Mary Ludgin:

I think we have something like 66,000 miles of coastline in the US, X Alaska. It's just the case that some of these places, they're abundant in their resources, they're lovely places, but they've got some issues ahead that relate to creating resilience in a setting of climate change and more frequent incidences of inundation, so it's the rivers flooding, it's the sea levels rising, it's the wind is more intense, and a lot of that hits the sun belt.

I would make the argument don't put all your eggs in that basket because there are costs ahead, including spiking insurance costs.

 

Nancy Lashine:

Hello, and thanks for tuning in to Real Estate Capital. I'm your host, Nancy Lashine of Park Madison Partners. Park Madison is a capital solutions and advisory firm serving the global institutional real estate business. Capital is the lifeblood of the real estate industry. But the decisions on where and how it's allocated are driven by people and personalities.

 

Who are they? What motivates them? What have been their biggest successes and lessons learned throughout their careers? On this show, we introduce you to some of the real estate industry's most influential thought leaders and decision makers. And we talk about what is important to them, how they make critical decisions, who has influenced them, and a lot more.

 

Today I am speaking with Mary Ludgin of Heitman. Mary is a born teacher and a great storyteller. And if you've heard her before, you'll know what I mean. She has a long career at Heitman, a global real estate investment management firm with over 51 billion in assets under management.  Mary is an equity owner of the firm, serves as their head of investment research, and also sits on Heitman's global investment and management committees.

 

Mary is passionate about sustainability in real estate and has written extensively about climate risk for the Urban Land Institute. She's also led numerous industry associations, chair of the Pension Real Estate Association, president of NACREF and president of Real Estate Research Institute. Mary's one of those people who has important insights and opinions on a broad range of real estate topics.

 

So the hard part of this conversation was deciding what to talk about. We went pretty broad discussing housing affordability, migration patterns, the future of urban downtowns, the impact of rising climate risks, the opportunity in data centers, and the public policies that are available to address these and other issues.

 

Our conversation begins with Mary sharing her views on the so-called “urban doom loop”.

 

Mary, thank you so much for joining us today. You are a sought-after speaker. You're a leader in our industry. You're currently the head of Global Investment Research. You're a partner, sit on the investment committee at Heitman. You've been at Heitman for quite a long time.

Mary Ludgin:

Decade.

Nancy Lashine:

We've known each other for many years, both through your leadership roles at Priya and now at ULI. I had the privilege of hearing you at the recent ULI global trustees meeting, and the subject matter was revitalizing downtowns, which really was prescient because somehow it felt like after a year of going post-COVID to conferences, Priya in Seattle, and ULI in downtown Dallas, and then downtown Los Angeles, and just seeing the devastation in those downtowns and obviously living in New York City, which is so much bigger, so it's not quite as obvious, I thought it was a really important topic. I'm so glad you are excited to speak about it today. I did not know that you wrote your PhD thesis on urban politics and public policy. Did I get that right, by the way?

Mary Ludgin:

Pretty close. It was on the politics of urban redevelopment. This was the late seventies, early eighties. It was a thing then, and we thought we had it figured out. Downtowns were immensely healthy pre-COVID, with some exceptions. To have it be a topic again feels a little like déjà vu all over again, to quote Yogi Berra, and pretty frustrated because we made so much progress.

But at the same time, downtowns are being reinvented, and they've been reinvented before. So I have confidence that what comes out of this will be positive. Our cities need more housing. If we have an excess of office space, time to figure out how to use that additional space and all the embodied carbon it represents.

Here's my environmentalist credentials coming in. We have these existing buildings. Carbon was expended to create the building materials to put them in place. Let's benefit from that. And when we know that it costs something on the order of $700,000 to build a single unit of affordable housing in our expensive cities, can't we figure out ways to take these buildings and make them into homes for seniors, homes for working-age people, schools, medical office, storage? There's so many exciting potential reuses for these buildings. I'm hoping that what gets unleashed as we think about reimagining downtowns is the full creative process of what should cities look like, and how do we use this moment to solve some of the intransigent problems, homelessness as an example.

Nancy Lashine:

Sure. Well, there's a lot there to talk about. This was in the 1970s that you initially looked at this? Is that what you said?

