June 2017 Monthly Letter

The Blog
Page 3

According to her biography, Barbara Millicent Roberts grew up in the mythical town of Willows, Wisconsin. For a period of time she attended Willows High School but later moved on to Manhattan International High School in New York City. Over the years, she has had more than 40 pets including cats, dogs, various horses, a zebra, a lion cub, and a panda. She has held dozens of professional positions including doctor, pilot, astronaut, veterinarian, and flight attendant. Her taste in cars is legendary. Her favorite color is bright pink. That color has become known as Barbie Pink. On March 9th, the folks at Mattel celebrated Barbara Millicent “Barbie” Roberts’ 58th birthday. No matter what you think about this cultural icon, you have to admit that she’s looking good for her age.

The ubiquitous Barbie doll made its debut on March 9, 1959, at a toy fair in New York City. She was an instant hit. About 350,000 dolls were sold in the first year of production. Since then, it is estimated that more than a billion Barbies have been sold worldwide.

Negotiating the emotional minefield between whims and dreams is a difficult task for any parent (or consumer for that matter). The marketing machines of companies flash shiny objects in our eyes forcing us to make tough decisions, ones that don’t always leave us happy, satisfied or popular.

I once read that in a grocery store there are over 100 salad dressing choices. With so many to choose from we are never able to be satisfied since we can’t try all of them. Whereas with only 3 or 4 choices we can be sure of our favorite. Could this be the root of IN-N-OUT Burgers grand success?

I remember a bumper sticker that used to say “I want to be like Barbie…that bitch has everything.” Well before you become rich you must decide whether you want to be secure, comfortable, or rich. These are called core values, or the reasons you want to invest.

The first reason most people invest is because they want to feel more secure That’s why Social Security or a retirement plan is very popular with people whose core value is the need for security. Security is a very important aspect of investing. You don’t want to be a destitute out on the streets with nobody taking care of you.

Unfortunately, many people who are counting on government or their employer to provide for their retirement will be sorely disappointed. A person who invests to be secure or values security will always say, “Well, I have to have a roof over my head and I need to put food on my table.” Their whole orientation is security or survival.

The next level above security is to be comfortable. They say, “I just want…” They want the house, the second vacation house, or the extra car. They want to take a cruise every now and then. Their highest priority is the need to be comfortable.

The third core value that motivates people is wanting to be rich. Most people dream of becoming rich but if the dream of becoming rich disturbs any of the lower core value of security or comfort, they’ll forsake being rich.

They’ll dream of being rich but if it means giving up a safe, secure job, then being rich remains a dream. If it’s just too much trouble to become rich and they’re comfortable at the moment, then they won’t pursue becoming rich. Those are the three core emotional reasons why certain people chose certain investment paths. Money is just an idea. It’s a formulation of the mental, emotional, and spiritual ideas inside of you that determine what you ultimately become. In the end, you need to fight for the future you want.

Today Big Data is to commerce what oil was in the past. Data helps retailers interpret what consumers will buy and when and for how much. The data comes from everywhere. Indoor tracking systems like Bluetooth beacons or Philips lighting or facial recognition. From web browsing and app use. From transaction data aggregated by Visa and MasterCard. Even from Uber, who knows that riders spent 2 billion directly after getting out of an Uber. How about the father who got a call congratulating him on becoming a grandfather before his daughter told him she was pregnant – all courtesy of Big Data and browsing history!

In 1890, Samuel Warren wrote a paper called, “The Right to Privacy” and in it he cited “recent inventions and business methods” – including instant photography and tabloid gossip – “have invaded the sacred precincts of private domestic life.” In the paper, they called for the “right to be left alone” and what they called, “the right to one’s personality.”

Although technology may be making our lives more public than we want, loneliness seems to be an epidemic. The number of Americans who say they have no close friends has nearly tripled in the last decade. While technology offers us an easy way to keep in contact with friends and meet new people, technology encourages shallow conversations that can distract us from meaningful, real life interactions. Smartphones have transformed grocery lines from a chance for small talk with neighbors to an exercise in email checking. Starbucks has sealed the fate of the coffee shop as nothing more than a place of mutual isolation.

