Themed redevelopments, Test Pattern, Restaurants

I was talking with a developer friend of mine last week.  He was telling me about an office building he and his partners own that has some good size vacancy.  There’s a lot of vacant space in the market they’re in and while their building is competitive there just haven’t been that many tenants snooping around.  Then he told me their solution.  It was close to my heart as I have used ‘themed leasing’ in a few ‘challenged’ projects I’ve worked on over the years.  His solution:  lease to non-profit entities and call the building “The Non-Profit Center.”  When they looked at the numbers they realized that they could make money by lowering the effective rent almost to the level that the lead non-profit’s budget could absorb.  The tenants take the space as is (it had been previously occupied and has some very respectable improvements).  It’s a sensible approach to leasing, especially in a market like this.  What it fondly reminded me of was 99 Hudson Street, New York (Tribeca).  It is a 160,000 sf, 16 story building.  When the fellow I worked for at the time, Mort Olshan, bought the building with Marshall Rose and Fred Gould, we handled the management/leasing/construction.  It was the early 1980’s.  Robert DiNiro was living there, in the top two floors of a bank building on the corner of Hudson and Franklin Streets (for all I know he’s still there).  Someone had built a new condo project across the street from us at 90 Hudson.  They are having difficulty selling the units.  We did some market research and decided to convert the building from one that had housed printers to a very nice, Class B office building.  There’s a lot more to this story but out of respect for your time I’ll get to the point.  Mort, Marshall and Fred wanted to ‘give back’ something to the community.  The NAACP Legal Defense & Education Fund was looking to expand.  At that time they were headed by their long-time leader, Jack Greenberg.  After a series of meetings (in which there were always about 12 people, including a number of attorneys (which included Cliff Case, whose dad was a long-time Senator from NJ) and usually just Mort and me from our side) a deal was struck:  30,000 sf, three full-floors at a very, very fair rent.  The deal also included a condo-purchase option agreement at a very, very fair price.  We agreed that we would offer basically the same deal to any Legal Defense and Education Fund.  So, we ended up with what we called, “The Legal Defense Fund Building” and while there were other type tenants, none complained about the branding and it was one of the most interesting redevelopments I’ve ever been involved with as when we started I didn’t even know what a Legal Defense & Education Fund was!

It wasn’t that many years ago (when you measure in dog or Internet years) that TV in the U.S. basically shut down at midnight or maybe a tad later.  It was after the 11pm news and also after the early Tonight Show first with hosts Jack Paar and later with Steve Allen and finally with Johnny Carson (I don't really care for Leno).  After that, the screen showed what was called a “Test Pattern” and from what I recall there was this medium pitched noise that went all night until either some early morning prayer show or The Today Show which when I was growing up was hosted by Dave Garroway with sidekick Jack Lescoulie and J.Fred Muggs (a chimpanzee).  Anyway, what got me thinking about this is how 24/7 our world has become.  You can do a lot of customer service type things on the phone or on line at any time of the day or night.  Once upon a time, in the 1980’s I came up with an idea, when I was a consultant to the owner of a very distressed (vacant) strip center to lease the center to businesses that were all open 24-hours.  He didn’t go for it and in hindsight I think I was way ahead of the curve but, hey, when you talk about themed solutions to distressed properties, you have to think outside the ‘big box.’ Actually, my idea exists in the form of 24-hour 'groceries' and 'drug stores' that have lots of other departments and stuff. Anyway.....

I received an email this week from the retired legendary real estate investment manager, Ted Leary, who has found a new life as a consultant to some of the country’s biggest pension funds and keynote speaker at various global real estate conference.  Ted, from time to time, publishes a commentary and the one he send out this week, in my humble opinion, is a wonderful assessment and observation on the institutional real estate world.  It’s Ted’s open and honest thoughts  of where we’re at and what we need to do to get where we’re going.  It’s too long to post here but it’s not too long to read.  I’ll be happy to forward it to you; just send me an email (steve@simplicate.com).

Recently I learned about a very interesting company called “Get What You Set.”  With the beginning of a new year staring us in the face I thought that this discovery was a serendipitous one.  In their own words, “Get What You Set is a revolutionary system for job seekers and career changers that reveals the secrets of a seasoned Fortune 100 recruiter who has represented thousands of candidates.”  But in roaming around their website there’s a lot more than just this.  Check it out.

