Interview conducted and condensed by
VIVIAN MARINO
Q. Tell me a little bit about the practice.
A. The practice has about 100 professionals across the country. We’re in New York, Boston, Philadelphia, South Florida, Chicago, Los Angeles and San Francisco. There are seven partners, in addition to four managing directors, and we cover the real estate asset class from single-family residential to big office.
What we do really depends on the market needs, but it includes due diligence, financial advisory and strategic portfolio performance reviews. Our specialty is analysis. We don’t compete against the brokerage community — we don’t have any vested interest in the outcome of a transaction.
Q. What is your main role there?
A. I get involved in recruiting and retaining our people and our clients.
Q. Who are your clients?
A. It’s mostly institutional. They tend to be the big pension funds that invest in real estate or advisers to the pension funds and REITs. But I do have entrepreneurial clients. J. P. Morgan Investment Management and Starwood Capital, GE Capital, NorthStar Realty Finance and Ogden CAP Properties are examples of clients.
Q. How is business?
A. It’s very good. There are two ways of answering the question. One, the real estate asset class couldn’t be positioned better in an economy like now, so there’s a tremendous amount of capital formed to invest in real estate, which is good for our business. And then because there are some markets where prices are at prerecession levels, there are clients looking to take money off the table, so there’s selling of assets. There’s a lot of transaction activity, which is good for our practice.
What’s interesting is, if things are terrible and there are bankruptcies and disputes between parties, we do well. If things are going gangbusters like they were in ’06, we do well. The only time we’re slow is when there’s a lot of indecision in the market.
Q. Like during the recession.
A. But interestingly enough, when that went on in ’08 and ’09, valuation was a tremendous issue and valuation is a big part of our practice. Financial instruments were hard to valuate; hard real estate was a little bit easier.
Q. How would you categorize 2012?
A. Coming out of the recession the big gateway cities were the ones that performed best. That included New York, Washington, San Francisco, Boston, Chicago and Los Angeles. That’s where investors were willing to take risks. You had diverse employment base, better leased buildings, less risk of a double-dip micro recession.
So that’s where we were — and 2012 was a continuation of that.
Apartments were the darling real estate subsector. But what happened in 2012 was we saw apartment cap rates get too low in some of those markets — south of 5 percent — and so investors were looking to invest outside apartments and outside the gateway cities. We started seeing in 2012 an interest in the office asset class, the industrial asset class, and a little bit more interest in retail.
Q. Are there regions of the country where you see future growth?
A. The other 45 markets that are covered in our investors survey look like that’s where all the opportunities are — whether it be Raleigh-Durham, N.C.; Texas markets like Austin, Houston and Dallas; Seattle; and Denver.
None of them is radically overbuilt from an office or apartment perspective. What’s also interesting is those markets have a high percentage of echo boomers in their population — the 25- to 34-year-olds. That’s who’s going to buy a house in the future, who’s going to work in an office or retail or warehouse, or shop in retail.
Q. Let’s talk about your recently released 2013 Emerging Trends Survey of investors.
A. One cool thing: We asked the 900 participants what they think their prospects are for profitability for the real estate asset class, and we intentionally don’t define profitability — 93.1 percent felt that 2013 would be fair or better from a profitability perspective. That’s up almost seven or eight percentage points from last year.
There isn’t a lot of overbuilding in this country, so all of the stock that was created in the wake of the boom leading up to 2006-2007 — that’s in the process of being absorbed. Housing has turned a corner. The challenge we have in our country is in our job re-creation.
Q. Do you personally invest in real estate?
A. I have a home. That’s it.
Article source: http://www.nytimes.com/2012/12/05/realestate/commercial/the-30-minute-interview-mitchell-roschelle.html?partner=rss&emc=rss