Featured are: Goldie B. Wolfe Miller, Millbrook Corporate Real Estate Services; Megan Riess, Fishman Haygood Law Firm; Allison E. Beall, Pacific Building Group; Irene L. Hosford, Brown McCarroll LLP; and Elizabeth E. Solender, Solender/Hall Inc.

Although investment capital is again flowing in the commercial real estate sector and aggressively seeking products, at least in select markets, it may be a tricky year ahead for the industry. Among the concerns cited by speakers at the Urban Land Institute’s recent Real Estate Capital Markets Conference held in New York are the relative dearth of debt capital, possible refinancing difficulties ahead and the current and potential effects of the European economic crisis.

The good news is that, in the words of Stephen Furnary, chairman and CEO of Clarion Partners, the U.S. commercial real estate market is improving and improving pretty nicely. Real estate values have increased—that is a fact, noted Furnary, who predicts that the improvements in NOI, rents and occupancies will continue unless there is a double dip recession in the U.S.

Commercial property delivered solid performances in 2011 and 2012, and outperformed other major asset classes, said Jacques Gordon, global strategist with LaSalle Investment Management. Cash and liquidity are abundant—there is plenty of money. Real estate prices have held up around the world, and much capital around the globe wants to get into real estate, particularly U.S. real estate, said Gordon. Transactional volume, he also noted, is approaching a new normal.

On the other hand, speakers at ULI also expressed serious concerns over the European budget crisis. Will Greece be like Lehman? I subscribe to that view, said Gordon.

In the immediate term, the European budgetary crisis is already causing disruptions in the CMBS markets although the benchmark Treasury interest rate has fallen to record lows in the mid-1 percent range. The conduit market is sensitive to credit spreads, and when Greece hiccups, it reverberates directly to what we can quote, said Greta Guggenheim, president of Ladder Capital. Guggenheim reports that as spreads have widened in the past few weeks as a result of the turmoil in Europe, the company has seen a very dramatic fall in its fixed-rate pipeline, although the floating-rate financing volume is up.

We are in a world of turmoil, said Robert S. Blumenthal, managing director at Deutsche Bank Securities Inc. We don’t know each day when we wake up [what to expect], he said. He noted that European debt crisis has spread from Greece to Spain and Italy. Blumenthal said spreads have increased to 145 basis points from 105 basis points. Lenders could pull deals due to the situation in Europe, and Blumenthal advised borrowers to quickly lock in deals if they had reasonable offers on the table. He said he thinks the situation in Europe will deteriorate further before it improves.

Another downside risk is that the low-interest-rate environment may be inflating commercial property prices. Without a doubt, low interest rates seem to be placing keeping cap rates low, agreed John Kukral, president of Northwood Investors. We are in more of a liquidity- than a fundamentals-driven recovery, added Raphael Fishbach, principal of Mesa West Capital. Commercial real estate is once again seeing the cost of debt driving asset prices, said Scott Weiner, chief investment officer of Apollo Commercial Rea Estate Finance Inc. Super low cap rates pose a potential problem for refinancing in the out years: If interest rates are higher at that time, the property’s razor-thin income margin may not be sufficient to obtain a new loan that covers the old debt. Kukral opined that interest rates are bound to rise in the future, at the same time he does not see the NOI growth that is needed to compensate for that rise in mortgage servicing costs.

The government seems to be able to inflate the prices of all real estate except those of single-family housing, quipped Weiner. All the same, Kukral said that in five to six years, real estate prices would likely appreciate, and his company tends to see or project value increases of 6 to 8 percent in good real estate in core markets. And Robert Lieber, executive managing director of Island Capital, noted that ideally, interest rate increases would be associated with an accompanying economic recovery that would also drive up NOI. However, if stagflation rears its head, interest rates could rise without a ramp up in economic growth.

Although capital is flowing again, it remains selective, and the ability of the industry to refinance maturing loans in future years remains a question with some panelists. Lieber observed that a portfolio of some $500 billion in outstanding CMBS loans will present the need for recapitalization. And Jon Brayshaw, principal of Prime Finance, said that there is a huge imbalance in the supply and demand of debt capital. He said there is $1 trillion in total debt, half of which will be maturing in future years. Even if there were 100 groups like ours, there would not be enough capital to absorb that shortfall, he said.

On the other hand, equity may come to the rescue of a possible debt capital shortage—if certain conditions are met. Bruce Batkin, president of Terra Capital Partners, noted that capital imbalance in the recapitalization arena lies on the debt side. There is a lot of equity, much of it looking for unrealistically high returns, he said. Noble Carpenter, executive managing director, principal of Cassidy Turley, affirmed that there is sufficient equity. We just need transaction flow to get going which requires the economy to recover sufficiently and regulations to be resolved.

And Robert Ivanhoe, chair, Global Real Estate Practice of Greenberg Taurig, said that if the economy recovers sufficiently, it will be easier to meet the industry’s refinancing needs. There is enough rescue capital out there assuming lenders can take losses.

The Urban Land Institute and PricewaterhouseCoopers L.L.P. have released the results of the annual Emerging Trends in Real Estate survey — and the responses point to a stronger commercial real estate outlook for the remainder of 2012. The more than 195 participants believe that profitability, lending, and investor markets all show brighter signs and that markets are looking up for CRE firms.

The survey, which has been issued for 33 years, is jointly produced by PwC and the ULI, and it includes survey responses from more than 950 leading real estate experts, including investors, developers, property company representatives, lenders, brokers and consultants. For the mid-year survey, 195 participants who completed the original 2012 Emerging Trends survey were interviewed.

Most importantly, the survey showed a general trend toward optimism, even when compared with the year-end 2011 results. The number of respondents rating profitability forecasts for 2012 as excellent rose by approximately 2 percent, and the number rating the category as very good rose by the same amount. In fact, the only rating that fell was the abysmal-fair bucket, which dropped by approximately 10 percent.

According to the report, foreign investors and private equity will still lead the charge as active buyers of commercial real estate, but both values have declined slightly.  The biggest jump came from private local investors and public equity REITs.  According to Real Capital Analytics through the first quarter of this year, private-capital investors have completed the most deals, followed by public-equity companies.

The sources of debt capital values displayed some positive signs in the mid-year update.  Insurance companies continue to be number one overall.  However, government-sponsored entities’ value increased over 11 percent from the original survey in November 2011.  Other strong gains were found in the CMBS market, commercial banks, and mezzanine lenders all strong signs that the availability of debt is showing improvement.  According to Commercial Mortgage Alert, U.S. CMBS deals total $10.8 billion, up over 12 percent year-over-year.  In addition, RCA states that there were increases in lending as well in completed transactions.