Restaurant (just observations and opinions): Tyler Florence, Napa, California. Apparently he's a celebrity chef but I had not heard of him. He opened his place at the Napa riverfront a few weeks ago (near Morimoto's new place.) Seems like Napa is becoming one giant food court! Anyway, I went there with a chef friend of mine. We sat at the bar. It was busy. Soon after we sat down, Robert Curry, the executive chef from Auberge du Soleil sat down next to us. We were told that sitting at that table 'over there' was the lead food critic for the San Francisco Chronicle, Michael Bauer, who I've learned really likes Chef Florence. Anyway, the food was definitely good but really heavy. I don't see myself going there much because, well, I try to avoid heavy foods. But, interestingly, I learned that Morimoto has been averaging 700 covers on Saturday nights since he opened. This is huge, as is the restaurant and the staff. It shows the power of the celebrity chef. I just wonder how these guys will do when their free-rent period expires!

Btw. Here are some restaurants in Napa (not Napa Valley but Napa proper):

1. Angele

2. Pizza Azzurro

3. Oenotri

4. Celadon

5. Ubuntu

6. Boon Fly Cafe

7. Cole's Chop House

8. Zuzu

9. Napa General Store

10. Norman Rose

11. Small World

On the road...
Jan. 12-14:  Laguna Beach, CA to attend IMN’s Eighth Annual Winter Forum on Real Estate Opportunity & Private Fund Investing (Will you be there?).
Jan. 22-23:  Ormond Beach, FL for the unveiling of my dad's headstone.
Jan. 24-31:  New York (including seeing Umphrey’s McGee in concert at the Best Buys (formerly Nokia) Theatre on Jan. 28.
Jan. 26:  A quick trip to Chicago
Feb. 1-3:  Dana Point, CA to attend IREI’s Fifth Annual VIP Conference.
Feb. 7-10:  New York
Feb. 11:  Chapel Hill, NC to be a judge in the University of North Carolina/Keenan-Flagler Real Estate Challenge
Feb. 14-18:  West coast
Mar. 16-17:  Washington, DC for the PREA Spring Conference
Apr. 13-15:  Venice to attend INREV's Annual General Meeting
May 12-14:  North Palm Beach, FL for the annual meeting of the Homer Hoyt Fellows







These are my views and not that of my employer.

Woosh! 2010...gone in the blink of an eye

2010 was a year that was supposed to be different than 2008 for the commercial real estate industry but I’m not so sure how much it really was.  Maybe some of the positive differences were occurring outside the U.S. and not all of us is involved in the global real estate scene lest we forget:  real estate is a local business.  But is it really?  In some ways it is and will always be.  When I was doing consulting for institutional owners of commercial real estate who had either taken back a property in foreclosure or were considering it and asked me to first evaluate the potential of the property, the one thing that I told my clients was:  Look, things have changed in the market since this building/shopping center/apartment complex/industrial building was built (and you financed it!).  I have some ideas about how that property can be redeveloped or used for an alternative purpose and in doing that you can realize more value than by selling it as a ‘distressed property.’  But the one thing I cannot do is to move the building to a different (better) location.  So, without sounding trite, real estate is not portable.  Perhaps that’s what makes it a local business.  But the global nature of the industry does exist in the source of real estate capital.  It’s truly a global game.  “Act globally, think locally” really doesn’t cut it anymore.  “Act globally, think globally” is more like it, don’t you think?  And it doesn’t just relate to the real estate industry.  To spread peace and understanding we have to, well, “Act peacefully and practice understanding.”  We need to make more of an effort to meet people from different countries and cultures; to communicate; to stay in touch (it’s so easy today) and to realize that we are all the same; we are all human beings no matter where we live, what color our skin is, what language we speak, what religion we practice (or not at all), what we eat, how we dance, what music we like or what kind of mode of transportation we use.  The sky is the same above all our heads; it's the same sun we see rise; the same moon; the same stars; the same blackness. It seems so simple to me-we are all the same, we are the human race and it’s up to each one of us to accept the responsibility for the earth that we inherited from our ancestors and to leave this place better than we found it. It's a huge responsibility. 

