporation

Relationships – just like LinkedIn, where you can easily see your network and act on  it quickly, With this kind of system, you can know at any time if a particular player has a relationship with your existing portfolio. Your network can help you close the next deal.

According to Romito, “The system works because it gets rid of the stuff that slows down brokers—while delivering better information to the owner. Waiting a week for a report just doesn’t cut it anymore.” Front end, back office or in between, it’s difficult to escape the conclusion that real estate investment management runs on data and technology. Christopher Merrill asked everyone in attendance to write down all the software their firm uses. Surprisingly, every attendee was able to quickly write down an extensive list of technologies they are using today. Are we paying enough attention to the systems in use today? Are we missing out on technologies that could better drive our success? Do we want to be disrupted, or should we take on the challenge of disrupting others?

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This year’s 20/20 Investor Summit was a discussion of four topics: the current state of the market, risk, outsourcing, and disruptive technology. As diverse as the topics were, the session really came down to one discussion: where are we and where are we going? Real estate investment management has only been around for about 25 years—and just like a human 25 year-old person, we are at a dramatic point in our lives. There are many exciting challenges and opportunities ahead of us, and yet we struggle with the challenges of our adult lives when we use rules and skills we learned when we just started out.

“Instead of getting by on the insights of the past, we must learn to use new techniques, access new information, approach work in different ways, and create new rules for a changing world.”

Gunnar Branson NAREIM

Chatham Financial Corporation

As an adolescent industry, we have had some tremendous success—but things we did to be successful 10 years ago may not apply as well today as they did then. Instead of getting by on the insights of the past, we must learn to use new techniques, access new information, approach work in different ways, create new rules for a changing world. Fortunately, like many 25 year-olds trying to make their way in the world, we are not alone. We have colleagues and friends to help us. We all need help to get to the other side of the shore— to the future. Fortunately, as real estate professionals, we know how to do this, how to create relationships, how to adapt to changing situations on the ground, how to bring capital and real estate together, how, when the world seems to want to fly apart, we hold it together.

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Profiles of Sponsors & Underwriters CBRE CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2012 revenue). The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting.

Chatham Financial Corporation Chatham Financial is the leading independent capital markets advisor to real estate investors bringing both advisory and technology solutions to enhance the real estate investment profiles of their clients through accretive debt and derivatives solutions. Globally, the firm advises and executes on over $1.5bn average daily transaction volume. Services include interest rate risk management, strategic capital advisory, defeasance / prepayments, debt management and reporting, debt valuation, foreign exchange hedging, hedge accounting, Dodd-Frank and EMIR regulatory compliance and ISDA negotiations. Many of the largest private investment managers, REITs, developers and pension funds rely on Chatham as an extension of their in-house capital markets and reporting teams to provide market insights and develop best practices for implementation at either the portfolio or asset level. Leveraging its market presence and 25 years of expertise in the real estate capital markets, Chatham helps optimize capital markets strategies that best support the real estate investment objectives and return targets and allow clients to focus more heavily on their core competencies in the underlying real estate development, investment and management.

Greenberg Traurig Greenberg Traurig, LLP is an international, full-service law firm with approximately 1750 attorneys serving clients from 36 offices in the United States, Latin America, Europe, the Middle East and Asia. In the U.S., the firm has more offices than any other among the Top 10 on The National Law Journal’s 2012 NLJ 250.

Jones Lang LaSalle Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of $2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $47.7 billion of real estate assets under management.

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Mayer Brown Mayer Brown is one of the largest law firms in the world, with more than 1,600 lawyers in the Americas, Asia and Europe. We have an extensive global Private Investment Funds practice involving more than 100 lawyers from across the firm’s worldwide practice areas. Our lawyers’ broad market experience enables fund sponsor, adviser and investor clients to structure funds and investments creatively and efficiently to maximize fund-raising flexibility and opportunities. Mayer Brown provides comprehensive, commercially-focused legal advice to both sponsors and investors on structuring, marketing, formation and operation of real estate funds. Working as international counsel we have helped many of the leading global names in private equity real estate raise funds with institutional, retail and private investors across the Americas, Asia and Europe. Our international network of investment fund lawyers enables us to provide a combination of global market knowledge and local legal, regulatory and tax expertise in key jurisdictions. Our fundraising practice is also supported by a leading real estate transactions group.

Engineering and Science, Inc.

