ULI Chicago’s Under 35 members met in August for the 2nd sold-out Small Group Discussion Series of 2018. The three-part speaker series featured top CRE executives from Sterling Bay, Harrison Street Real Estate Capital, and Moderne Ventures.
Each meeting included interesting insights regarding the current state of the CRE industry and provided an intimate setting in which young professionals learned about evaluating the risks and rewards associated with various endeavors, as well as how to approach the flexibility required within the real estate market.
Session 1: “Sterling Bay – Creative Office Development in Chicago’s Fulton Market District”
Chang Lee, Principal, Sterling Bay, the Session 1 guest speaker, shared case studies surrounding the redevelopment of Harpo Studios in Fulton Market, highlighting the newly opened McDonald’s HQ, future Hyatt House and West Loop Chicago Public Library.
Before Sterling Bay was known as the premier developer of Fulton Market, it was Oprah that pioneered the neighborhood through her development and expansion of Harpo Studios. After 25+ years of being on the site, the 3.5 acre campus went up for sale in 2014. It was a bidding war between a premier hotel developer to control the land, but ultimately Sterling Bay prevailed and purchased the four-building complex despite grappling with a per square foot acquisition price that soared above market pricing at the time. To get over that mental hurdle, Chang said the biggest lesson he learned is that success in these types of endeavors involves conviction in your plans and strategy. With land prices now more than doubling over the past five years, Sterling Bay is reaping the rewards of taking the risk.
Coming full-circle, McDonald’s chose the Harpo Studios site for the relocation of its world headquarters, a ground-up, nine-story 550,000 SF build-to-suit. A true example of Chang’s statement that ‘creative office is for everyone’, the office building only has four private offices with the rest of the space being a combination of huddle rooms and open office hoteling. McDonald was also in need of hotel space for its “Hamburger University” training program attendees, resulting in a 14-story, 200-key Hyatt House – Hyatt’s newer flag of extended stay hotels. Additionally, Sterling Bay saw a need in the new Fulton Market community and is gifting a two-story building to Chicago Public Libraries for a new West Loop branch.
Session 2: “Harrison Street Real Estate Capital – Case Studies in Raising Institutional Capital on behalf of Real Estate Funds”
Session 2 featured Joey Lansing, Senior Managing Director, and James Choi, Vice President of Client Services & Investor Relations, Harrison Street Real Estate Capital. The Harrison Team provided an in-depth introduction from the firms founding in 2005 to their evolution as a major player in CRE investment management, holding over $15.6B in AUM, spread across senior living, student housing, healthcare, and storage assets. The team credited Harrison Streets’ laser focus on data analyses and demographics to vet the financial and enrollment health of target investments (from universities to health systems) for their ability to achieve higher income yields and downside protection diversification across their major investment vehicles. Notable insights regarding the evolution of CRE markets included:
- Rise of P3 funding to support on-campus development of non-housing assets by universities nationwide – including athletic, academic, and student activity centers
- Saturation of debt funds coming online, which present a unique challenge to differentiate investment vehicles amongst peer competitors
- Expanding opportunities for growth across Western European and SE Asian Markets in higher ed and senior living sectors
The Harrison Team stressed the importance of taking a focused and research centric approach to analyzing real estate investments in this hyper-competitive market. They reiterated that teams who can remain nimble and able to offer clients investments spanning the risk/return spectrum will differentiate themselves as the market continues to evolve.
Session 3: “Moderne Ventures – The Hottest Real Estate Tech Startups and the Venture Capital Fueling their Growth”
The final Session featured Modern Ventures, a Chicago-based venture fund with a focus on real estate technology startups. Stephanie Koenig, Associate, and Lindsay Hyde, Director, Moderne Ventures, walked through the fundamentals of venture capital and the company’s three core service areas: the Venture Fund, the Moderne Network, which builds relationships across the industry, and the Moderne Passport, which acts as a growth-stage accelerator for selected companies (~20 of 4,500 that apply each year).
The company is currently investing its second fund of $44M after seeing an impressive 15x return on its first fund, which included the IPO of DocuSign. Lindsay explained the importance of monitoring current trends, such as blockchain and cryptocurrency, ride-sharing and autonomous vehicles, community and service-based amenities, and IoT. She stressed that technology should either increase your rent/pricing, increase your retention, or drive down OpEx – explaining that if it is not doing one of these things, then it is probably just bells and whistles. Moderne Ventures was joined by two companies from the Passport Program – TransitScreen and Loop&Tie.
Ryan Croft, Co-Founder & COO, TransitScreen, discussed TransitScreen’s mission to address the urban mobility information gap via its three products: a live transportation display, “Mobility Score” web content and API, and a mobile app for TransitScreen building tenants. Lindsey Jordan, Director of Sales, Loop&Tie, explained Loop&Tie’s gifting platform, which allows their clients, including Greystar, to build relationships that directly impact metrics- for example, sales and renewals- while also obtaining valuable data on customer preferences and feedback.
Thank you to our contributors Alice Davis, Gensler; Vera Halicki, Ameritus LLC; and Patrick Slattery.
ULI Chicago Small Group Discussion Series events are designed to provide ULI Chicago Under 35 Members with intimate opportunities to learn from the some of the top individuals and firms in the Chicago CRE scene. Interested in attending? Stay tuned for more Small Group Discussion Series events coming in early 2019.