Chinese New Year:
Ciochetti Kicks Off 2009 Exploring
Real Estate in the World’s Most Populous Nation
By Jim H. Smith
“You can’t be global without being global,” says MIT Center for Real Estate Chairman Tony Ciochetti. It’s the mantra of a tireless advocate. Ciochetti, who arrived at MIT in 2004, has devoted much of the past five years to a crusade aimed at building bridges between the Center and the constantly evolving world of the global real estate profession.
Ciochetti’s expansive vision has multiple goals, but they all presume an important role for the MIT/CRE in the creation of 21st century real estate practice worldwide. “One of the first things that impressed me when I came to MIT is that it’s an institute, not a university,” says Ciochetti. “MIT’s longstanding international presence is reflected in the fact that some 47 percent of our students are international. The world truly is becoming smaller and one of our responsibilities is to identify and help solve some of the larger global problems.”
That obligation is all the more imperative when one considers that an estimated two thirds of the world’s development is occurring abroad. “Our role is to have an impact on the way real estate is developed around the world,” Ciochetti notes. “We have a responsibility to develop opportunities for our students, faculty and alumni to become engaged in shaping development in those growing markets.”
He has spent much of the past five years opening doors to those opportunities. He has led student courses on expeditions to Europe and Asia, where they have met with dozens of representatives of prominent real estate firms thanks to professional relationships Ciochetti has been developing for more than a dozen years. He has helped the Center establish and build upon partnerships and relations with companies in 14 foreign nations and with prominent universities on three continents. He has also taught courses and consulted with leading real estate companies in Europe, Asia and the Middle East.
While it’s a record of success – one that is especially likely to pay dividends as the world’s economy rebounds – it has also resulted in an expanding international network that demands regular hands-on attention. So Ciochetti, who traveled thousands of miles on multiple trips abroad in 2008 – all in addition to managing the demands of teaching a normal course load and serving as Academic Director of the Center – began 2009 knowing that it would be another busy year of globetrotting. The winter holidays over, but the spring semester still weeks away, he embarked upon a nearly three-week trip that took him to Hong Kong, Shanghai, Beijing and London.
China offers huge potential to real estate professionals equipped to help solve that giant nation’s development challenges. With an average national gross domestic product growth rate exceeding ten percent over the last three decades, China has the world’s third largest economy – topped only by the U.S. and Japan – and it is far and away the fastest growing major nation in the world.
“The Center for Real Estate now has three domestic Chinese partners” notes Ciochetti. “I felt it was important to start the year by connecting with them and understanding what’s happening in real estate there. When you have these sorts of important global connections it’s essential to be in contact on a periodic basis. ”
Doing so, however, was a daunting task, considering the scope of real estate development going on in this 5,000-year-old nation. With a population of more than 1.3 billion, China has 13 cities whose populations exceed 2,000,000 and another 80 with populations between 500,000 and 2,000,000.
But, Ciochetti will tell you, it was also an exhilarating experience. The best way to research the ins and outs of real estate in foreign countries is to be there, on the street and in meetings with leading real estate practitioners.
Visiting Old Shanghai
Ciochetti’s expedition began on Saturday, January 10 – a day that broke bleak and bitterly cold in Boston – with a morning flight out of Logan. He touched down 18 hours later, halfway around the globe, on a typically muggy, 80º day in Shanghai.
Ideally situated at the mouth of the Yangtze River, on China’s mainland coast, the nation’s largest city has a population of more than 10 million in its urban core and that many more inhabiting surrounding suburbs. An immensely important banking, industrial and export center – fed by over 700 million tons of cargo shipped up and down the Yangtze annually – Shanghai is a vast commercial engine, essential to China’s economy, and it is undergoing rapid transformative development designed to ensure it will continue to play that role for years to come.
It was to this burgeoning metropolis that Ciochetti embarked for three days of meetings with executives of several major companies –AMB Property Corporation, which opened its first Shanghai office five years ago; Jones Lang LaSalle; and Zhongkai (ZK) Group, all MIT/CRE partners, and Shanghai CRED Real Estate Holdings, one of the top 100 real estate companies in China. His goals, throughout the trip, were to explore opportunities to recruit new partners for the CRE and develop potential opportunities to put Center research to work, thesis topics for students, hosts for future student trips and, ultimately, jobs for graduates.