Mary Ludgin:

I did. New York was going [inaudible 00:05:54].

Nancy Lashine:

Yeah. That was the Lindsay era, right? Felix Rohatyn-

Mary Ludgin:

The Lindsay.

Nancy Lashine:

... came to the rescue.

Mary Ludgin:

Absolutely. Would that he were still alive and could bring that energy, but maybe that's the opportunity we should all model ourselves on Felix Rohatyn, the creativity and stamina he brought to trying to fix his city and a model for other cities in the process.

Nancy Lashine:

I'm sure there's been so much talk about the urban doom loop, which is the cycle of unstoppable collapse, tumbling property tax revenue forces cities to slash spending, the speeds, the flight of residents, and then businesses triggers a rise in crime and unrest. A lot of folks are talking about this phenomenon.

Mary Ludgin:

Yes.

Nancy Lashine:

What thoughts do you have about how do you start reversing that?

Mary Ludgin:

Well first, let me add another element to the thinking about the risks for cities. You have a number of mayors recently put in place for whom their basic constituency is not the downtown business interests. Their constituency is people in the neighborhoods. Part of what needs to be done is the proof statement for why urban revitalization needs to include downtown revitalization.

Our new mayor in Chicago comes from the neighborhoods. He has a great constituency. He was elected outright. Downtown was not on his mind as an area of focus. It needs to be as part of how he tends to the city as a whole. I would add that political dynamic into the mix because he didn't run on a, "Let's fix downtown as part of making Chicago stronger." He ran on, "I'm going to help the neighborhoods."

Nancy Lashine:

Right. And that feels a little bit like what happened in Los Angeles as well. When you have a mayor that imposes a 5% tax on all real estate transactions off the gross in order to fix the homeless problem, I mean, that does not help real estate revitalization.

Mary Ludgin:

I think there's some naivete about how much building owners can withstand in a setting in which there are so many other dynamics, including rising insurance costs, and lessened levels of tenant appetite, tenant demand. It's a difficult time for that to happen.

I did meet the mayor of Los Angeles during the ULI fall meeting, and my sense is that she wants to pull back from that. She's recognizing the implications are not positive and there are other ways to try to solve her homelessness issues, including recognizing things like that HUD is not interested in temporary solutions, they're only interested in permanent solutions. She's trying to figure out how to come up with some clever interim steps to get people in a position where they can get medical services and temporary housing so that they can become employed as part of getting off the streets permanently. Anyway, she seems like she's pretty creative. I was impressed.

Nancy Lashine:

Oh, that's good. Well, I'm glad to hear that. What are you seeing? Who's doing it right? Where are you seeing some programs in place, especially in our big 24/7 cities that are particularly struggling? What's working?

Mary Ludgin:

There are some interesting lessons from Canada. Calgary has been dealing with a dead downtown for a lot longer than the crisis that US cities are facing now. They've had giant office vacancies long before hybrid work became a feature. They have a grant program where the owner of a building can apply for a grant and they can do what they wish with it, including using it to help demolish the inventory. That's interesting. I think it's a little radical. I would far rather see reuse rather than demolition, but some of these buildings don't lay out for some other use. So, Calgary's been in the lead in trying to think about ways to solve the problem.

I'm proud that Chicago was pretty early to recognize we have an existing funding source in the form of a tax increment finance district that is in the heart of the problem area, the LaSalle Street financial district corridor. Under the prior mayor, we had a commitment to use TIF funds for what they were intended to do, which is to stimulate revitalization. That mayor left town soon after saying, "Yep, good idea." And now there's a new mayor that, I think, thoughtfully trying to consider, "Is this the path forward?" But, we have a finance mechanism in place that can allow us to generate revenues to be able to incentivize development or redevelopment.

San Francisco, by contrast, doesn't have such a plan in place, doesn't have an existing district or any means of bonding based upon existing tax revenues, for instance. So, they have to start from scratch. That's a harder matter. San Francisco will come back, I'm firmly convinced it will, but they're having to look at what their options are and how to put it together.

New York's a really interesting case because Lower Manhattan benefited, in my view, from tax incentives that helped take obsolete office space and convert it to resident, creating a much healthier environment. You've got history in doing it, and it looks like it might be time to do it again.