PARTNER Engineering & Science, Inc. Partner Engineering and Science, Inc. (Partner) is one of the largest engineering, environmental & energy consulting and design firms in the country. With over 500 multidisciplinary professional staff across several offices and business service lines, Partner and its dedicated Investment Advisory Group offers nationwide due diligence with depth to commercial real estate investors. Beyond its core service offerings, Partner also provides thought leadership on a wide range of commercial real estate issues and trends. Our experts regularly publish and present insights about challenges in the industry, and emerging trends related to the ongoing evolution of technology in real estate. In support of this evolution, Partner continually researches and invests in the latest building evaluation technologies such as IR cameras, drones, 3D laser building modeling devices and software, and the creation of a cloud-based platform to help our clients manage the due diligence process and experience our reports in a more responsive, accessible and live format. This forward-looking approach has been part of Partner’s fiber from our entrepreneurial beginnings, owed in great measure to the vision of our CEO Joseph Derhake, PE, who has recently been nominated and shortlisted for Ernst & Young’s 2015 Entrepreneur of the Year Award.

POLSINELLI Polsinelli’s 750-plus lawyers operate from a tightly integrated network of 21 offices located across the U.S. including Atlanta, Chicago, Dallas, Denver, Kansas City, Los Angeles, New York, Phoenix, St. Louis, San Francisco, and Washington, D.C. The firm’s Real Estate and Financial Services Department of 175 lawyers, ranked by Law360 as one of the Top 10 Largest Real Estate Practice Groups in the country, are strategically located in major U.S. real estate markets and are immersed in every aspect of commercial real estate from the “ground up”—assemblage, development, incentives, environmental, leasing, financing, deal and tax structuring, new markets and other tax credits, and all aspects of capital raising including securitization, and fund and REIT formation and operation. Polsinelli’s tight integration and collaborative culture, along with its deep bench, enable the firm to quickly and efficiently mobilize expert teams of lawyers nationwide to handle large portfolio transactions. Our strong special niche real estate practices include corporate relocation and incentives, student housing, and healthcare, (Polsinelli was named U.S. News Health Care Law Firm of the Year in November 2014.) The firm’s Real Estate Finance group has documented and closed more than 2,700 commercial mortgage, construction, mezzanine, and preferred equity financings, $23-plus billion in principal amount, covering all 50 states and D.C.

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RealFoundations RealFoundations® is a global management consultancy focused on helping companies in the real estate industry improve their operations and achieve their potential. We were founded in 2000 after concluding that the real estate industry was being poorly served by the big consulting firms. Since the founders and executive team of RealFoundations® have years of experience working for those big firms, we also shared a great deal of frustration at the lack of importance placed on deep industry content knowledge. We believe that value can best be delivered by management consultants who understand your business, the market dynamics that drive it, the winning strategies and ideas that have been proven in your industry, and the most cutting-edge technology solutions that can help unleash your potential. We understand that consultants are hired to make something happen—to facilitate change within your business and recognizing the importance of accelerating the time it takes to get from ideas to results. When you hire RealFoundations®, we guarantee you a few basic things. We guarantee a team of creative, energetic professionals who are as much business advisors as consultants—a senior team who understands your business and the terms that you use to conduct your business. We guarantee a partnership founded on our extensive expertise in collaborative work—a partnership dedicated to finding the right combination of answers and solutions unique to your situation and your business. We guarantee that the rates you pay are rational and reflect our lean overhead structure. Most importantly, we guarantee you will work with a group of individuals you actually like having around. When was the last time you said that about a consultancy?

PwC US PwC US helps organizations and individuals create the value they’re looking for. We’re a member of the PwC network of firms, which has firms in 157 countries with more than 195,000 people. We’re committed to delivering quality in assurance, tax and advisory services. Find out more and tell us what matters to you by visiting us at www.pwc.com/US.

State Street With US$28.5 trillion in assets under custody and administration, and US$2.4 trillion in assets under management* as of March 31, 2015, State Street is a leading financial services provider serving some of the world’s most sophisticated institutions. Our flexible suite of services spans the investment spectrum, including investment management, research and trading, and investment servicing. With operations in 29 countries serving clients in more than 100 markets, our global reach, expertise, and unique combination of consistency and innovation help clients manage uncertainty, act on growth opportunities and enhance the value of their service.