One of the first people he met with was Tianjin Luo, director of Shanghai CRED Real Estate Holdings, and a 2008 alumna of the MIT/CRE. “China presents a huge real estate attraction for global investors,” she says. “However, the market often is opaque and hard for foreigners to understand. For a prestigious research institute like the MIT/CRE, active involvement in the Chinese real estate market will not only help the Chinese elevate the ability of (our) professional pool, but also help global institutions to better enter and perform in China. The MIT/CRE can be a good bridge, connecting knowledge, experience and opportunity in many ways.”
It was very helpful to have an alumna, familiar with Shanghai’s complex real estate scene, assist him in interpreting what is going on there was, Ciochetti says. “It’s important to understand that all countries have different cultures and styles of doing business. CRE graduates in these markets help establish the CRE presence. Tianjin is a great example.”
“Tony’s meetings with the executives of my company and the other companies were valuable to both sides, especially at that point, earlier this year, when global property and financial markets were undergoing turmoil,” says Luo. “The meetings helped both parties share market views and information. More important, Tony’s presence helped to promote the MIT/CRE image and expertise. This kind of promotion also benefits the alumni community working here in Shanghai.”
Ciochetti spent a day meeting with senior executives at Shanghai CRED Real Estate Holdings and toured part of a 40-block area in central Shanghai that the company has been developing for more than 30 years. “As one of the largest real estate developers in Shanghai, CRED has had a very visible impact on the built environment,” says Ciochetti. “It was enlightening to tour with senior officials and see how their products have evolved. Early areas of their extensive development reflect the norms of the 1970s, while newer sections use state-of-the-art building technologies of the 1990s and 2000s.”
The following day, Ciochetti renewed his contacts with Tom Marquis, senior vice president and managing director of AMB Property China. Since establishing its first Shanghai office in 2004, AMB, a longtime partner of the Center, has quickly become an important player in Chinese real estate. A prominent owner, operator and developer of industrial real estate in the Americas, Europe and, increasingly, Asia, AMB operates as a publicly-traded real estate investment trust.
Earlier this year, Mike Evans, managing director of the company’s Asia operations, described China as “one of the bright spots in the world economy” and noted that although China’s economic growth rate had “slipped into the high single digits, it’s still significantly better than most of the rest of the developed world.”
In 2008, AMB hosted a CRE class on one of Ciochetti’s global courses to China. “As a logistics provider, AMB is a great example of U.S.-based real estate companies following their customers around the world,” Ciochetti observes.
When Ciochetti and Marquis first met, several years ago, Marquis had just hired MIT/CRE alumnus David Yu as a transactional analyst. Earlier this year, Marquis named Yu eastern regional vice president in charge of development for the company. “David is a premium example of Tony’s work,” he said. “We recruited him directly out of the MIT/CRE program and he’s a natural. He can smell a decent real estate deal.”
The third day of Ciochetti’s visit to Shanghai was devoted to meeting with ’03 alum Wang Qian, chief executive officer, managing partner and chief financial officer of ZK Group, a partner of the CRE since 2005. The two men spent the afternoon together and Wang then hosted Ciochetti for dinner. The discussions covered a wide range of issues, from the company’s extensive real estate activities in China to its relationship with the MIT/CRE. “It’s always great to catch up with Qian,” says Ciochetti. “He’s a very significant force in Chinese real estate and I look forward to hearing his perspective each time we meet.”
Founded in 1994, ZK Group has risen on the tide of China’s late 20th century economic expansion. With 32 subsidiaries in nine Chinese cities – including Shanghai, Hangzhou, Zhengzhou, Haikou, Nanchang, and Chongqing – ZK is currently engaged in more than a dozen residential and mixed use projects, especially in third and fourth tier cities. Since Wang’s responsibilities include both strategic development and general management of the company, his perspective on the current state of Chinese real estate was perhaps the most wide-ranging Ciochetti had yet encountered.
“ZK Group is not only conducting development directly, but also providing advisory services for investors and the real estate development industry,” notes Ciochetti. “This is still a very new role for real estate professionals in China and ZK Group is rapidly establishing preeminence in a capacity that is bound to become more prevalent in the future.”
On January 15, the second leg of Ciochetti’s trip took him 750 miles down the coast of China to Hong Kong. The trip was a lesson in the economics of international travel. It turned out that the most cost-effective way to get from Shanghai to Hong Kong was by way of Seoul, a ricochet that saved money by using common airlines, but added more than a thousand miles and some eight hours to the trip.