Nancy Lashine:

Yeah, no. That's really good point. I hadn't thought about it that way, but the whole financial district, or what's called FIDI, that post-GFC time frame, there were these really old buildings, many of them were converted to residential. You've got a whole vibrant resi and restaurant community downtown now, which you don't have in that Plaza District, say, between 40th and 60th Street, between Third and Sixth Avenue or Seventh Avenue, because that's really office and some incredibly high-end condos that nobody really lives in.

Mary Ludgin:

Exactly.

Nancy Lashine:

It'll be interesting because, clearly, Third Avenue and Sixth Avenue in New York City, for example, there's plenty of redevelopment needed in the side streets. There's plenty of redevelopment needed.

Mary Ludgin:

Absolutely. Nancy, you pointed out these monoculture places, that's not where... There is office demand still, but office tenants don't want to be in monoculture locations where they're the only thing happening. They want to be in live-work-play locations. At least that's the dynamic I'm seeing across the country. So, how do we take these places that have been monocultures? Downtown Chicago is one such. We've had significant residential development and conversion in Chicago, but in an arc around the downtown skipping the downtown. Now's the moment to push those residential uses and put them in place.

Nancy Lashine:

In a weird exception to the rule, I'm signing a new lease right now in a monoculture, Park Avenue. There's a pocket in New York City that is just corridor that rents are higher than they were pre-COVID, and there's not much available, and it's incredibly accessible to all parts of the city and the suburbs because people here do commute. You have to to attract a broad workforce. This is the part of town everybody does want to have an office in if you want an office. The exception to the rule, I suppose.

What are you seeing? Talking about politics, you were talking about it very much as a local solution. Are there statewide or national solutions that are happening or that you think could work for these problems?

Mary Ludgin:

There are. The Biden administration is trying to put tools in place to stimulate revitalization. Again, it fits with climate-oriented policy. It's recognition that the lowest carbon footprint a person or a firm could have is in a city, and therefore let's try to make our cities work. A giant opportunity lies ahead of us in the convulsions that are coming from lesser levels of office demand.

The Biden administration released some announcement about a month ago about being able to apply certain low-cost funding to office-to-resi conversions, for instance. It's kind of complicated. I'm still learning more about how it works, but it's one tool.

There's some interesting twists where there is national funding for historic preservation conversions, but those buildings you have to interface with the National Park Service. In Chicago, we have buildings that are on the National Register of Historic Places. In order to do something with their facades, the interface is with the National Park Service as the protector of these monuments. Well, they're not monuments, they're office buildings, so how do we work together? So, there's some little twists.

There are county programs in Chicago, which is the place I know the most about for the office-to-resi conversion. There are county-level tax incentives that are in place. They work best with vacant buildings, so they're not so good if you've got a building that's 50 or 60% occupied. And there are some state incentives depending on the location.

I think we're going to figure out how to pool these dollars and make it work. I'm heartened, Nancy, to see that there's been a bounce back in the residential markets in downtowns. Our office markets may be challenged, but the COVID period when vacancies in downtown high-rises spike, we're done with that. Vacancies are back to pre-COVID levels. And that's the clue. They may not be the same people who were living in downtowns prior to COVID. Because some of those people, it was the life stage for them, time to go to the suburbs, time to go to cheaper places to live, but there's been backfill. It says to me that the desire to be together as humans remains. It may be that we're not going to be as often together in office space in collaborating, but we want to be close to cultural amenities. The ability to get five different varieties of Thai food within a five-block radius, that seems to appeal to a broad array of the population.

Nancy Lashine:

I'm so glad you mentioned Thai food. Yum. Talking about residential, have you seen solutions to the homelessness crisis, which obviously is a major issue for revitalizing our cities, and our sidewalks, and just quality of life for everybody?

Mary Ludgin:

It's interesting because my job is global. I'm in places where homelessness is not present. Look at Japan. They figured out house their people. Singapore's figured out how to house its people. The US hasn't done a very good job of that. Our efforts at public housing in the fifties and the sixties, started earlier than that even, were not wildly successful, as those were concentrations of people of one income strata and that didn't turn out to work very well. I think we have to look globally for some solutions on how to house our people. It's a shame. We should be shamed by it.

Nancy Lashine:

I mean, do you think that's cultural? Do you think that's political will? Do you think it's just sheer law of numbers?

