The AFIRE Podcast

Many of the challenges facing the US real estate market mirror those seen in the Asia-Pacific region.

https://www.afire.org/podcast/202412cast/

So as investors are planning for the rest of the year, it’s the perfect time to speak with Simon Treacy of Singapore’s CapitaLand Investment, which manages properties in more than 40 countries.

Treacy is the CEO of CapitaLand’s Private Equity Real Estate, Real Assets division, and says “The world is pretty much synchronized now. The same discussions you’re having in the US—we’re having in most markets around Asia.”

On tap: What are Treacy’s predictions for the rest of 2024? What’s in store for valuations? How will changing interest rates affect global property markets? And are we finally going to see a breakthrough from a sluggish market to something that’s a little more active?

Plus: Lessons for the US market from an Asian perspective. “We are starting to see [that] we’re coming towards the end game of the interest rate cycle,” Treacy says. “And as a consequence of that, we’re just starting to see transactions click up a little bit more.”

How can affordable housing become a reality in cities like New York, whose current blueprint and zoning regulation is not easily suited to modern market-rate and affordable housing development?

https://www.afire.org/podcast/202411cast/

In our latest episode of the AFIRE podcast, CEO and host Gunnar Branson speaks with David Kramer, president of the Hudson Companies, a leading developer in NYC, about what it takes to build affordable housing in a city made for anything but.

It’s a wide-ranging, entertaining conversation about the challenges of living and developing real estate in one of the most vibrant cities in the world—and America’s key “gateway” city. Kramer and Branson explore the tension between developer’s public profiles, and the realities of trying to build new projects in a sustainable way, while also nurturing a city that is hospitable to people from all walks of life.

Kramer also takes down the common misconception that landlords determine rents. In fact, Kramer says that achieving housing affordability starts with increasing the number of units in a given market. “The solution . . . should not be chastising landlords and trying to limit rent increases—it should be increasing the supply.”

With decades-worth of insider perspective and a whole host of entertaining analogies, Kramer’s interview provides a portrait of a New York developer doing his best to contribute to a city where people love to be—and what other cities can learn from this approach.

Forecasters are predicting another record-hot summer in North America. What’s hard to predict, though, is how environmental disasters will affect the real estate market around the country.

https://www.afire.org/podcast/202409cast/

Intense hurricanes, droughts and untamable wildfires are all playing roles in the increase of premiums—bringing insurance to the forefront of real estate investing like never before.

…which is why we’re talking now, in the latest episode of the AFIRE Podcast, with president and general counsel of EDGE Fund Advisors, Tiffany Sanders. The firm had owned their 1.1 million square foot building in downtown Manhattan for five months before Hurricane Sandy wreaked havoc on New York City in 2013, with tenants that included a major bank and two media companies. “[The property] was supposed to be a low-maintenance dividend-producing machine,” she explains.

What followed Hurricane Sandy was a long and arduous process of recovering from the storm’s aftermath—pumping out water from the building, replacing electrical equipment that had been fully submerged, and repairing damaged interiors. “You can’t turn that stuff back on,” Sanders recalls. “You have to rebuild it.”

For Sanders, the process yielded a better understanding of navigating insurance costs, preparing for the worst, and averting crises—all of which are things other investors may want to consider as we enter uncharted territory this summer. “We underestimate our vulnerability and we overestimate our readiness,” Sanders says.

After four years and $10M in flooding restoration, Sanders recounts her experience dealing with an environmental disaster and redesigning the building to keep tenants afloat post-storm. She also shares what she says other building owners should know about planning for climate disasters in the years ahead.

Melissa Román Burch is New York City Economic Development Corporation’s chief operating officer—and one of the speakers at the AFIRE Annual Member Meeting in New York City this September.

https://www.afire.org/podcast/202408cast/

She says the five boroughs are home to more than a million buildings and unprecedented employment growth, with more private sector jobs than ever before. But the city’s housing crisis threatens to limit economic development.

