Class Time with Tony Trella

Tony Trella of the Meranth Company

One of the best experiences that I have had during my time in the Master’s Program is the fact that actual practitioners come in and give presentations on their experiences in the Real Estate business.  Tony Trella spoke this Saturday, and was a wealth of knowledge.  Mr. Trella has had a very successful career running large institutional development firms and now runs a consulting company. 

Mr. Trella spent a good deal of time teaching us where the real estate market has been in the past, to give us a better understanding of where he sees the market heading.  Tony started off working for a large development company, developing thousands of single family homes in planned communities.  Levittown, on Long Island, was the beginning of the creation of the first planned community and lead the way to mass development of planned communities around the country.  William Levitt was considered the father of modern suburbia and approach building communities much like Henry Ford’s creation of the assembly line.  In this case the developments were not built in a factory but had an assembly line approach to the construction and entire communities where planned instead of the traditional house by house building of that time.  

Tony had a handout for the class that described the financial engineering that a REIT is inherently based on.  I was a little confused exactly how this worked so I spoke with him after class to make sure that I was interpreting it correctly.  I was floored to learn that is how a REIT operates.   This troubles me because I can see a huge bubble in the REITs and I think a blip in cap rates will cause many REITs to fail and a wave of consolidation or writes downs seem to be in near future for many of these institutions.  I just hope that this will not be a systematic problem that would cause a massive double dip in the real estate market.  What was interesting was how Tony had a very positive outlook on the future of real estate development in the near term and the previous speaker, Jesse Holhouser, had a more negative long term outlook.  I interpret that as a true market condition, bull’s vs bears.