So what does this have to do with commercial real estate? Shopping centers? Office buildings? Well let me tell you. Successful real estate in the future is social real estate. Location, location, location brings new meaning in a social setting. The best location is where people will want to live, work and play. Shopping centers will be social centers.

Although you may buy your Barbie dolls now on Amazon, most of you still go to the grocery store to buy your groceries. The grocery store has been largely immune to the ravages of online shopping. But a war is coming. Beside the current intense competition of Vons, Ralphs, Wal-Mart, Target and Costco, you have the growth of niche players like Trader Joe’s, Whole Foods, and Sprouts. Soon you will see the growth of ALDI, LIDL and Grocery Outlet. Not to be outdone, Amazon is stepping up its grocery delivery business and is now rolling out stores that will just deduct your purchase from your credit card as your walk out the door – no cashier needed. To make things harder, struggling brick and mortar retailers such as dollar stores and pharmacies have increased their inventory of grocery items (can you image Amazon buying Rite-Aid or CVS? Amazon delivering your drugs and an Amazon store on every corner.)

Like the grocery business, our activity has increased but business has gotten harder to close. Although we are working hard to get rich we are trying to be happy being satisfied. We have ventured into the Big Data market and done a Barbie analysis of the San Diego market (I apologize ahead if you or your neighborhood is insulted).

San Diego Barbie from KGB Bob and Coe Show

La Costa Barbie – this princess Barbie is only sold at the brand new La Costa Forum. She comes with an assortment of Kate Spade handbags, a Lexus SUV, a long-haired dog named Honey, and a cookie-cutter house. Available with or without tummy tuck and face lift. Workaholic Ken sold only in conjunction with “augmented” version.

Rancho Bernardo Barbie – this modern-day homemaker Barbie is available with Ford Windstar minivan and matching gym outfit. She gets lost easily and has no full-time occupation or secondary education. Traffic-jamming cell phone included, headset sold separately.

Escondido Barbie – this recently paroled tattooed and nose pierced Barbie comes with a 9mm handgun, a desert/river ready lifted Chevy truck with dark tinted windows, and a methlab kit. This model is only available after dark and can only be paid for in cash, preferable in small, untraceable bills. Unless you are a cop, then we don’t know what you’re talking about.

Del Mar Barbie – this yuppie Barbie comes with your choice of BMW convertible or Hummer H2. Included are her own Starbucks cup, credit card, and a country club membership. Also available for this set are Shallow Ken and Private School Skipper. You won’t be able to afford any of them.

Santee Barbie – this pale model comes dressed in her own Wrangler Jeans, two sizes too small, a NASCAR shirt, and Tweety Bird tattoo on her shoulder. She has a six-pack of Coors Light and a Hank Williams, Jr CD set. She can spit over 5 feet and kick mullet-haired Ken’s ass when she is drunk. Purchase her pickup truck separately and get a confederate flag bumper sticker absolutely free.

La Jolla Barbie – this collagen injected, rhinoplastic Barbie wears a leopard-print bikini outfit and drinks cosmopolitans while entertaining friends at the beach house. Percocet prescription available.

Lakeside Barbie – this tobacco-chewing, brassy-haired Barbie has a pair of her own high-heeled sandals with one broken heel from the time she chased Beer-Gut Ken out of Lemon Grove Barbie’s house. Her ensemble includes low-rise acid-washed jeans, fake fingernails, and a see-through halter top. Also available with a mobile home.

Leucadia Barbie – this doll is made of actual tofu. She has long, straight, brown hair, archless feet, hairy armpits, no makeup, and Birkenstocks with white socks. She smokes good sinsemilla buds and prefers that you call her “Willow.” She does not want or need a Ken doll, but if you purchase two Leucadia Barbies and the optional Volvo wagon, you get a coupon for a free wheat-grass smoothie at any Whole Foods Market.