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Verisk Commercial Real Estate Verisk Commercial Real Estate—a Verisk Analytics (Nasdaq:VRSK) business—provides commercial property assessments, risk analytics, and data to lenders, equity investors, and other commercial real estate consulting professionals. Since 1971, Verisk’s team of highly trained and geographically dispersed field representatives—who perform walk-through surveys on more than 350,000 commercial properties nationwide each year—has assessed and graded buildings for hundreds of conditions and physical characteristics. We have a national infrastructure for collecting and delivering information and a national processing center that assembles all of our products. Products and services include Property Condition Assessments (PCAs), Fannie Mae and Freddie Mac PNAs, Enhanced Zoning Reports, and Verisk exclusive and proprietary risk analytics to augment traditional reporting in commercial real estate. Verisk Commercial Real Estate accesses our growing proprietary data base of more than 3.5 million commercial properties and 6 million businesses and other Verisk resources to provide insight on catastrophe and weather risk, crime, fire protection, insurance coverage, fraud prevention, and much more. Verisk provides customers insight that goes beyond the visible. For more information visit www.verisk.com/cre.

VTS VTS (formerly View The Space), a New York-based technology company, is the leading leasing and asset management platform built to provide real-time leasing and asset management data to the top landlords and brokerage firms in the world. VTS allows brokers and owners to manage deal activity, identify trends and quantify portfolio performance from their desktop or mobile device. With over 1 Billion square feet under management, VTS has been the driving force behind the industry’s shift towards real-time data and has quickly become the standard in the marketplace.

Yardi Systems, Inc. Now in its fourth decade, Yardi® is committed to the design, development and support of software for real estate investment management and property management. With the Yardi Investment Suite™, Yardi Commercial Suite™, Yardi Multifamily Suite™ and Yardi Orion™ Business Intelligence, the Yardi platform is a complete real estate management solution. For real estate investment organizations and their service providers across the globe, Yardi provides high-performance software for investment management, asset management and asset operations. The fully integrated and transparent Yardi platform provides top-to-bottom, real-time data access across an entire portfolio—from the investor down to site managers and tenants—enabling organizations to easily monitor and adjust investment strategies toward consistent growth and profitability. Yardi technology and services lead the real estate industry through innovation and value for clients. Yardi is based in Santa Barbara, Calif., and serves thousands of businesses, corporations and government agencies worldwide from offices in North America, Europe, Australia, Asia, and the Middle East. More information about Yardi products and services is available at www.yardi.com.

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Speakers Sean Bezark Greenberg Traurig Partner

Sean W. Bezark is a Shareholder in Greenberg Traurig LLP’s Chicago office. Sean primarily focuses his practice on environmental matters for public corporations, privately held companies, banks, lenders, managers, REITs and private equity investment funds. He advises clients on environmental aspects of corporate and real estate transactions, bankruptcy cases, portfolio management, environmental investigations and remediation projects, brownfields development, insurance procurement and risk and cost allocations. He also counsels clients on legal and technical aspects of complex contamination remediation projects and in obtaining reimbursement from insurance companies, indemnitors, real estate and corporate predecessors and third parties. Sean’s experience also includes negotiating settlement of all types of environmental claims and civil and criminal complaints brought by federal, state and municipal governmental agencies, and various private party environmental claims and demands.

Marc Bourdages Partner Engineering & Science Technical Director, Investment Advisory Group

Marc Bourdages has devoted his entire career to the improvement, operation and acquisition due diligence of commercial investment properties. He has over 30 years of experience in the architectural, design and construction fields, and extensive knowledge of commercial real estate improvement and due diligence —all exercised in context with how the cyclical nature of the real estate economy directly affects the value of the various asset classes. Mr. Bourdages primarily works with institutional and private equity clients, providing services that include real estate acquisition/disposition advisory services, property condition assessments, owners’ representation services, plans and specifications review, construction monitoring services and project management services. Prior to joining Partner, Mr. Bourdages held a 10-year tenure as principal of ForeSite Advisory Services, LLC, where he oversaw completion of over 6 billion dollars of commercial real estate transactions across hundreds of Property Condition Assessments (PCAs) for numerous real estate investment entities.

Gunnar Branson NAREIM President & CEO

Mr. Branson is the President & CEO of the National Association of Real Estate Investment Managers (NAREIM), an association of companies engaged in the real estate investment management business in the United States. Before joining NAREIM in 2011, Mr. Branson worked for over 25 years in commercial real estate, professional services sales, product innovation and marketing. He has transformed businesses and accelerated growth as a leader, strategist, business developer and innovator. In addition to holding leadership roles at companies such as GE Capital Real Estate and Heller Financial, as a consultant he worked with companies such as Jones Lang LaSalle, Wells Fargo and Fidelity to develop new markets and new products. His consulting practice centered on change acceleration and practical innovation.

