Friday, June 26, 2009

On the Road

“ If we want things to stay as they are, things will have to change. D'you understand?”* Since I got my first Roget's Thesaurus when I was about 14, I’ve always loved quotes. I still have that edition on my bookshelf and it still has the quotes that I underlined way back then that meant something to me. But thanks to my friend Ted Leary, I was introduced to a new quote this week and decided, just for the heck of it, to Google it (maybe that is the single most life-changing phrase of our times). What I found is how many different ways people used that quote, from talking about the current economic situation and it’s (hopefully) resolution, to a change management consulting firm to a law firm (leave it to the lawyers to find a way to turn everything towards them). But Ted pulled the quote from a piece last week by economist Martin Wolf who also said, “Reform of regulation has to start by altering incentives.” Well, maybe because so many people have time on their hands these days hoping that things will change and not stay the same, there’s a lot of noise about altering incentives. But isn’t working for incentives part of a free-economy and, excuse me the rest of the world, isn’t entrepreneurship and taking risks what America was built on? While I lost interest in professional sports when the players started making a lot of money and started showing loyalty to money rather than their teams and fans, I have, at this stage of my life, decided that if someone can make a lot of money, they should be allowed to, no mater what field it’s in. Unless, of course, it's made illegally or unethically. I think the U.S. government is attacking the wrong culprits. Where we need attention is in oversight and compliance, that’s where the system failed and that, to me, is at the root of what has to change. We can’t rely on people having a conscious when it comes to making money (hmmmm: are ethics and conscious the same thing?). Sure, how many meals can you eat in one day and how many suits or pairs of shoes do you need in your closet. But what we need to do focus on fixing the system to prevent abuses from happening. And, from what I see, abuses continue to happen where some of those who were involved with causing problems are now making money in solving those problems. In that there seems to be something really wrong. Are we doomed to continue to go around in circles?

RCA (Real Capital Analytics) June Capital Trends Reports were published today. I offer you a few choice morsels:

1. Apartments: Some encouraging signs include some larger deals now in contract, the emergence of new buyers and the return of some investors after a year or more on the sidelines.
2. Industrial: Drop in transactions is on par with other property types but defaults and foreclosures in the have been relatively mild so far compared to other property types.
3. Retail: Sales volume languish and the inventory of properties for sale swells and defaults and foreclosures proliferate.
4. Office: Some signs that investment trends are stabilizing. Although they are not improving on an absolute basis, the pace of decline is slowing.

I feel that it's a given that the industry considers RCA to have the best monitor of the pulse of the industry so these comments should make us feel both somewhat optimistic but also decidedly realistic. And while it's not a 'stand up and cheer' comment, based on what we've been through already, hearing that the 'pace of decline is slowing' in some property sectors, well, that's a good sign isn't it?

Riding in the subway this morning I saw an ad for a cellular phone service offering a deal at 99 cents per day. But then I thought: hmmmm, that’s like $365 per year (which could still be a great deal but seemed like a lot of money to me). But the point is in how things are presented. This phone company just wanted to get people to consider changing. Just like all the fast food companies throw unbelievable bargains out to us from time to time: they just want us to change, to change our habits. So I got to daydreaming (after all it is a summer Friday) and thought about how that might correlate into our industry. Most service businesses employ the same strategy: give us a chance to prove ourselves and we think you'll use us. But in my experience, while things often look greener on the other side of the fence, you generally don’t get something better when you change-you may get something equal or even worse. Surveys indicate that institutional investors, more focused inwardly these days in resolving their own portfolio issues, have been reducing the number of managers that they do business with for a variety of reasons. Of course, some of these relate to lack of performance and perhaps some relate to the loss of key individuals (once the promotes evaporated) that were managing their account. But to me, there is opportunity in the air; the opportunity to build relationships now that will lead to new business when things open up again. I’m not saying that things will stay as they are (or were) but the change that our industry is experiencing now will get us to another place where we’d like them to stay as they are. Still no one knows how long that’ll take although it seems like a lot of folks are hoping it’s after we come back from ‘summer vacation.' And while change always brings certain challenges with it, being stuck in the world of ‘same’ may not be totally unchallenging itself .

The amazing photo above is one taken by my friend Sam from Toronto. He and his family visited Iceland recently and sent me some pix they took. At first, I thought they were Adobe Photoshopped. But no! These are real and amazing and makes me want to visit that country and experience the beauty and the wide open spaces.

*From Giuseppe di Lampedusa's The Leopard

These are my personal views and not that of my employer.

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