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 ! 30%#)!, 2%3%!2#( 2%0/24

MYDOORTOLDMEHOWTHEYWANTTOGET RESULTS OF THE INDIVIDUALS WITH PORT REALESTATE ALLOCATIONWILLCONTINUETO -OSTSTANDASIDELEAVINGTHEIRCLIENTS
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4HAT PRACTICE HE SAYS HAS HELPED ESTATE IN THOSE PORTFOLIOS HE TELLS HIS HOPEFULLY WITH MORE OPPORTUNISTIC ONLY  SAY THEY OWN 2%)4S 4HE
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HIMGROWTHEENDOWMENTFROM CLIENTS IS TO PROVIDE AN INFLATION
SPECIALIZEDMANAGERSv MOSTCOMMONASSETPURCHASEDAFULL !PARTMENT
MILLION TO  BILLION IN A LITTLE OVER PROTECTION HEDGE %NERGY AND COM
/NE REASON SUCH PRIVATE PARTNER
SAYTHEYBUYAPARTMENTS
/FFICE
YEARS MODITIESFUNDSAREUSEDFORASIMILAR SHIPS OFTEN OUTPERFORM 2%)4S IS THAT )NVESTORS SAY THEY SEE A BULLISH
2ETAIL
!  SURVEY OF  COL
PURPOSE THE INVESTMENT MANAGER FACES LITTLE FUTURE IN THE MULTI
FAMILY HOUSING
)NDUSTRIAL
LEGE ENDOWMENTS BY THE .ATIONAL TIME PRESSURE 2%)4S MUST STAY RELA
SECTORSAYTHEYPLANTOKEEPON
-IXED
USE
!SSOCIATIONOF#OLLEGEAND5NIVERSITY
"USINESS OFFICERS FOUND THAT ALMOST
ALL ENDOWMENTS HAD DIRECT EXPOSURE
!DVISORSTOTHERICHAREDIFFERENT
4HE REAL ESTATE VEHICLE OF CHOICE FOR
BOTH THE ULTRA
TIVELY LIQUID BUT A PARTNERSHIP MAY BUYING APARTMENTS ! TOTAL OF 
5NDEVELOPEDLAND
KEEP AN INVESTORS MONEY FOR UP TO SAY THAT THEY BELIEVE APARTMENT RENTS
(OSPITALITY
HIGH NET WORTH AND  YEARS ACCORDING TO -ORRELL 4HIS AREGOINGUP
/THER
TO REAL ESTATE 4HE PREFERENCE FOR REAL INSTITUTIONALMARKETSSEEMSTOBEPRI
MEANS THAT THE MANAGER HAS MUCH 4HE NEXT MOST POPULAR FORM OF
.ONEOFTHEABOVE
INVESTMENT IS UNDEVELOPED LAND
WHICH CAUGHT THE FANCY OF  OF 5NSURE

RESPONDENTS ALL OF WHOM SAY THEY .OANSWER

&)'52% !$6)3/23$/.4(!6%!(!.$,%/.7(!4).6%34/23/7.
PLANTOKEEPBUYINGLAND/NLY   
7HICHOFTHEFOLLOWINGPROPERTYTYPESDOYOUINVESTINTHROUGHDIRECTPERSONALINVESTMENT2%)4SAND4)#S)NVESTORS
7HICHOFTHEFOLLOWINGPROPERTYTYPESDOYOURCLIENTSINVESTINTHROUGHDIRECTPERSONALINVESTMENT2%)4SAND4)#S!DVISORS OWN PROPERTY THROUGH THEIR OWNER
SHIPOFANON REALESTATERELATEDBUSI
).6%34/2 !$6)3/23
NESSES !T THE SAME TIME INVESTORS INCREASE AMONG THEIR WEALTHY CLIENTS CYCLESATTHESAMETIMEv
/FFICE
!PARTMENT LOOKFORALITTLEHOMELANDSECURITYIN WHILETHINKITWILLSTAYTHESAME 9ET SOME ECONOMISTS ARE BEGIN
!PARTMENT
/FFICE THEIR PORTFOLIOS  INVEST IN 53 &ORTHERELATIVELYFEWADVISORSWHO NING TO QUESTION WHETHER THAT NON
2ETAIL
5NDEVELOPEDLAND REALESTATEANDONLYOUTSIDETHE DOADVISEONREALESTATETHEREAREAFEW CORRELATION STILL HOLDS OR IF THE FLOOD
-IXED USE
-IXED USE COUNTRY IMMEDIATECHALLENGES/NEISFIGURING OF MONEY INTO REAL ESTATE HAS SOME
)NDUSTRIAL
2ETAIL OUT HOW MUCH REBALANCING IS NECES HOW LED IT TO BEHAVE MORE LIKE OTHER
)NDUSTRIAL
5NDEVELOPEDLAND 0OST MODERN0ORTFOLIO4HEORY SARY 4RADITIONALLY PORTFOLIO EXPERTS MAINSTREAM INVESTMENT CLASSES IN
(OSPITALITY
(OSPITALITY !RE THESE INVESTORS HEADED FOR TROU HAVEREGARDEDREALESTATEASNON COR THE SAME WAY THAT THE BEHAVIOR OF
/THER BLE IF REAL ESTATE MARKETS WEAKEN RELATED TO THE STOCK MARKET -ORRELL SOMECOMMODITIESHASCHANGED%ARLY
/THER
.ONEOFTHEABOVE #LEARLY FINANCIAL ADVISORS THINK THAT FORINSTANCEREMAINSATRUEBELIEVERh) THIS YEAR +ARI "AYER 0INKERNELL AND
.ONEOFTHEABOVE
5NSURE WEALTHY CLIENTS HAVE GONE FAR ENOUGH THINK THAT THE REAL ESTATE MARKET SORT 2ICHARD "ERNSTEIN TWO ECONOMISTS
.OANSWER
.OANSWER INEXPOSINGTHEMSELVESTONON LIQUID OFRUNSONSUPPLYANDDEMANDCYCLES AT -ERRILL ,YNCH PUBLISHED DATA THAT
  