“For more than 40 years, job growth has outpaced housing growth,” Burch tells host Gunnar Branson, AFIRE CEO. “This is a multi-decade problem… that has reached an inflection point.” Rental-unit vacancy rate is down to a historic low, around 1.4%, she says, while at the same time, the office sector faces occupancy challenges, with more than 100 million square feet sitting empty.

To address the housing crisis, the city has unveiled a housing moonshot—a goal to build 500,000 new units over the next decade, about double the typical rate of supply.

Exactly how the city will go about achieving that, on some of the most expensive real estate in the world, is topic number one in our latest podcast episode, now streaming on all podcast platforms.

Mosaic Real Estate Investors CEO Ethan Penner, the latest guest on the AFIRE Podcast, doesn’t believe the office sector has hit bottom.

https://www.afire.org/podcast/202407cast/

Yet, at the beginning of 2024, Penner and his business partner Chad Carpenter announced a new US office-focused real estate finance company, Reven Office REIT, that intended to raise $1 billion to provide office owners and investors with bespoke financing solutions.

“Office is a very complicated investment asset today,” Penner says. “It’s something that has inspired fear in investors, and rightly so. But what’s interesting is that when fear becomes pervasive, markets are abandoned. And of course, babies are thrown out with bathwater.”

Penner and his partners are trying to find those “babies”—the office investments that continue to have upside, despite ongoing challenges for the sector.

In this episode of the AFIRE podcast, Penner explains his sometimes counterintuitive take on the health of the office sector with podcast host and AFIRE CEO, Gunnar Branson. Aside from his enthusiasm for finding overlooked gems in the sector, Penner holds concerns about the effect of AI on the future of office. “The [threat] that looms largest, that’s on the horizon, that people are in denial about,” Penner says, “is the impact of AI on jobs, period. I think that there’s a real threat— technology happens faster than people can imagine.”

Commercial real estate in 2024 is dominated by uncertainty. Midway through 2024, nobody is buying at prices people are willing to sell for, and banks lack any incentive to bridge the gap between asking prices and active offers.

https://www.afire.org/podcast/202406cast/

…not to forget the looming question that AFIRE CEO Gunnar Branson keeps coming back to:

“How much will climate change cost us?”

“Lots of firms had hoped that this was the year when we could move back in, in a big way,” says Mary Ludgin, a senior advisor and equity owner for Heitman, a global real estate investment management firm headquartered in Chicago. Now, Ludgin says, “we’re still playing the waiting game.”

So where do we go from here? How does all this uncertainty get resolved? As one of the industry’s most insightful commentators, Ludgin provides her best insights on how the market will pan out over the rest of the year. Her most pointed guidance for investors is to weather this uncertainty by diversifying on as many fronts as possible, from property types to locations, climate change exposure, and geopolitical risk factors.

“As somebody that’s been trying to predict the future for my 35-year career in this field,” Ludgin says, “I’ve realized that there are things you can predict. And then there are the black swans—and the only way to buttress against the black swan… is to diversify.”

With all of the other troubles currently affecting commercial real estate, should ESG still be a priority?

https://www.afire.org/podcast/202405cast/

Compliance with established environmental, social, and governance (ESG) became a critical measure of real estate performance over the past decade. But with the current slate of challenges faced by CRE—everything from high costs to building and infrastructure obsolescence—some investors are feeling inclined to put ESG lower on the punch list.

...but that would be a mistake, argues Patrick Richard, CEO of Stoneweg US, the US-based subsidiary of the Swiss real estate firm.

In fact, in this new episode of the AFIRE Podcast, in conversation with AFIRE CEO Gunnar Branson, Richard builds a compelling case that investors should prioritize ESG investments as a way to generate higher returns on investment—especially now.