Sentiment at ULI’s spring conference in Charlotte, N.C., in early May reflected the same results as the survey. During one of the sessions, Glenn Grimaldi, executive vice president at HSBC, cited low interest rates as a major trend that is driving the real estate industry by allowing for low acquisition cap rates. The low interest rates will also have implications on the amount of deleveraging as loans mature in the next few years, he said. Grimaldi forecasted that banks may sell more loans at discount in the next years.

Sam Zell

Straight talk on the real estate industry’s outlook from two of its eminent investors capped last week’s annual REIT conference sponsored by New York University’s Schack Institute of Real Estate. Speaking in separate one-on-one conversations, Sam Zell and William Mack offered several hundred real estate professionals and NYU students their views on leverage, consolidation and the industry’s uneven recovery.

Zell swatted away baseless optimism during a half hour of frank and sometimes salty remarks. “In terms of sales, in terms of velocity, our industry is extraordinarily constipated,” the Equity Group Investments chairman said. The pretend-and-extend strategy, he argued, has only delayed a reckoning: “When you pretend and extend and nothing happens, you’re up a creek.” Reducing the leverage that still burdens the industry in many quarters will take another three or four years, he predicted.

Trimming the industry’s debt load is a prerequisite for increasing the flow of initial public offerings. “I don’t see how you’re going to get any kind of effective public execution until the industry as a whole is a lot healthier,” Zell contended. An improving market will also speed up the pace of mergers — a topic on which Zell himself is in the spotlight. On Wednesday, Equity Residential said that it had struck a deal with Bank of America and Barclays PLC to extend the exclusive negotiation period for buying a 26.5 percent stake in Archstone, one of Equity Residential’s chief competitors. That new deadline is May 21.

Zell’s interviewer, attorney and merger specialist Robin Panovka of Wachtell, Lipton, Rosen & Katz, asked for further comment. “Archstone is an extraordinarily attractive portfolio of apartments,” Zell said. “We have been involved in a process. That’s all you’re going to get out of me.” However, some audience members noted that the previous panel on REIT consolidation and globalization was missing an announced speaker — Equity Residential president & CEO David Neithercut.

Earlier in the afternoon, AREA Property Partners founder and chairman William Mack sat down with Panovka to take the pulse of the industry. Asked about the importance of geographic and market diversification, Mack replied, “I don’t think it’s time for REITs to venture out into five different product lines in fifteen different countries.” He cited studies indicating that shares of single-focus REITs tend to trade above net asset value, while their more diversified counterparts often trade below NAV.

Mack also offered perspective on the major property categories, which he variously described as bumping along the bottom of the market or beginning to experience slow growth. Multi-family, he said, remains the “bright star” of the industry, and can look forward to a long stretch of growth: “I think multi-family probably has legs of five to seven years — if we don’t screw it up the way we usually do.” Pressed by Panovka about possible hazards of overbuilding or overpricing, Mack predicted that stricter underwriting by lenders would help keep a lid on excess.

By contrast, Mack termed the office market “spotty.” Existing inventory can fill much of today’s demand, apart from notable exceptions like San Francisco, Washington, D.C., New York City and Boston. The business side of the hotel industry is picking up, but leisure travel will take several years to come back. Retail is doing best today in major cities, mixed-use settings and those catering to niche stores. However, the retail recovery remains uneven, and some B malls are in danger of going out of business. And the industrial sector, which took a smaller hit in the recession than most other property types, has “bounced off the bottom” and is making slow progress, Mack said.

Jonathan Gray of Blackstone (left) and William Ackman of Pershing Square Asset Management speak at the Schack REIT discussion.

Where is the growth in an age of uncertainty? Some of the industry’s most influential leaders wrestled with that timely question Thursday at the annual REIT conference organized by New York University’s Schack Institute of Real Estate.

Several members of the opening panel agreed that, for the most part, REITs should stick to their knitting. “Our mainstay is high-quality retail real estate,” said Robert Taubman, chairman & CEO of Taubman Centers Inc. “We don’t know anything about the apartment business, and we don’t know anything about the office business.” But he also stressed that the answer is not necessarily cut and dried: “I do think you can morph into areas slowly, a step at a time,” he added.

Michael Kirby, chairman of Green Street Advisors Inc., looked askance at the REIT model in Europe, where most public real estate companies tend to be multi-sector. “A lot of leverage plus development activity is pretty dangerous — plus they’re unfocused,” he said. Ventas Inc. chairman & CEO Debra Cafaro also noted the contrast in the U.S. and European styles of REITs; the nuance, she added, is that “Most of the sectors do touch at the margin.” For example, she noted, senior living, a growing niche in which Ventas is a market leader, has a considerable overlap with the multi-family business.

Whether REITs should look outside the U.S. was a question that speakers brought up repeatedly during the day-long conference. Taubman cited his firm’s success in China, where his company applies U.S.-style retail programming and counts on its local partners to navigate the bureaucracy. Throughout the day, executives cited Simon Property Group Inc.’s $2 billion deal last month for a 29 percent stake in Klepierre, a Paris-based retail real estate company.  To be sure, Europe will offer plenty of other opportunities, including distressed assets, noted Michael Kirby, chairman of Green Street Advisors Inc. Nevertheless, he recommended that most REITs stick to what they know. “I hope must U.S. REITS stay out (of Europe) and leave it to Blackstone to fix, because I don’t think it’s their core competency.”

A few hours later, the chief architect of Blackstone L.P.’s real estate strategy himself weighed in during a lunchtime roundtable. The powerful hedge fund has already invested $2.3 billion in real estate assets this year, estimated Jonathan Gray, the firm’s global head of real estate. Markets that offer “a high amount of distress and limited building are interesting places to play,” he noted. Europe does indeed offer a number of places that fit the bill.  Although the European Central Bank has staved off a panic for the time being through massive infusions of capital into the financial system, Gray expects distressed properties to hit the market at a picked-up pace. One caveat: low growth will characterize Europe for some time to come, Gray said, and “it’s important that your pricing reflect that.”