National City Barbie – this Barbie now comes with a stroller and infant doll. Optional accessories include a GED and bus and trolley pass. Gangsta Ken and his ’79 Caddy were available, but are now very difficult to find since the addition of the infant.

Chula Vista Barbie – this Spanish-speaking-only Barbie comes with a 1984 Toyota with expired temporary plates and three baby Barbies in the back seat, but no car seats. The optional Ken doll comes with a pickup truck loaded 10-feet high with mattresses. Green cards are not available for Chula Vista Barbie or Ken.

Hillcrest Barbie/Ken – this versatile doll can be easily converted from Barbie to Ken by simply adding or subtracting the multiple “snap-on” parts. Bonus: free rainbow flag with proof of purchase sticker.


Customer service is always a tricky thing. In today’s world of instant communication and streaming video it is increasingly challenging – take the United Airlines debacle as an example. That was tough to see but especially for me who grew up in a United Airlines family – dad spent 30 years trying to make “the friendly skies of United.”

In the commercial brokerage world, I have found that the best brokers are, first and foremost, excellent communicators and impeccably honest. They negotiate with confidence yet never forget the implications of a sale or a lease. The best brokers are flexible and creative, yet practical. They respond to challenges quickly, deliver disappointing news gently and never lose sight of those pesky details that can loom large if left undone.

Truly, brokers need to be nearly superhuman! With typical aplomb, the best salespeople don’t linger on this fact. They just go out and do the work, day in and week out. Perhaps the dedication is most important of all. Some say “passion” is an overused word. However, it is critical in commercial real estate sales and leasing. Passion – not money – is the fuel that keeps us going and is the thing that pulls us out of bed each morning.

Well, rising rates and a wait-and-see stance regarding tax reform, regulatory easing and infrastructure spending proposed by the Trump Administration have created a pause in the commercial property sales market. Sales declined 15% in the fourth quarter of 2016 and continued slowing in the first quarter of this year. Although rates rose, lender spreads tightened, absorbing much of the real increase. As rates continue to increase they hopefully will do so in line with job and rent growth. Despite the slowing of sales, occupancy levels continue to rise in most product types (apartments, industrial, office and in many cases retail). As these markets tighten, terms (free rent, TI’s, etc.) and rent will rise. Can you spell I-N-F-L-A-T-I-O-N? In fact, Zillows recently reported that a San Diego apartment renter will need a $648 a year raise just to keep up with rent increases.

New construction will satisfy some demand and mitigate some increases. However, keep in mind something I learned early in real estate, “value of existing real estate increases to reach the replacement cost.” In other words, when rents or sales get too high, people will build new. So as construction costs rise, existing rents and sales will also rise. Can you spell I-N-F-L-A-T-I-O-N?

Now, speaking of construction costs, the General Contractors of America has reported double-digit increases for key construction materials. Among the most widely used materials in construction, there were price increases over the past 12 months totaling 19% for steel mil products, 17% for copper and brass, 8.8% for aluminum, 7.6% for gypsum products such as wallboard and plaster, and 7.3% for lumber and plywood. In addition, the price index for diesel fuel, which contractors use directly and also pay for through surcharges on the thousands of deliveries to construction sites, soared 35%.

Of the top 10 states with the most new construction, California was #3 behind New York and Texas.

Of concern is the accelerating demise of the retail industry. The Wall Street Journal reported that since January, 2,880 retailers have shuttered – Bebe, Radio Shack, Rue 21, Payless Shoes, Limited… On top of that mergers like Walgreens and Rite Aid will cause more than 1,000 stores to be closed or retenanted.

Jamie Dimon, Chase Bank CEO, says, “The retail business has always been violent and volatile, with half the retailers that were around 10 years ago now gone.” Other say that the exit of one retailer can present an opportunity to boost rents and lease space to a higher-quality store. Still others say we are over-retailed and under-demolished, presenting their case for redevelopment. I think the key in the future for retailers is to have great customer service, a great physical and online experience (Home Depot and Road Runner Sports are classic examples of this). If you are a property owner, you have to realize you no longer own a shopping center or an office building but instead an “Activity Center” or “Community Center” and you need to manage it as such.

