WASHINGTON, DC-The ultimate, bottom-line cause of the 2008 crash as Urban Land Institute chairman Jeremy Newsum sees it: making money was too easy. The industry was a playground for financial engineers, and when it was over, a lot of people paid the price. Newsum made his comments at events held at the Urban Land Institute’s annual meeting here this week.

Going forward, the real estate industry--and institutional investors that still seek out these assets--will have to bring the focus back to the actual building. “We must return to a model in which the developer or owner bears the primary responsibility for the property,” Newsum noted.

The investment needs of a fixed life fund, for example, do not necessarily correlate with the lifecycle of a real estate asset, Newsum said. Closed-ended real estate funds, which typically have five-to-10-year terms are inherently unstable, he related--at least from the real estate asset’s perspective. The fund is unconcerned about a timeframe longer than its own investment hold period and thus focuses on wringing out maximum income from the property.

Newsum’s key to a recovered real estate sector is a contrarian one in that he does not particularly wish to see the so-called “money waiting on the sidelines” rush in and snap up languishing properties. Such opportunity funds, he says, should be a sideshow “not the main event,” and certainly not the industry norm for how properties are built and traded.

 

Scroll down for highlights from ULI.

Highlights from the Event

ULI's Patrick Phillips at the opening general session.

Welcome to ULI's fall meeting!

Opening multifamily roundtable: From left: Henry Cisneros, Bart Harvey, moderator Tom Bozzuto, Steve Preston, Ron Terwilliger.

Jonathan Miller, Steve Blank and Mitch Roschelle discuss the findings from PwC and the Urban Land Institute

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Erika Morphy

Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.