Real Insight. Real Estate.

Archive for the ‘Politics/Government Programs’ Category

Medical Office Buildings, commonly referred to as MOBs, are one of the few darlings of the current real estate finance industry.  They garner low rates, great terms, and even bankers’ whose commercial loan portfolios took a drubbing want to lend in that space. Need proof? I was at lunch with a banker a couple weeks ago who said that they simply were not doing any construction lending of any kind, period.  When I followed up that comment asking him about medical office buildings, his response was “Oh, well, yeah.  We’d definitely make an exception there.”

While many real estate insiders expected a slow down of the medical office frenzy once Scott Brown’s surprise victory in taking Ted Kennedy’s vacant Senate seat potentially swayed the fate of the healthcare reform bill, it has simply delayed the inevitable.  The popular belief was that the future growth of the sector was going to be fueled only by the 30 million plus currently uninsured people the healthcare reform bill would have added to the system.  But when you figure demand will generate supply, you better make sure to look at the whole picture. Read the rest of this entry »

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So, for months I’ve been subjecting you to my musings regarding the intersection between commercial real estate and macro economics.  Of course, right when I stop droning on for a week or two, a “crisis” in Greece ostensibly causes a 9% “correction” in stocks.

Well, I’m back, and I’m here to help…. well, at least to make some smart-ass comments.

Let’s begin.

The “crisis” really isn’t about Greece, it’s about the whole Eurozone, and it’s not over.   When they tell you the situation in Greece has been settled, just ask them if the “subprime crisis” is still well contained.  While it’s tempting to think I’m being overly dramatic, people far smarter than I will tell you the Euro is doomed to failure.  Tomorrow?  The next day?  Perhaps not, but well within your business career.

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The very insightful Annaly Salvos blog provide a interesting graph on the level of support the GSE’s have been providing the residential mortgage market via a all-out domination of the origination market. Just as we over-shot the natural level of home-ownership in the United States through misguided policies built up over centuries of well-intentioned programs, the GSE’s, and the Pols that back them find it hard to find a way to stop funding the market. After all, it is easy to argue they all own massive homes, and anything closely related to affordable housing is easy politics.

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While many you have not even gotten to the ‘aftermath’ portion of the credit crisis, the federal government is busy not learning lessons with the benefit of hindsight.  Obama’s plan to funnel $30 billion to “small banks” is exactly the sort of central economic planning that effectively caused the crisis. Read the rest of this entry »

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Regardless of whether your political inclinations bear to the left or right, chances are that as an American you’ve become weary of government “bailouts.”  There’s something about the federal government meddling in free markets that is very “un-American.”  We scoff at the Chinese and call them “currency manipulators” when their government artificially holds down the value of the Yuan.  Both the Executive and Legislative branches of the U.S. Government have made requests to China to eliminate the peg.  But when we’re faced with similar circumstances in the U.S., do our officials step up to the plate and lobby for minimal government intervention?  No they don’t—And the best example right now is Fannie and Freddie.

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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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Every highly publicized debacle needs a scapegoat. Ask Buffalo Bills fans about Scott Norwood.  Ask NBA Commissioner David Stern about former referee Tim Donaghy. Ask Tiger Woods the golfer about Tiger Woods the philanderer.  Whether deserved or not, that is exactly what Federal Reserve Chairman Ben Bernanke is becoming…. a scapegoat.  The big difference between him and the aforementioned persons, is that when you study the facts, he’s the only one who may not deserve the amount of scrutiny being heaped upon him.
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For decades government policy has been to encourage lenders to provide mortgage loans to lower-income families. When mortgage brokers refused to make such loans because the risk was too high compared to the interest rates they could charge and still expect repayment, they were accused of discrimination. Now low-income borrowers, enabled by the policies of the federal government (I fall into this category with my 96.5% loan to value FHA loan), are in a bind. As has become expected of this administration, politicians are seeking to punish the lenders.

In the Sunday edition of the New York Times an article title “U.S. To Pressure Mortgage Firms For Loan Relief” quotes Treasury’s assistant secretary for financial institutions as saying, “The banks are not doing a good enough job. Some of the firms ought to be embarrassed, and they will be.”

Is this the Treasury, or a group of thugs? Read the rest of this entry »

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I recently read this article about possibly the greatest real estate turnaround EVER.  Instead of paraphrasing the story (I’ll let you read that on your own), I’ll quickly summarize it and get to the more interesting commentary on the lessons this deal story has for the future of urban redevelopment. Especially when you consider the plight and blight of a place like this. Read the rest of this entry »

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Did you see the movie, “A Beautiful Mind” (not “War Games”)? If you didn’t, don’t bother. The film is mediocre at best, and there are better ways to spend two hours. I only bring it up because it’s about a guy named Nash who overcame personal tragedy to win a Nobel Prize in economics. His work was mostly on game theory; one scenario being a Game of Chicken (Hawk-Dove).

You are probably saying “1) Russell Crowe is sort of annoying and, 2) I don’t know what this has to do with real estate.” My response: 1) I agree about Crowe and, 2) plenty.

If you are in commercial real estate, you are living with the consequences of several games of chicken. And, your future is a function of several more.

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