Real Capital Analytics (RCA) published their July Capital Trends Monthly reports this week. Here are a few morsels to take chew on this weekend:
1. Retail: Many buyers remain on the sidelines until more distressed situations become available. The steep plunge in average prices reﬂects some market movement but is exacerbated by the dearth of sales needed to set market clearing pricing. This conclusion is also borne out by the most recent Moody’s/REAL Commercial Property Price Index data, which show a year-over-year decline of 18.5% for retail properties nationwide in the ﬁrst quarter of 2009.
2. Industrial: Buyers continue to add downward pressure to pricing as motivated sellers are becoming more accepting of reduced prices. Average pricing per square foot fell to its lowest level since 2005. The most recent Moody’s/REAL Commercial Property Price Index data showed a decline of 12.3% for industrial properties yoy for Q1’09.
3. Apartment: Virtually all the growth in sales volume in the second quarter was from garden apartments. Financing from Fannie and Freddie is behind at least 50% of all closed deals. There are other—if faint—signs that the apartment market may be waking up as well.
4. Office: The ofﬁce sector may also be poised for increased trading, as sales in June were up along with deals reported in contract. Included in these pending transactions are some larger deals, which have been rare this year. Signiﬁcant declines in prices are likely behind this recent burst of activity, but many buyers remain on the side-lines until more distressed situations become available. The steep plunge in average prices last quarter reﬂects some market movement but is exacerbated by the dearth of signiﬁcant CBD tower sales. This conclusion is also borne out by the most recent Moody’s/REAL Commercial Property Price Index data, which show a year-over-year decline of 28.7% for ofﬁce properties nationwide in the ﬁrst quarter of 2009. The slide was the largest for any property type.
I got a few emails about my comments last week from people who feel that the other shoe is yet to fall in the commercial real estate world. As they are closer to the deals than I, I defer to their judgment as perhaps I've become part of the group who are thinking that positive thinking and actions will bring us through. From reading RCA's full Capital Trends Monthly reports, there seem to be a mixed-bag of signals, none of which appear to be crystal clear about the industry's future.
My flight from JFK to Austin, Texas this week was one to remember. Due to a runway closure we sat for at least an hour waiting to take off. Then, from the minute we took off until the minute we landed the seatbelt sign was illuminated (as they say in airplane talk) and the plane bounced around like an apple in an apple-bobbing tank. I don't mind it but what's amazing is how many people simply ignore the sign and stumble their way back to the restroom (yes, I was seated in the last row). It's just another example to me of people not caring about anyone else (was I interested in this 300 lb guy falling into my lap saying, "Sorry", when the turbulence jolted the plane again? Anyway, we made it and I had forgotten (or never experienced, I can't remember) the feeling of walking into a blast furnace (hmmmm, did I ever actually do that before?) when walking out into the 105 degree F/40.5 C heat of Austin, Texas!
Also, this week stayed at the historic Driskill Hotel, in Austin. Reading the story behind the hotel it seems like a history of Texas in a ways. This hotel has had numerous owners since it's opening in 1886. It's currently owned by Lowe Enterprises and is operated by Destinations Hotels & Resorts. Walking into the lobby is breathtaking and both a throwback to yesteryear (whatever year that is) and a testament to modern historic renovation. The other times I've been to Austin I've stayed at a very funky motel which was converted to a hip place called the San Jose hotel.
Walking around Austin, Texas at night after a great dinner at Truluck's (see below) and hearing a band, we wandered into the back entrance of a club called Antone's. Front and center was an elderly man playing the piano and singing the blues, backed up by what appeared to be the houseband. I asked the sound guy and found that it was Pinetop Perkins, a legendary bluesman who is 95 years old! I had heard of Pinetop but couldn't have picked him out of a lineup. It was great to see him, doing his thing and fronting the band. After a few songs, he left the stage and took up what looked to be a regular alcove near the restrooms and set up his display of CD's (one of which I bought). While inspiring it was also a little sad to see a guy with his reputation and recognition, sitting all alone, smoking cigarettes and selling his own CD's. There was just something sort of unfair about it. But checking his website there are plans for celebrating his 96th birthday and seemingly no plans for retirement. When I was playing in the house band at a club called Cheers in Long Branch, NJ in the early 90's. There was a regular named Dancin' George. He was in his 80's. Came in at least several times a week and loved to dance with the young girls. He was clearly a character in a sea of regulars and we loved him...everyone did. Showing respect and kindness for 'elders' is something that should be ingrained in all of us and sometimes in situations like this I find myself thinking that at some point, many years from now, I'm going to be old and hopefully still being able to stop into a neighborhood club and have the band allow me to sit in for a few songs. I don't see myself being like Dancin' George but then again you never know how time will change things.
Congratulations to my good friend and top-notch real estate journalist Mark Cooper who told me this week that he and a colleague have purchased AsiaProperty magazine and will be launching a website in the very near future. Mark will be relocating from London to Hong Kong. All the best Mark. And in late-breaking news, congrats to Cathy Ebert, Blackrock alum who has joined Emmes Asset Management as MD of Client Relations. Congrats to you too Cathy.