Also, let’s remember another thing:  we need to make and savor our own good news; we need to find our own happiness.  Look at any news media and you know what you will hear and see for the most part:  bad news, sad news and only a smattering of glad news.  We can’t rely on the media to perk up our day; there are some behavioral scientists that believe that reading/watching the news creates stress (I think they're right). Sadly, we can’t rely on the media for much of anything these days but that’s a story for another day.  Each day we have is a blessing.  Don’t forget that.  I slip some days too but for the most part but I find that those mornings, no matter where I am in the world, when I get up and look at myself in the bathroom mirror and I smile at myself and say, “Boy am I a lucky guy” (notwithstanding how terrible my hair looks first thing in the morning) I go into that day with a positive feeling that no matter what happens at work or anywhere else, I’m going to appreciate and relish that day.  2010 just wooshed past us.  Days, weeks, months, years pass and we look back and say, “What happened to that year?  Did I accomplish any of those things that meant something to me personally or just work?  OMG, ‘time keeps on slippin, slippin, slippin into the future” (Fly Like An Eagle, Steve Miller Band).  The lyrics to this song say a lot more than just this line.  So in writing this to you it’s also a reminder to myself to make sure I don’t let any day, week, month or year slip away without doing something for myself.  It’s not selfish. It’s important because we’re the only ones who are responsible for our own happiness.  Yes, all of this is connected even if it sounds rambling but then again this isn’t the first time you all have put up with me rambling (and it won’t be the last!).

Some very sad news received early this week.  Keith Barket, Managing Director of Angel Gordon, died last week of complications from peritoneal mesothelioma, a rare form of abdominal cancer. He had been diagnosed only just after Thanksgiving.  Keith and I did not know each other well but we did know each other.  Only a few months ago we had a nice chat at an industry event where he was a panelist.  He grew up in the real estate industry and was considered by many to be one of the smartest guys and shrewdest investors in our business.  He was 49. Very sad.  So young.  

For 2011 I’m going to share a marketing secret:  we’re considering using Eric Estrada as our spokesperson!  

Photo: Mother Nature once again showing us who's the boss (I thought it was interesting that some people whose flights were disrupted were able to arrange alternate flight by contacting airlines through Twitter vs. the traditional telephone or standing in long lines at airports.) This photo is outside of a friend's house in suburban New York City this week.

Please accept my sincerest and bestest wishes to you and those close to you for a healthy and happy 2011! As always, I appreciate your support of OTR.

On the road...
Jan. 12-14:  Laguna Beach, CA to attend IMN’s Eighth Annual Winter Forum on Real Estate Opportunity & Private Fund Investing.

Jan. 22-23: Ormond Beach, FL for the unveiling of my dad's headstone.Jan. 24-31:  New York (including seeing Umphrey’s McGee in concert at the Best Buys (formerly Nokia Theatre) on Jan. 28.
Jan. 26:  A quick trip to Chicago
Feb. 1-3:  Dana Point, CA to attend IREI’s Fifth Annual VIP Conference.

Feb. 7-10: New York

Feb. 11: Chapel Hill, NC to be a judge in the University of North Carolina/Keenan-Flagler Real Estate Challenge

Feb. 14-18: West coast

Mar. 16-17: Washington, DC for the PREA Spring Conference

Apr. 13-15: Venice to attend INREV's Annual General Meeting

May 12-14: North Palm Beach, FL for the annual meeting of the Homer Hoyt Fellows

These are my views and not that of my employer.

Photo:  Cottage in the English Countryside.  Thanks Stephen.

Some things are happening in the real estate cosmos that give me a cautious but renewed sense of better times on the way.  What are they, you ask?  Well, for one thing, there are some RFP/RFQ/RFI starting to surface.  Another thing is just the way people are talking and behaving; it just seems like we’re tired of what’s been happening and need to, well, be the change we wish to see in the real estate world (sorry Mahatma); and we’re just the people to do it.  Of course, valuations are still not something that people agree on as is the price of debt.  But when I read that CMBS’ are being talked about, well, that means something too, doesn’t it?  Of course, this is pure speculation on my part and my crystal ball is not any clearer than yours but don’t you feel a change coming?