   INVESTMENTS !MONG THOSE SURVEYED WHERETHESTOCKMARKETGOESMOREON SHOW THAT BETWEEN  AND 
$IRECTPERSONAL)NVESTMENT $IRECTPERSONAL)NVESTMENT 2%)4STOCKS 4)#S ONLY  THINK THE NET ALLOCATION CORPORATEPROFITSvSAYS-ORRELLh4HEY REAL ESTATE WENT FROM HAVING A NEGA
2%)4STOCKSANDOR4)#SNET
TO INCOME PRODUCING REAL ESTATE WILL CAN OFTENTIMES OPERATE ON DIFFERENT TIVECORRELATIONWITHTHE30

 October 2006 October 2006 

 ! 30%#)!, 2%3%!2#( 2%0/24

MOREOPPORTUNITYTOBUYORSELLWHEN
7HENITCOMESTOCHOOSINGCOMMERCIALREALESTATEINVESTMENTSHIGH THETIMINGISRIGHT &)'52% !$6)3/23!2%.4352%7(%2%).6%34/23!2%(%!$%$
).2%!,%34!4%
NETWORTHINDIVIDUALSTENDTOBEDO IT YOURSELFERS-OSTSAYTHEYPURCHASED 2EADYOR.OT /VERTHENEXTFIVEYEARSWHICHOFTHEFOLLOWINGPROPERTYTYPESWILLYOUINVEST
THEIRINVESTMENTSWITHOUTTHEHELPOFTHEIRPRIMARYFINANCIALADVISOR 3TILL WHEN IT COMES TO CHOOSING
COMMERCIAL REAL ESTATE INVESTMENTS
INTHROUGHDIRECTPERSONALINVESTMENTS2%)4SAND4)#S

HIGH NET WORTH INDIVIDUALS TEND TO ).6%34/23

!PARTMENT
ESTATETRANSACTIONCOULDBEAVIOLATION ESTATE WAS STRONGEST AMONG THE INSTI VATE PARTNERSHIPS -ORRELL USES PUB BE DO IT YOURSELFERS 4HE MAJORITY OF
/FFICE
OF THE RULES THAT PREVENT REGISTERED TUTIONS WITH ENDOWMENTS OF  BIL LIC 2%)4S ONLY AS TEMPORARY PARKING INVESTORS RESPONDING TO THE 4RUSTS 
2ETAIL
REPRESENTATIVES STOCK BROKERS FROM LIONORMOREWHICHKEPTANAVERAGEOF SPACEFORMONEYTHATISEARMARKEDFOR %STATES-ARCUS  -ILLICHAP SURVEY
5NDEVELOPEDLAND
ACTINGASFIDUCIARIESFOREXAMPLE PERCENTOFTHEASSETCLASSINTHEIR MORE DIRECT INVESTMENT IN COMMER SAIDTHEYPURCHASEDTHEIRINVESTMENTS
!DVISORS TO THE ULTRA WEALTHY AND PORTFOLIOS %NDOWMENTS OF BETWEEN CIALREALESTATEh!2%)4BASICALLYOWNS WITHOUT THE HELP OF THEIR PRIMARY -IXED USE

INSTITUTIONS ARE MORE LIKELY TO GET ANDMILLIONKEPTALITTLEMORE OPERATING PROPERTIES AND THE RENT FINANCIALADVISOR-OSTn SAY )NDUSTRIAL

