Kellogg Real Estate Conference and Venture Competition

From startup visions to inflation predictions: Recapping the 2022 Kellogg Real Estate Conference and Venture Competition

Marking its first in-person gathering in three years, the Kellogg Real Estate Conference and Venture Competition showcased a broad mix of current events content and forward-looking ideas. From the frank inflation talk of a former U.S. Treasury secretary to the unveiling of novel startups taking their next steps toward success, the April 20 event delivered well beyond the promise of its subtitle, “Real Estate and Inflation: What Happens Next?”

Hosted by the Guthrie Center for Real Estate Research, the conference/competition pitted four teams of MBA students against each other for a grand prize of $25,000. A two-man Kellogg EMBA team took top honors for its vision of turning empty storage space into a win-win for customers and non-traditional providers.

From Larry Summers: Hard words on the soft landing

The conference keynote, delivered by Harvard University professor and president emeritus Larry Summers, proved newsworthy in and of itself. The former Treasury secretary under President Clinton and Director of the National Economic Council for President Obama took aim at the Federal Reserve’s monetary policy—expressing pointed skepticism that the Fed’s current inflation-fighting tactics would prove effective.

“Unfortunately, history is not very kind to a soft landing,” Summers told attendees. Contending that the Fed waited far too long to act on inflation, he cautioned attendees against holding out hope that the current inflationary spiral would cool to levels more in line with the previous decade, when rates of inflation averaged just above 1.5 percent annually between 2012 and 2020.

“I think it’s going to be a little harder to maintain really low inflation than it was historically,” Summers said in a Q&A with Janice C. Eberly, the James R. and Helen D. Russell Professor of Finance and Kellogg’s Senior Associate Dean for Strategy and Academics. “I guess I’d be quite surprised if the inflation rate as measured by the Consumer Price Index over the next five years was below 3 percent.”

In looking ahead, Summers also pointed to a root cause of today’s inflation. He said the government’s $2.8 trillion in stimulus money released as a result of the COVID-19 pandemic created “a substantial likelihood that the economic bathtub would overflow … that the economy would overheat.”

Noting that 70 percent of Fed tightening moves since World War II have been followed quickly by recession, Summers opined: “I think we have a quite remote probability of avoiding either the continuation of substantial inflation or the economy slipping into recession in the next two to three years.”

And somewhere between inflation and recession comes intervention, which has its accompanying hazards. "Policymakers will do," he predicted, "what policy makers with multiple objectives do, which is try to achieve both of them—and they'll take their pain on both sides."

A panel's closer look at inflation's potential impact

A capital markets update panel took advantage of its hour-plus time slot to examine the timeliest of topics: the potential effects of inflation on real estate. One overarching conclusion was that while real estate offers a level of robust insulation, the uncertainty shaking the larger economy should give pause to all smart investors.

Moderated by Frank Schmitz, partner co-head and co-founder of PJT Parkhill Real Estate Group, the panel featured two Kellogg alumni,  Kimberly A. Adams ’01, Managing Director at JPMorgan Chase & Co., and Seth Singerman ’05, President and Managing Partner, Singerman Real Estate LLC. Also joining was Matt Johnson, a 2006 Northwestern grad and Managing Director, Morgan Stanley, along with Jeffrey F. Fastov of Square Mile Capital.

Speaking to volatility and its potential impact on investors, Anderson noted that “everybody is trying to find their footing as to how transitory is this and how do you make decisions when things are changing week by week." The good news, as she sees it, is that "real estate is a natural inflation hedge. It is extremely attractive today relative to other asset classes."

Johnson noted that “particularly from a real estate standpoint we're really in an absorbing perspective right now. The tone of most of my discussions with my clients has changed massively.”

Noting that the money supply has grown by 50 percent since the COVID-19 pandemic began (a point echoed in conference keynote remarks), Singerman asserted that “there could be some risk to growth. I think Goldman Sachs says there’s 20 or 30 percent recession risk and that feels reasonable.”