Mary Ludgin:

I think it's all of the above. And it takes multiple terms for a mayor if the mayor's trying to solve the problem. And mayors alone can't do it. This requires federal level dollars.

Nancy Lashine:

Even if mayors solve the problem, it seems like it could be a temporary solution.

Mary Ludgin:

Think you're right about that. We've had a lot of turnover in cities. Some places there are term limits and other places there aren't, but we've had a lot of one-term mayors. That's tricky because some of these policy initiatives need a long time to gestate and then to be executed.

Nancy Lashine:

What about the migrant crisis?

Mary Ludgin:

Absolutely. Should have mentioned it and a complicating factor right now. In Los Angeles, one of the innovations under the current mayor has been the acquiring of motels and low rise hotels as means of temporary housing. Again, recognizing HUD is not providing those dollars, but the city can finance it or can commit dollars to it. So, that's been a practice, I'm observing it here, Cook County, which is where Chicago is located. They're using their tax revenues to buy transient hotels and use them for both migrants and for the domestic homeless.

Nancy Lashine:

But how feasible is that as a long-term solution, Mary? Because, I mean, certainly Mayor Adams has been very vocal in New York. I mean, New York City already is dealing with declining revenues as a result of what we call the doom loop. Then, to just have the migrant to try to house all these people... Well, this is a bias. But whenever the government tries to do something like this, it's not the most efficient. When we look at how much they're paying for land, even to pitch tents in parts of the New York area, it's kind of nuts and very inefficient.

Mary Ludgin:

Agreed. I'm going to go 30,000 feet on you because how we get there is going to be complicated. But I would say as our population ages, we're not quite in the position of Europe or parts of Asia where the population is actually declining. We're not there. We need to see the migrants that are coming to our country as our future and recognize get support for this interim period where they don't have jobs yet, they're not able to contribute, but recognize that they've come here to contribute in the same way that my forebears and your forebears came here to contribute, they just needed some help in the interim, and see it as an opportunity.

Nancy Lashine:

I don't see that as 30,000 feet. That's absolutely real, and the frustration is... I mean, I'm two blocks from the Roosevelt Hotel. I'm sure most of those people there would be thrilled to be able to go get a job, but they don't have work visas and the state can't issue them. The federal government has to issue them, so it's federal government blocking policy for the cities that are dealing with a migrant crisis. It's an immigration issue.

Mary Ludgin:

Nancy, that's why I went to 30,000 feet because those are policy issues. I don't know the resolution to, but it's time we as a nation of immigrants recognize just how critically important immigrants have been for the evolution of our country to date and how important they are going forward.

Nancy Lashine:

Oh, we're going to be so boring here because we agree on that.

Mary Ludgin:

[inaudible 00:20:49].

Nancy Lashine:

Certainly, I mean, we do need to have clear immigration policy and border policy out of fairness, but we are so wrong about it right now. It feels like for some cities, a Chicago, a New York, a Los Angeles, it's really having a great impact right now. What about the southern cities that benefited so much during COVID, so Austin, Nashville, Tampa? Those cities have seen incredible growth. Obviously, it's become more expensive to live there, so they've lost some of their cost advantage, if you will. But do you see this as just a cyclical phenomenon or do you see it as real secular shift moving to some of the southern cities?

Mary Ludgin:

It's been underway since the seventies. We were observing large corporations leave Connecticut and other high tech states back in the seventies. JCPenney came to Dallas, the early moves to Dallas. So, it's been underway for a long time.

What I think we observed was these lower tax locations, they have an advantage. Certain corporations are going to take advantage of it. At a moment when millennials are looking for a way clear to buy houses, these places have had an advantage. That said, as you pointed out appropriately, they've gotten more expensive. As a real estate investor, I'm always skeptical of high growth markets because we tend to overbuild high growth locations. The development, particularly on the residential side, tends to get green lighted because there's been so much population growth. Well, in America, we've regularly proved that you can overbuild good demand. I don't think Austin or Nashville represents a particularly smart investment opportunity right now, although there may be some disappointed residential developers there, so that may become... Buying at a discount may be the investment opportunity.