INVOLVED WITH REAL ESTATE HOWEVER THANINREALESTATE ALS GET PASSED THROUGHv SAYS -ORRELL THEIR TRANSACTIONS HAVE BEEN TRADI (OSPITALITY

h)TSANICEASSETCLASSTOHAVEASLONG -ICHAEL0OMPIANDIRECTOROFPRI
h4HERES NOT A LOT OF OPPORTUNITY FOR TIONALPURCHASESALES /THER
ASYOURENOTINAPOSITIONWHEREYOU VATE WEALTH CONSULTING AT (AMMOND REAL SIGNIFICANT ADDITIONS OR VALUE
/VER TWO
THIRDS OF INVESTORS WHO .ONEOFTHEABOVE
HAVE TO SELL ITv SAYS ,OUIS -ORRELL !SSOCIATES IN 3T ,OUIS WHO WORKS ADDEDTOTHEASSET
SIDEv PURCHASED PROPERTY n 

SAY 5NSURE
VICE PRESIDENT FOR INVESTMENTS AND ONLY WITH FAMILIES WORTH MORE THAN h7ITH A 2%)4 YOU MAY BE JUST THEY HAVE MADE INVESTMENTS DIRECTLY .OANSWER
TREASURER OF 7AKE &OREST 5NIVERSITY  MILLION SAYS THAT HE TYPICALLY GETTING MORE BASIC EXPOSURE TO THE AS A SOLE OWNER /F THAT SAME GROUP   
-ORRELL KEEPS APPROXIMATELY  OF ADVISES CLIENTS TOKEEP TO  OF ASSET CLASSv ADDS 0OMPIAN hVERSUS  HAVE ALSO INVESTED IN PARTNER

THEENDOWMENTINhREALASSETSvAMIX THEIR HOLDINGS IN SOME KIND OF COM
WHEN YOU INVEST IN SOME OF THESE SHIPS ! TOTAL OF  ARE INVOLVED /VERTHENEXTFIVEYEARSWHICHOFTHEFOLLOWINGPROPERTYTYPESWILLYOURCLIENTS
OF REAL ESTATE AND COMMODITY FUNDS MERCIAL REAL ESTATE 4HE ROLE OF REAL FUNDS YOURE GAINING MANAGER ALPHA IN4ENANTIN#OMMONSTRUCTURESAND INVESTINTHROUGHDIRECTPERSONALINVESTMENTS2%)4SAND4)#S
4HAT PRACTICE HE SAYS HAS HELPED ESTATE IN THOSE PORTFOLIOS HE TELLS HIS HOPEFULLY WITH MORE OPPORTUNISTIC ONLY  SAY THEY OWN 2%)4S 4HE
!$6)3/23
HIMGROWTHEENDOWMENTFROM CLIENTS IS TO PROVIDE AN INFLATION
SPECIALIZEDMANAGERSv MOSTCOMMONASSETPURCHASEDAFULL !PARTMENT
MILLION TO  BILLION IN A LITTLE OVER PROTECTION HEDGE %NERGY AND COM
/NE REASON SUCH PRIVATE PARTNER
SAYTHEYBUYAPARTMENTS
/FFICE
YEARS MODITIESFUNDSAREUSEDFORASIMILAR SHIPS OFTEN OUTPERFORM 2%)4S IS THAT )NVESTORS SAY THEY SEE A BULLISH
2ETAIL
!  SURVEY OF  COL
PURPOSE THE INVESTMENT MANAGER FACES LITTLE FUTURE IN THE MULTI
FAMILY HOUSING
)NDUSTRIAL
LEGE ENDOWMENTS BY THE .ATIONAL TIME PRESSURE 2%)4S MUST STAY RELA
SECTORSAYTHEYPLANTOKEEPON
-IXED
USE
!SSOCIATIONOF#OLLEGEAND5NIVERSITY
"USINESS OFFICERS FOUND THAT ALMOST
ALL ENDOWMENTS HAD DIRECT EXPOSURE
!DVISORSTOTHERICHAREDIFFERENT
4HE REAL ESTATE VEHICLE OF CHOICE FOR
BOTH THE ULTRA
TIVELY LIQUID BUT A PARTNERSHIP MAY BUYING APARTMENTS ! TOTAL OF 
5NDEVELOPEDLAND
KEEP AN INVESTORS MONEY FOR UP TO SAY THAT THEY BELIEVE APARTMENT RENTS
(OSPITALITY
HIGH NET WORTH AND  YEARS ACCORDING TO -ORRELL 4HIS AREGOINGUP
/THER
TO REAL ESTATE 4HE PREFERENCE FOR REAL INSTITUTIONALMARKETSSEEMSTOBEPRI
MEANS THAT THE MANAGER HAS MUCH 4HE NEXT MOST POPULAR FORM OF
.ONEOFTHEABOVE
INVESTMENT IS UNDEVELOPED LAND
WHICH CAUGHT THE FANCY OF  OF 5NSURE

