Editor's Statement

"Everything you know, I taught you. I did not teach you everything I know."

THESE WERE THE WORDS of an investment banker who was providing me documentation for a pool of low-income, tax credit apartments for which Bartram & Cochran was performing the due diligence. That was 12 years ago, and

In talking to other CREs over the years, similar war stories are told. In part, our jobs were made easier with more market knowledge being made available. Tight timelines were (and always will be) an issue in completing assignments, and some colleagues reported buying at cap rates that were hard to justify. While we as an organization cannot set industry standards for underwriting, we do set a standard for integrity and not taking information provided to us at face value. This issue of Real Estate Issues (REI) examines some of the current problems and possible trends playing out in today's real estate environment and economy-hopefully, you'll find some valuable insights in the material.

"Housing markets continue to crash. Financial markets are in turmoil. Employment is slowing. Spending is starting to slow. The Federal Reserve seems a little spooked, trimming its official forecast for 2008, and aggressively easing policy. The dollar is at a new near-term low." -Peter Burley, CRE

So begins our lead article in this issue of REI, a roundtable comprised of four nationally renowned economists and forecasters: CREs Peter Burley, Ray Torto, Ken Riggs and Alan Billingsley-each giving an assessment of the economy, employment, housing, financial market implications, the dollar, and property markets. This is an article that should be circulated in your office and among your clients.

"The only difference between the chaotic stock market and income-property sales is time scale." -Marc Thompson, CRE

CRE Marc Thompson sent his article "Deflation Risk in Income Property Investments and Permanent Loan Portfolios: A 2008 Update" just as we were going to press. It is a great add-on to the economists' roundtable, and provides more background regarding underwriting standards and the capital markets.

"Global trading in the world's foreign exchange market has jumped from about $70 billion per day in the 1980s to over $3.2 trillion per day in 2007." -Oakleigh Thorne, CRE

"Seizure in the Capital Markets" provides an in-depth analysis of international capital markets and their impact on real estate in the United States, as exemplified in the Washington, D.C. office market, but applicable to any of the major U.S. cities.

"CME housing futures and options are the first comprehensive financial tools that make it possible to trade U.S. real estate values." -Stijepko Tokic, J.D., and Damir Tokic, Ph.D.

This article takes a look at investing in real estate in a new light. "Home Price Indices Futures," by Stijepko Tokic, J.D., and Damir Tokic, Ph.D., analyzes the potential use of the Chicago Mercantile Exchange housing futures for hedging, arbitrage and speculative purposes. It is an interesting concept that might be an attractive alternative for institutional and private equity investors.

"One full year after a hurricane, little evidence emerges suggesting a lingering effect on residential real estate prices." -Eli Beracha, Ph.D., and Robert Prati, Ph.D.

In their article "How Major Hurricanes Impact Housing Prices and Transaction Volume," authors Eli Beracha, Ph.D., and Robert Prati, Ph.D., provide data that defy conventional wisdom and the popular press.

"Real estate requires more; it is a result of largely people, contracts, relationships and trust." -John Meltzer, CRE

CRE John Meltzer provides us with his firsthand and personal perspective of hurricanes in his counterpoint piece "Rebuilding after Katrina: An Owner's Perspective Two Tears Later."

In other news, Real Estate Issues is pleased to announce that Peter C. Burley, CRE, has accepted the position of associate editor of CRE. Peter is vice president of research for Simpson Housing Limited Partnership in Denver. His first action was to organize the roundtable in this issue. We look forward to his insights and creativity in future editions.

On a staff level, Carol Scherf has joined the CRE staff as communications manager. Among her responsibilities is the publishing of REI. This is the first edition under her direction, and on behalf of the editorial board, we want to welcome her aboard.

Before joining The Counselors, Carol worked as a reporter, and also as a communications and public relations manager at several corporations in Chicago. Please call her at (312) 329-8429 or email her at cscherf@cre.org for submissions or suggestions.

A new feature that the REI editorial board has just approved is the submission of case studies for inclusion in the journal. Please refer to the CRE website, Real Estate Issues for more details about submitting work.

The economy continues to "ping" us. How The Counselors react-and more to the point-lead the industry, will continue to be a focal point of this editorial board. We look forward to the dialog.