As the corporate real estate profession evolves to include more functions and the very ground shifts from private ownership to public ownership of assets, so too must the composition of organizations seeking to serve the profession evolve. A case in point is the Chicago-based Commercial Investment Real Estate Institute (CIREI), which came into being 30 years ago as an association of commercial real estate brokers. CIREI confers the Certified Commercial Investment Member (CCIM) designation on CIREI members following completion of an educational and networking regimen. Today, brokers represent just 50 percent of the organization’s 10,000 person membership. Other members include property managers (15 percent), asset managers (10 percent), corporate real estate executives (10 percent), developers and investors (8 percent), appraisers (5 percent) and lenders, attorneys and accountants (2 percent).
In November, Allen M. Feltman becomes 1999 President of CIREI. Feltman, who owns Allen M. Feltman Real Estate, Dallas, has worked in the real estate industry for 22 years, specializing in site selection and brokerage of income-producing commercial property. He received his CCIM designation in 1984. He served as vice president of CIREI’s Southwest region for three consecutive terms.
Site Selection: Your organization seems to be enjoying solid membership growth. What challenges does this represent for you?
Allen M. Feltman: We continually work to upgrade our education product. One of my goals is to increase our networking and do things to increase our members’ business. In turn, that promotes the designation for us. CCIMs represent 1,000 markets here in North America, and we are expanding.
We already have chapters in Canada, but we are expanding into other international markets also. What ties us together in our network of businesses is that we basically speak the same language due to our education. I analyze property in Texas the same way a CCIM in Portland, Maine, analyzes property.
SS: What opportunities will international expansion of the organization bring about?
AMF: We have over 55 chapters in the U.S. and Canada, and we are looking at opening our first chapter in the Pacific Rim. Also, we have identified foreign ambassador markets that we are working with. These are countries to which we are sending a CCIM representative who can help us do business in and out of that country. We will add another six countries at the end of this year.
International organizations are interested in the education product we have, because they are moving to privatization in these different countries, and they want their people to be as professional as they can be and as educated as they can be when they start buying and selling real estate in a non-governmental type of situation.
SS: How are CCIMs serving the corporate real estate community specifically?
AMF: CCIMs are part of a team
real estate attorney, the accountant, the investor, and in the corporate real estate market there are different levels of decision makers as well. We feel that we fill the real estate component in the team and bring that to the table. One of our [corporate] members mentioned recently that when he hires people to decide what they are going to do with a piece of property he likes to work with other CCIMs, because we all speak the same language. But he wants the next step, he wants the advice on what to do with that property.
We feel we have the expertise to bring a decision to the table for this team. In corporate America, that is what the corporate real estate officers are looking for. The role of the CCIM is to bring not the answer but an opinion supported by data to the table with which the corporate executive can make a decision.
SS: 1998 was a banner year for most industries. How would you characterize the past year from a commercial investment real estate industry perspective?
AMF: The first factor was demand for real estate. Second, the economy was extremely healthy. The real estate market was fueled basically by inexpensive, non-recourse debt.
As we look over the hill with the Fed talking about lowering interest rates, that may keep the fires burning for a while. Here in Dallas, for example, it is uncanny what is going in all sectors — residential, retail, the office market and the industrial market. As I go around the country, except for certain areas, the country is healthy.
All of our members are extremely busy in all markets, save one or two, one being the Northeast, which isn’t as strong as the other sectors, and the second is Hawaii due to what is going on in Asia. They have higher highs and lower lows historically than the mainland states and Canada. But the Southeast is doing fabulously, and the West Coast is doing great as are just about all points in between.
SS: What are your thoughts on how the commercial real estate market will perform in the year ahead?
AMF: It looks like money will continue to be inexpensive and still a non-recourse debt. One of the factors that we are starting to see in certain areas is the beginning of a slowdown or a leveling off. Typically, particularly every several years, we ask ourselves in the real estate business Are we overbuilt? That is a very real question here in Dallas; I assume in certain areas that question may not have as big an impact as it does here — we had explosive growth in this market. Once you get that slowdown in demand, it can come to a screeching halt pretty quick.