RESPONDENTS ALL OF WHOM SAY THEY .OANSWER

&)'52% !$6)3/23$/.4(!6%!(!.$,%/.7(!4).6%34/23/7.
PLANTOKEEPBUYINGLAND/NLY   
7HICHOFTHEFOLLOWINGPROPERTYTYPESDOYOUINVESTINTHROUGHDIRECTPERSONALINVESTMENT2%)4SAND4)#S)NVESTORS
7HICHOFTHEFOLLOWINGPROPERTYTYPESDOYOURCLIENTSINVESTINTHROUGHDIRECTPERSONALINVESTMENT2%)4SAND4)#S!DVISORS OWN PROPERTY THROUGH THEIR OWNER
SHIPOFANON REALESTATERELATEDBUSI
).6%34/2 !$6)3/23
NESSES !T THE SAME TIME INVESTORS INCREASE AMONG THEIR WEALTHY CLIENTS CYCLESATTHESAMETIMEv
/FFICE
!PARTMENT LOOKFORALITTLEHOMELANDSECURITYIN WHILETHINKITWILLSTAYTHESAME 9ET SOME ECONOMISTS ARE BEGIN
!PARTMENT
/FFICE THEIR PORTFOLIOS  INVEST IN 53 &ORTHERELATIVELYFEWADVISORSWHO NING TO QUESTION WHETHER THAT NON
2ETAIL
5NDEVELOPEDLAND REALESTATEANDONLYOUTSIDETHE DOADVISEONREALESTATETHEREAREAFEW CORRELATION STILL HOLDS OR IF THE FLOOD
-IXED USE
-IXED USE COUNTRY IMMEDIATECHALLENGES/NEISFIGURING OF MONEY INTO REAL ESTATE HAS SOME
)NDUSTRIAL
2ETAIL OUT HOW MUCH REBALANCING IS NECES HOW LED IT TO BEHAVE MORE LIKE OTHER
)NDUSTRIAL
5NDEVELOPEDLAND 0OST MODERN0ORTFOLIO4HEORY SARY 4RADITIONALLY PORTFOLIO EXPERTS MAINSTREAM INVESTMENT CLASSES IN
(OSPITALITY
(OSPITALITY !RE THESE INVESTORS HEADED FOR TROU HAVEREGARDEDREALESTATEASNON COR THE SAME WAY THAT THE BEHAVIOR OF
/THER BLE IF REAL ESTATE MARKETS WEAKEN RELATED TO THE STOCK MARKET -ORRELL SOMECOMMODITIESHASCHANGED%ARLY
/THER
.ONEOFTHEABOVE #LEARLY FINANCIAL ADVISORS THINK THAT FORINSTANCEREMAINSATRUEBELIEVERh) THIS YEAR +ARI "AYER 0INKERNELL AND
.ONEOFTHEABOVE
5NSURE WEALTHY CLIENTS HAVE GONE FAR ENOUGH THINK THAT THE REAL ESTATE MARKET SORT 2ICHARD "ERNSTEIN TWO ECONOMISTS
.OANSWER
.OANSWER INEXPOSINGTHEMSELVESTONON LIQUID OFRUNSONSUPPLYANDDEMANDCYCLES AT -ERRILL ,YNCH PUBLISHED DATA THAT
  
   INVESTMENTS !MONG THOSE SURVEYED WHERETHESTOCKMARKETGOESMOREON SHOW THAT BETWEEN  AND 
$IRECTPERSONAL)NVESTMENT $IRECTPERSONAL)NVESTMENT 2%)4STOCKS 4)#S ONLY  THINK THE NET ALLOCATION CORPORATEPROFITSvSAYS-ORRELLh4HEY REAL ESTATE WENT FROM HAVING A NEGA
2%)4STOCKSANDOR4)#SNET
TO INCOME PRODUCING REAL ESTATE WILL CAN OFTENTIMES OPERATE ON DIFFERENT TIVECORRELATIONWITHTHE30