So like most things in life, it comes down to “people skills” and making people happy. Whether you are an airline, a broker or property owner, customer service is king. I hope you enjoy the story and in some small way it makes up for having had to watch countless reruns of someone being dragged off an airplane.

My lead flight attendant came to me and said, “We have an H.R. On this flight.” (H.R.  Stands for human remains.)

“Are they military?” I asked.

‘Yes’, she said.

‘Is there an escort?’ I asked.

‘Yes, I already assigned him a seat’.

‘Would you please tell him to come to the flight deck. You can board him early,” I said…

A short while later, a young army sergeant entered the flight deck.  He was the image of the perfectly dressed soldier.    He introduced himself and I asked him about his soldier.

The escorts of these fallen soldiers talk about them as if they are still alive and still with us.  ‘My soldier is on his way back to Virginia,’ he said.  I asked him if there was anything I could do for him and he said no.  I told him that he had the toughest job in the military and that I appreciated the work that he does for the families of our fallen soldiers. The first officer and I got up out of our seats to shake his hand.  He left the flight deck to find his seat.

We completed our pre-flight checks, pushed back and performed an uneventful departure.  About 30 minutes into our flight I received a call from the lead flight attendant in the cabin. ‘I just found out the family of the soldier we are carrying, is also on board’, she said.  She then proceeded to tell me that the father, mother, wife and 2-year old daughter were escorting their son, husband, and father home. The family was upset because they were unable to see the container that the soldier was in before we left.

We were on our way to a major hub at which the family was going to wait four hours for the connecting flight home to Virginia.  The father of the soldier told the flight attendant that knowing his son was below him in the cargo compartment and being unable to see him was too much for him and the family to bear. He had asked the flight attendant if there was anything that could be done to allow them to see him upon our arrival. The family wanted to be outside by the cargo door to watch the soldier being taken off the airplane. I could hear the desperation in the flight attendants voice when she asked me if there was anything I could do. ‘I’m on it’, I said. I told her that I would get back to her.

Airborne communication with my company normally occurs in the form of e-mail like messages. I decided to bypass this system and contact my flight dispatcher directly on a secondary radio. There is a radio operator in the operations control center who connects you to the telephone of the dispatcher. I was in direct contact with the dispatcher. I explained the situation I had on board with the family and what it was the family wanted.  He said he understood and that he would get back to me.

Two hours went by and I had not heard from the dispatcher. We were going to get busy soon and I needed to know what to tell the family. I sent a text message asking for an update. I Saved the return message from the dispatcher and the following is the text: ‘Captain, sorry it has taken so long to get back to you. There is policy on this now and I had to check on a few things. Upon your arrival, a dedicated escort team will meet the aircraft. The team will escort the family to the ramp and plane side. A van will be used to load the remains with a secondary van for the family.

The family will be taken to their departure area and escorted into the terminal where the remains can be seen on the ramp. It is a private area for the family only. When the connecting aircraft arrives, the family will be escorted onto the ramp and plane side to watch the remains being loaded for the final leg home. Captain, most of us here in flight control are veterans… Please pass our condolences on to the family. Thanks.

I sent a message back telling flight control thanks for a good job. I printed out the message and gave it to the lead flight attendant to pass on to the father. The lead flight attendant was very thankful and told me, ‘You have no idea how much this will mean to them.’

Things started getting busy for the descent, approach and landing. After landing, we cleared the runway and taxied to the ramp area. The ramp is huge with 15 gates on either side of the alleyway.  It is always a busy area with aircraft maneuvering every which way to enter and exit.  When we entered the ramp, and checked in with the ramp controller, we were told that all traffic was being held for us. ‘There is a team in place to meet the aircraft’, we were told. It looked like it was all coming together, then I realized that once we turned the seat belt sign off, everyone would stand up at once and delay the family from getting off the airplane. As we approached our gate, I asked the copilot to tell the ramp controller we were going to stop short of the gate to make an announcement to the passengers. He did that and the ramp controller said, ‘Take your time.’

