September 2017 Monthly Letter
As many of you know or remember, I had a bit of a health scare last year at this time. I’m thrilled to report that a year later, the doctors have given me a clean bill of health, we’ve closed more deals than the previous year, my golf handicap is down 5 strokes and I have run 4 half marathons. I even had the honor to visit the Navy Seal Obstacle Course. The first thing I realized was that “America’s Finest” are stunningly gifted. They are world class athletes and I am proud to have them defending us. The second thing I realized was their success on the O-course is based on speed, force, strength (some bruises) but most of all a 100% commitment (That’s easy to give lip service to but you just try to jump at a rope from three stories with no net!).
Speaking of being proud and fit. I was excited to see Los Angeles announced as the host of the 2028 Summer Olympic Games. As in 1984, this will have a spillover effect into San Diego with many events actually being hosted here, not to mention tourism. In the immediate future, preparation to host the Olympics will proliferate and hasten the influx of funding for commercial real estate and infrastructure. Los Angeles (and Southern California) will finally be catapulted to being a world city (also called a global city or world center).
Speaking of visiting San Diego, passenger traffic at San Diego International Airport rose 5.3% from a year ago for the January-to-June period. For the month of July year over year, the passenger count was up 11.1%. Passenger traffic is a strong indicator of a healthy economy.
So Charles Schwab recently asked how much does it take to be wealthy in San Diego? The answer – $2.7 million.
The top five definitions of wealth among 500 San Diegans surveyed are:
- Having a lot of money (30 percent)
- Enjoying life’s experiences (25 percent)
- Being able to afford anything they want (24 percent)
- Living stress-free and having peace of mind (19 percent)
- Having loving relationships with family and friends (13 percent)
While 36 percent of those surveyed say they are already millionaires or believe they can reach that level, the majority (64 percent) say they don’t have any hope.
When asked to compare two opposing ideas of wealth at a more personal level, San Diego residents lean into things that money can’t buy:
- Fifty-seven percent say wealth is about having gratitude vs. having money (43 percent)
- Sixty-six percent equate wealth with having good physical health vs. having lots of money (34 percent)
- Seventy-four percent believe wealth is about spending time with family now vs. leaving an inheritance for them (26 percent)
Well the first step to becoming wealthy is to have a job and the economy is certainly helping that by adding another 209,000 in July. Locally, however, even though there was job growth, the restaurant industry had its first drop since 2010. This is largely due to the minimum wage increase to $11.50 an hour and influx of more efficient menu ordering (iPads, robots no table service etc…).
Speaking of jobs – Steve Jobs that is – it is hard to believe that he brought us the first iPhone just 10 years ago and the galactic shift it has caused in our lives over that period. Having just read his biography I was struck by how much of a pot smoking, persistent, charming jerk he was. Those around him used a term that came from Star Trek to describe him – they said he had a Reality Distortion Field (RDF). In Star Trek, the menagerie episode, the aliens created their own new world through mental force. In Job’s case he used it to distort peoples sense of proportion and scale of difficulty and make them believe that the task at hand was possible. He would also use RDF to appropriate other’s ideas and repurpose it as his own weeks later.
Now Apple is on to the iPhone 8 and driver-less cars. Projections are 54 million on the road by 2035. While countless companies are trying to prove that cars can drive themselves, I am more interested in what we’ll actually do while the car is driving us around. Self-driving cars will allow you to eat, talk on the phone and do your make up (or shave). Actually, people do that now so why wouldn’t we want help. Geez, I still remember my dad telling me a car radio was a distraction.
For those of you who like more number and details you should really enjoy the UCLA Anderson school/Allen Matkins, California Commercial Real Estate Survey and Index – The Turn of the Cycle. For those who want a simple graphic of where we stand you need to go no further than the San Diego Housing Inventory and Price Index Charts below.
Let me be the first to tell you that trees don’t grow to the sky and markets walk upstairs and jump out of windows.
Speaking of trees, we have a big problem in San Diego and you need to watch for it at your house and commercial properties. Insect and disease are hitting sycamores and willows throughout Southern California. I am talking about 100,000 willows in just the SD County Tijuana River Valley that have died. The shot hole borer beetle could kill could kill as many as 27 million trees in SoCal. That’s 8% of the regions trees. This starts having an effect on weather, property values, HVAC costs and wildlife. The replacement cost alone could be 36 billion. Watch for Oak Borer Beetle, Asian Citrus Psyllid, Glassy Winged Sharpshooter (oleanders), South American Palm Weevil. If you have trees – watch them, treat them and replace them if they die.
Now the “other green,” Pot. Despite Steve Jobs smoking lots of it and it becoming legal in California, owners need to take note. First, if you have a pot use on your property, it probably voids your loan and certainly makes you unable to finance or refinance one. Second, the San Diego appellate court recently affirmed a $175K judgement against a Landlord for allowing a dispensary on his property. The city attorney stated, “Landlords who rent to operators of illegal dispensaries have committed a crime and will be held accountable.”
I have come to the pinnacle of success in business.
In the eyes of others, my life has been the symbol of success.
However, apart from work, I have little joy. Finally, my wealth is simply a fact to which I am accustomed.