 October 2006 October 2006 


TOAPOSITIVECORRELATIONOFTODAY
n A TREMENDOUS SHIFT THAT MEANS REAL
ADDED OWNERSHIP  AGREED OR STRONGLY
ESTATEISLIKELYTOBOBANDWEAVERIGHT
ALONGSIDETHESTOCKMARKET
! 30%#)!, 2%3%!2#( 2%0/24
&)'52%$!.'%2!(%!$).6%34/23!.$!$6)3/233!9#!0)4!, NEWMANAGEMENTHASANOPPORTUNITY CORRECTIONASAKEYRISKFORREALESTATE TERM PERSPECTIVE THAT WEALTHY FAMILIES
!002%#)!4)/.)3")''%34!442!#4)/./&#/--%2#)!,2%!,%34!4% FOR A TURNAROUND 3UCH VALUE
RELYONTOREMAINWEALTHYFAMILIES
STRATEGIESMAKESENSEINAWORLDWHERE AGREEDTHATITWASWHILEEITHER !LTHOUGH THE SPECIAL QUALITIES OF
7HATAREYOURREALESTATEPRIORITIES)NVESTORS MUCH OF THE ASSET CLASS GENERALLY DISAGREED OR STRONGLY DISAGREED WITH THE ASSET CLASS PRESENT A CHALLENGE TO
4HISISSTILLAMINORITYVIEWHOW
7HATAREYOURCLIENTSREALESTATEINVESTMENTPRIORITIES!DVISORS REVERTSTOALOW
GROWTHMEAN THESTATEMENT MOST ADVISORS SOME ADVISORS BELIEVE
EVER 7ILLIAM 'OETZMANN A PROFES
!PORTFOLIOCANACCOMMODATESPEC
THAT UNDERSTANDING THE FUNCTION OF
SOR OF FINANCE AT THE 9ALE 3CHOOL OF 6ALUEAPPRECIATION ULATIVE INVESTMENT AND THE ATTENDANT ,OOKSLIKEAJOBFORANADVISOR COMMERCIALREALESTATEINTHEIRCLIENTS
-ANAGEMENTSAYSHEHASSTUDIEDTHE RISKASLONGASITISWELL
BALANCEDWITH 4HE RESEARCH SHOWS THAT THERE IS CON
PORTFOLIO IS AN ESSENTIAL PART OF WHAT
ISSUEANDFOUNDNOEVIDENCETHATREAL 4OTALRETURN
OTHER TYPES OF ASSETS 5NFORTUNATELY SIDERABLE CONFUSION AMONG HIGH NET THEYDO
ESTATECYCLESARECHANGING"UTTHEJURY THE 4% SURVEY SUGGESTS THAT SOME WORTH INVESTORS ABOUT HOW BEST TO h-ONEYMANAGEMENTISSOMEWHAT
IS STILL OUT IN HIS VIEW  h9OU NEED INDIVIDUALINVESTORSONTHELOWEREND HANDLE THEIR REAL ESTATE WEALTHˆEVEN OF A COMMODITY NOWv REFLECTS ,EWIS
$IVIDENDCASHINCOME
YEARSOFDATATOASSESSTHISvHESAYS OF THE HIGH
NET
WORTH SCALE MAY NOT ASTHEYCONTINUETOPLUNGEDEEPERINTO * 7ALKER AN INDEPENDENT FINANCIAL
2EAL ESTATES ROLE WITHIN THE PORT
FULLY UNDERSTAND WHAT CATEGORY IN THE ASSET CLASS 4HESE CLIENTS ALL COULD ADVISOR IN .ORCROSS 'A h9OU FIND
FOLIO IS CURRENTLY BEING DEBATED IN /THER WHICHTOPLACETHEIRREALESTATE BENEFITFROMTHESKILLSOFAPROFESSIONAL THAT IN MANY CASES YOU EARN YOUR
ACADEMIC CIRCLES FOR OTHER REASONS AS OF INVESTORS EITHER AGREED OR STRONGLY FINANCIALADVISORANINDIVIDUALWHOIS MONEY IN WAYS BEYOND JUST MONEY
WELL7HILEREALESTATEHASOFTENSERVED .OANSWER AGREED THAT REAL ESTATE IS A LOW
RISK NOTWEDTOANYPARTICULARTYPEOFASSET MANAGEMENT 9OU EARN THAT MONEY
AS AN EXCELLENT HEDGE AGAINST INFLA
INVESTMENT (OWEVER INVESTORS ALSO IS SKILLED IN PORTFOLIO BALANCING AND BYBEINGARESOURCEBYBEINGTHEREFOR
)NVESTORRESPONDENTS   
TIONSOMEINVESTMENTEXPERTSBELIEVE IDENTIFIED THE POTENTIAL FOR A PRICE ESTATEPLANNINGANDCANKEEPTHELONG
THATCLIENTv
!DVISORRESPONDENTS
THATITMAYACTUALLYBEOFLIMITEDUSE
AS A VEHICLE FOR CAPITAL APPRECIATION
4HEIR VIEW IS THAT THE RUN
UP IN REAL 02).#)0!,342!4%')%3/&2%!,%34!4%).6%34-%.40!24.%23()03