Ciochetti used the time to review student papers and projects. “I’ve found that one of the best times to read and grade student papers is the focused time I get on flights,” says the seasoned traveler. “It’s quiet time, without the usual blur of activity that goes on at the Center. Often, after meetings, I use the time on a plane, while ideas are still fresh and immediate in my mind, to brainstorm new strategies for enhancing the work we do at the Center. The more experience we get in these foreign markets, the richer we can make our program.”
One of the most densely populated areas on the planet, Hong Kong is a study in maximum utilization of space. Surrounded on three sides by the South China Sea, its seven million inhabitants live cheek-to-jowl at the highly concentrated standard of 6,200 people per kilometer. The city’s natural constraints on development, precluding sprawl, have forced it to grow vertically. In no other city do more people work above the 14th floor. Hong Kong boasts more than 7,500 skyscrapers, the greatest number in the world, and nearly 40 of the world’s 100 tallest residential buildings.
Ciochetti’s itinerary in Hong Kong was an apt metaphor, as condensed as the city’s populace. Over the next five days, he would tour construction sites and meet with leaders of four major real estate companies – Hang Lung Properties, a leading Hong Kong developer with a highly diversified portfolio of properties; the prominent global real estate banking and advisory firm M3 Capital Partners; Kerry Properties Ltd., one of Hong Kong’s largest property investment and development companies; and Center partner China Vanke, the largest developer of residential real estate in China, based in the country’s second busiest seaport, burgeoning Shenzhen, Guangdong, just to the north of Hong Kong.
The proximity of Hong Kong and Shenzhen has created a bustling mega-city that is a de facto laboratory for real estate development, which has proceeded at a brisk pace there despite the global economy. In turn, that has consistently drawn the attention of foreign real estate companies like M3 Capital Partners, a prominent global real estate investment banking and advisory firm, founded in 1991, that also has offices in New York, Chicago, and London. Raising capital from investors in North America, Australia, Europe, Asia and the Middle East, M3 completed 82 capital raising and financial advisory transactions worth almost $55 billion between 2004 and 2008.
As in Shanghai, Ciochetti reconnected with former MIT/CRE students, including ’07 alum Yong “Tony” Wang, on whose thesis Ciochetti served as advisor. Wang, who works as an analyst with M3 Capital Partners, helped him coordinate a dinner with alumni on his last evening in the city.
“Working with Tony and the MIT/CRE has been of significant value to me,” says Wang, “as I found a great job with one of the firms we met during our international trip to London. I think the global connections Tony and the Center have will help our company expand our client and investor network. We will also benefit from the Center’s research and supply of talented graduates.”
Ciochetti’s meetings with partners in Hong Kong focused on how the Center could further help those companies grow and attract talent. Meetings with potential partners were designed to introduce them to Ciochetti and the CRE and discuss how the Center could add value for them. As throughout the trip, Ciochetti was also scouting opportunities to develop research and educational opportunities for Center faculty and students.
“I think Tony’s efforts (to expand the Center’s role in China) are extraordinary, as MIT is a great brand in Asia,” says Wang. “What will be valuable is how the Center can have more interactions in Asia and China on both academic and professional aspects of the real estate industry, and how it can bring some of its cutting edge research to the emerging markets here. Most important is how the Center’s current partners and potential partners connect with one another at MIT/CRE seminars and forums in this region.”
Ciochetti also spent time in Hong Kong with Huey Ang, who met him while she was completing her master’s degree at Cambridge. A development professional with her father’s company, Hong Kong-based Kerry Properties, she focuses on self-sustaining mixed use development in heavily populated “second tier” cities that are not as economically developed as major metropolises like Shanghai and Beijing. Ciochetti renewed his friendship with Ang in Hong Kong after she took a summer course at the CRE in 2007. Kerry Properties hosted one of Ciochetti’s first groups of students visiting China.
“I really appreciate that Tony is taking this initiative,” she says. “China is a huge country, very dynamic and it’s very valuable for students to see what’s going on in real estate here and in other parts of the world. I also like the fact that MIT has a strong relationship with Tsinghua University. Tony brings a truly open-minded perspective to the task of establishing global links for the Center. He is very open to ideas and opportunities.”
