Friday, February 3, 2012

VIP, Brainstorming, Accelerated Disintermediation

This week, IREI held it's annual institutional real estate industry 'homecoming', VIP.  More than 350 people were there.  Lots of people who knew each other and lots of people looking to meet people they didn't know, particularly if those people were institutional investors and especially if they had money to invest.  VIP has grown exponentially since Geof Dohrmann and I launched it six years ago.  Yes, there was a lot of good content offered but the most interesting time for me to both participate in and observe are those when people have the opportunity to "network."  The participation part for me is easy as a bunch of those attending knew me or knew of me.  The difference this time was that, having recently launched my new company, Solutions By Steve Felix, I too had something to promote.  So here are a few of my takeaways:

  • Things are going well-in the context of 'the new normal.
  • We don't like investing where there's a 'leap of faith' involved.  (Comment about investing in certain emerging markets)
  • It's the uncertainty in the Eurozone, not how horrific the situation is, that is causing investors to sit on their hands.
  • The most danger to the U.S. recovery?  U.S. Political Gridlock and Uncertainty (Audience Quick-Tally Response)
  • One year from now there will be fewer countries in the EU.
  • I don't believe that Greece runs out of money on March 20th.  I believe they're out of money now!
  • 2012 will be the worst year for commercial real estate loan defaults.
  • Investors just don't invest in assets that are over-leveraged.
  • Some of the best opportunities today are in preferred equity but off-shore investors have to be educated.
  • Accelerated disintermediation of the sale of loans via an eBay type auction process has become an extraordinarily powerful tool in selling loans.  This could be the thing we look back on and say it was a game-changer for the commercial real estate industry.
  • Tenants don't like being called tenants anymore but they are the people who truly Occupy Wall Street.
  • The Greeks invented defaulting on debt.

Restricting Retail?
A proposal is being considered in New York that will limit the ground-floor width of all new stores to 40 feet (and new banks to 25 feet) on two major streets on the Yupper West Side, Amsterdam and Columbus Avenues.  "Across New York City, the proliferation of chain stores, banks, pharmacies in the past decade or so has robbed many neighborhoods of the quirky one-of-a-kind shops that give those places their distinct personalities and where customers can form a relationship with their shopkeepers."  In Napa, California, there is a group called, "Napa Local" that was formed to protest against a Starbucks leasing space at the corner of First and Main (really!).  They want the city to adopt an ordinance controlling "Formula Businesses," i.e. chain stores to "preserve the unique quality that is downtown Napa."  Hmmm, let's see, in both cases, as a landlord, you would be restricted from who you can rent to.  While tenant mix and use-clause restrictions have been used in the shopping mall industry (where one landlord controls the whole shebang), trying to stop individual landlords, who own a building, from renting their space is not a good direction to be going in.  Can you imagine the lawsuits that would be filed against municipalities if they were successful in enacting this type of legislation?  Also, to me it's pretty simple why the independent retailers have disappeared from the landscape:  customers don't support them.  People talk about having quaint shops and no chains but if you can't pay the rent, how are those specialty stores going to stay in business.  It'll be interesting to see what evolves.  By the way:  the 'unique quality' of downtown Napa is vacant.  While there have been some wonderful additions in the past years, including a new hotel and several 'celebrity chef' restaurants, if you drive down First or Second or Third Street you'll notice that there are so many vacant or 'fake' storefronts you'd scratch your head...maybe.  In Napa Valley, the town that has the 'one of a kind shops' is  St. Helena and those merchants have chosen to open stores there because people who spend money go there.  I spent many years in the shopping center, shopping mall and outlet center industry.  At one point, I developed the "Everything's Big/Everything's Small" theory of retailing.  I won't bore you with it now but when reading about these cities (and how many others may be talking about it) it's like you're trying to control things a little too much and, if you look back in history, there are serious prices to be paid when that starts may be only the beginning.  

I've always been a proponent of value of brainstorming.  I found this comment from a piece I read this week particularly
enlightening.  Early brainstorming advocates strongly recommended that the "Do Not Criticize" rule made those sessions more effective.  But recent studies suggest differently:  "....debate and criticism do not inhibit ideas but, rather, stimulate
them....imagination can thrive on conflict....dissent stimulates new ideas because it encourages us to engage more fully with the work of others and to reassess our viewpoints....maybe debate is going to be less pleasant, but it will always be more productive."   Pretty interesting, huh?  It comes down to the idea that we can't get bent out of shape when someone comments on an idea we have but rather take it as contributing to the group goal of coming up with the very best idea or solution.   Sometimes easier said than done.

Wouldn't it be great if our memories only remembered happy things?  But that's not the way it works.  Yesterday, the weather was really nice where I live, probably about 65 degrees in the afternoon.  I was driving somewhere and out of the corner of my eye saw a dad and his son throwing a baseball back and forth.  What jumped into my mind was a day, a long, long time ago, when I was throwing a baseball back and forth with my older son.  It was obviously a moment which I have never truly forgotten. It had been sitting in my sub-conscious all these years. Funny how the mind works isn't it?

More kids:  Congratulations to my nephew and his wife on the birth of their little girl.  Our family now has five cousins born within less than three years of each other!  Are they going to have fun or what?  

With gratitude:  Thanks to all of you who sent me notes (or talked with me in person) about last week's story of my friend in Geneva. It meant a lot to me. 

Final item:  Angelo Dundee died on Wednesday (90).  If you aren't a fan of boxing (or in my case grew up in a boxing family) you probably don't know his name.  For 60 years he was a trainer and manager of professional boxers, the two most well known are Cassius Clay (Muhammad Ali) and Sugar Ray Leonard.  My uncle, Barney Felix, the senior boxing ref in New York State at the time, was in the ring when Clay took the heavyweight championship from Sonny Liston in Miami Beach in 1964.  Barney told us one story about that bout that never made it into the papers.  One day, when we're having a drink together make sure to ask me about it..... 

On the road next week...

Feb. 6-10:  New York

Go Giants!

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