ESTATE VALUES THAT HAS PRODUCED SUCH &)'52%!$6)3/23$/.4+./7(/7#,)%.437),,53%2%!, PROVIDEDBY-ICHAEL0OMPIANOF(AMMOND!SSOCIATES
OUTSTANDING RETURNS SINCE  WILL %34!4%).%34!4%0,!.3
PROVETOBEFLEETING 7HATAREYOURULTIMATEPLANSFORTRANSFERRINGTHEREALESTATEHOLDINGSIN 490%/&(/,$).' $%&).)4)/. #/--%.4
! -AY  STUDY BY 7ILLIAM YOURESTATE)NVESTORS
7HEATON A PROFESSOR OF ECONOM
)NGENERALWHATAREYOURCLIENTSULTIMATEPLANSFORTRANSFERRINGTHEREAL Core High quality, fully leased, low or no leverage. “It’s pure Timing is not right for
ICS AT THE -ASSACHUSETTS )NSTITUTE OF ESTATEHOLDINGSINTHEIRESTATES!DVISORS income. You’re just buying a revenue stream. core now, says Pompian
4ECHNOLOGY LOOKED AT A DATABASE OF 2EALESTATEHOLDINGSWILLREMAIN – values in the class are
ASPARTOFESTATEWHENTHE
 REPEAT SALES TRANSACTIONS OF BUILD
ESTATEISTRANSFERREDTOHEIRS Expected return: 7-9% too high.
INGSMORETHANSTORIESTALLINLOWER Holding period: As long as you like
2EALESTATEHOLDINGSWILLBESOLD
ANDTRANSFERREDTOHEIRS
-ANHATTAN AND MIDTOWN -ANHATTAN ASLIQUIDASSETS
Core Plus Good quality – with dents. In need of a little renovation or
BETWEEN  AND  AND FOUND
/THER more tenants.
THAT ALTHOUGH DURING CERTAIN DECADES
THERE HAD BEEN AFTER
INFLATION SWINGS (AVENOTFINALIZEDPLANSFORTHE
ULTIMATETRANSFEROFREAL Expected return: 10-12%.
OF AS MUCH AS  TO  IN VALUE ESTATEHOLDINGS
Holding period: At least 5 years
OVER THE CENTURY PRICES REALLY HADNT $ONOTKNOW
GOTTENANYWHERE Value-Add Properties in need of tenants, repositioning, and/or redevel- More attractive
.OANSWER
)N -ANHATTAN FOR INSTANCE )NVESTORRESPONDENTS opment. 50-60% leverage. 50/50 income and capital gains.
7HEATON WRITES THAT PRICES DECLINED !DVISORRESPONDENTS   
 A YEAR FROM  TO  )N THE Expected return: 12-15%.
SPRICESROSEAYEARDROPPED Holding period: 3-7 years
BYHALFDURINGTHE$EPRESSIONNEARLY .OR IS THIS AN ISOLATED INSTANCE MANYOFTHEMAREHEAVILYINVESTEDIN
RECOVERED THE PREVIOUS PEAK IN THE 7HEATON NOTES THAT A SIMILAR STUDY RELATIVELY SHORT
TERM OPPORTUNITIES
FORTIES THEN DROPPED AGAIN BY  A
YEAR BETWEEN  AND  0RICES
RESUMEDTHEIRANNUALMARCHUNTIL
THE PROPERTY CRASH OF  "ETWEEN
OF !MSTERDAM HOME PROPERTY VALUES
FOUND  YEARS OF ESSENTIALLY FLAT
RETURNS
4HIS IS NOT TO SAY THAT ADVISORS
0OMPIAN FOR INSTANCE BELIEVES THAT
PRICESOFWHATARECOMMONLYDEFINED
AShCOREvHOLDINGSnQUALITYPROPERTIES
RETURNING A STEADY STREAM OF INCOME
Opportunistic New or distressed properties. Leverage up to 80% - most More attractive
gains from capital appreciation.
Expected return: 15-20%
Holding period: 3-5 years
 AND  PRICES AGAIN DROPPED SHOULD URGE CLIENTS TO RETREAT FROM nARESOBID
UPINMOSTMARKETSTHAT
IN HALF ADJUSTED FOR INFLATION )N THE REAL ESTATE 7HEATONS STUDY SUGGESTS THE ONLY INTERESTING DEALS ARE IN THE
END THE TRUE LONG
RUN VALUE OF THE THATMANYULTRA
HIGHNETWORTHINVES
MORESPECULATIVECLASSESOFPROPERTIES
3/52#%(!--/.$!33/#)!4%3
PROPERTY AFTER INFLATION WAS ACTU
TORSARESTILLWELL
POSITIONEDTOPROFIT SUCHASNEWDEVELOPMENTSORPROPER