I’ve spoken about how important client/customer service is and we’ve all heard and read how much more it costs to acquire a new customer than to keep an old one.  Well, this past Monday night I was the customer and I experienced what may have been the worst customer service (except for that waiter in Paris one time) that I’ve ever had.  I will not bore you with the details but suffice it to say that I will never, ever go back to this place where I had brought a lot of people over the years. The name of the place that I will never return to is Pera Brasserie on Madison Avenue between 41 and 42^nd Streets in New York.  Even if you were thinking of going and asking me for a referral I couldn’t provide you with any:  the two managers I had gotten to know (who knew what customer service was all about), the bartender, the servers, the coat check person, even the chef have all been let go over the past few months.  Watching this place self-destruct is just another bad example to keep alongside the good examples of things we want to remember.

So, this drink thing on Monday night:  there were about 42 people who showed up.  A few of my highlights involved some people reconnecting after many, many years of not seeing each other; of people meeting each other for the first time and chatting up a storm; of my being able to introduce my wife to a number of folks who were formerly a name only and of celebrating the holiday and the upcoming start of a new year.   The demographics:  commercial/institutional real estate people from various walks of life; one artist/chef/branding expert; executive recruiters; private equity real estate managers; real estate data gurus; a retired real estate exec who is now a published author; an exec from a well-known real estate family office; someone who works for Mike Bloomberg and is helping form the Chinatown BID (Business Improvement District) and real estate owners, brokers, developers and service people.  Truly eclectic. 100% real estate. Thanks to everyone who was there.  It was fun to see you all together.

On Wednesday the stretch of Abbey Road where the Beatles were photographed for the cover of the album of the same title was designated a site of national importance by the British Department for Culture, Media and Sport, meaning that it cannot be altered without the approval of the local authorities.  In the mid 2000’s, IREI’s Geof Dohrmann and I got to cross this street and have our picture taken doing it.  It’s rock and roll history.  Hell, it's history! 

Photo:  Snow in Holland.  Thanks Marinus.

Congratulations to my good friend, Jim Hime who has just been named Chief Financial Officer of Global Real Estate at ADIA (Abu Dabhi Investment Authority) and has moved from one humid climate to another.  BTW, Jim is an award-winning author of three mystery novels which I have totally enjoyed reading (http://www.jameshime.com).

There's something nice about the fact that the holiday display windows at Macy's flagship store in Herald Square in New York still draws lines of people. In a world of virtual extreme technology, video games that are more than real, music videos that look like you are in outer space and inner space at the same time, these window displays, featuring barely animated figures telling holiday stories, are a throwback to a simpler time.  Congrats to Macy’s for keeping up a tradition that allows younger generations a chance to see a kinder and gentler approach to Christmas. (http://manhattan.about.com/od/citylife1/ig/Macy-s-Holiday-Windows-/)

My parting thought on this holiday weekend is: Happy Christmas to all my friends around the world who celebrate this holiday. I hope you are where you want to be and sharing it with those who are most special to you.  Seasons change.  But the feeling of togetherness and belonging is constant.  Even if you don’t celebrate the holiday (which I believe has transcended religion in many ways), celebrate the spirit of giving.  Celebrate life.  Celebrate the closeness of all of us, wherever we are.   And celebrate the spirit of peace that, regardless of what is going on, is strong inside us all. 

 Photo:  Sunset over Manhattan and New Jersey; Monday evening; from my office.

These are my views and not that of my employer.

Good news from RCA; Holidays and 2011 goals

PERE Magazine has opened the voting for it's 2010 Global PERE Awards.  You can vote here.  From PERE:  "Remember these awards are totally independent in that there is no sponsorship and no panel of judges. It is down to you and your peers to nominate and then vote for the people and organisations that mattered the most in 2010." THE DEADLINE TO CAST YOUR VOTE IS TODAY!

Random thoughts as we near the end of the year:

Starting to pull together my goals for 2011 which, for the past several years, I've been writing down in my diary.  I do believe it makes a difference to write them and look at them from time to time.  Here are a few:

• Don't feel the need to respond to emails immediately.  Think.  Then respond (if you have to).
• Walk more slowly.  Basically, don't rush.
• Keep my expectations modest.  Then I'll be pleasantly surprised more often than disappointed. 
• Keep myself open to serendipity.
• Make time to work on personal projects and not keep putting them off.
• Appreciate how small our world is becoming; especially in our industry.
• Remember "The Four Agreements":  [1] Be impeccable with your word; [2] Don't take anything personally; [3] Don't make assumptions; [4] Always do your best.
• Don't ever forget who and what are most important to me in my life.
• Continue to maintain connection with people I know and look forward to making new connections.
• Take it easy on myself and remember that it's not my job to 'fix the world.'

