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Challenges and Strategies in Real Estate for 2010

Challenges and Strategies in Real Estate for 2010. Remarks by: David M. Mincberg Chairman and Chief Executive Officer Flagship Properties Corporation Chairman, Houston Housing Authority Houston, Texas. Background The Real Estate World Has Changed Why and How. Real-World.

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Challenges and Strategies in Real Estate for 2010

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  1. Challenges and Strategies in Real Estate for 2010 Remarks by: David M. Mincberg Chairman and Chief Executive Officer Flagship Properties Corporation Chairman, Houston Housing Authority Houston, Texas

  2. Background The Real Estate World Has Changed Why and How Real-World

  3. Houston by the Numbers • City of 2 million people • Metro area of almost 6 million people • Area of almost 1,500 square miles • Remarkably diverse • 90 different languages • Lagging woefully in mass transit

  4. Opportunity! • Create a vision • Craft a plan • Not encumbered by past • Design for reality

  5. Survey Time • Real estate pricing/values? • Inflation or Deflation? • Déjà vu? • Analogies anyone? • Bubbles up…bubbles down • How long do bubbles last?

  6. Is it True? • Did real estate developers really over-leverage?

  7. Or said differently… What’s lurking in the woods? What’s Really Out There?

  8. Vacancy Levels Continuing to Rise Sharply

  9. Monthly CMBS Delinquency

  10. $1.5 Trillion of Commercial Mortgages are Maturing Between 2009 and 2013

  11. One banker said to the other…

  12. CRE Value Trends • Opportunistic funds are down 52% according to the NCREIF/Townsend fund indices. • Core funds are down 36.3% from their peak by the end of Q3 2009.

  13. Commercial Real Estate Value Trends • Blackstone marked down its real estate portfolio by 30% in Q4 2008 and another 19% in Q1 2009.—Wall Street Journal 05/07/2009 • Goldman Sachs’ biggest private real estate equity fund, called Whitehall Street Global Real Estate, L.P., invested $3.7B between May 2007 and August 2008 in a portfolio of casinos, hotels and office buildings. They have since written down those assets by $2.1B…--Wall Street Journal 05/15/2009

  14. CRE Value Trends • MIT Transaction-Based Index shows property values have fallen 39.2% from their peak by the end of June, 2009. • Moody’s/REAL CPPI shows property values down 40.6% as of the end of August. • NACREIF Property Index indicates that it has recognized less than two-thirds of the coming right-downs in property values.

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