But I would layer on that these are places that have some climate issues they're going to need to wrestle with. And their tax policies may change, may have to change, because the feds can't afford to defend... I think we have something like 66,000 miles of coastline in the US, X Alaska. It's just the case that some of these places, they're abundant in their resources, they're lovely places, but they've got some issues ahead that relate to creating resilience in a setting of climate change and more frequent incidences of inundation, so it's the rivers flooding, it's the sea levels rising, it's the wind is more intense, and a lot of that hits the sun belt.

I would make the argument don't put all your eggs in that basket because there are costs ahead, including spiking insurance costs that need to be put into pro formas, need to be put into sensitivity analyses. It's probably a moment to be looking at if you're going to buy Austin, you should also be thinking about buying Minneapolis or Columbus, and some places that have lower levels of climate risk, because climate risk is here to stay.

Nancy Lashine:

You raised such a great point that there's a new factor involved in diversification and diversifying your climate risk.

Mary Ludgin:

There absolutely is. I can't remember it exactly, Nancy, but US News and World Report released... I think it was best places to live. May have been best places to retire, one or the other. For the first time it was not stocked with Florida. That's not a knock on Florida, but it's a recognition that the cost structure of some of these very welcoming places has changed, and the cost structure in Florida that's changed is the insurance cost. Then, the risk of natural disasters needs to be on people's minds when they think about place for their golden years or a place for whatever the color is of the years that happens before the golden years.

Nancy Lashine:

Beyond just economic disincentives like insurance costs, we've seen European investors, Canadian investors red line certain coastal markets because of climate. Has Heitman and your investment policy thought about doing that? And how do you think about climate change in the context of where you're willing to commit dollars?

Mary Ludgin:

We are not red liners in part because there's so much nuance even within a metropolitan areas. There's higher ground and lower ground in a metro area. But what we have created is colors. We have a service that we work with through Moody's that gives a score to each of the locations in our portfolio so we can look at what our existing exposure is by client, by funds, by firm. Then, when we're conceiving of a new debt or equity investment, we can look at what would the addition of this investment mean for the climate risk profile of the client.

We have some colors. They're loose 20%. We don't want more than 20% exposure to hurricanes, for example. Is that the perfect number? I'm not sure it is, but it's a nod in the right direction, which is these are real risks, we don't know when they're going to hit, but we need to make certain that we're not ignoring them. I think for a long while the investment advisory business in real estate, our job is to underwrite risk and opportunity. And I think there was a whole hassle of risks that we weren't underwriting, and now we're starting to. It's early days. I'm not sure we're good at it. Some of the risk measurement tools are not particularly great, but it's better than putting blinders on.

Nancy Lashine:

Are you working with lenders or insurance companies that you can learn from in terms of how to metric those risks?

Mary Ludgin:

Yes, for sure. That said, understanding their paradigm... So insurers, they can raise the costs of your insurance annually. We don't have that opportunity. Similarly, they can decide they're pulling out of a market. Yes, we can learn a lot from the insurance companies, but we don't have the same tools that they have, so we need to take a longer view.

Nancy Lashine:

Great. Let's switch gears a little bit. You mentioned, I mean, you are a global head of real estate. We talked about what's going on in cities here in the US. What's going on around the world? Are there places that their urban locations are really on fire and are growing?

Mary Ludgin:

Yes, there are. I think you could put it on a continuum of places where there's less hybrid work and places where there's more. In places where there's more hybrid work, like the US, there's greater dislocation in office settings, including suburbs, but also in downtowns.

Go to Europe, less so, but not immune to the, "Hey, we got used to working from home. There are efficiencies. We're set up to be able to do it." We're seeing more work-from-home. It's having an impact on the value of office properties in big cities within Europe, and more to come.

Much less so in northern Asia where people are back to work. Their homes are not the right size for people working from home regularly. The investment in the tools to make that happen isn't in place fully. And there are cultural elements that contribute to being in person.

Different in Australia. You have places like Melbourne where... There was a long period of lockdowns in Melbourne, longer than other cities in Australia. They're definitely comfortable with working from home. So, it varies a lot by location.

Nancy Lashine:

What are your best investment ideas for 2024? I have to ask you, Mary.