I'm sure you have your own list.  Maybe we even share a few of the same goals.  It's not easy to remember them, that's why documenting them and referring back to them from time to time really helps (I got that idea from some book).  But as someone once told me, be gentle with yourself.  And if you want to be more productive, let's say step up the amount of calls you make each week, remember this:  the difference between making zero calls and making one is 100%!  Don't try to go from zero to sixty and nine seconds.

Where I work, we've  been developing on our 2011 conference attendance/sponsorship plan and overall marketing/advertising .  We are taking a hard look at where and what to spend our money on.  Periodically, I get a call from an industry friend, asking me which conferences I think are the important ones to go to (actually I owe a guy a call on this subject).  I've been fortunate over the years to have attended a whole lot of conferences and conventions, both in the U.S. and Europe and the one thing I always try to keep in mind is this: choose wisely and look for those opportunities that are less about boosting your own ego than about getting in front of the right people.  Some of those opportunities are pricey but, as someone once said, 'you get what you pay for...sometimes."  The Chinese saying is 一分钱一分货, "yi fen qian, yi fen huo" (pronounced ee fen chee-ahn, ee fen hoo-oh). This translates literally to one cent gives you one cent's worth of merchandise.

As some of you know, I've been playing keyboards in rock and blues bands for a long, long time.  I'm really excited that recently I got asked to join a very cool band based in Calistoga, CA called "Maple Station Express."  As we add gigs, I'll post them below.  I'm just thrilled to get to rehearse once a week and play music with some talented (and nice) people.  I can't imagine what my life would have been like without music.

Our company had it's holiday this past week at Bowlmor Lanes just off Times Square. If you are looking for a place to crush some pins, have a few drinks, eat some pretty decent food and bowl on funky lanes with rock and roll playing in your ears, check it out.  It was more fun than I've had in a long time (P.S.  When I just went to their website I learned that they also have operations in Bethesda, Cupertino. Long Island, Miami and Orange County).

"Pricing Firms Across The Board" is the headline from this week's U.S. Capital Trends Report/November 2010 from RCA.  The lead in to all the data: "The analysis of November transaction activity shows that year-to-date sales volume has reached $90.7 billion and is poised to easily surpass $100.0 billion by year-end. The analysis also offers further evidence that the distress market has reached an inflexion point in the fourth quarter, with workout activity outpacing new additions to distress and total outstanding distress coming off its high for this cycle."  Hey, this sounds like pretty good news to me.  We've just about made it through 2010, although I wonder if the usual flurry of 'year-end deals' is like it used to be; probably not.  Everyone I talk with as I travel around believes that 2011 will truly be better than 2010.  Well, we're ready for it so 'bring it on.'

Final thing:  I look forward to hearing from you.  Best way to reach me is:  steve@simplicate.com

Photo:  Morning in Boston yesterday.


On the road:
December 20, 2010:  New York. The second almost-annual end of year buy your own drink thing at Pera Brasserie, Madison Avenue between 41 and 42.  6:30pm.  I've gotten emaills from a bunch of folks from the industry (and other random friends and acquaintances).  Should be fun.  Hope to see you there on Monday.

Jan.12-14: Laguna Beach, CA to attend IMN’s Eighth Annual Winter Forum on Real Estate Opportunity & Private Fund Investing.


Jan. 24-28: New York

Feb. 1-3: Laguna Nigel to attend IREI’s Fifth Annual VIP Conference












These are my views and not that of my employer.

On the road in Frankfurt

“So, what was the mood at the two real estate conferences you attended in Frankfurt this week, Steve?”  Well, while no one has actually asked me that question yet, I felt I needed to ask myself.  Festive: the Christmas feeling is powerfully alive. But, the mood at both the PERE Forum and the INREV Investor Platform/Committee Meetings, while fairly upbeat was clearly not overly optimistic. 

There were differing opinions as to where the institutional capital is going to come from in 2011 and there is no consensus that values have stabilized.  Like in the U.S. there is active bidding for premier core assets but not all major players will participate in those auctions.  There was a lot more mention of value-add opportunities being available here than in the U.S. and what opportunistic returns really mean anymore.  We are clearly living through a serious change in the global institutional real estate world and those who will be successful going forward are those that recognize that they have to make changes in the way they operate, underwrite, communicate, report, apply fees and every other aspect of the private equity real estate investment business. Investors are getting more demanding and have learned a lot of lessons.  Managers cannot afford to ignore any of these issues. If they do, they will not survive.