One of Ciochetti’s first meetings in Hong Kong was with M3’s senior partners there, Rory Hardick and Chris Vallace. “We talked about their efforts to establish a Hong Kong office and their vision for their company’s work in that rapidly growing part of the world,” Ciochetti recalls.
When Ciochetti made a day-long trip to Shenzhen, Wang accompanied him. In Shenzhen he met with Dong (David) Xie, group vice president of China Vanke Co., Ltd. Xie is an old friend of the CRE, having spent a year at MIT as a fellow in residence in 2008.
While in Hong Kong, Ciochetti also met with Ronnie Chan, chairman of Hang Lung Group and Hang Lung Properties, a major property developer in Hong Kong and mainland China with a diversified portfolio of projects that includes retail, commercial, office, residential, industrial and parking garage properties. Chan joined Hang Lung in 1972 and became its chairman in 1991.
“Ronnie is a great supporter of the CRE,” says Ciochetti. “He was very active with the Center in the 1980s and 1990s and has sponsored seminars for us in Hong Kong.”
Though the trip to China afforded little space for R&R, Ciochetti found himself with time on his hands one afternoon and used it to visit the Flagstaff House in Hong Kong Park. Located in the heart of the city, a short distance from the hotel where Ciochetti stayed, Hong Kong Park is an oasis. A verdant sanctuary within the city’s concentrated bustle, it is also an excellent example of modern design ideas, successfully stewarding a natural landscape within the constraints of a modern, high-rise environment.
The Flagstaff House is Hong Kong’s oldest surviving colonial-style building. Former residence of the commander of British forces in the province, it was built in 1846 and, since 1984, has served as a museum of tea ware, a branch of Hong Kong’s Museum of Art.
“In between meetings, I passed some pleasant time there, learning about Hong Kong’s unique tea culture,” says Ciochetti. “As in all of China, tea plays an important role in the daily lives of most residents. But the tea culture in Hong Kong is unique, having been influenced by a century and a half of British rule.
“By Chinese standards, Hong Kong gets off to a late start in the morning,” he adds. “During the day the streets may be choked with pedestrians. But before eight in the morning they are usually quiet.
That evening, before departing for his final Chinese destination – Beijing – Ciochetti had the opportunity to reconnect, over dinner, with six MIT/CRE alumni in Hong Kong. “Hong Kong is one the CRE strongholds abroad,” he says. “We have a significant alumni population there and it’s always rewarding to see them. This is what it’s all about in the end – seeing our students successfully employed in good positions with prestigious companies around the world.”
Ancient Modern City
Beijing is nearly half a continent removed from Hong Kong, more than 1200 miles and several climatic zones to the north. As with his trip from Shanghai to Hong Kong, Ciochetti economized on travel by making his connections through Seoul.
The political, cultural and educational epicenter of China is also the nation’s second largest city. Located at the extreme northern edge of the Yellow River’s broad alluvial fan, a vast plain that is China’s bread basket, Beijing is also a major transportation hub and financial center, home to some 15-17 million people and the third largest concentration of Fortune Global 500 companies in the world, after Paris and Tokyo.
One of the planet’s most developed cities, it is an architectural showcase, offering contrasting views of a nation at once very ancient and very new. While it encompasses a treasure trove of historic buildings, including many palaces and temples, Beijing has also been witness to an extraordinary rate of real estate development in recent years, much of it stimulated by the 2008 Olympics.
Some $35 billion was invested in infrastructure, environment and industrial improvements over the seven years preceding the international athletic competition. Such a staggering rate of development creates both opportunities and problems, of course. Ciochetti experienced one of the most apparent developmental challenges soon after arriving on January 21 – the city’s nearly unceasing traffic snarl. A high percentage of the more than three million automobiles in Beijing are privately owned, reflecting China’s growing affluence, but they spend much of their time in near-gridlock conditions.
The city is home to Tsinghua University, where Ciochetti has been fostering a reciprocal educational relationship for many years. He took time to reaffirm that relationship while he was visiting the city, spending time with Hong Wang, a professor in the university’s Business School and an alumnus of the CRE. He also met with executives of Beijing Capital Land, a CRE partner, and with several prospective students applying to the CRE.
