Arthur Coppola, President & CEO, Macerich Company

Richard Kincaid, President, Equity Office Properties Trust

Roy March, President, Senior Partner, Eastdil Realty, LLC

Andrew Segal, President & Founder, Boxer Properties, LLC

Scott Syphax, President & Chief Executive Officer, Nehemiah Corporation

Moderator:

Joel Kotkin, Senior Fellow, Milken Institute; Senior Fellow, Davenport Institute for Public Policy, Pepperdine University

Summary:

After the stock market bubble burst in 2000, real estate has regained its position as the "gold" standard of the 21st century. Moderator Joel Kotkin began the session by pointing out that real estate investment surpassed investment in equities and asked panelists if this trend would hold and attract more investors in coming years. Indeed, panelists agreed that today′s real estate market is not a short-term boom but an expansion that could well sustain itself beyond the current economic recession.

Panelists believed that real estate isn′t a question of whether to invest, but rather of where within the real estate market, to invest. A diverse set of real estate investment opportunities were explored. Office space investment was one sector noted as having performed well in primary markets such as San Francisco and New York while some panelists noted positive results from secondary markets like St. Louis and Atlanta. Opportunities in tertiary markets like Cleveland and Indianapolis, should not be overlooked either, noted panelists.

Richard Kincaid of Equity Office Properties Trust, found job growth to be the engine in secondary markets. He emphasized that companies need to cater to the knowledge-based worker in San Francisco and San Jose while noting that manufacturers would continue to face pressure. Job-creation is of particular importance to insuring that real estate fares well in upcoming years.

Despite the performance in primary and secondary real estate markets, one panelist stressed the inability for some investors to benefit because of barriers to entry. Some panelists viewed San Francisco′s office market as one with large amounts of office space, while others questioned its underutilization, noting that leased buildings in downtown San Francisco contain empty floors unavailable to potential tenants. Contrary to conventional wisdom, this situation has been profitable for some real estate companies and they view the current situation as one that will continue to stabilize itself regardless of vacant space in these buildings.

Other issues addressed by the panel included public real estate such as shopping centers and malls. Andrew Coppola of the Macerich Company urged investors to consider investing in real estate companies with holdings in retail centers. He noted the ability of these "consumer driven" real estate holdings to weather an economic storm because of the sales productivity originating from these locations. Demographic statistics were shown highlighting the growth of minority populations in the U.S. and Coppola reminded the audience to not overlook tailoring retail shopping centers to these communities. The Macerich Company′s investments in retail centers targeting minority consumers have proven successful.

Finally, panelist Scott Syphax of the Nehemiah Corporation focused his attention on highlighting the importance of home ownership, especially in the inner-city communities. Syphax stressed importance in improving the social conditions of low-income communities by leveraging access to capital and home ownership. He believes that providing this demographic group with access to financial instruments could help improve their economic well-being since asset creation is driven by home ownership which then could lead to prosperity. Overall, there was a generally positive tone towards real estate investment today and in upcoming years. Panelists covered several important real estate topics, provided insight as to where opportunities currently exist, and where new opportunities may arise.

Background Info:
Housing Affordability in Three Dimensions: Price, Income and Interest Rates
A New Kind of Gold? Investment in Housing in Times of Economic Uncertainty
Milken Institute Review: Institute View - Vive la Central City

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