Real Insight. Real Estate.

Archive for December, 2009

Local governments are using every lure they can to attract businesses to their areas and corporations are taking full advantage of it.  This article from The Wall Street Journal cites the example of Starwood Hotels & Resorts’ plans to move their headquarters from White Plains, NY to Stamford, CT.  Starwood doesn’t have any reason to go through the pains of relocating, so the incentives they are getting from the State of Connecticut must be pretty sweet to get them to move.  But is it a good idea for local governments to be spending tax revenue on creating incentives to attract major businesses?  Sure, having a new major employer in town will bolster the local economy, but at what point is the city or state going overboard with incentives?

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When I first started my career as an investment sales broker, a mentor taught me an effective method to have property investors reconsider their position in their properties.  While my goal was essentially to coax them into a selling frame of mind, there were myriad instances where selling simply did not make sense.  Yet, that didn’t mean there was no opportunity to do business with such a client. Instead of focusing on cap rates and price per square foot numbers, I could instead shift their focus from the stability of cash flow to the meager return they were receiving on the equity they had invested in the property.

“Mr. Property owner, I understand your building is full, you are free and clear of debt, the property is cash flowing well, and you want to pass the property down to your grandchildren.  But what is your return on equity?” Read the rest of this entry »

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An Examination of Real Estate Auctions

Real estate auctions are becoming more prevalent as the fallout from the devaluation of real estate continues. Growing up on a farm, I would often attend agriculture equipment auctions with my Dad. In the beginning, the worse the weather, the more excited we were to attend the auction. We believed that we would be able to buy things at a discount because people wouldn’t want to attend an auction if they had to stand outside in the freezing rain. We could not have been more wrong; rainy day auctions seemed to bring a premium. The most common phrase at a rainy day auction is some variation of “Man, I didn’t think anyone would be here”. More people show up to farm auctions on rainy days because they don’t think anyone else will be there. Ironically, this shared perception results in an increased number of auction participants, which in effect increases the competition and tends to increase prices. I hypothesize that as a buyer you are better off going to farm auctions on sunny days. What affects asset prices at real estate auctions?

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The Real Deal online magazine published an article a few weeks ago about the success of gourmet food trucks in New York City.  Having lived in NYC for a number of years, I can attest to the popularity of these trucks and carts.  Sure, the majority of street vendors sell garbage, but there are a number of them that sell high quality product that would be a huge hit in a traditional brick and mortar retail location.  In fact, there have been several stories of entrepreneurs who have started a food business out of a truck and soon opened brick and mortar restaurants with huge success.  In a suffering economy, would it make sense for non-food retailers to take a stab at  trying the same strategy?

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What’s the best way to stave off inflation fears?

Ironically….it may be to invest in Real Estate.

Should Obama force Community Banks to Lend?

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The Week of December 19-25

- How far away is CRE from rebounding?  Could it only be a year away?

- The Fed has turned down only 3 of 58 legacy CMBS applications for TALF financing.

- How long could small banks suffer for their bad CRE bets?

- CRE in 2009: Where deleveraging is seen as the year’s biggest accomplishment.

- Despite the surge in REIT investment, could there still be opportunity?
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Merry X-Mas!

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Twas the night before Christmas, and so we decided to make you laugh.

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We’ve been writing about it for months, so I’ll not have any sympathy for those caught off guard by recent headlines regarding the US Yield Curve. As this chart from the New York Times shows, 2009 was the year of curve steepening. With the Fed printing money like mad to keep over night fed target rates low, it’s been up to the back end of the curve to do all the moving. The question, of course, is why? And, why do we, the commercial real estate market, care? Read the rest of this entry »

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After an owner of 7,000 apartment units recently put his hands up in exasperation when I brought up the subject of online apartment ratings, I decided to do some research on the topic. I looked up one of his apartment complexes and the first google result was apartmentratings.com. Of the 167 reviews posted since 2001, most were negative and boiled down to a few categories: incompetent management, unfriendly leasing agents, too many bugs, the walls were to thin, and it took too long for snow removal. Despite a new website with live chat capability, rental rates and availability information, virtual tours, and floor plans, the online image was not very good because of the negative ratings. Read the rest of this entry »

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