William E. Croteau PwC Senior Partner, Financial Services

Bill has spent almost 30 years with PwC, including 27 years in the San Francisco Bay Area and 19 years as a Partner. His career has been focused almost exclusively in the financial services industries, with particular focus in the real estate, global banking and asset management sectors. Bill is currently leading PwC’s business development efforts for the US Real Estate industry practice in the Western US. He is also heavily involved with PwC’s efforts to grow executive and community relations in the Bay Area. Prior to his current roles, Bill served as the Global Relationship Partner for two major financial services clients, including a Fortune 20 financial institution. In this role, Bill had overall responsibility for PwC relationships at the executive level and all services provided by PwC around the world.

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John D’Angelo RealFoundations Managing Director

John D’Angelo is a Managing Director with RealFoundations, a global management consulting firm exclusively serving the real estate sector. With over 20 years of real estate industry experience, Mr. D’Angelo focuses on the firm’s institutional investor, investment manager and corporate occupier clients. His teams have developed trusted relationships with some of the most respected organizations in the world, including: Clarion Partners, GIC, JP Morgan Asset Management, Shorenstein, TIAA-CREF, the Bank of America, Jones Lang LaSalle and Simon Properties. Prior to joining RealFoundations in 2003, John was a Senior Manager with CapGemini Ernst & Young, the Ernst & Young Kenneth Leventhal Real Estate Group, and initially, Kenneth Leventhal & Company. Mr. D’Angelo began his career with Grubb & Ellis where he worked both in internal IT and as the Research Director for Orange County, CA.

Lucy Fletcher JLL Vice President, International Capital Group and Americas Capital Markets

Lucy is a Managing Director of JLL’s International Capital Group and Americas Capital Markets. Based in Canada, she is responsible for importing and exporting real estate capital into and out of North America and from Asia Pacific through the JLL capital markets network regionally and globally.

Greg Fuhrman Yardi Regional Account Executive, Investment Management

Greg Fuhrman, CPA, is a 20-year business veteran. Greg has seen all sides of the Real Estate and Private Equity lifecycles: institutional fundraising, acquisitions, dispositions, property management, asset management, accounting, and tax structuring and compliance. Greg worked for Ernst & Young Kenneth Leventhal for six years, specializing in financial statement audit and M&A. Greg joined a PERE firm in Los Angeles and grew the accounting team over five years as the firm grew from $500MM AUM and two investors to $5BB AUM and 100 investors in 7 private equity real estate funds. Upon relocating to Colorado, Greg helped firms with Cleantech technologies raise $2 million of start-up capital in 2009 and 2010, while conceiving and building a nationally-recognized Laundromat. In 2012, Greg joined Yardi Systems on the Investment Management Sales team.

Patricia Gibson Hunt Realty Investments, Inc. President and CEO

As President of Hunt Realty Investments, Inc., Patricia Gibson is responsible for the overall operations and strategic direction of the company, as well as its interaction and investment relationships with other Hunt entities. Patricia joined Hunt Realty Investments, Inc. in April 1997 as Senior Vice President with responsibility for the firm’s acquisition, investment management and capital markets activities. Prior to joining Hunt Realty Investments, Pat served for three years as Senior Vice President and Director of Structured Finance at Archon Group, a subsidiary of Goldman, Sachs and Company. At Archon, she oversaw the institutional and capital market efforts for over $1 billion in commercial mortgage backed securitizations and portfolio financings. Before joining Archon, Pat spent nine years at The Travelers Realty Investment Company.

Chatham Financial Corporation

Lucy has 16 years of experience in the investment, asset management, development and consulting of real estate transactions. She was based in Asia Pacific for 10 years until she relocated to JLL’s Canadian platform in 2013. She re-joined the JLL group in 2010 from Bank of America Merrill Lynch where she was the Regional Head of Asset Management for the private equity real estate group in Asia Pacific. In this role she was responsible for overseeing the regional portfolio asset management, reporting and investor relations for the Merrill Lynch Asian Real Estate Opportunity Fund (US$2.65 billion original invested equity capital) and Merrill Lynch’s Asian balance sheet portfolio (US$1.8 billion originally invested equity capital). She has personally been involved in excess of $5 billion of real estate transactions across Asia Pacific and North America.