Blackstone’s trademark is finding potential upside in distressed or underperforming properties, and Gray hinted that more of the same is ahead. In the past year, Blackstone had closed blockbuster deals like the $9 billion acquisition of Centro Properties Group’s U.S. retail assets, and the $1.1 billion pickup of suburban office assets from Duke Realty Corp.  “I’m not saying that investing in suburban office holdings is the same as investing in West L.A. or New York City,” Gray explained. But “at the right price, I think you can make a good investment.”

Jones Lang LaSalle Inc. sees big prospects blossoming in Lower Manhattan, and the commercial real estate services firm has just assigned managing director John Wheeler, a longtime JLL employee with nearly three decades of experience, the task of spearheading the office’s increasing penetration of the submarket.

“We see as a firm, and I see as an individual, tremendous opportunity in this marketplace,” Wheeler told Commercial Property Executive. “It was an ideal time for me to increase our market share, and there’s no better time to do this.”

The expansion of his role as managing director essentially constitutes the firm’s effort to formalize its treatment of the Lower Manhattan office brokerage operations as a distinct and self-sustaining marketplace.  As head of the office, Wheeler will utilize his cultivated knowledge of downtown and his well-honed real estate skills in everything from brokerage activities to property management, to capitalize on the area’s renaissance. Major achievements under his belt include his assistance in Wells Fargo’s disposition of more than 1.1 million square feet of commercial space and the orchestration of the New York City Housing Authority’s 20-year lease of the entire 550,000-square-foot office building at 180 Water Street.

It’s a new day in Lower Manhattan, which is the fourth-largest office market in the country, and, as Peter Riguardi, president of Jones Lang LaSalle’s New York region, noted, Wheeler is one of the few players well qualified to take the firm’s local office to a new level. And the assignment will require every ounce of Wheeler’s expertise because while the market has opportunities, he told CPE, it also has issues to overcome.

“First and foremost is the misconception of the market by people who have not been active down here,” he explained. “They’re holding onto notions and opinions of the market that no longer match the dynamic community it has become. People who may have started their careers in Lower Manhattan and long ago migrated to Midtown often still hold the notion of a place that goes dark at 6 o’clock at night. And yet with the dynamic growth of the residential communities down here, we’ve seen the neighborhood truly become a 24-hour neighborhood.”

And then, he added, is the false impression that Lower Manhattan’s office offerings are predominantly pre-war buildings that do not provide the amenities and accommodations found at new properties. “By the time 1 and 4 World Trade Center are completed, nearly 20 percent of our supply in Lower Manhattan will be space constructed post-2000,” he said. “Coincidentally, over the last 10 years, we’ve had 10 million square feet of older office buildings taken out of the office supply and converted to residential units. So the overall average age of our stock is now younger than Midtown Manhattan.”

The final piece of the educational puzzle that the Lower Manhattan office plans to put together for prospective users is enlightenment regarding what the market has to offer in the post-9/11 environment. “You can see 1 and 4 World Trade Center, you can see the PATH transit hub, you can see the Fulton transit hub,” he said. “These are all areas that actually will have the best office product and the best transit hubs in Manhattan and in the region.”

Indeed, the area has reeled in a few big fish that will surely help lure more users. Condé Nast committed to 1 million square feet at 1 WTC in 2011, and law firm Wilmer Cutler Pickering staked a claim to roughly 336,000 square feet at 7 WTC at the beginning of this year, pushing the 1.7 million-square-foot building’s lease level up to100 percent. “There’s a reason that over the last five years, over 20 percent of the leasing activity in Lower Manhattan has come from tenants migrating to Lower Manhattan and I expect that trend to increase,” Wheeler said.

Wheeler is prepping the office for what will hopefully be an onslaught of activity. “We’ve always had a presence in Lower Manhattan,” he said, “and we’ve been very successful with our blue-chip clientele, but we’re not satisfied with our market share. So as part of our strategic approach to the market we wanted more people dedicated exclusively to the Lower Manhattan marketplace.”

After a long week of seminars, presenatations and, of course, plenty of networking, the 2012 MIPIM conference in Cannes, France, drew to a close. While an atmosphere of cautious optimism pervaded, regions and countries are thinking big again. Whether it be London’s Olympic Park, the Grand Paris project, Qatar’s Downtown Doha project, Russia’s Skolkovo Innovation City, Istanbul’s Zorlu Center or Rome’s Ostia waterfront, the scale of ambition and vision is widening. Ultimately, demographics rule: The world population is growing and so is the need for innovation and renewal.

The discussions ranged the entire gamut. Howard Roth, the global real estate leader for Ernst & Young, was “cautious but positive, even in Europe, thanks to the recent stimulus,” he said. “There’s plenty of equity looking for a home this year.” Jim Fetgatter, CEO at AFIRE, was pleased with the direction the market is taking, especially in America. “The mood of investors has improved dramatically since the dark days of 2008 and 2009,” he said. “With the problems of Europe and the uncertainty of the future there, the U.S. is perceived to have a certain optimistic prognosis, however slowly the recovery unfolds.”

Even the most optimistic attendees still expressed some caution, as obvious risks remain. Distressed assets are still weighing heavily on lenders’ balance sheets, and unwinding these assets could fuel more financial turbulence for banks and the market in general. Much of the conversations were about when, if and how banks will let go of assets and debt. It was clear that BNP Paribas, hurt by the euro-zone debt crisis, was preparing for more stringent Basel III banking rules.

It was announced during MIPIM that the French bank sold a 28.7 percent stake in Klépierre SA for $2 billion to U.S. shopping mall giant Simon Property Group. David Simon, chairman & CEO of Simon and the new chairman of Klépierre’s supervisory board, said his firm has long admired Klépierre’s pan-European footprint and strong growth potential. “The investment in Klépierre represents an attractive opportunity for SPG as we seek to broaden our global footprint,” he said.

Consolidation is also continuing in services. NAI Global, the largest network of independent commercial real estate firms worldwide, with an 80-strong attendance at MIPIM this year, was recently acquired by C-III Capital Partners L.L.C. to create a leading, fully integrated commercial property services company.

“Corporate and investment clients will now benefit from an even broader range of services in more locations worldwide,” Jeffrey Finn, president & CEO of NAI Global, said. “In particular, they will have access to a corporate solutions and capital markets offering with expanded asset/property management, project/facilities management and valuation services so they can get the most value from owning, managing or disposing of their assets.”