PERE attracted 90 delegates to it’s first European Forum and INREV 111 (40% increase from 2009).  But the mood?  In all my years in this great industry I have never heard and felt more uncertainty which isn’t really so surprising given how 2009 and 2010 have panned out.  So, what’s clear to me is that, well, nothing is clear.  Of course, there are the requisite number of ‘year end’ deals and many people are working frantically to conclude those (From what I heard, the sale of ING Real Estate or it’s component units is not one that will close by 12/31).   But, going into 2011, the year that we all hope will be demonstrably better than 2009 and 2010, it seems to me that it’s still more hope than promise. 

Here are a few “Notes & Quotes” from this week:

• In 2000 there were 1000 Dutch pension funds; in 2010 there are 585.
• “Investors should have more realistic return expectations”
• “LP’s want access to low-leverage funds”
• “Investors want to see managers with good ideas”
• “We’re looking for real estate exposure, not operational exposure (manager risk) when making investment decisions.”
• “Managers should be compensated for delivering real Alpha”
•  “There have been intellectual analyses suggesting that the WFC was driven by a lack of regulations. A wave of regulation is coming towards the property industry”
• INREV Challenge:  “Developing tools to get under the skin of the data.”
• “There continues to be a need for improved fee transparency”
• “Investors concerns continue in these areas: risk and debt management, alignment, manager stability, conflicts, environmental & sustainability

I felt great to reconnect with many of my old European institutional real estate friends and make new friends at these events. People is really what it's all about anyway, isn't it?  

My flight from San Francisco to Frankfurt was on United.  Coach.  The service was a joke, truly.  The 13-hour return flight yesterday was on its Star Alliance partner, Lufthansa.  Lufthansa’s service level has always been head and shoulders above United but the glaring difference on this trip was so evident I felt I needed to mention it. At the essence, United does not exhibit that it cares one iota about it’s passengers in coach while Lufthansa, from the quality of the food, to the free alcoholic beverages (United now charges in coach), to the customer service attitude of it’s in-flight crew makes me wonder how these ‘alliances’ are supposed to work.  Shouldn’t there be some consistency in level of service in each cabin?  Or maybe it was just the flight I was on….although I don’t think so.  (BTW, my ticket: $960.  Had I bought business class at the same time on the same flight:  $6,000!  Absolutely ridiculous).

Hotel of the week: Best Western Plaza Hotel, Esslinger Straße 8, Frankfurt, Germany. Down a little side street, within walking distance of old town and the train station (and the Villa Kennedy where both the conferences I attended this week were held).  Villa Kennedy rooms were running around €280 a night and I stayed for €330 Euros for four nights….total!  The Best Western is a modest hotel and does not have a restaurant or a workout room.  But it does have clean rooms, fairly fast and free Internet and an extremely friendly and helpful staff.  My last night there I discovered that the counter just off the lobby is really a bar and ended up having one of the most enjoyable chats with four German hotel guests and the hotel’s assistant manager/bartender.  Keep it in mind!

Congratulations to Bart Coenraads who joined Aviva Investors as head of it’s Asian Real Estate Multi-Manager team.  Also congratulations to my colleague, Catriona Allen who in January becomes the Co-chair of INREV’s Research Committee. 

Photo:  Villa Kennedy, Frankfurt, Germany.  Happy holidays!

On the road....
Dec. 13-21:  New York
Dec. 20:  The second almost-annual end of year buy your own drink thing.  Pera Brasserie, Madison Avenue between 41 and 42.  6:30pm.  At least 47 people are expected.  
Dec. 16:  Boston
Jan.12-14:  Laguna Beach, CA to attend IMN’s Eighth Annual Winter Forum on Real Estate Opportunity & Private Fund Investing.
Jan. 24-28:  New York
Feb. 1-3:  Laguna Nigel to attend IREI’s Fifth Annual VIP Conference



These are my views and not that of my employer.  

The coincidence of the moment

Friday, December 3rd, 2:48 AM.