ALLYLOWERINTHANIN THROUGHREALESTATEINVESTMENTBECAUSE TIES IN NEED OF REHABILITATION WHERE

 October 2006 October 2006 


TOAPOSITIVECORRELATIONOFTODAY
n A TREMENDOUS SHIFT THAT MEANS REAL
ADDED OWNERSHIP  AGREED OR STRONGLY
ESTATEISLIKELYTOBOBANDWEAVERIGHT
ALONGSIDETHESTOCKMARKET
! 30%#)!, 2%3%!2#( 2%0/24
&)'52%$!.'%2!(%!$).6%34/23!.$!$6)3/233!9#!0)4!, NEWMANAGEMENTHASANOPPORTUNITY CORRECTIONASAKEYRISKFORREALESTATE TERM PERSPECTIVE THAT WEALTHY FAMILIES
!002%#)!4)/.)3")''%34!442!#4)/./&#/--%2#)!,2%!,%34!4% FOR A TURNAROUND 3UCH VALUE
RELYONTOREMAINWEALTHYFAMILIES
STRATEGIESMAKESENSEINAWORLDWHERE AGREEDTHATITWASWHILEEITHER !LTHOUGH THE SPECIAL QUALITIES OF
7HATAREYOURREALESTATEPRIORITIES)NVESTORS MUCH OF THE ASSET CLASS GENERALLY DISAGREED OR STRONGLY DISAGREED WITH THE ASSET CLASS PRESENT A CHALLENGE TO
4HISISSTILLAMINORITYVIEWHOW
7HATAREYOURCLIENTSREALESTATEINVESTMENTPRIORITIES!DVISORS REVERTSTOALOW
GROWTHMEAN THESTATEMENT MOST ADVISORS SOME ADVISORS BELIEVE
EVER 7ILLIAM 'OETZMANN A PROFES
!PORTFOLIOCANACCOMMODATESPEC
THAT UNDERSTANDING THE FUNCTION OF
SOR OF FINANCE AT THE 9ALE 3CHOOL OF 6ALUEAPPRECIATION ULATIVE INVESTMENT AND THE ATTENDANT ,OOKSLIKEAJOBFORANADVISOR COMMERCIALREALESTATEINTHEIRCLIENTS
-ANAGEMENTSAYSHEHASSTUDIEDTHE RISKASLONGASITISWELL
BALANCEDWITH 4HE RESEARCH SHOWS THAT THERE IS CON
PORTFOLIO IS AN ESSENTIAL PART OF WHAT
ISSUEANDFOUNDNOEVIDENCETHATREAL 4OTALRETURN
OTHER TYPES OF ASSETS 5NFORTUNATELY SIDERABLE CONFUSION AMONG HIGH NET THEYDO
ESTATECYCLESARECHANGING"UTTHEJURY THE 4% SURVEY SUGGESTS THAT SOME WORTH INVESTORS ABOUT HOW BEST TO h-ONEYMANAGEMENTISSOMEWHAT
IS STILL OUT IN HIS VIEW  h9OU NEED INDIVIDUALINVESTORSONTHELOWEREND HANDLE THEIR REAL ESTATE WEALTHˆEVEN OF A COMMODITY NOWv REFLECTS ,EWIS
$IVIDENDCASHINCOME
YEARSOFDATATOASSESSTHISvHESAYS OF THE HIGH
NET
WORTH SCALE MAY NOT ASTHEYCONTINUETOPLUNGEDEEPERINTO * 7ALKER AN INDEPENDENT FINANCIAL
2EAL ESTATES ROLE WITHIN THE PORT
FULLY UNDERSTAND WHAT CATEGORY IN THE ASSET CLASS 4HESE CLIENTS ALL COULD ADVISOR IN .ORCROSS 'A h9OU FIND
FOLIO IS CURRENTLY BEING DEBATED IN /THER WHICHTOPLACETHEIRREALESTATE BENEFITFROMTHESKILLSOFAPROFESSIONAL THAT IN MANY CASES YOU EARN YOUR
ACADEMIC CIRCLES FOR OTHER REASONS AS OF INVESTORS EITHER AGREED OR STRONGLY FINANCIALADVISORANINDIVIDUALWHOIS MONEY IN WAYS BEYOND JUST MONEY
WELL7HILEREALESTATEHASOFTENSERVED .OANSWER AGREED THAT REAL ESTATE IS A LOW
RISK NOTWEDTOANYPARTICULARTYPEOFASSET MANAGEMENT 9OU EARN THAT MONEY
AS AN EXCELLENT HEDGE AGAINST INFLA
INVESTMENT (OWEVER INVESTORS ALSO IS SKILLED IN PORTFOLIO BALANCING AND BYBEINGARESOURCEBYBEINGTHEREFOR
)NVESTORRESPONDENTS   
TIONSOMEINVESTMENTEXPERTSBELIEVE IDENTIFIED THE POTENTIAL FOR A PRICE ESTATEPLANNINGANDCANKEEPTHELONG
THATCLIENTv
!DVISORRESPONDENTS
THATITMAYACTUALLYBEOFLIMITEDUSE
AS A VEHICLE FOR CAPITAL APPRECIATION
4HEIR VIEW IS THAT THE RUN
UP IN REAL 02).#)0!,342!4%')%3/&2%!,%34!4%).6%34-%.40!24.%23()03
ESTATE VALUES THAT HAS PRODUCED SUCH &)'52%!$6)3/23$/.4+./7(/7#,)%.437),,53%2%!, PROVIDEDBY-ICHAEL0OMPIANOF(AMMOND!SSOCIATES
