Last night a bunch of former colleagues informally got together at a Grand Central watering hole to catch up. Most people seem to be doing well, maybe there was a bit more passing of business cards than normal. "It's time to keep your head down and work hard," someone said over the din and a beer.

Everybody expects performance to head south and there was some reminiscing about how pension fund advisors used to manage and massage returns on the way down in core real estate accounts -- avoiding anything too precipitous. One manager I knew of a decade ago had a bunch of bad properties with few good prospects -- somehow inevitable writedowns came in measured increments over six or seven quarters rather than all at once. The advisor apparently wanted to avoid the consultants' "penalty box" or rouse clients' to withdraw or stop investing. Is that happening again? NCREIF returns are falling, but we still see appreciation registering despite cap rate decompression and softening fundamentals. There were a few wink-winks among the group at the bar.

Another former colleague in the fund management business said he has bluntly told portfolio managers at his company to be very careful in today's environment: "One thing you don't want is to be the last firm taking writedowns -- that will start to raise a lot of questions that you don't want to answer."

Appraising portfolios has always depended on rearview mirror assessment looking at recent deals -- managers use various combinations of in house and third party appraisers, who review properties at least annually, many quarterly, typically without site visits. It would be naive to think the process does not allow for some back room give and take, especially when transaction activity is fairly limited like today.

The dicey question now for many fund managers and their appraisers is to calibrate how low and how fast. Let's put it this way -- it won't be a straightforward calculation. But at this point in the cycle, managers won't win points for holding back if that's their inclination.

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Jonathan D. Miller

A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.