Count Down to Paris!

After the Winter 2010 semester, the Graduate School of Architecture at Columbia University in the City of New York will send select students from the Masters of Science in Real Estate Development Program, who have participated in the International Real Estate course taught by Joanne Douvas  and Tommy Brown of Clerestory Capital, to global destinations.  50 students will travel abroad to Mumbai, Hong Kong, Sao Paolo, Miami, and Paris.  The students were hypothetically given $ 1 BN of institutional capital to allocate for investment globally, of which $150 MM was allocated for investment in France by the Investment Committee.  Over the course of the semester students prepared an in-depth investment thesis to defend in front of the Investment Committee, comprised of seasoned real estate professionals such as Lynn Thurber, Barden Gale, and David Hodes.  The European team proposed to invest $75 MM in the hotel sector and $75 MM in the office sector and projected a 14-16% net, levered IRR.  Speaking to real estate industry professionals in France and underwriting a live deal, the E.U. team concluded that the European market is highly competitive and dominated by well-capitalized French real estate companies.  The E.U. team decided the best way to align themselves in the market would be through a joint venture or co-investment with a local operator that has better access to off-market deals and capability to execute in-place strategy.  With such findings, the investment committee reduced the allocated amount to $100 MM.  Nevertheless, the E.U. team feels that the fundamentals in the French real estate market are strong: values have fallen 35% in real terms from 2007 peak, rents are climbing, yields are coming down, and there is limited new supply relative to take-up.   The E.U. team will be traveling to Paris, France to meet with local players and enjoy the fruits of their labor!  The E.U. course was taught by Paula Schaefer, former Managing Director at Morgan Stanley Real Estate.