"When Tony became the chair of the Center for Real Estate he reached out to China right away,” recalls Greg Peng, managing director, Merrill Lynch (Asia Pacific) Ltd., a 2000 graduate of the Center with whom Ciochetti reconnected in Beijing. “He wanted to bring the Center to the real estate industry in Beijing and he’s done well. In 2005, he organized a very successful seminar on real estate finance for our company. He’s developed key relationships with prominent Beijing real estate companies and with Tsinghua University.”
Peng, who graduated from MIT’s urban planning program in 1991 and worked as an architect in Boston for several years before returning to China, says he is hopeful that as the economy improves, the Center will be an important source for talent for his company and other Beijing-based real estate businesses.
“It was good to catch up with Tony,” he says, “and learn what he’s been doing. He always brings new ideas with him.”
January 25 was the day before Chinese New Year and as evening fell the streets of Beijing became a light-and-shadow parade of revelers strobe-lit by exploding fireworks. That night, Sharon Qu, marketing executive with Beijing Capital, and her family hosted Ciochetti at their home, a quiet retreat filled with stunning antiques, for a traditional Chinese family New Year’s Eve celebration that featured a feast of homemade dumplings Ciochetti helped to make. Over dinner they talked about Beijing’s phenomenal growth and the changes Sharon and her family had witnessed over the past decade.
“It was a great honor to be invited to her home for that very special evening,” says Ciochetti. “It was one of those rare occasions where you get a sense of connection with people from a different place and culture. Where, despite the differences, you ultimately realize that you share the common goal of respect and friendship.”
The next morning was New Year’s Day and Ciochetti’s 90-minute ride from his hotel to the airport – a trip that, under normal circumstances, would have been fraught with stress over whether or not he would arrive in time to catch his flight – was uncharacteristically swift and, thus, surreal. The streets were empty. It was as though Beijing, ablaze with fireworks as dusk fell the previous afternoon, had been abandoned overnight. Nearly everyone had gone home for the holiday.
After more than two weeks in China, Ciochetti was headed home from a productive trip that had reconnected him with partners of the Center and former students and introduced him to prospective partners and companies that might host future delegations of students to China. It had also given him rich insights into the swiftly evolving and highly complex Chinese real estate market.
But before he could return to the U.S. there was a two-day stay in London, after a brief change of flights in Paris, for a whirlwind round of meetings to catch up with both old and new contacts. Over two days, Ciochetti met with Don Belanger, managing director of UBS Investment Bank, who hast hosted CRE students on past trips to London and Europe; Rory Hardick, principal of M3 Capital Partners; Gerard de Gunzberg, principal of M3 Partners; Michael Topham, executive vice president of MIT/CRE Partner Hines UK, the world’s largest private developer; and Hines real estate professional and former MIT/CRE student Alex Knapp.
“Real estate is a global business and cross-collateralization of ideas, innovations and expertise can only make us all more effective,” says Topham, who has known Ciochetti for nine years, has also lectured at the Center several times and hosted students on trips to London. “Being involved with the MIT/CRE allows us to engage in a dialogue regarding issues affecting our industry, with a goal of preparing students for the challenges they will meet in the real world.”
“What Tony is doing, developing a truly international focus on real estate in an academic setting is relatively unknown,” says Knapp, who found his job at Hines as a direct result of participating in one of Ciochetti’s European classes. “It’s generally treated as a local industry. But, in fact, it really is increasingly international and that’s why what Tony is doing is so important. He’s a good ambassador.”
Belanger, who has known Ciochetti for more than a decade, since they were both participants on a panel at a real estate conference in New York, spent an afternoon catching up with his old friend and discussing how to help MIT/CRE graduates position themselves to be more attractive to international firms and ways in which the Center and UBS can work together or more projects in the future.
“Tony is a great conduit,” says Belanger. “He’s always building networks and connections. He seems to be the only one doing this, reaching out from a leading academic institution and establishing these international connections.”
On January 29 Ciochetti departed London for the final leg of his trip, bringing him back to Boston on Friday, January 30. In the nearly three weeks since he embarked, the weather had moderated somewhat. Temps climbed into the thirties, appropriate for late January, but not bone-chilling. It was enough to make one feel that spring might be just around the corner. But for the weary traveler – who had visited six of the world’s largest cities, on two different continents thousands of miles apart, in just three weeks – it was enough to know that the weekend lay ahead.
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For more information on partnering with the MIT Center for Real Estate, please see Becoming a Partner. For additional information or questions, please call or email Elizabeth Mathieu, Industry Liaison, at 617-253-8311.