Keynote Speaker Issues Words of Caution

DALLAS-A recognized pro of the capital markets has a bit of advice for the nation: stop mistreating the money source or it might go away.

The words of caution came from Luis Belmonte, principal of the San Francisco-based Seven Hills Properties, who was the keynote speaker at yesterday's NAIOP awards event for the region's top office and industrial brokers of the year. Pocketing the wins were Gary Collett, senior director in Cushman & Wakefield of Texas Inc.'s industrial division, and colleague, Michael S. Wyatt, an executive director focused on office who also recently won the prestigious Stemmons Award from the North Texas Commercial Association of Realtors.

Belmonte, known for his insight and straight-forward commentary, told more than 200 professionals at the Dallas Country Club in Highland Park that Treasury buyers like Dubai and China could upset the apple cart if they decided to pull back on their spending or sell what they've bought. The Chinese own $1.7 trillion of US Treasuries and Dubai has $500 billion. "If they lose faith in us and decide to sell," he said, "we're in trouble. The money can go anywhere it wants. If we mistreat it, it will go away. And right now, I think we're mistreating it."

With words of caution hanging in the air, Belmonte added that the commercial real estate industry is better steeled to weather any attitude change than ever before. "Huge amounts of money have flown into this sector. We think we've finally won the beauty contest. We're absolutely deluding ourselves," Belmonte said. "We didn't win the beauty contest. The reason the money arrived was that the remaining alternatives sucked. The question is is it going to stay. If it goes away, how fast will it go and how much? No where is it written that this money stays in the business."

Belmonte steadfastly believes money sources "won't leave in total." First, overbuilding isn't an issue this time around. Second, "investments that produce returns are needed," he stressed. And third, he said "wildly escalating construction costs" are adding extra fuel. But, the highly leveraged buyer is going to largely disappear from the scene plus it's a recognized fact that alternative investments are picking up steam. "The alternative investment climate is changing by the minute," he reported.