“Improved deal volume and confidence remain centered on core deals in major markets, but confidence is growing that it will spread to smaller markets,” Chris Ludeman, president of CBRE Capital Markets, said. “A major driver is the rapidly improving debt-capital markets. The unpredictability of the U.S. presidential election — and its possible impact on fiscal, monetary and regulatory policy — remains a wild card. However, chronic fiscal and political uncertainty may be the new normal, and one to which CRE investors will need to adapt years to come.”

The moderately upbeat projection of services firm Cushman & Wakefield Inc. paints a global real estate picture that is on track to brighten by the second half of 2012, as the U.S. leads an uptick in investment sales growth and vacancy rates will decline in more than half of the world’s major office markets.

The good news will have to wait for the second half of the year, largely as the global capital markets and the real estate industry take time to bounce back from a sluggish end of 2011. “That fourth-quarter delay will definitely continue the first quarter, maybe into the first half,” the firm’s president & CEO, Glenn Rufrano, told Commercial Property Executive. Government deleveraging in many industrialized nations is generating uncertainty about both deficits and tax policy, doubts that are hampering growth in Europe, the U.S. and even Asia — the latter of still which remains the strongest region overall.

This year investment sales volume will reach $867 billion globally, a 7.5 percent increase from 2011. That growth rides mostly on the strength of a 25 percent increase in the Americas, where volume will hit an estimated $275 billion. Though the increase is significant, Rufrano noted that it is still a far cry from the $500 billion in annual volume the market recorded during its pre-recession peak.

The moderately upbeat projection of services firm Cushman & Wakefield Inc. paints a global real estate picture that is on track to brighten by the second half of 2012, as the U.S. leads an uptick in investment sales growth and vacancy rates will decline in more than half of the world’s major office markets.

The good news will have to wait for the second half of the year, largely as the global capital markets and the real estate industry take time to bounce back from a sluggish end of 2011. “That fourth-quarter delay will definitely continue the first quarter, maybe into the first half,” the firm’s president & CEO, Glenn Rufrano, told Commercial Property Executive. Government deleveraging in many industrialized nations is generating uncertainty about both deficits and tax policy, doubts that are hampering growth in Europe, the U.S. and even Asia — the latter of still which remains the strongest region overall.

This year investment sales volume will reach $867 billion globally, a 7.5 percent increase from 2011. That growth rides mostly on the strength of a 25 percent increase in the Americas, where volume will hit an estimated $275 billion. Though the increase is significant, Rufrano noted that it is still a far cry from the $500 billion in annual volume the market recorded during its pre-recession peak.

Senior industry leaders gathered at the exclusive pre-MIPIM 2012 event hosted by CREOpoint CEO J.C. Goldenstein to share both their expectations for the week and their sentiments on the global real estate environment.

The mood among participants was mostly positive. After sitting on the sidelines for several years, yield-starved investors are eager to find new opportunities. Demitrios Louziotis, senior vice president of global real estate solutions at ARGUS Software, sees many signs that the replacement cycle may be starting again — especially in Asia, where risk tolerance is returning. Reggie Winssinger, a member of W.P. Carey’s board of trustees, emphasized the attractiveness of the low-interest-rate environment, at least for investors whose deals are sound enough to qualify for loans.

Howard Roth, global real estate leader for Ernst & Young L.P., was “cautious but positive, even in Europe, thanks to the recent stimulus,” he said. “There’s plenty of equity looking for a home this year.”  Gunnar Branson, the new CEO of NAREIM, was in a good mood and said his firm’s last quarterly confidence index was back up. Chris Lawrence, executive vice president of investment management at Bentall Kennedy, noted that there are interesting opportunities due to technology and demographics in sectors such as the growing medical-office market.

However, even the most optimistic of CREOpoint’s other attendees expressed some caution, as obvious market risks remain. Distressed assets are still weighing on lenders’ balance sheets and the unwinding of these assets could fuel more financial turbulence for banks and the market in general. Peter Grant, deputy real estate editor of The Wall Street Journal, said that office leasing and investment sales markets in the U.S. haven’t rebounded after showing signs of cooling in the second half of last year. While emerging markets were repeatedly mentioned as investment niches, the lack of a predictable exit strategy continues to keep many investors away.

Louziotis may have best summarized the mood. “This time last year, the champagne glass was half full,” he said. “When we got to the fourth quarter, we realized the bottle was empty. Now the question is where is the next bottle coming from — and who’s bringing it.”

Commercial Property Executive will be offering J.C. Goldenstein’s MIPIM coverage throughout the week, via the “CPE Daily News Update” and available at http://www.cpexecutive.com/category/regions/international/. For real-time intelligence and networking in 13 languages, visit http://bit.ly/MIPIM2012 and get the free CREOpoint mobile app, compliments of ARGUS Software.

CREOpoint operates the top global commercial real estate business and social network. The firm offers complementary sponsorships through its CREOnewsletters, risk-management and business-intelligence subscriptions and custom dashboards, as well as new-media consulting through CREObuzz.

Cohen (left) and Padilla

Is this the year stakeholders in commercial real estate debt will have to “face the music?” In CPE’s 2012 Mortgage Bankers Roundtable, top executives of the commercial real estate financing industry’s leading companies contemplate how capital sources will meet the industry’s refinancing challenge. Participating in the roundtable are Jack Cohen, CEO of Cohen Financial; William Hughes, senior vice president & managing director of Marcus & Millichap Capital Corp.; Eduardo Padilla, president & CEO of NorthMarq Capital; and William Walker, chairman, president & CEO of Walker & Dunlop L.L.C. Part II of this discussion, “Taking Stock of Today’s Financing Conditions,” addresses interest rates, underwriting standards, CMBS and the future of Fannie and Freddie.

Hughes (left) and Walker

What is your company strategy this year?

William Walker: First of all, the refinancing volume that is coming up over the next fi ve years is a huge opportunity for a firm of Walker & Dunlop’s size and scale. Second, the difficulty CMBS has had coming back into the market provides a huge opportunity for a firm such as ours that is a non-bank financial services firm. The third is just that we are not a bank, and so much of Dodd-Frank and other regulatory issues that are challenges for depository institutions are not challenges for (us).

And (regarding) two of the big providers, CMBS, just from a structural standpoint, has not been able to come back into the market and address the opportunity very well, and banks are still, I think, trying to recover from the recession and fi gure out what the road map is for the future as it relates to their ability to finance commercial real estate.