In the meantime, when interest rates are as low as they are and as low as they may be tomorrow, builders build and lenders lend. But the job of the real estate professionals is to lease and/or sell those buildings, and the tenant is the customer and a very important customer. You take care of them when they are there and you look for them everywhere when they are not.
SS: How do you think the U.S. market is viewed by non-U.S. real estate investors?
AMF: In the past foreign investors had two reasons to come to the United States. First, the returns were better in the U.S. Secondly, the U.S. was always seen as a safe place to park your money. Many still are looking to invest here not so much from a return on investment perspective, but because of volatility in some of the countries and the changes they are going through as they move from a government-run society to a more democratic society where the private sector is starting to deal in real estate, as are utilities and different industries all over the world.
Real estate of course is a long term investment. For our members to advise their clients to put money in different countries you have to be pretty sure that you are going to have stability in that country. Just because a country opens up its borders to outside capital doesn’t mean you can move through the real estate system like we do here. We are pretty streamlined, and a lot of investors saw that in Russia years ago when they rushed over there to place money and then money got held up in different levels of government for a while. So it is still a very difficult subject. Russia is just one example.
For corporate people, the stakes are high. Do you own a building in Saudi Arabia or lease it? Such decisions involve huge capital commitments.
SS: As an affiliate of the National Association of Realtors, how involved is CIREI in lobbying efforts?
AMF: We and the National Association of Realtors were instrumental in lowering the capital gains tax. We take an active role on such issues as property issues, environmental issues, real estate taxes and other matters impacting real estate ownership all over the country. We end up lobbying for the whole real estate community.
SS: What impact if any does heightened institutional participation in the market have on real estate asset valuations?
AMF: Institutional players have been a major force for the last decade or two. Currently, the main players are the REITs [real estate investment trusts]. But interestingly enough, limited partnerships and private investors are not that far behind REITs and other active buyers of real estate.
Typically, the REITs have gone into not just the main markets but the secondary markets and have lowered the cap rates a lot of property owners were selling at. The pension funds, because of their long-term look and hold [tendency], are fueled by the company’s pension money, whereas the REITs are fueled by Wall Street. Given the involvement of these institutional investors, it is incumbent upon our members to know what the REITs are looking for, and what insurance companies are looking for to meet their goals. Our members have to understand their clients.
SS: The REIT market, from an investment perspective, looks like a moving target more than most asset classes do. Should this concern commercial real estate investors?
AMF: REITs are securities. When you purchase a piece of a REIT through Wall Street you are buying a security. Now, in terms of corporate real estate executives that are actually buying real estate, that is the commodity that fuels the REITs.
There are still a lot of joint ventures and private investors in the real estate market who are buying the actual structures whether it be land, apartments, industrial or office assets. REITs, because they are Wall Street driven, are more reliant on the interest rates.
What drives the market up and down also affects REITs, and their share prices have been depressed this year for a reason. Many REITs have a return built into their sales packaging, so if interest rates go down that ought to help the REITs, but if interest rates go up, investors will have to analyze REITs against other alternative investments. Real estate typically is a long-term investment. The stock market can be a long-term investment or it can be a short-term investment.
REITs have not been a very big seller lately. Interestingly, the big-four selling groups have been limited partnerships followed by pension funds, private investors and then the insurance companies. These people in turn are selling to the REITs, limited partnerships and private investors. So the private investor still is active, because the REITs are only buying properties of a certain size. It costs them just as much — brokers will spend just as much time on a large property as they will a small one. So that is the way the market is reacting. You take all these ingredients and you mix them together and that is what makes it such a fascinating industry. SS
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OCTOBER/NOVEMBER 1998
Industry Mission: 
Allen M. Feltman: We continually work to upgrade our education product. One of my goals is to increase our networking and do things to increase our members’ business. In turn, that promotes the designation for us. CCIMs represent 1,000 markets here in North America, and we are expanding. 