Mary Ludgin:

Yes. Generally speaking in a setting in which it's not completely clear if we've got a soft landing, just to use the US economy as a starting point, we think we've got a soft landing, but there have been such thoughts before and it's an extremely difficult maneuver to execute, that's for sure.

With that in mind, we always want our investors to be thinking about property types that are positioned to do well in periods of economic growth, as well as periods of either stagnation or decline. That includes the demographically driven sectors or sectors like storage that have real recessions. They're not just recession proof by any means, but they're... The triggers for demand and storage often include inexorable facts of life, death, divorce, downsizing. We like storage in the portfolio across the cycle.

Student housing tends to do well in periods when the economy's contracting, and it's done really, really well in the aftermath of COVID, just blazingly hot around the globe. So, put some student on your list.

Data centers are going through a really interesting period of a change in who leases space away from small entities, like Park Madison and Heitman that had co-location settings. We're not doing that anymore. The tenant demand is coming from bigger users that we're commanding a lot of pricing power. Anyway, it's an interesting sector that's worth looking at.

Nancy Lashine:

Are you doing hyperscale? Are you doing edge data? How are you thinking about it?

Mary Ludgin:

More on the hyperscale side of it. I wouldn't say it's a major focus of ours, but it is on the list, as is manufactured housing in a setting where housing costs have been so high. And you have two demographics that fit the profile for manufactured housing, but particularly the baby boomers. It's a great retirement option.

I would add where we've been investors for the last seven or eight years, in the single family homes for rent sector and in a setting in which home prices are so high. It's an alternative for people that want to get their kids out of the box in the sky and into a setting of walk to school with a backyard in the mix.

Nancy Lashine:

Oh, that kind of box in the sky. I was like-

Mary Ludgin:

That kind of box.

Nancy Lashine:

I was wondering where you were going with that. On single family residential, are you doing BTR, built to rent, or are you doing more buying scattered homes? How are you thinking about it?

Mary Ludgin:

We've done both. We've done both and are mostly focused, but not exclusively right now, on the build-to-rent part of the second.

Nancy Lashine:

Our investment strategies are awfully similar, Mary.

Mary Ludgin:

I'm glad to hear. It's either right or really wrong.

Nancy Lashine:

Well, we'll both be on the same side of the ledger, it sounds like, whatever side that ends up being. When you look at Heitman globally, how much of your assets is here in North America versus Asia and Europe?

Mary Ludgin:

More than half are in the US. It's where we started. That said, we've been in Europe since 1995, '96. Been in Asia since 2006. So growing those areas and like the nuance, the variability between them. We brought investment ideas from Europe and Asia to the US, and we brought investment ideas from the US and applied them to Europe and to Asia, including storage where we've invested in five continents.

Nancy Lashine:

Where are you growing fastest today?

Mary Ludgin:

Nowhere. This is a pause. This is a pause. It's been incremental growth, mostly in the alternative sectors, in Europe, in the US, in Asia. It's been a mix of some industrial, some of the alternatives like storage, and some residential, which is more of an alternative in Asia than it is in the US. But it's been a slow growth period, which I believe 2024 should be a moment of transitions from caution to cautious activity.

Nancy Lashine:

I sure hope you're right. You've been in the business a long time, and you've seen the evolution of products go from the insurance companies to core open-end funds to the closed-end funds and the defined contribution products. Then we had this proliferation again of open-end funds, and now, of course, they're stalled because any of these have come down so slowly and there's a concern that nobody wants to catch the falling knife. As the next generation of products evolve, what do you see as structures that are enduring for big institutional investors in the real estate investment arena?

Mary Ludgin:

I do think that there are cycles in what product works best or points in the cycle when one product works better than others. We did watch, certainly in the early nineties, the giving up on the big open-end funds only for them to have their moment again. I believe they'll have their moment again. There's value to it just so long as you understand liquidity is restricted at a certain point in the cycle.

Similarly, we watched the 15-year finite life funds have their moment, and then that was extinguished as we realized that that was just way too long a time. We've watched the separate account come and go and come again. We've watched REITs look like they were the future, and then, "Oh, no." They got priced as growth stocks. They're not growth stocks.

Anyway, what I would do if I were running a big investment program, I'd have a mix of those things and recognize that there are moments when you're going to be pleased that you have a mixture of exposures.