Eduardo Padilla: We are seeing the cycle coming to a lot of refinancing opportunities, and a need for CMBS to come in to deal just with its portfolio. There will be continued consolidation of this business into a handful of large players who are able to offer an entire platform of commercial real estate mortgage banking capital—Freddie Mac, Fannie Mae, FHA, life insurance companies, banks, CMBS and some brokered activity. In addition to that, we also see opportunities to continue to grow the equity arranging part of our platform. That is an area in which we think we can excel and that we have grown significantly: arranging the equity component of commercial real estate transactions, the institutional joint venture partners, institutional-quality mezzanine financing basically, everything on the top of the capital stack other than first mortgage debt.

We think that will be a significant part of our business going forward. Hopefully, in excess of $1 billion of our business in 2012 will fall into that category.

Jack Cohen: On the servicing side of the business, we are a rated primary and special servicer, so our strategy continues to be to serve the buyers of distressed notes who need infrastructure to manage those notes. As a broker, our focus is on a balanced capital market and an equity placement practice. The borrower needs equity to replace his overleverage, and there are plenty of equity providers out there looking for deals, so as a capital markets-based service provider, we will provide debt and equity in the primary and secondary market in addition to our primary and special servicing.

Will the capital markets be able to adequately fill the financing gap that has been left by CMBS?

William Hughes: I would say for 90 percent of the CMBS deals, there is adequate financing. Capital sources come in the form of private funds, investment banks and REITs that are willing for the sake of higher yields to take greater risk in the capital stack. Whether it be mezzanine or preferred equity, there are certainly ways to structure up so that you can help recapitalize partnerships where the existing CMBS debt is upside down and you have too much debt in play one way or another. The CMBS loans may not underwrite in today’s market because vacancies have increased and rents have decreased in many markets for most property types: the retail, office and industrial sectors. So you are having to bring additional debt or equity into the deal to be able to make those deals go. I still think you are going to see some extensions in the CMBS market, as well.

Padilla: The CMBS market needs to be able to (provide financing for) its own maturing loans first. There is roughly a $600 billion CMBS market now, and that includes delinquent and special servicer loans. So if you think about a $600 billion market that is existing without even growing that marketplace, and that on average the terms of those loans are less than 10 years, then you are looking at a $60 billion to $70 billion annual need just in dealing with maturities on a straight-line basis. I say it would be healthy to see CMBS provide $50 billion in annual financing, but that will still require some of the maturing loans to be short-term extended or worked out with special servicers. Then we are talking about growing that business beyond $600 billion.

Cohen: In my view, many are missing the point. Everyone is talking about this wave of CMBS maturities that is not going to refinance. Let me disabuse you of that notion. The issue is, losses have to be taken. Let me give you a map. In 2007, $400 billion was financed in this country. Assuming on average 80 percent LTV, that means $500 billion of value traded. Everyone across the globe would accept that on average, value devalued 40 to 50 percent. That means that real estate, which was worth $500 billion, was worth only $250 billion. At the same time, you cannot get an 80 percent loan, but only a 65 percent loan. So 65 percent of $250 billion is $175 billion. Think about it: In ’06 and ’07, we should not have put on more than $175 billion of debt, yet we put on $400 billion. Of course the losses have to be taken.

Will there be a crisis?

Cohen: No. It is really simple: If you cannot pay off the loan, sell the building. Take a loss. The equity will get wiped out, the lender will have to take a loss on his loan. A new owner gets a new loan and puts new equity in, and the value of the real estate has been reset. That’s what we need to turn the industry around—not bond buyers, not more debt. We need the real estate to get readjusted to its real value. That’s what the government missed. This extend-and-pretend by the banks, delay-and-pray, special servicers extending loans because no one wants to face the music—all these have done is delay the inevitable. What people were hoping for was that the marketplace would come back—it came back, to a normal market, not to an accelerated market. The part that was abnormal was the run-up in value, not the reset that happened in 2008 and 2009.

Tom Fish at MBA CREF on Financing Requirements

Tom Fish, Jones Lang LaSalle’s co-chairman & executive vice president of real estate investment banking, looks at the financing requirements borrowers are seeing in today’s lending environment.

Jere Lucey at MBA CREF on Note Sales

Jere Lucey, Jones Lang LaSalle’s managing director of real estate investment banking, examines the note-sale market at the end of 2011 and looks forward to increased activity in 2012.

John Manning at MBA CREF on 2011′s Rent Increases

John Manning, Jones Lang LaSalle’s managing director of real estate investment banking, examines last year’s rental increases and what that means for pricing opportunities and the lending market in 2012.

CPE: How effective do you find most green—or as you call them, “high performance”—elements that are tending to be incorporated into buildings?

IZZO: I think the reason we embrace, at Syska, the term “high performance” probably more so than just “green” or “LEED” (is) it feels like not all but some are very focused on the point system to achieve LEED. And they’re missing the point. They’re focused on the wrong point. The point is to have a high-performance environment, and the outcome is a LEED score rating that gets you to Silver, Gold, Platinum even, and have a strategy around the design, the construction and the operations to deliver a high-performance environment—for the tenants, for the occupants. I think some people work backwards: How do I get to that point? Oh, I need to do X, Y and Z. That’s not really a holistic solution. That’s probably not giving the ultimate owner or occupant the benefit that we’re talking about today. The people who are going to be very successful … really embrace the overall concept and then tune the systems to behave, not just focus on, “What decision do I need to make today to get that point in the future, when we fill out the paperwork?”

CPE: What specific kinds of green characteristics are you most recommending to clients?

IZZO: We’ve definitely done a lot of work around water and how to reuse water, and I think it is wonderful to watch many of the owners really be focused on that and figure out creative ways of being able to redeploy water usage.

BRENNEN: And which probably doesn’t get enough market recognition just yet. … Green kind of gets back to (a) holistic process (whereby) first you’ve got to reduce the load, so that when you add something green or renewable it has a bigger impact. How do I shrink my load? First, through good design, and engineer the architecture, and then begin to do things we’ve seen work really well. Displacement ventilation, (where) you bring in air down low, at a higher temperature, and because you do that, you actually get more hours of free cooling from the outside air in most environments you’re in around the country. …

Certainly, photovoltaics are becoming more and more cost effective. You still need the government rebates to help that, but the price is coming down. But, again, you want to put those at kind of step five. You want to go through four steps of reduce, reduce, reduce, reduce and then add photovoltaics, and then do things like displacement ventilation.

