The Pension Real Estate Association (PREA) in Hartford, Connecticut, is enjoying its 25th anniversary as the reference organisation for institutional real estate investment in the US. Set up in 1979 and officially incorporated in 1982, the association began at a time when the US government was considering legislation that would have a considerable impact on commercial real estate investing. A small group of real estate leaders began to meet to address specific concerns and soon decided that an industry association was needed to abet or monitor all of the government issues that transcend any individual adviser. Thus PREA began as an association primarily comprised of investment advisers.
However, it soon evolved to become what Gail Haynes, president of PREA, calls a “collective effort” by and for education and information in the broad real estate investment industry.
“Back then there was a realisation that this was an asset class that the plan sponsor community should be more aware of. Pension funds invested in stocks, bonds, cash and private equity, but had very little in real estate.”
Yet as John Koza, chairman of the board of PREA, notes, the introduction of the US ERISA legislation in 1974 had started to change the way institutional investors viewed investment – taking on board the prudent man rule for diversification of assets for security or higher returns.
“PREA really was a natural extension of the investigation of real estate being done at the time by consultants and investors.”
To this end, PREA started hosting an annual event bringing together members from the investment advisory community, service providers and, most importantly, the pension funds, endowments and foundations that would become its core member constituency.
These three industry segments (investors, investment advisers and service providers) make up the PREA board of directors, which appoints five to nine individuals from each group to make up the 21-strong board that meets three times a year. Board members’ terms are three years and an individual may serve two consecutive terms.
Today the organisation has a membership of over 415 entities and more than 1,300 individuals within these groups; a figure that has doubled in the last decade or so.
PREA’s mission statement, as Haynes outlines, is to provide education and research to members in a “holistic” fashion by bringing all the players in the industry into one all-encompassing organisation.
It does not function as a lobby outfit, preferring to keep members apprised of issues, as Koza notes: “We have a government affairs committee composed of a variety of attorneys which keeps our membership updated on important legislative developments so they are well versed and can lobby through the various channels that exist if they so choose.”
In terms of the work PREA does, a major element is the conferences that occur in the spring and autumn. PREA’s Spring Conference, from 4–5 March in San Francisco, is preceded by the PREA CEO Leadership Forum, which Koza says brings ‘thought leaders’ from across the industry together prior to the main caucus.
“There was a need for an information forum between the capital providers and the capital users in real estate, so the CEO Leadership Forum was created. This is a high level exchange of ideas on an invitation only basis.”
The Annual Plan Sponsor Real Estate Conference – this year from 20–22 October in Beverly Hills – brings together the association’s membership to talk through and listen to issues that are or will impact the business. Much of the content for this event is focused on plan sponsor issues with ideas injected from PREA’s Plan Sponsor Council. Haynes says the council plays an important part in the association’s governance, and seeks to ensure that PREA is providing targeted, useful information and research on a variety of topics such as benchmarking, reporting, valuation and transparency: “not just for our plan sponsor members, but for the overall promotion of best practices in real estate investment”.
These two events are bisected in the calendar by the ‘PREA Institute’ in June; a two-and-a-half-day practical real estate collegiate, this year taking place at The Wharton School of Business, part of the University of Pennsylvania.
“The PREA Institute has discussions about major portfolio issues with case studies and lectures,” says Haynes.
“Another way we address these areas directly with members is through the PREA Quarterly, a highly regarded industry publication. The editorial board finds a variety of economists and influential real estate thinkers to author articles with a strong research element.”
PREA also has a clear and informative web site (www.prea.org), covering the work that it does.
Additionally, the association’s research department, now in its third year, will be unveiling some new web-driven research capabilities on the site later this year as well as launching a number of major research projects.
Another area of concrete development for PREA since the mid 90s has been to help establish US real estate reporting and performance measurement standards for the industry: “This has been very important to plan sponsors. The publishing of standards has been supported by three organisations, PREA, NCREIF [National Council of Real Estate Investment_Fiduciaries] and NAREIM [National Association of Real Estate_Managers]. Collectively the three organisations sat down with input from plan sponsors and investment professionals to set benchmark standards for real estate investments, which are reviewed annually,” explains Haynes.
The theme is taken up by Koza: “PREA was very keen to have standards and investors wanted to see them permeate the industry so that they might receive standardised information in order to assist in their decision making. We support this programme and we are continuing to work with NCREIF and NAREIM to educate the industry regarding these standards.”
For investment advisers, Koza says the benefit of being part of PREA is the same educational platform allied with the opportunity to learn more about the current thinking of institutional clients.
“It’s also a chance to network with experts in a number of other areas that support the industry, such as researchers and consultants and benefit from best thinking from a wide array of sources in the real estate asset class.”
Annual fees for the association operate on a three tier basis with a deep discount for plan sponsors, endowments and foundations.
And membership is not exclusive to the US including, as it does, investment managers and pension funds from Canada, Asia and Europe.
Koza suggests this “inclusiveness” is a “fundamental objective” of the organisation: “We have a broad way of thinking about real estate and have long been interested in international investment, a topic of discussion for many years in our conferences.
“Recently, we’ve been focusing more closely on Europe in order to bring information back to our members. We have an outreach programme as part of our strategic plan to exchange information with similar educational interests in western Europe, for example.”
“We seek best practice information wherever it may be, either inside or outside of the US, and learn from investors and industry practitioners who may be doing things better.”
Koza believes this is particularly important considering the institutional capital flows, both foreign and domestic, seeking US real estate opportunities: “This is a time to be very careful and maintain a firm fiduciary focus when making investment decisions. That’s the major topic of discussion I hear going forward.”
Gail Haynes sums up why she believes PREA has become the organisation it is today: “I think we’ve been able to provide a balanced programme of education that has raised the knowledge base in the industry. That is our mission: to serve our members through the sponsorship of objective forums for education, research initiatives, membership interaction and the exchange of information.”