Nancy Lashine:

Very sage advice. What would you say to young folks who are looking to get into this business?

Mary Ludgin:

Well, my vantage point of 34 years in the industry, I've loved it. I get paid to learn. Maybe I'm making the argument for the virtues of being a researcher, right? I get to see what the pro forma says versus what happened, and to try to do the attribution analysis to understand why didn't the rent gross hit this number, why didn't it exceed it, and try to figure that out.

Real estate is never the same thing twice. I've lived how many recessions? No one of these recessions has repeated itself exactly. But that's part of the excitement. It's a truly stimulating field where there's chance for innovation and application of wisdom with a few tweaks to try to take advantage of these interesting moments, such as the one we're in. Sorry, that's a bit discursive, but-

Nancy Lashine:

No, not at all. I was just thinking that, just listening to you, anybody who thinks of themselves or knows themselves to be an intellectually curious person would say, "Wow, that is an amazing opportunity and an amazing industry to be able to be activate in." Because if you are intellectually curious, there's no end of places to apply your curiosity.

Mary Ludgin:

I would agree completely. Mark Twain's line I use regularly, "History doesn't repeat itself, but it rhymes." We're trying to look for the rhymes, but also the points of difference and capitalize on those points of difference.

Nancy Lashine:

I have had the pleasure of being on a Chicago riverboat and listening to you as a docent to do the architecture tour of the downtown loop without pausing for a breath. I mean, your memory is unbelievable. How did you get into doing that? And tell us about your fascination with architecture.

Mary Ludgin:

It started in college. I sat in the back of Art 105, a big survey of the history of art that was taught at my college, and heard a professor of architecture say, "Chicago has destroyed more great architecture than most cities will ever see built." It caused me to look at my home a little more closely. Chicago is a place of innovation in architecture. So I was here in this laboratory where the innovation had occurred in the period of skyscraper development, and it continued into the period of these gigantic Willis Tower, Sears Tower scale buildings. So there it was right in front of me.

My graduate advisor in my PhD political science program was a failed architect. At one point, my job for him was to figure out how Chicago got built, who financed it, who designed it, was there a public-private partnership in place? Anyway, so I got to look at my city building by building, so it was a logical thing to then begin to tell the story on the architecture of the skyscraper.

Nancy Lashine:

It is such a fascinating skyline though, because the old and the new are run on top of each other, and it tells so much about the history of industrialization in America.

Mary Ludgin:

It does. And Nancy, it also shows the transitions of economic use. There were manufacturing facilities in the downtown, or adjacent to it, similarly to the loft districts in New York City, and those became residences. They became hotels. They were an opportunity to reuse as economic transition occurred. To circle back to the beginning of our conversation, we've done this before. Let's make these remnants of our past part of our future.

Nancy Lashine:

That's comforting. Do you have a favorite architect?

Mary Ludgin:

I have a favorite period, and that's the Art Deco era, which tragically the shortest of periods, at least in the U.S. The Art Deco was coming out of Europe in the early twenties, and it got turned off with a great global depression, which basically had a ten-year run. These are lovely, soaring buildings that grace the skyline. They're my favorites, maybe because they're so rare.

Nancy Lashine:

There was a moment probably a couple of years ago when it looked like we were coming out of covet and things were going to be amazing that I thought we would see the roaring twenties again in the 2020s. It doesn't really feel that way right now.

Mary Ludgin:

No.

Nancy Lashine:

But that era of the 1920s, and flapper girls, and Art Deco, and incredible costumes, and great art, it would be nice to feel like maybe that's what we'll see in the rest of the 2020s. TBD.

Mary Ludgin:

Well, it could be that coming out of this period of federal central banks having to fight inflation, it could be we get through this period and there's a release of all the pent-up demand. Clearly we've seen it in the travel sector where there's been a release of it. But it would be nice if it had an impact on the built environment.

Nancy Lashine:

Speaking of travel, beyond your home city, what's your favorite city?

Mary Ludgin:

You know what? I am blessed. And this would be a gift I would give to anybody I could. I'm as excited to go to Indianapolis as I am to Tokyo. It's a little bit of a stretch, but there's something to be learned in each of them. That said, I do love my Asian travels. I really thoroughly enjoyed getting to know Singapore, getting to know Tokyo, getting to know Australia, getting to know China. Europe is friendly and fun, and I love going there, but I've really relished my Asia exposure. Walking on a beach alone at 7:00 in the morning in Brunei, an irreplaceable experience. 