We also see use of under-floor air, although it kind of got a bit of a black mark, because people didn’t know how to detail it. GSA even started backing away from putting in under-floor air, because they forgot how to seal the floor. Contractors didn’t know. Little details matter when you’re doing these kinds of things. So, under-floor air is a great strategy, but if you execute it wrong, it’s really bad. There have been some cases where that hasn’t gone well for people.

IZZO: I think the last piece is raising the set point temperatures. … These temperatures are written right into leases. And these are long-term leases. People have to evolve with these changes. Seventy-two degrees and a wet bulb of this or that—I think those are almost archaic. But if you look at a lease today, I guarantee you it’ll have the same specs.

BRENNEN: The other technology we see (is) geoexchange, which is a way of using the earth as a heat sink. … You’re not pumping. You’re not using chillers. You’re using the earth as a heat exchanger. But you also save water, because you’re not using cooling towers, which actually blow off and evaporate millions of gallons of water a year. So geoexchange, we think, has some significant upside. It’s not happening on a lot of projects just yet, because it is costly. So you have to do the lifecycle, and you have to be in it for the long run. But over time I think you’ll see more and more opportunity for geoexchange … probably not an urban environment like New York City. But when you get out where you have a little more land, that could be an interesting opportunity for clients.

IZZO: Interestingly enough, even here in New York, there are some pretty well-known installations that have had some high levels of success.

CPE: What do you see the next generation of high-performance or sustainable design looking like?

IZZO: These tools that continue to evolve and need to get refined will continue to help push the envelope. But I do think the next generation of system types really will be dependent on—and I hate to go back to it—but will be dependent on where we end up or what path we start heading down with the energy discussion. I think that’s really going to be a key driver in the next generation of these systems, how they start to take shape. … To get to the next plateau, it’s a different conversation. And energy will be a key part of that conversation.

BRENNEN: The other thing I’d say about the future of high performance is one of the words might be “transparency,” which is, I think, this idea of energy and impact on the environment. Your tenants will know and everybody will know; it’ll be transparent, through energy labeling or EnergyStar, or the building design might be transparent, where you can see in and see out. I don’t think there’ll be any more secrets. You’re going to know exactly how your building performs. And your tenants will know how your building performs. And you’ll be held to kind of a higher standard, almost, in the future because of that transparency.

CPE: Is there anything else that you see coming?

IZZO: I think the only other thing—and I’m far from an expert on this—it’ll be interesting, in the future, how projects get financed. … A lot of our owners today—government owners, corporate entities, educational facilities—continue to struggle in raising capital. So I think that conversation is evolving as well, with regard to P3 opportunities versus private equity versus foreign investment. With the current state of the economy, I think that will become more of a topic than ever before.

BRENNEN: I think P3 is really interesting. … We’re doing Long Beach Courthouse, which is the first P3 building of its kind in the U.S. We’ve seen P3 in infrastructure, like toll roads, but this is the first building being financed and built and operated by the—call it “developer”; it’s really an investor partnership.

IZZO: Even here in New York, I think the first half a dozen or so P3—and mostly around transportation—projects have been released, and it’ll be intriguing to see the response.

Gary Brennen (left) and Cyrus Izzo, co-presidents of Syska Hennessy Group.

CPE: What do you consider to have been the greatest improvements in real estate design in the past 10 years?

Brennen: What we’ve seen really being pressed by our clients—developers, landlords, government agencies—is this idea of high-performance—or green—design. We like the term “high performance” better, because it paints the picture about how design matters in how buildings take their shape and how they operate. That’s true for the landlord as well as the occupants. How do you create these high-performance environments—pretty creative spaces—that have positive energy but reduce their energy and carbon footprint at the same time?

Izzo: To Gary’s point, in order to bring these concepts to life, some of the tools that are available to the design community are really cutting edge. If you look back 10 years, or even five years, to the current day, tools like building information modeling, energy simulation tools and really being able to put forth a model that owners, developers, contractors and designers can all weigh in on and change before anybody really gets out into the field and puts a shovel in the ground has been amazing.

CPE: Tell me more about how you approach new construction today and what’s different about your approach from what it used to be.

Brennen: One of those (differences) now in the approach is how collaborative we have to be. The way to make that impactful is the use of the tools Cyrus just talked about. How do we bring forth our ideas in ways — through 3D modeling or the parametrics we use, in real time — that help our clients make predictive decisions early during — we call it the opportunity phase. When you’re visioning your project, how do you create the ideas that people understand and then predict the outcomes by using BIM and energy modeling tools, daylighting strategies and tools, so that you make the right decisions at the front end of a job that create these dynamic spaces people really need in the marketplace, to either market to tenants or market to their user groups or market, in some cases, to the neighborhoods? … It’s a way of creating an approach that helps the entitlement process by having low-energy, low-water, low-carbon- type facilities that show maybe it’s actually a positive to have construction.

Izzo: I think the other real game-changer in the industry is … collaboration with the owner, the design team and the contractors, as well as the folks who will operate the facility. In lieu of them being in various corners, kind of staking their claim and watching just their areas of interest, it really is, from the beginning of a project, a team approach to developing a truly successful outcome for the owner, so that all of these different stakeholders work together, hand-in-hand, from the project commencement right through to commissioning, completion and occupancy.

And then there’s some feedback that might occur just to see how these systems and the building are performing, and the KPIs against that. If they’re set up-front, it’s great to have an owner who’s willing to measure those KPIs as the building continues to evolve.

As engineer of record, Syska Hennessy collaborated with IBE Engineers to make the Cooper Union Academic and Science Lab Building in New York City technologically advanced, sustainable and flexibly designed. Photo by Iwan Baan Photography.

CPE: Is there anything in your experience that you think developers are just not focusing enough on now or could be addressing better?

Brennen: One of the challenges we see with developers and owners is that they need to be engaged early on in the decision-making and design process, in terms of making key decisions about how the building will operate, not just what it looks like. Sometimes you get trapped with the aesthetic, but performance matters in these high-performance, sustainable buildings. And (you can’t just say), “Let’s have the engineer create a high-efficiency mechanical system.” That’s not going to be good enough anymore; you’ve got to have a high-efficiency building design (from) the beginning.

I think owners have to learn and be engaged up front in that dialogue. How is the building massed? How is it oriented? What’s the glass and daylight condition? How do I keep solar gain out but good daylight in? It’s almost, “How do you engineer the architecture,” which drives the architect nuts a little bit, but you’ve got to tune the design from day one, and then … continue to tune the building after you occupy it to get the kind of results you want—and probably your tenants want, too.