OUTSTANDING RETURNS SINCE  WILL %34!4%).%34!4%0,!.3
PROVETOBEFLEETING 7HATAREYOURULTIMATEPLANSFORTRANSFERRINGTHEREALESTATEHOLDINGSIN 490%/&(/,$).' $%&).)4)/. #/--%.4
! -AY  STUDY BY 7ILLIAM YOURESTATE)NVESTORS
7HEATON A PROFESSOR OF ECONOM
)NGENERALWHATAREYOURCLIENTSULTIMATEPLANSFORTRANSFERRINGTHEREAL Core High quality, fully leased, low or no leverage. “It’s pure Timing is not right for
ICS AT THE -ASSACHUSETTS )NSTITUTE OF ESTATEHOLDINGSINTHEIRESTATES!DVISORS income. You’re just buying a revenue stream. core now, says Pompian
4ECHNOLOGY LOOKED AT A DATABASE OF 2EALESTATEHOLDINGSWILLREMAIN – values in the class are
ASPARTOFESTATEWHENTHE
 REPEAT SALES TRANSACTIONS OF BUILD
ESTATEISTRANSFERREDTOHEIRS Expected return: 7-9% too high.
INGSMORETHANSTORIESTALLINLOWER Holding period: As long as you like
2EALESTATEHOLDINGSWILLBESOLD
ANDTRANSFERREDTOHEIRS
-ANHATTAN AND MIDTOWN -ANHATTAN ASLIQUIDASSETS
Core Plus Good quality – with dents. In need of a little renovation or
BETWEEN  AND  AND FOUND
/THER more tenants.
THAT ALTHOUGH DURING CERTAIN DECADES
THERE HAD BEEN AFTER
INFLATION SWINGS (AVENOTFINALIZEDPLANSFORTHE
ULTIMATETRANSFEROFREAL Expected return: 10-12%.
OF AS MUCH AS  TO  IN VALUE ESTATEHOLDINGS
Holding period: At least 5 years
OVER THE CENTURY PRICES REALLY HADNT $ONOTKNOW
GOTTENANYWHERE Value-Add Properties in need of tenants, repositioning, and/or redevel- More attractive
.OANSWER
)N -ANHATTAN FOR INSTANCE )NVESTORRESPONDENTS opment. 50-60% leverage. 50/50 income and capital gains.
7HEATON WRITES THAT PRICES DECLINED !DVISORRESPONDENTS   
 A YEAR FROM  TO  )N THE Expected return: 12-15%.
SPRICESROSEAYEARDROPPED Holding period: 3-7 years
BYHALFDURINGTHE$EPRESSIONNEARLY .OR IS THIS AN ISOLATED INSTANCE MANYOFTHEMAREHEAVILYINVESTEDIN
RECOVERED THE PREVIOUS PEAK IN THE 7HEATON NOTES THAT A SIMILAR STUDY RELATIVELY SHORT
TERM OPPORTUNITIES
FORTIES THEN DROPPED AGAIN BY  A
YEAR BETWEEN  AND  0RICES
RESUMEDTHEIRANNUALMARCHUNTIL
THE PROPERTY CRASH OF  "ETWEEN
OF !MSTERDAM HOME PROPERTY VALUES
FOUND  YEARS OF ESSENTIALLY FLAT
RETURNS
4HIS IS NOT TO SAY THAT ADVISORS
0OMPIAN FOR INSTANCE BELIEVES THAT
PRICESOFWHATARECOMMONLYDEFINED
AShCOREvHOLDINGSnQUALITYPROPERTIES
RETURNING A STEADY STREAM OF INCOME
Opportunistic New or distressed properties. Leverage up to 80% - most More attractive
gains from capital appreciation.
Expected return: 15-20%
Holding period: 3-5 years
 AND  PRICES AGAIN DROPPED SHOULD URGE CLIENTS TO RETREAT FROM nARESOBID
UPINMOSTMARKETSTHAT
IN HALF ADJUSTED FOR INFLATION )N THE REAL ESTATE 7HEATONS STUDY SUGGESTS THE ONLY INTERESTING DEALS ARE IN THE
END THE TRUE LONG
RUN VALUE OF THE THATMANYULTRA
HIGHNETWORTHINVES
MORESPECULATIVECLASSESOFPROPERTIES
3/52#%(!--/.$!33/#)!4%3
PROPERTY AFTER INFLATION WAS ACTU
TORSARESTILLWELL
POSITIONEDTOPROFIT SUCHASNEWDEVELOPMENTSORPROPER

ALLYLOWERINTHANIN THROUGHREALESTATEINVESTMENTBECAUSE TIES IN NEED OF REHABILITATION WHERE

 October 2006 October 2006