I stopped the aircraft and set the parking brake. I pushed the public-address button and said, ‘Ladies and gentlemen, this is your Captain speaking I have stopped short of our gate to make a special announcement. We have a passenger on board who deserves our honor and respect. His Name is Private XXXXXX, a soldier who recently lost his life. Private XXXXXX is under your feet in the cargo hold.  Escorting him today is Army Sergeant XXXXXXX.  Also, on board are his father, mother, wife, and daughter. Your entire flight crew is asking for all passengers to remain in their seats to allow the family to exit the aircraft first. Thank you.’

We continued the turn to the gate, came to a stop and started our shutdown procedures. A couple of minutes later I opened the cockpit
door.  I found the two forward flight attendants crying, something you just do not see. I was told that after we came to a stop, every passenger on the aircraft stayed in their seats, waiting for the family to exit the aircraft.

When the family got up and gathered their things, a passenger slowly started to clap his hands.  Moments later more passengers joined in and soon the entire aircraft was clapping.  Words of ‘God Bless You’, I’m sorry, thank you, be proud, and other kind words were uttered to the family as they made their way down the aisle and out of the airplane. They were escorted down to the ramp to finally be with their loved one.

Many of the passengers disembarking thanked me for the announcement I had made.  They were just words, I told them, I could say them over and over again, but nothing I say will bring back that brave soldier.

I respectfully ask that all of you reflect on this event and the sacrifices that millions of our men and women have made to ensure our freedom and safety in these United States of AMERICA.


Freestanding Office Building

1725 S. Escondido Blvd, Escondido, CA – $500.00/month (includes utilities)

1725 S Escondido Blvd, Escondido, CA

Rent includes utilities. Small, quiet professional office. Some covered parking. Plenty of on-site parking. Easy access to I-15.

Download full property brochure here.

For more information contact:

Matt Orth
BRE #01884500

Dunn Edwards Paint Center for Lease – $1.50 psf NNN

505 N Broadway, Escondido, CA 92025 – End Cap Space

505 N Broadway, Escondido, CA 92025

Great street visibility. Easy access to Highway 78. Window frontage. Remodeled strip center.

Download full property brochure here.

For more information contact:

Don Zech
BRE #00885909
Matt Orth
BRE #01884500

Retail Strip Center in Norco for Sale – Fully Leased


313 6th Street, Norco, CA 92860 – Investment property located at signalized intersection.

313 Sixth St, Norco, CA 92860

100% leased investment property. All tenants with 3-5+ years remaining on lease. Highly trafficked strip center. Approximately 6,000 sf with dedicated parking lot. 5.75% CAP. Property will be delivered clear of any existing debt at COE.

Download Full Property Brochure Here

For More Information Contact:
Don Zech


CA BRE Lic. #00885909

The difference between death and taxes is death doesn’t get worse every time Congress meets.” – Will Rogers

Well it looks like politics will remain noisy but won’t fundamentally contaminate the economy. The recent Fed actions to raise rates signals their confidence in the economy and their attempt to stave off future inflation. Rising interest rates, of course, cool investor activity and slow transaction activity. Also as interest rates rise so do CAP rates and subsequently, all the value built up over the last few years will slowly disappear. We will soon be facing the classic investor conundrum of wanting “the return of your money more than the return on your money.”

The good news is that steady hiring and low local unemployment levels are finally supporting higher wages and increased spending. This is all a positive for commercial property demand and owners. Unemployment and market prices are finally at pre-crisis (2007) levels. County unemployment is at 4.2%, down from January’s 4.55 and last February’s 4.8%. On properties under $2.5 million, sales volume rose 12.99% and pricing was up 5.5% from a year ago. Inventory shortage is the next step on the chart.

Credit is tricky. It seems to work against us more than it works in our favor, and in recent years, there’s been a push to improve the system. In this vein, the three major credit bureaus (Equifax, Experian, and TransUnion) recently decided to make a change that will help 12 million consumers in the U.S. According to the Consumer Data Industry Association, the three bureaus will change their standards for reporting tax lien and civil judgement data. If the data doesn’t include a complete list of the person’s name, address, social security number, or date of birth, it won’t be included, and, according to MarketWatch, most liens and judgements don’t include all of this info. The change will go into effect around July 1st. Paid tax liens stay on a person’s report for seven years.