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Matt Henry Chatham Financial Managing Director

Matt Henry is a Managing Director and member of Chatham Financial’s Operating Committee. He leads the Real Estate business specializing in debt and derivative solutions for REITs, investors, owners and developers. Matt joined Chatham in 2004 as one of the founders of the investment banking advisory business, and since then has worked on strategic capital raising and restructuring assignments totaling over $20 billion. Matt’s capital raising experience includes equity, preferred equity, mezzanine debt, first mortgage construction and permanent debt, lines of credit, and DIP loans. He has represented clients in the acquisition of distressed real estate securities, in lender workouts, as a financial advisor in Chapter 11, and as an expert witness. Matt holds a BA in Business and Economics from Wheaton College, and an MBA from the University of Michigan’s Ross School of Business.

Barratt C. Johnson State Street Global Services Managing Director, Global Head of Real Estate Operating Platform, Real Estate Fund Services

Barry Johnson is a Managing Director within the Alter-native Investment Solutions division of State Street Global Services, responsible for the global real estate operating platform. He was previously head of the real estate fund administration operations in North America. With more than 20 years’ experience, Mr. Johnson joined State Street in February 2012 as part of the real estate fund services lift-out from Morgan Stanley. Prior to joining State Street, Mr. Johnson was the global head of real estate fund control at Morgan Stanley. He previously worked as a real estate fund controller for Lend Lease Real Estate Investments prior to an acquisition by Morgan Stanley, focusing on core real estate funds. He also worked for Ernst & Young, primarily focusing on the financial services industry.

Jeffrey J. Kiley PwC Partner

Jeff is a Partner in PwC’s Real Estate Group in New York and has specialized in serving clients in the real estate industry primarily in an audit capacity for more than 25 years. Having served many of the leading real estate investment advisors in the U.S. during his career, Jeff has developed a professional focus in the private real estate equity industry, and is currently designated as our firm’s Private Real Estate Equity Leader in the U.S. His experience includes public and private offerings involving real estate equity and debt securities, valuation analysis including the application of fair value measurements guidance to real estate investments and real estate financing, acquisition due diligence reviews, property management controls reviews and real estate performance measurement consulting and verification under the Global Investment Performance Standards. Mr. Kiley currently serves as NCREIF’s Treasurer and as member of its Board of Directors.

Spencer Levy CBRE Head of Research, Americas

As the Americas Head of Research for CBRE and a senior member of the company’s global research team, Spencer Levy plays an integral role in the development and implementation of the global research strategy and business plan. He oversees the analytical activities of the CBRE research community within the Americas region and is responsible for the management of professionals who are focused on producing market-leading insight and interpretative analysis on the latest real estate trends. A seven-year veteran of CBRE, Mr. Levy had previously served as Executive Managing Director in the company’s Capital Markets division. Prior to CBRE, he was a principal at Stifel Nicolaus (formerly Legg Mason Capital Markets), a leading investment bank serving the real estate industry, where he played a significant role in M&A, IPO and private capital-raising activities.

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Ryan Masiello VTS Founder & CRO

Prior to VTS, Ryan spent 9 years as a top tenant rep and agency broker in Midtown Manhattan, the world’s most competitive office market. He started his career at Cushman & Wakefield and in 2006 was recruited by JLL President and industry icon, Peter Riguardi to help lead the firm’s business development efforts in New York. As a Senior Vice President at JLL, Ryan spent 6 years working closely with Peter and led over 3,000,000 RSF of leasing transactions with a focus on Fortune 500 and high-growth technology companies. Some of his key clients included IAC, Adobe, Operative Media, ISIS Mobile, TechMedia Network, Endurance Reinsurance, BNY Mellon, Shearman & Sterling and Equity Office Properties. Ryan was recognized as a 4-time global top-producer and was selected frequently to advise on corporate technology and growth strategies. As someone who is obsessed with driving efficiencies, he began leveraging his day-to-day pain points to map out the foundation of VTS.

Brad L. Peterson Mayer Brown Partner

Brad Peterson is a Business & Technology Sourcing partner in Mayer Brown’s Chicago office. He has represented clients in all major types of outsourcing transactions and has negotiated opposite all of the first-tier and most of the second-tier providers. Brad has also represented information technology buyers in hundreds of technology transactions, including cloud computing, software licensing, software development agreements, hosted services agreements, and ERP implementation agreements. Brad has for several years been a co-chair of the Practicing Law Institute’s program on Outsourcing and a co-chair of the Contracting Process Chapter of the International Association of Outsourcing Professionals. He is a member of the Advisory Board of the Sourcing Interests Group.