Nancy Lashine:

Ooh. That might have to go on my bucket list. Wasn't even there before.

Mary Ludgin:

There'll be no alcohol in your bucket unless you bring your own somehow.

Nancy Lashine:

As long as I can have coffee at 7:00 in the morning, I should be okay.

Mary Ludgin:

7:00 in the morning. Smart. Yeah.

Nancy Lashine:

If you could have dinner with anybody, dead or alive, who would it be?

Mary Ludgin:

Oh, Nancy Lashine is on the list.

Nancy Lashine:

Oh, stop. You can have dinner with me any old time, and you know that, Mary.

Mary Ludgin:

Thank you. Who would I want to see? I guess I'm going to pick an architect. I live in a house designed by Frank Lloyd Wright. He was just Frank Wright when he designed our house. I wouldn't mind talking with Frank Lloyd Wright.

Nancy Lashine:

I hear you. That would be pretty incredible.

Mary Ludgin:

He would do the talking.

Nancy Lashine:

There's some great books about Frank Lloyd Wright, too, right?

Mary Ludgin:

I've read many of them.

Nancy Lashine:

What recommendations do you want to share for books, or movies, or TV shows, or things that you have recently experienced that you think are worthy of sharing with others?

Mary Ludgin:

Well, I'd be remiss if I didn't call out The Bear, that marvelous story about [inaudible 00:41:30].

Nancy Lashine:

Love The Bear. And having come from a family in the restaurant business, it was particularly poignant.

Mary Ludgin:

Very.

Nancy Lashine:

Park Madison Partners is named after the Park Madison coffee shop.

Mary Ludgin:

Oh, I'm so pleased to know the backstory. That's fabulous. I did not know that. This was not a planted question. The Bear comes to mind.

I've just finished a couple books I loved. I'm going to look them up as we talk because they've floated from my brain. I'm an audiobook listener, and I have benefited from audiobooks putting me back to sleep in the middle of the night.

Nancy Lashine:

I just read Tom Lake. I would give it a 6 of 10, Ann Patchett's new book.

Mary Ludgin:

Oh. Oh, yes, yes, yes.

Nancy Lashine:

I can't give you a great recommendation on that, but I am in the process of reading and listening, I sometimes do both, to the new Elon Musk biography, and that is phenomenal.

Mary Ludgin:

Oh, Walter Isaacson's biography?

Nancy Lashine:

Isaacson's incredible. Yeah, yeah.

Mary Ludgin:

Maybe I'll bring you some cherries from Northern Michigan and that will make [inaudible 00:42:29] better. Did Meryl Streep read it to you?

Nancy Lashine:

No, I did hear that she was... I should have listened to it as an audio. I read it. But I heard that she was fabulous in reading it.

Mary Ludgin:

It seems to me as though there's a lot of overlap with her own life. I knew it was fiction, but it seemed as if there was a little bit of Meryl Streep, the young actress.

Nancy Lashine:

Oh, now that's interesting.

Mary Ludgin:

Maybe that heightened it for me. I loved Tom Lake, even though it's kind of a weird name.

Nancy Lashine:

Mary, you can always bring a twist to any conversation. I may have to go listen to the Audible now. And I thought I was done with that.

Mary Ludgin:

You thought you were done. Ann Patchett is always worth a second listen, in my view.

Nancy Lashine:

Yeah. Well, she has some fabulous books. Well, thank you so much.

Mary Ludgin:

Oh, thank you, Nancy. Great to see you. Thank you, John, in the background.

Nancy Lashine:

Pleasure.

I hope you enjoyed this episode of Real Estate Capital. Before you go, I have a quick favor to ask. We put a lot of thought and effort into this show and making sure we bring you insights from real estate leaders that you don't normally find in the mainstream media. So if you're enjoying this show, please remember to follow it on your favorite podcasting app so you never miss an episode. We'd also love for you to share it with others or give us a review on Apple Podcasts so others can find us. Thanks again for tuning in. For more information about our firm, please visit our website at parkmadisonpartners.com.