Bankers argue this is a bad move because they’ll have a harder time gauging creditworthiness for loans. As a result of this change, 12 million U.S. consumers will probably see a boost in their score. How high? That depends on a lot of factors, including what their score looks like to begin with. Earlier this year, the Consumer Financial Protection Bureau (CFPB) put out a call for public feedback on credit reporting. They want to research the possibility of using other information, like rent and bill payments, to gauge credit. The idea is: if your credit sucks but you have a history of on-time rent payments, that history should be included in your report, too, as it may help boost your score.

Assembly Bill 1732 went into effect on March 1, 2017. It added language to the Health and Safety Code to require all single-user toilet facilities be identified as all-gender toilet facilities. That means most every restroom in a strip center or small office building needs to have a new sign on it. You can Google “all gender restroom sign CBC 11B-703.” and find what you need to buy

While on the subject of compliance, AB2093 now requires further disclosure with Tenants and in leases with regards to ADA Compliance and CASp reports. If you are using the AIR lease forms, they have been updated, if not you should review your form with a real estate attorney immediately.

To comply with AB2093, commercial landlords generally must do the following:

  1. Disclose in every lease of commercial property whether the property being leased has been inspected by a CASp.
  2. If the property has been inspected, and there have been no alternations that would change the property’s compliance with accessibility standards, provide a copy of the CASp report at least 48 hours before the lease is signed. The report may be provided with an agreement that the report will remain confidential except as necessary to complete corrections the tenant agrees to make.
  3. If the property has been inspected and the CASp report indicates that the property complies with accessibility requirements, a landlord must provide a copy of the current disability access inspection certificate and the inspection report within seven days of the date of the execution of the lease.
  4. If the property has not been inspected or if an inspection certificate has not been issued indicating whether the property is in compliance, then a landlord must make the following additional disclosure in its lease: “A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the premises.”

Well as the noise and action of politics and bureaucracy crowd your life, just remember that complexity is a subsidy or in other words, one man’s rule is another man’s gain . Look at golf, a simple game (hit the ball into the hole in the fewest strokes) with only 34 rules (yet the rule book is 204 pages and ½ inch thick!). I guess if it were easy (life, real estate or golf) then everyone would be good at it. Hope you enjoy the story.

The Masters is one of the four major championships in professional golf. The Masters is scheduled for the first full week of April, and it is the first of the majors to be played each year. Unlike the other major championships, the Masters is held each year at the same location, Augusta National Golf Club, a private golf club in the city of Augusta, Georgia.

The tournament has several traditions. Since 1949, a green jacket has been awarded to the champion, who must return it to the clubhouse one year after his victory, although it remains his personal property it  is stored with other champions’ jackets in a specially designated cloakroom. The Champions Dinner, inaugurated by Ben Hogan in 1952, is held on the Tuesday before each tournament, and is open only to past champions and certain board members of the Augusta National Golf Club and the previous Champion gets to pick the meal. Beginning in 1963, legendary golfers, usually past champions, have hit an honorary tee shot on the morning of the first round to commence play. This year we will all sorely miss Arnold Palmer.

The Masters is unlike any other golf tournament and despite the exclusivity and prestige of the event, food prices at the concession stands remain ridiculously cheap. Augusta National’s famous pimento sandwich is the star of the show and costs just $1.50. The most expensive food items on the menu are the grilled chicken wrap and the classic chicken sandwich at $3.00 each. A domestic beer will set you back $3.00. Someone could even order every single item on the Masters’ breakfast menu for a total of just $0.50 more than a water bottle at the Super Bowl.

Thousands of people are welcomed, guided, fed, assisted, and given a chance to buy a wide range of Masters memorabilia. It is all done by very kind people who demonstrate southern hospitality, enabling thousands of visitors to enjoy great golf in a beautiful setting.

