Business Management Executive Q&A
April 15, 2009
CPN Editor-in-chief Suzann D. Silverman spoke with Dale Anne Reiss, who retired last June after 10 years as global director and more than a decade more as a managing partner in Ernst & Young L.L.P.’s real estate, hospitality and construction services practice. She recently formed her own consulting firm, Artemis Advisors L.L.C. Now a consultant for Ernst & Young, she last month also retained DLA Piper as a client.
CPN: What are some of the things you’re working on now?
Reiss: Today, rare is the real estate company that isn’t somehow looking at restructuring in some form or renegotiations in some form or re-evaluation of their alternatives in some form.
CPN: Let’s talk about your view of the industry these days. How would you evaluate the health of the commercial real estate industry as a whole right now, especially as it compares to that of other industries?
Reiss: It’s important to recognize that every industry is challenged right now: automobiles, banking, insurance, retailers, airlines, hotels, gaming, restaurants, manufacturing—there’s no industry out there that isn’t facing some challenges right now. So that real estate is facing some challenges isn’t surprising because real estate is there as a service arm to other industries; we provide the space for other industries. If other industries are challenged, real estate will be challenged.
CPN: What’s the biggest problem you see commercial real estate companies having?
Reiss: I think the issue is the availability of financing because financing is the lifeblood of real estate. It’s a raw material for real estate, just like concrete and rebar, and when that’s not readily available it impacts the industry dramatically.
CPN: Do you see them responding appropriately?
Reiss: Sure. Companies are tightening their belts and they’re looking at their alternatives. They’re negotiating with their lenders, they’re evaluating what transactions are out there, you’re seeing companies that can selling properties or bringing in partners or renegotiating debt. ... I think companies are trying to take the appropriate action.
CPN: There have been efforts to compare this recession to others, with most people pretty much deciding it can only be compared to the Great Depression. But are you drawing on knowledge of the past few recessions or how companies performed during any of the past few recessions in determining what the best responses are today?
Reiss: I think every one is really different. Back in the early ‘80s, where we faced double-digit interest rates during a period where the industry was still doing massive construction, that certainly created a series of challenges that was unique to that timetable. And certainly during the late ‘80s and early ‘90s, where we faced a situation where commercial real estate overbuilding brought about the downturn and helped to in effect cause the collapse of the savings-and-loan system, (there) was a different fact pattern. I think each recession and how real estate responds to it and its role in each recession is different, and I don’t know that there’s a one-size-fits-all answer.
CPN: Generally speaking, how would you advise commercial real estate firms to best weather this economy? What would you most advise them to do?
Reiss: I think the best thing to do is to tighten the belt, batten the hatches, evaluate the debt and the properties they have and prepare for the future. Remember, this is also the time of the greatest opportunity. That’s a very important thing to remember.
CPN: What are your greatest concerns for the industry right now?
Reiss: It’s important to remember that real estate really provides service to other industries, so it can only recover when other industries recover and they demand space again, so it’s tied up with a lot of issues in the economy as a whole that real estate players can’t necessarily control. ... What happens with immigration, what happens with government policy, what happens with certain international policies ... all (real estate companies) can do is react. They can’t direct.
CPN: What’s your prediction for when the industry will recover?
Reiss: There, again, it’s tied to the economy as a whole, and it’s important to remember that real estate is a trailing indicator. We won’t see a turn until after the economy as a whole also turns.
CPN: Do you see financing loosening up sooner than that?
Reiss: I sure hope so. I think that in part depends on government actions that are coming out as they deal with all the various policies with the banks, with the insurance companies. There’s a lot in play simultaneously, and I’m not sure anyone can see through all the actions that are occurring at this time to put a date on when things will turn. I sure don’t think it’ll be ’09.
CPN: Some of these policies take time to take effect, too.
Reiss: Absolutely.
CPN: Is there anything else you think it’s important to add?
Reiss: One of the interesting things is what’s happening in the world--globally. Real estate had become a global investment class during the last cycle, and I think the importance of the global part of real estate will continue through this cycle also. That’s an interesting aspect for DLA Piper and why I’m enjoying working with them and helping them create and build their global real estate practice--because real estate is global right now, and I don’t think it’s going to go back to being a domestic activity.
