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Views of 2009: Alison Hill and John Kessler

Interviewed at the PERE Breakfast Club: ULI 2009, AMB managing director Alison Hill and MSREF VII chief financial officer John Kessler talk about the coming debt opportunities facing US real estate investors.

Debt is the new equity and there’s not a week goes by when, apparently, a new debt-focused fund isn’t launched. Despite the talk though, the scale of the opportunity might not be as great as people had first anticipated.

It’s a question on the lips of many investors as they assess their strategies for 2010. However for traditional equity-minded investors now looking to debt, there is a another cautionary tale: beware of style drift.

Here we present the thoughts of two senior professionals who took part in a special PERE breakfast hosted on the fringes of the annual fall Urban Land Institute conference in San Francisco in November.

Over the course of 10 days, PERE is presenting a summary of those 16 professionals’ perspectives on 2009, and their thoughts for 2010. The following are edited highlights from an article that appeared in the Dec/Jan issue of PERE magazine. Click here to view, subscribers only.

Alison Hill, Managing Director,
AMB Property Corporation

If there has been one oft-repeated complaint from LPs about some GP behaviour during the past few years it’s that of strategy drift. “Investors are assessing if GPs did what they said they were going to do. If a GP adopted a different strategy during the investment period, then investors will not look favourably on those managers.”

John Kessler, Managing Director and Chief Financial Officer,
Morgan Stanley Real Estate Fund Global VII

Kessler believes the amount of debt capital actually sitting on the sidelines ready to deploy isn’t as great as anticipated. What he does agree with though is that “debt is a real opportunity”. And with the shut down of the CMBS market and “financing … hard to secure” those opportunities could be “around for a while”.