A question often asked by consultants and others is “What’s keeping you up at night?” In my case, it’s “What woke me up so early this morning?”  Let’s see. Could it be the end of another year approaching so quickly?  Did I have an early morning global conference all that I forgot about?  Do I have enough carrots to feed the horse across the street?  Why did I eat that whole pizza last night?  The coffee I had at 2pm yesterday?  When will things get better?  Why do so many people watch these ridicuolus reality shows?  How come I’m not getting my phone calls and emails returned?   I think, for most if not all of us, this kind of list is much, much longer.  It reminds me about the first line of a song I wrote years ago, “Some days, I think I think too much.”  But this morning I tried all the tricks I know to get back to sleep, without success and so I just gave in, got up and am writing this to you all.  

There’s a lot of stress in the world and in our lives.  This week I watched the family across the street from me moving out of their home.  One of their children has some form of mental illness.  I watched as she was led out to the family van; she was hysterical; crying, screaming.  Horribly sad.  She didn’t want to move.  Her house sold in August, 2001 for $285,000.  Her family bought it in July 2005 for $700,000.  While the documents haven’t been recorded yet, it’s likely that they sold it for a little more than $400,000.   Moving has an effect on all of us.  My youngest brother is mentally retarded.  If he is taken out of his routine it is upsetting to him.  My neighbor’s daughter was being taken out of the routine she’s had for five years.  She wasn’t able to control herself.  It was heart-wrenching for me to watch from my window.  

In some ways, we are all creatures of habit.  Whether it’s getting up every day around the same time, going to the gym, eating the same breakfast, having the same coffee (or exotic coffee-based drink) bought at the place where everybody knows your name, taking the same bus or train to work, the list goes on.  But those of us without serious emotional problems can cope, for the most part, with these disturbances.  We understand why things are happening or why things have to be the way they are.  But even then, things changing are upsetting at the least even to those of us who are emotionally stable, stalwart and strong.  For this kid, it was like her life ending and she didn’t know what was on the other side of the rainbow.

In the real estate world, things are just happening at a much, much slower pace than we had gotten used to in the past.  Well friends, I think we better get used to this for the forseeable future. There is fierce competition for certain ‘core’ assets, driving prices up, cap rates down and when those transactions close the winners wondering if they really won or not.  Institutional investors are also sounding like they’re willing to go up the risk spectrum to value-add type deals but pushing them over the line into the opportunistic world is a little harder.  Having said that, there are some really big opportunity funds that have been raised this year and their challenge is to find the opportunity to invest in.  RCA reported this week that the "gains in investment activity have been uneven....Cross-border investors and non-traded REITs have been more focused in their investment activity....Clear differences are emerging in pricing trends....access to credit will also be a leading factor in determining market trends and pricing." Like I said, it’s not your father’s real estate investment world anymore.  That went bye-bye with the Oldsmobile.  Like it or not, we have entered a new era.  We have to learn to adapt. Yesterday, someone used the phrase, “patient money.” It was the first time I’d heard it in a while.  But to me, it’s not just the money that needs to be patient, it’s all of us as things are just not going to move as fast as we would like them to.  We’re going to have to invest more time, more money, more creativity, more discipline in growing all of our businesses.  We're going to have to invest more patience! The days of wine and roses (except here in the Napa Valley) are gone.  In my opinion, it could be decades (if ever) before we see a market like the one that we came through. And, as look-back books written in 2030 may suggest, what we’re going through is a good thing. It’s just that we’re too close to the situation to know that it’s good for us.   Like a lot of things in life, perspective is everything.  

I had written a much longer intro to this section but I'll spare you the details.  This past week, in the New York Times Op-Ed section, there is a great piece, “Where Anonymity Breeds Contempt”.  It’s not a short piece but I think it’s worthwhile reading as it hits right at the heart of a bad trend in our society and suggest some solutions.  Personally, I think that no one should be allowed to post anything, anywhere anonymously. Just look at some of the horrible things that have happened, especially recently, where the Internet was used in destructive ways and is being held responsible for the suicides of several young people.  We’re on the road to nowhere, people and the destination is not one we’re going to like getting to. As the Mahatma said, "We must be the change we wish to see in the world".