Amos J. Rogers III State Street Corporation Managing Director, Alternate Sector Solutions

Amos is a member of State Street’s Sector Solutions—Alternatives team with primary responsibility for business development of the Real Estate Administration Services business. Previously, Amos was a principal at The Tuckerman Group, a State Street affiliate and was the portfolio manager responsible for State Street’s $10B REIT fund portfolio. Amos has spent more than 20 years in the commercial real estate industry holding previous senior positions at Pioneer Investments and Citigroup. Amos holds a BS degree from Clarkson College and a MS degree from the Massachusetts Institute of Technology, Sloan School.

Nick Romito View the Space CEO & Co-Founder

Nick started his career as a tenant rep and landlord broker at NYC’s Murray Hill Properties in 2005, where he expanded the U.S. presence of international companies such as Kartell, Natuzzi and Alessi, while also assisting in growing the firm’s 8-million square-foot office portfolio. In 2007, he took over leasing and asset management for AM Properties in New York City, where he oversaw the leasing, infrastructure and technology implementation of a 3-million square-foot office portfolio. Realizing there were no technology platforms to help centralize leasing activity, analytics, and marketing, he began laying the groundwork for VTS. Nick has been featured in The Wall Street Journal, The New York Times, Entrepreneur Magazine and has spoken at Harvard Business School’s renowned Technology Cyberposium. He resides in New York City, but is on an airplane about 50% of the time.

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National Association of Real Estate Investment Managers

Paul Ryan PwC National Real Estate Tax Partner

Paul founded PwC’s national real estate tax practices. Paul has over 22 years experience working with real estate advisors, private equity fund sponsors and several large non U.S. institutional investors. Paul has extensive experience assisting private equity fund sponsors with the development of innovative fund and deal structures for both U.S. and international real estate investments whilst balancing the needs of a diverse pool of investors within a single fund structure. He has an in-depth knowledge of market practices (e.g., general partner compensation) and the tax sensitivities of all types of fund investors, including both U.S. and foreign tax exempts, domestic and foreign institutions, and high net worth individuals and is a specialist in dealing with UBTI matters, including development of innovative techniques to facilitate tax-exempt participation in private equity funds. Paul also has significant experience working with both public and private REITs, as well as publicly traded partnerships (PTPs) Prior to spending full time in the real estate tax practice, Paul spent five years in the firm’s banking practice almost exclusively in the accounting for income tax area. His clients included several multi-national investment banks.

Narendra Srivatsa, Ph.D. Verisk Commerical Real Estate Director, Product Development

Chatham Financial Corporation

Narendra Srivatsa is Director of Operations & Product Development, for Verisk Commercial Real Estate, where he identifies market needs and develops profitable opportunities by creating innovative, differentiated commercial real estate products and services in the areas of property assessment, data analytics, and risk management. He has an extensive background in operations, business development, product development, workflow management, and marketing at Fortune 50 and midsized companies in a variety of industries. Mr. Srivatsa holds a Bachelor of Science degree in chemical engineering from Indian Institute of Technology and a Ph.D. from the State University of New York, College at Buffalo.

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National Association of Real Estate Investment Managers

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Chatham Financial Corporation

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ABOUT NAREIM  The National Association of Real Estate Investment Managers (NAREIM) provides members the opportunity to refine strategy, improve operations, and provoke new thinking through meetings, surveys and thought leadership activities. NAREIM members manage investment capital on behalf of third party investors in commercial real estate assets such as office, retail, multi-family, industrial and hotels. Collectively, NAREIM members manage over a trillion dollars of investments assets. NAREIM members invest in office, retail, multi-family, industrial and hotels. Investment is made throughout the “capital stack” meaning that investments are made both in equity positions (direct ownership) and debt (first and subordinate mortgages). In the debt sector, investment managers have platforms to buy existing debt (mortgages and other instruments such as mezzanine and CMBS) and to make private equity financed loans.

BOARD OF DIRECTORS Chair Patricia Gibson Hunt Realty Investments, Inc. Vice-Chair Peter DiCorpo CBRE Global Investors Treasurer George Pandaleon Inland Institutional Capital Partners

Scott Onufrey Kimco Realty

Amy Price Bentall Kennedy

Preston Sargent Bailard Real Estate

Chris Merrill Harrison Street Real Estate Capital

Kevin Smith Prudential Real Estate Investors

Stanley Alterman USAA Real Estate Company

Ed Casal Aviva Investors

Chair Emeritus Jeffrey Barclay Goldman Sachs

410 North Michigan Avenue Chicago, Illinois 60611 312.884.5182 www.nareim.org