Izzo: I don’t like to generalize, but the one big topic that I think everyone talks about but I don’t know that, as an industry—owners, architects, engineers, contractors—we’ve quite figured out is the future of energy. What does that look like? How does that impact the decisions we’re making today and the buildings that we’re designing and building today? I don’t know that there’s a clear-cut answer just yet. But I don’t believe people are focusing as much as we all should be on what the future of energy will be like in this country five, 10, 20 years from now. It’ll be very different, and we just want to make sure we’re mindful of what might occur, because the decisions we make today may not make sense with the changing landscape of energy.

CPE: Are you incorporating that into your thinking now?

Izzo: We’re addressing it probably as much as anyone else. However, I don’t know that owners have embraced that conversation too readily. Everyone wants to talk about green energy. When people see the current payback scenarios, et cetera, et cetera, that conversation typically ends pretty quickly. As an industry, we probably want to make better decisions. And … probably some more R&D is required of what decisions we should be making today, since energy will continue to be a challenge for the next 20 years.

Brennen: Essentially, all our resources: energy and water. … We certainly see the federal government beginning to push again, with their idea of carbon neutrality by 2030. It’s a very ambitious goal for the federal sector, to be carbon-neutral in their whole portfolio by 2030. I don’t know how you get there from here, but it certainly means you’ve got to start rethinking how you design buildings, as we talked about, with all our modeling tools and rethinking the skin, the massing and the orientation. And you might even have to have renewable energy sources in your building, so that you’re almost energy positive, if you’re really going to get there—whether that’s solar, fuel cells, co-generation or wind.

CPE: How much redevelopment do you need to do in order to incorporate some of this?

Brennen: When you think about your existing buildings, as landlord or developer, you have to reposition them not just for their looks and finishes but how they perform in this new kind of energy environment or regulatory environment we’re all going to be in. How do you improve the performance of the building and its systems, not just its look and feel?

Izzo: That has everything to do with the owner’s bottom line. The performance of those buildings will either make or break how competitive they are in attracting tenants, and also attracting a favorable bottom line. And it all comes down to: What is the return on those dollars that they invest? If those systems are not performing well, they will not be competitive with the building next door, and they will have a tougher time attracting and retaining quality tenants and charging market rents.

CPE: What do you see as the next evolution of commercial buildings?

Izzo: Sticking to the energy topic, sticking to the highly collaborative spaces, sticking to the high-performance solutions so that the employees are productive, the buildings operate well, I think you’ll find that things like IPD, BIM and these tools will continue to be refined so that commercial office buildings in the future remain very efficient, not just to construct but to finance and operate. In the past, there might have been more investment dollars available (for) proper- ties, and people were willing to potentially tolerate lower efficiencies. I think that’ll be off the table in the not-so-distant future.

Brennen: The U.S. practice usually was to overcome the environment that they fit in— so overcome the solar gain, overcome the cold temperature outside. Now buildings’ design needs to engage. You know, architects talk a lot about this: “of its place and of its time.” Well, now the building itself needs to respond to and engage with the sun. What are the opportunities to have daylighting or solar PVs? What’s the opportunity to naturally ventilate transitional spaces, where you may not have to use mechanical cooling. …The building needs to engage the outdoor environment it’s sitting in.

And then the occupants will live in that space, and you’ll have this much brighter, day-lit, comfortable environment for them to be productive in. That’s really an area that still continues to evolve, because we’re so used to just overcoming it by adding in chillers and mechanical systems and all that stuff.

CPE: What are some examples?

Izzo: If you look at people who have really studied their environment and figured out ways of leveraging their environment, whether it’s using river water for cooling or figuring out new and exciting ways of using geothermal systems, although at first glance they may not have had the best short-term ROI, I think people with a longer-term view understand that that will pay dividends—maybe not in three years but over the life of the facility. It’ll be very potent and very measurable for their investors.

Brennen: Longer term, corporate clients are definitely thinking along these lines … talking about building LEED Platinum. … GE (wanted a) LEED Platinum data center, because that was important to them, for their employees but also as a message to the marketplace. We see it in RFPs coming out now for Intuit—LEED Platinum for their new building up in Mountain View. They’re beginning to take a longer-term view about the environment and its impact on their local workforce, but also the community at large and how good a neighbor they need to be.

The government kind of started this process, but now we see it in our corporate clients. You’re going to see it (expand) to the more savvy developers, who have to cater to these kinds of corporate clients. It’s almost a three-step process. The smart developers, Hines or Durst, they get it. They know they’ve got to get out in front of this.

CPE: What do you see as the biggest prob- lems with or drags on building operation today?

Izzo: It’s probably around training. These buildings continue to become quite complicated in how they’re designed, and, most important, how they’re operated. Now, with some of the systems, everything is riding on technology. I think people have to really spend time training their teams to be able to operate these buildings and tune these buildings, because it’s not just set the thermostats once and walk away for the next 30 years. You have to really continue to monitor these measurements that you get back in the system. And then how do you proactively manage those systems to take advantage of some of the data points you get back?

As a building evolves and matures, you need a very robust operations team, who’s highly trained, highly technical; who can take advantage of a building and tune its systems to be able to wring the most efficiency out of all of the systems that are designed and installed. And that’s not really static; that’s a very dynamic process.

CPE: That means a different kind of team.

Brennen: A little more sophisticated, and I think Cyrus’ key word there is “proactive.” Traditionally, the building engineers were probably very good reaction-wise; this is a different mindset. How do you think ahead? How do you learn from what the building’s systems are doing and then continually improve them through (being) proactive, using your BMS systems smartly, understanding … how you can tweak set points. It goes on and on and on. But it’s a different … mindset and culture that these buildings are going to demand over time.

For further discussion of sustainable, or “high-performance,” practices, turn to “Sustainable Solutions.”

Liberty Property Trust chief information officer Steve Messaros spoke with CPE editorial director Suzann D. Silverman about the integrated, corporate-level approach the REIT has taken to its business strategies, and in particular how technology and real estate work together. The office and industrial property company introduced a scenario-planning strategy in 2007 in which it began considering and planning for possible futures, a process it revisited last year.