On the road....
Dec. 6 & 7:  Frankfurt, Germany to attend the PERE Forum-Europe and moderate a panel.
Dec. 8:  Frankfurt, Germany to attend INREV’s Investor Platform and Committee Meetings
Dec. 13-21:  New York  (On Dec. 20 a bunch of us are going to meet at Pera Brasserie, Madison between 41 and 42 for the “The second almost-annual end of year buy your own drink thing.”  If you’re around please stop by starting at 6:30pm)
Dec. 16:  Boston
Jan.12-14:  Laguna Beach, CA to attend IMN’s Eighth Annual Winter Forum on Real Estate Opportunity & Private Fund Investing.
Jan. 24-28:  New York
Feb. 1-3:  Laguna Nigel to attend IREI’s Fifth Annual VIP Conference

Photo: Life is tough!

These are my views and not that of my employer.

The Day After

In the U.S., today is the day after Thanksgiving.  Some people refer to it as "Black Friday."  (Black Friday is the day following Thanksgiving Day in the United States, traditionally the beginning of the Christmas shopping season. The day's name originated in Philadelphia, where it originally was used to describe the heavy and disruptive pedestrian and vehicle traffic which would occur on the day after Thanksgiving. Use of the term began by 1966 and began to see broader use outside Philadelphia around 1975. Later an alternative explanation began to be offered: that "Black Friday" indicates the period during which retailers are turning a profit, or "in the black.").  I never knew that we had Philadelphia to thank, not only for those great pretzels, but also for this!  


But, can you imagine being in Phnom Pehn, Cambodia the day after this weeks horrible tragedy on the bridge there?   A celebration turned into a crush of death?  There's a song that has the line, "There'll always be a morning after."  But there's not always one.  Will we make it thorough today without someone being crushed to death like happened two years ago ("Customers trampled a Wal-Mart employee to death on Black Friday.  The incident occurred as the shoppers crammed into the store when the doors opened at 5 a.m. Some 2,000 shoppers were waiting to get inside the store for Black Friday sales.  Other workers were trampled as they tried to rescue the man, and customers stepped over him and became irate when officials said the store was closing because of the death, police and witnesses said.

A person who witnessed the stampede, said shoppers were acting like "savages...When they were saying they had to leave, that an employee got killed, people were yelling 'I've been on line since yesterday morning.' They kept shopping."  


I don't watch TV much but I'm sure there were news teams camped out, not only at that specific Wal-Mart but other stores around the country....looking for a story (Note:  Some of the stores in my town opened at 4am today).  


Our world has seen other deaths in crushes of people at things like sporting events and rock concerts.  Only one time did I witness anything like this personally.  It was at a Pearl Jam concert.  An outdoor venue (no seats).  My son and I chose to stand pretty far back, with a fence at our backs so that we at least had that buffer between ourselves and the crowd behind us.  At some point, lead singer, Eddie Vedder walked to the side of the stage and looked down.  We were pretty far back so only saw some shuffling around where he was pointing.  But he stopped the show and started talking, "Hey, don't push those people.  Give them some room.  You're crushing them.  Give them some air.  We are not going to start playing again until you guys back off.  People, if someone dies here tonight, we'll never perform again."  


What have we become?  Where is our consideration for one another?  What happened to everybody loving one another or at least being considerate of one another?  Is the human race taking giant steps backward?  How many more preventable tragedies have to happen before we'll wake up?  Why have we become so violent, so entitled, so selfish, so angry, so, so, rough, so aggressive...I could go on an on with adjectives.  But no matter what you call it, we need to catch ourselves...before it's too late.


I know it sounds simple but why can't we just treat others as we'd like to be treated ourselves?  Why can't we show a little peace, love and understanding (Elvis Costello) to each other.  What's the hurry?  How important is it to be first in line, for anything?  One of my favorite quotes is from Gandhi:  "You must be the change you wish to see in the world."  Each of us can, and must, make a difference. Maybe at this time of year, with the holidays and the New Year close at hand, is a good time for all of us to take stock of ourselves and our approach to life.  Yes, things have changed, probably for the majority of us.  I'm not making the money I was making two years ago and we've had to make adjustments (i.e. sushi only once a month :-)  But, no kidding around, the experts say that, at least in the U.S., we're not going to fully recover for 10 years.  10 years?  That is a lifetime.  But what it is it is and if we aren't kind to each other, whatever time it takes for things to improve we will be crushed by our own disappointments.  The morning after can be bright, if we just look for the light instead of the dark.

These are my views and not that of my employer.