CPN Editor-in-chief Suzann D. Silverman spoke with Dale Anne Reiss, who retired last June after 10 years as global director and more than a decade more as a managing partner in Ernst & Young L.L.P.’s real estate, hospitality and construction services practice. She recently formed her own consulting firm, Artemis Advisors L.L.C. Now a consultant for Ernst & Young, she last month also retained DLA Piper as a client.
CPN: What are some of the things you’re working on now?
Reiss: Today, rare is the real estate company that isn’t somehow looking at restructuring in some form or renegotiations in some form or re-evaluation of their alternatives in some form.
CPN: Let’s talk about your view of the industry these days. How would you evaluate the health of the commercial real estate industry as a whole right now, especially as it compares to that of other industries?
Reiss: It’s important to recognize that every industry is challenged right now: automobiles, banking, insurance, retailers, airlines, hotels, gaming, restaurants, manufacturing—there’s no industry out there that isn’t facing some challenges right now. So that real estate is facing some challenges isn’t surprising because real estate is there as a service arm to other industries; we provide the space for other industries. If other industries are challenged, real estate will be challenged.
CPN: What’s the biggest problem you see commercial real estate companies having?
Reiss: I think the issue is the availability of financing because financing is the lifeblood of real estate. It’s a raw material for real estate, just like concrete and rebar, and when that’s not readily available it impacts the industry dramatically.
CPN: Do you see them responding appropriately?
Reiss: Sure. Companies are tightening their belts and they’re looking at their alternatives. They’re negotiating with their lenders, they’re evaluating what transactions are out there, you’re seeing companies that can selling properties or bringing in partners or renegotiating debt. ... I think companies are trying to take the appropriate action.
CPN: There have been efforts to compare this recession to others, with most people pretty much deciding it can only be compared to the Great Depression. But are you drawing on knowledge of the past few recessions or how companies performed during any of the past few recessions in determining what the best responses are today?
Reiss: I think every one is really different. Back in the early ‘80s, where we faced double-digit interest rates during a period where the industry was still doing massive construction, that certainly created a series of challenges that was unique to that timetable. And certainly during the late ‘80s and early ‘90s, where we faced a situation where commercial real estate overbuilding brought about the downturn and helped to in effect cause the collapse of the savings-and-loan system, (there) was a different fact pattern. I think each recession and how real estate responds to it and its role in each recession is different, and I don’t know that there’s a one-size-fits-all answer.
CPN: Generally speaking, how would you advise commercial real estate firms to best weather this economy? What would you most advise them to do?
Reiss: I think the best thing to do is to tighten the belt, batten the hatches, evaluate the debt and the properties they have and prepare for the future. Remember, this is also the time of the greatest opportunity. That’s a very important thing to remember.
CPN: What are your greatest concerns for the industry right now?
Reiss: It’s important to remember that real estate really provides service to other industries, so it can only recover when other industries recover and they demand space again, so it’s tied up with a lot of issues in the economy as a whole that real estate players can’t necessarily control. ... What happens with immigration, what happens with government policy, what happens with certain international policies ... all (real estate companies) can do is react. They can’t direct.
CPN: What’s your prediction for when the industry will recover?
Reiss: There, again, it’s tied to the economy as a whole, and it’s important to remember that real estate is a trailing indicator. We won’t see a turn until after the economy as a whole also turns.
CPN: Do you see financing loosening up sooner than that?
Reiss: I sure hope so. I think that in part depends on government actions that are coming out as they deal with all the various policies with the banks, with the insurance companies. There’s a lot in play simultaneously, and I’m not sure anyone can see through all the actions that are occurring at this time to put a date on when things will turn. I sure don’t think it’ll be ’09.
CPN: Some of these policies take time to take effect, too.
Reiss: Absolutely.
CPN: Is there anything else you think it’s important to add?
Reiss: One of the interesting things is what’s happening in the world--globally. Real estate had become a global investment class during the last cycle, and I think the importance of the global part of real estate will continue through this cycle also. That’s an interesting aspect for DLA Piper and why I’m enjoying working with them and helping them create and build their global real estate practice--because real estate is global right now, and I don’t think it’s going to go back to being a domestic activity.
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