In the first conference keynote, “A Conversation with Armando Codina and Hamid Moghadam,” the two longtime friends and business partners discussed their careers in real estate and current trends in the market.
Codina, executive chairman, Codina Partners, a long-time South Florida development company, welcomed Moghadam, to Miami. He then asked the chairman and CEO, Prologis, a San Francisco-based real estate investment trust (REIT), about the turning points in his career.
Moghadam said he got started in real estate in 1983, and formed AMB Property Corporation with partners Douglas Abbey and T. Robert Burke. “We borrowed $50,000 and got into the advisory business helping distressed owners,” he said. The team leveraged that experience into sponsoring its first fund, raising $100 million in 1988 and investing in neighborhood shopping centers and industrial buildings.
Despite a downturn in the U.S. office market, AMB’s fund kept performing and Moghadam and his partners raised $400 million for its second fund, and steadily grew its portfolio to $5 billion in assets under management.
In 1995, Moghadam met Codina and purchased Beacon Industrial Park. Since then, the two have stayed in close touch and partnered on various projects through the years.
A strategic decision
Next, Codina asked Moghadam about his decision to exit the retail sector and focus purely on industrial properties in gateway cities like Miami. “That must have been one of the best strategic decisions in your career,” he said. “How did that happen?”
Moghadam said he attended a mid-1990s conference about the brand-new field of ecommerce and how it might affect other businesses. After looking at Webvan, an early online grocery store company, Moghadam said AMB decided to exit the retail category, selling $1 billion in shopping center asset to other REITs. Since then AMB Properties, which merged with Prologis in 2011, has focused on industrial properties in major U.S. and international population centers.
Noting Codina’s long-term success in South Florida, Moghadam then asked his friend if he had a “sixth sense” about real estate market cycles. “No – I got lucky,” said Codina with a laugh.
During the recession of the early 1990s, Codina said he had the largest single debt exposure in South Florida. “We were under siege from the banks, but we were able to dispose of multiple properties and never defaulted on a loan.”
In 2006, Codina merged his firm with Flagler Development Group, part of Florida East Coast Industries, and served as chairman until 2010. Since then he has led Codina Partners’ residential, commercial and mixed-use projects including Downtown Doral, a $1 billion development.
“I believe that success in real estate is about paying careful attention to analytics and trusting your instincts,” Codina said. “Don’t believe your press releases, and don’t think you’re bulletproof.”
Moghadam asked Codina if his service on corporate boards has given him a better picture of real estate market conditions. “That undoubtedly helped,” Codina said. “It gave me other perspectives on South Florida outside my real estate and investment background.”
Different business models
Codina then outlined his business model, which has included developing almost all types of commercial real estate in South Florida. “As a Cuban-born American, I have close ties to my family,” he said. “I would try to have lunch with my mother every day. So, I wanted to go out to my projects and come back in time to see her,” he said. “I also felt I was less likely to make a mistake by staying in my market.”
Codina emphasized the importance of working with great partners, “because there are no good deals with bad guys.” He also encouraged University of Miami students to consider becoming research analysts as a first step toward building their knowledge of the real estate market.
In contrast to Codina, Moghadam has focused on investing in industrial properties on a national basis. It’s a sector that now driven by national companies and local players, with fewer mid-size firms.
“Supply chains are longer and more complex now,” Moghadam said, adding that about 2 percent of the goods in the global economy go through the company’s buildings. “With the growth of ecommerce, industrial offers amazing career opportunities for today’s real estate students,” he added.
Codina agreed, adding, “If I only owned one market type for my grandchildren, it would be industrial.”
Looking at the market
Reflecting on the industrial market, Moghadam said Prologis’ investments in gateway metropolitan areas like Miami, San Francisco, Seattle and New York/New Jersey have been solid performers over time. “Other markets, like Dallas and Chicago, are also doing well, but they can keep expanding geographically without the natural barriers you have here in South Florida,” he said.
In general, the U.S. economy remains healthy, along with other leading markets in the developed world. “In the U.S. we are in the ninth year of expansion and still building less industrial product than we are absorbing,” Moghadam said. “It’s also getting more complicated to develop this product and bring it to the market.”
However, lack of labor is the number one pain point for warehousing, distribution and logistics businesses, Moghadam added. “The onramps to a career are not as appealing as for other sectors,” he said. “Education and workforce initiatives are important for addressing that issue. Automation is growing in importance, but full systems are still several decades away.”
Finally, Codina asked Moghadam what advice he had for students. “Think of your career as a funnel,” Moghadam said. “Get as much exposure to as many things as you can, and then begin to focus on one thing you can do really well. You should also build your customer service skills because they will go a long way toward determining your success.”