Q. What initiatives have come out of your review of your scenario-planning strategy?

A. We’ve got six major corporate-wide initiatives: We call them key success factors. These are competencies needing continuing investment to maintain competitive advantage in the series of possible futures that are out there, and pretty much all of them require attention from IT. The first is sustainability and sustaining—basically, improving the efficiency of our portfolio. … (It) spawned one of the first major projects where the IT department at Liberty got involved on the real estate side, developing a building wide area network (BWAN). …

Another is our ability to communicate in the organization—how we communicate and collaborate is a key factor for how we succeed, and IT plays a tremendous role in facilitating this. The third that requires IT investment and support is asset management: constantly improving our ability to manage our assets to produce the highest-possible returns in the long term. Along the same lines, operational efficiency is a key success factor for us; it is imperative that we operate efficiently as we grow, and IT plays a large role in this. Talent management—making sure we have the human capital we need—is another success factor. And finally, since the entire reason for our organization’s existence is to provide valuable real estate solutions—what we call extraordinary work environments—to corporate America, we need to be constantly in consultation with, learning from and educating a large number of tenant customers. This requires internal and external communication strategies and technological tools from us.

We truly have a crucial role to play in virtually every aspect of our company’s operations. This makes having an R&D function particularly important, and I think it could be a future key success factor. We are just starting to dip our toe in the R&D water, but I think that could be one that’s really important to get right very quickly.

Q. Are you striving, with what you’re putting in place, to make them more flexible so you can shift them as technology evolves further?

A. There’s a shift to try to push some of the control out to our customers. We’re beginning to see that in the BWAN phase II. I mean, you could look at a future scenario where real estate companies will still be leasing to companies and organizations, but we might also be getting into leasing by the seat. Trying to understand what that means and what level of control will be necessary to really succeed in that market would be an interesting thing. Now, that’s not something that’s going to happen overnight or even in the next few years, but that’s one of the things, at least in the back
of my mind, that we need to be prepared for.

Q. R&D relative to anything specific or at a broader level?

A. It’s both broad and specific. Significant technologies are all coming into vogue and down to the Main Street level very quickly—the combination of unified communications, 4G and cloud is incredibly significant and potentially will have a huge impact on the way we work … how (office buildings) will be built out, and what will succeed and not succeed in the future. So for me it’s much more about the technology. I mean, there’s always the market and the demographics, and there will always be a need, but is there something significantly going to change in the office area that we need to be aware of? I think there is, and the more armed we are with knowledge, the better off we’ll be and the better the decisions we’ll make today (for our) real estate.

Q. Are you striving, with what you’re putting in place, to make them more flexible so you can shift them as technology evolves further? Liberty Property Trust is considered one of the leaders in the sustainability movement among real estate investors and owners, and you mentioned it as one of your initiatives. What are you doing in regards to sustainability?

A. I think the BWAN project was a great example, where up ’til then our sustainability initiative was really limited to building LEED buildings—not an insubstantial investment, but it was really on the periphery. When you own a few billion dollars’ worth of real estate and you’re developing a few hundred million dollars’ worth every year, to really move the needle from a sustainability perspective on an enterprise basis, you have to look at how you improve your existing assets. It is a very, very tough process to go through each one of the buildings trying to understand (whether it) is an efficient building (or) an inefficient building (using) objective measurements. That’s where the BWAN—at least, the first phase of it—allowed us to run through the primary inventory of buildings … to make a determination of whether or not it’s an efficient building— should we invest further in that building or is that building so inefficient that it should be directed more to dispositions? …

From an efficiency perspective, we’re making sure that we’re not wasting tenants’ dollars: that the buildings, when they shouldn’t be running, are shut down. … That’s a big deal, and there are a lot of folks out there that still don’t do that. You can’t do it from your invoices and looking at your kilowatt usage based on an invoice that you might get from a utility company. You really need to look at your energy profile and understand what it means. … It’s certainly not a science; it’s much more of an art than I thought when I first went into this process. …

Phase II is a 10-building project where we’re testing and trying to understand what brings the best value. … Is it motion sensor lighting? Is it HVAC controls? … Is it daylight harvesting? Is it simply monitoring the energy profile for a building? Submetering the space for each individual tenant? What is it that drives and provides the best business case for investment? Because we’re trying to take that 10-building project and extrapolate those results across the rest of the portfolio, and we really need to understand … what gives us the quickest turnaround, what’s the best return on our investment.

Q. You said it’s more art than science. Do you see it ever becoming more of a science?

A. I think there are some technologies out there still in the formative stage, where you could begin to look at … just how many people come into the building, when do they come into the building, where do they go, how does the traffic move throughout a building—trying to understand how all of that fits into HVAC and lighting. Obviously, you can have lighting and you can have motion sensors, and that’s relatively simple, but the motion for one person versus 10 people versus 100 people. That’ll begin to scratch the surface of the kind of information that we’re going to need if we’re really going to have smart buildings.

Q. What types of capabilities do you now include on your IT team and how has that changed?

A. IT has always been a great resource to translate things. Typically, it’s trying to translate technology into business applications … and explain it to a seasoned business individual. The same thing holds true in building initiatives, where you’ve got people that are very comfortable talking about building automation systems and LON and BACnet, but that’s not a typical lexicon for an IT or technology individual.

We ended up going out to our property management group (in 2006) and pulling in a director of portfolio technology (Fred Dougherty) that was very, very well versed in building technologies but still had a lot to learn about IT. We embedded him in the IT group, so he was able to both teach us more about building technologies and learn some of the principles that we apply in IT and marry those two. And now, he’s a great bridge for discussions with the field when it comes to the individual property managers and being able to talk the property management talk while at the same time translating the technology piece.

Q. Do you see more real estate companies bringing in executives from outside IT to run the department?

A. I think you’re seeing a lot more heads of IT that don’t necessarily have a technology background, that come from the business. … My background is accounting, finance, and it’s not technology. Back in 2003, when I was put in charge of the IT function at Liberty, there were very, very few people that weren’t very technology oriented. Very, very bright people, but they didn’t necessarily know a whole lot about real estate; they knew a lot about technology. I think that pendulum is swinging to real estate first, technology second.

Q. CoreNet Global for a while has been pursuing a concept of integration in corporations of the real estate, IT and HR departments. How do you see those efforts being applied among real estate companies?

A. Tying together real estate and IT has been happening at Liberty for quite some time, but the combination of HR into that mix is something of relative recent development here. (About three years ago) we had a new (head of HR) brought in, a woman by the name of Caren Hosansky, who has really pushed the agenda of change management and how important that is to the ultimate success of a project. And managing expectations of all the different stakeholder groups and trying to understand what the motivations are behind each one of those stakeholders, because generally they’re all different.