Despite a lengthy and fairly august-sounding title, Stan Ross' current position as chairman of the board and interim director at the Los Angeles-based University of Southern California's (USC's) Lusk Center for Real Estate, doesn't nearly cover the breadth of commercial real estate and business experience he brings to the table.
Ross was formerly vice chairman-real estate industry services for Ernst & Young LLP (E & Y), New York, and a member of its Management Committee, which sets policy and strategy for the firm. Ross also served as managing partner of E & Y's Kenneth Leventhal Real Estate Group, where he was responsible for its overall business planning, strategy, direction and operations.
He continues his diverse activities in the real estate industry as special consultant for Ernst & Young, and serves on several boards of directors--including those of The Irvine Company, Newport Beach, California; Forest City Enterprises, Cleveland; and the University of Judaism, Bel Air, California.
Ross is widely recognized for his experience in strategic planning for real estate companies, with expertise in mergers, acquisitions and reorganizations, and the development of creative financial structures. He was involved in the initial organization of the Resolution Trust Corporation (RTC), and was a member of the Auditing Standards Board of the American Institute of Certified Public Accountants (AICPA), New York, which sets the auditing rules for the accounting profession.
Ross is an honorary trustee and governor of the Urban Land Institute (ULI), Washington, D.C., and trustee of Baruch College, New York, from which he graduated in 1956 and was awarded an honorary doctor of laws degree in 1999.
Mortgage Banking recently interviewed Ross about his outlook for the commercial real estate market in 2007 and beyond.
Q: Can you summarize your outlook for the commercial real estate market and the overall economy for the rest of this year and into 2008?
A: I'm actually feeling a lot better [now] than earlier in the year. I'm feeling good about the balance of the economy.
What I feel is happening is that while housing is down, I think the signals are on the corporate side--where their balance sheets are strong and they have the liquidity, and they haven't yet made the investment in inventory and in capital expenditures and in capital investment.
Now they are ready [to invest], and they will actually do it. I think they will [invest], and that will overcome some of the weakness in consumer spending and then that will result in some job growth and some wage growth.
Q: Has your outlook for 2007 changed significantly since the start of the year? You seem to have alluded that you are a little more optimistic now than earlier.
A: Well, you can't turn it all around this late in the year. We'll still have lower [economic] growth, but we will have some growth.
Q: What types of loan financing vehicles--multifamily, office, industrial, retail or hotels--do you see enjoying the greatest demand in 2007, and what do you expect will see the least growth?
A: Well, in terms of the financing, if I had to rank them, the hotels and the retail [sectors], I think, are going to have less interest. They continued to perform OK at the beginning of the year, but I think that will start to taper off. They're starting to see trends of too much new retail development in the pipeline.
On the hotel side, they're a little more nervous with high energy [costs] and the implications for travel.
I see office and industrial having a high level of demand for financing. Certainly, industrial continues to grow and move, and [in] office, as we've seen, vacancies are coming down and there's strong interest. We certainly have plenty of capital to meet that demand.
Q: Specifically regarding the condo market, should market watchers just write off condos in 2007 and look to 2008, or is there room for improvement for this segment, perhaps later in the year? …