One thought I pulled from a column I read this week. It's about all the technology connectivity tools that are out there:
"Try everything, but stick to what works best for you. Pick a few things every week to try, but don't invest too much time. Just because it's free doesn't mean it doesn't cost you anything. You can't make or buy more time!" I agree with this guy and I guess my trials of Linkedin and Facebook and my decision to stay with just my own address book and my trusty Gmail account are what works for me.
I used to be a regular reader of the NY Times Op-Ed columnist Tom Friedman ("The World Is Flat"and other books) until, for me, his writing became too darn promotional of his latest book. But this week, he wrote a moving piece and I'd like to share it with you in it's entirety.
59 Is the New 30
Last April I took a break to caddy for the former U.S. Open champion Andy North when he teamed up with Tom Watson to defend their title in the two-man Liberty Mutual Legends of Golf tournament in Savannah, Ga. So it was with more than a casual spectator’s interest that I watched in awe on Armed Forces television from Afghanistan as Watson made his amazing run at winning the British Open at age 59. Watson likes to talk about foreign affairs more than golf. So to let him know just how many people wanted him to win, I e-mailed him before the final round: “Even the Taliban are rooting for you.” Indeed, I have been struck at how many golfers and non-golfers got caught up in Watson’s historic performance — tying for the lead after four rounds at Turnberry, but losing in a playoff to the 36-year-old Stewart Cink. I was not alone in being devastated that Watson was not able to par the last hole and clinch the win. Like millions of others, I shouted at the TV as his ball ran across the 18th green — heading for trouble — “STOP! STOP! STOP!” as if I personally had something at stake. Why was that?
Many reasons. For starters, Watson’s run was freaky unusual — a 59-year-old man who had played his opening two rounds in this tournament with a 16-year-old Italian amateur — was able to best the greatest golfers in the world at least a decade after anyone would have dreamt it possible. Watching this happen actually widened our sense of what any of us is capable of. That is, when Kobe Bryant scores 70 points, we are in awe. When Tiger Woods wins by 15 strokes, we are in awe. But when a man our own age and size whips the world’s best — who are half his age — we identify.
Of course, Watson has unique golfing skills, but if you are a baby boomer you could not help but look at him and say something you would never say about Tiger or Kobe: “He’s my age; he’s my build; he’s my height; and he even had his hip replaced like me. If he can do that, maybe I can do something like that, too.”
Neil Oxman, Watson’s caddy, who is a top Democratic political consultant in his real life, told me: “After Thursday’s round with Tom, when we left the scoring tent I said to him, ‘You know, this is a thing.’ He understood what I meant. On Sunday morning, the two of us were in the corner of the locker room without another human being around, sitting in these two easy chairs facing each other behind a partition. We were chatting about stuff, and I said to him, ‘For a lot of people, what you’re doing is life-affirming.’ I took it from a story about when Betty Comden and Adolph Green — the writers of “Singin’ in the Rain” — showed Leonard Bernstein the famous scene of Gene Kelly. Bernstein said to them, ‘That scene is an affirmation of life.’ What Tom did last week was an affirmation of life.
Also, as Watson himself appreciates, the way he lost the tournament underscored why golf is the sport most like life. He hit two perfect shots on the 18th hole in the final round, and the second one bounced just a little too hard and ran through the green, leaving him a difficult chip back, which he was unable to get up and down. Had his ball stopped a foot shorter, he would have had an easy two-putt and a win.
That’s the point. Baseball, basketball and football are played on flat surfaces designed to give true bounces. Golf is played on an uneven terrain designed to surprise. Good and bad bounces are built into the essence of the game. And the reason golf is so much like life is that the game — like life — is all about how you react to those good and bad bounces. Do you blame your caddy? Do you cheat? Do you throw your clubs? Or do you accept it all with dignity and grace and move on, as Watson always has. Hence the saying: Play one round of golf with someone and you will learn everything you need to know about his character.
Golf is all about individual character. The ball is fixed. No one throws it to you. You initiate the swing, and you alone have to live with the results. There are no teammates to blame or commiserate with. Also, pro golfers, unlike baseball, football or basketball players, have no fixed salaries. They eat what they kill. If they score well, they make money. If they don’t, they don’t make money. I wonder what the average N.B.A. player’s free-throw shooting percentage would be if he had to make free throws to get paid the way golfers have to make three-foot putts?
This wonderful but cruel game never stops testing or teaching you. “The only comment I can make,” Watson told me after, “is one that the immortal Bobby Jones related: ‘One learns from defeat, not from victory.’ I may never have the chance again to beat the kids, but I took one thing from the last hole: hitting both the tee shot and the approach shots exactly the way I meant to wasn’t good enough. ... I had to finish.”
So Tom Watson got a brutal lesson in golf that he’ll never forget, but he gave us all an incredible lesson in possibilities — one we’ll never forget."
Restaurant of the week: Austin, TX-Trulucks. Great seafood. Nice ambiance. Large, diverse wine list offering tastings of more than 100 wines. 400 Colorado, Austin, TX.
On the Road to:
Ormond Beach, FL
San Diego, San Francisco, Sacramento, CA
Photo: Day One-Hedgesville Reunion
These are my personal views and not that of my employer.