“One thing that sustainability does is protect the value of your assets,” explains Richard, who sees ESG prioritization as a way to decrease risk and increase revenue—critical differentiators in the current real estate market. Richard explains how investing in climate resilience can decrease insurance premiums and lender interest rates, currently significant cost centers affecting pro formas. By investing with an ESG mindset, despite some current external financial or philosophical pressures, Richard says: “Not only are you protecting your assets, but you’re creating value at the same time."

Affordable housing may be the most important issue facing the commercial real estate industry today. Statistics show a shortage of more than seven million homes in the US alone.

https://www.afire.org/podcast/202404cast/

More than half a million people are experiencing homelessness, and high interest rates and a growing population are making housing more expensive for more people.

So—how do we solve the problem?

What options are available to those of us who are investors, developers, builders, owners, and operators?

To get some answers on the current housing situation—and future-focused solutions—AFIRE CEO and podcast host Gunnar Branson recently sat down with Paul Bernard, president and CEO of Affordable Homes & Communities, a nonprofit developer with a focus on housing creation in Maryland, Virginia, and Washington, DC.

Bernard argues that the housing crisis is partly caused by barriers to new construction, leading to high homelessness rates, high housing costs and insufficient supply.

Affordable housing is not a commodity, Bernard says. Instead, it’s an asset class where developers and investors can follow concrete steps to alleviate housing availability issues and still find returns. According to Bernard, building more affordable developments requires an all-hands-on-deck approach, starting with a new narrative that will change public opinion of affordable housing, tax credits and renewed, innovative, problem-solving partnerships with nonprofits, for-profits and the public sector.

Many leaders believe this is the key to becoming fully immune to all future risks—but evading risk forever is just unrealistic.

Risk plays a big part in commercial real estate. To thrive, it’s crucial to adopt a proactive approach to manage risks effectively.

So how can commercial real estate investors thrive in a time of such incredible volatility, change and blindness? How do we thrive amid constant uncertainty and exposure to risk?

On this new episode of the AFIRE Podcast, AFIRE CEO Gunnar Branson sits down with General Stan McChrystal (Ret.), CEO and Chairman of the McChrystal Group, to discuss the risks facing investors during this time of heightened uncertainty in commercial real estate.

As a retired four-star general in the US Army, General McChrystal translates his military training to educate leaders in commercial real estate on how to employ a proactive approach to managing risks instead of steering clear of possible failures.

There’s this “unwillingness to be realistic about risk,” says McChrystal. “As a consequence, when you try to mitigate risk to zero, it takes so long that you’ve priced yourself out of the option.”

In this riveting conversation about risk, General McChrystal walks us through what’s considered effective communication, how avoiding mistakes amounts to the first blunder, and how to fight back against our inclination to avoid risk.

https://www.afire.org/podcast/202403cast

Technology can be enormously disruptive to commercial real estate. Remote work is responsible for the global devaluation of office properties. Artificial intelligence (AI) is already changing the way we live and work.

So what will be the effect of AI on institutional investment strategies?

https://www.afire.org/podcast/202402cast/

To get at some answers, AFIRE CEO Gunnar Branson talked to one of his favorite futurist investors, Jeffrey Kanne, president and CEO of National Real Estate Advisors, an AFIRE member firm and investment manager specializing in a build-to-core strategy, developing and managing large-scale, urban commercial and multifamily projects for its institutional client accounts.

“The advent of AI as a technological tool is going to greatly increase the rate of change,” Kanne tells Branson. “I’m very nervous about where you can place money and think it’s safe.”

The best opportunity for investment, Kanne believes, is in data centers that provide consistent power and temperature-controlled environments for the Googles, OpenAIs and Microsofts of the world.

With that in mind, Kanne and Branson discuss how investors can enter the data center market.

“It’s not rocket science,” Kanne says, while outlining potential pitfalls and barriers to entry for new operators. “It’s incumbent on all of us as investors to think about what the world will be like in five years, ten years, fifteen years,” Kanne says. “When I look ahead, data centers are a good place to focus on.”