Over the weekend, you may meet Lynn Swann, a former Pittsburgh Steeler (inducted into the Pro Football Hall of Fame) and a member at Augusta National or Condoleezza Rice, one of three women members at Augusta National.

Augusta National Golf Club was founded by Bobby Jones, one of the greatest golfers of all time, and Clifford Roberts in 1933. Bobby Jones wanted an elegant retreat for his friends where they could enjoy each other and golf. He and Roberts created a tone and atmosphere that remain to this day.

My favorite Augusta National story is about the Eisenhower tree. This was a huge loblolly pine that stood right in the middle of the 17th fairway. President Eisenhower, an ardent member of Augusta, visited 45 times (5 before he became president, 29 while he was president, and 11 times after he retired from the presidency). Eisenhower was an enthusiastic golfer and this tree was driving him crazy — because he kept hitting it. Finally, in 1956, Eisenhower went to the Board of Governors meeting as a member and made a motion to cut the tree down. Cliff Roberts, president of the club, ruled him out of order. Ike, of course, accepted the ruling as a mere member.

Imagine the moment.

Here was a retired five-star general, former commander of the Allied forces in Europe, who was at the time the extraordinarily popular president of the United States – and he was ruled out of order.

No one could dictate. Not even the President. Everyone has  to abide by the rules. This is the spirit of Augusta National and the spirit of the great championship that occurs there every spring.


Well I am happy to announce that six months later I have successfully gone from “flat line to finish line”, completing the Carlsbad Half Marathon and I am looking forward to running the Golden Gate Bridge Half Marathon later this month. I tried to take a Zumba class. I bent, twisted, gyrated, jumped up and down and perspired for an hour. But, by the time I got my leotards on, the class was over. Next time I will try yoga!

With the news media being dominated by everything Trump, I do have to reflect back over 25 years ago when I read “Trump Style Negotiating” by Trump’s broker George Ross. There were lots of nuggets like, “the aura of legitimacy”, using deadlines to your advantage, creating value by how you present. But perhaps the most amazing thing to me (a true deal junkie) was that they closed 702 deals in 10 years.

The press is fond of talking about “Trump-o-nomics” but I am much more watchful of “Trumpflation”. If Trump’s stimulus plans succeed in producing GDP growth at an annual rate of 3% or more, that could lead us to a spike in the inflation rate. Historically, the combination of inflation at low rates usually leads to higher real estate appreciation. Rapidly increasing rates of inflation are not very helpful to consumer purchasing power for basic goods like food, utilities, restaurants or gas and transportation. However, the best hedge has been and probably will be something called real estate.

Using the old investment formula called, The Rule of 72, you can quickly calculate how soon your investment will double in value by dividing 72 by an estimate of the annual appreciation rate.

Speaking of appreciation, here are Nick’s Numbers:

Hi all;

Total office building sales for 2016 were up over 2015 by 18% with 2016 average price per square foot at $293.77 vs $238.28 for 2015. Cap rates were higher, however, at 6.76% vs 6.46%.   ~Nick

San Diego outranks many of its competitors in “liveability” measures such as parks and bicycle infrastructure and weather, but lags in areas including joblessness and poverty, according to a recent San Diego Chamber of Commerce report. In a separate report by San Diego Sport Innovators, San Diego is becoming North America’s bicycling capital with its retail and wholesale sector topping $547 million in annual sales and employing over 1200 workers.

Owners: Tenants Beware! We recently attended a talk about Title 24 impacts (which we have been experiencing). If TI’s are more than moving a couple of lights or HVAC ducts then you need to show a 50% reduction in energy costs for the space or be forced to meet all Title 24 requirements (motion detectors, low energy, LED bulbs, energy efficient HVAC, etc.). Bottom line is it will add $8-$10 psf for lighting and $2-$8 psf for HVAC (a total of $15-$20 to the price of your TI project!).

Market activity is good but too many deals in the hurry up and stop mode. Whether it is regulation, cost, funding or otherwise we see a lot of time expended to see a deal die because government approval cycles might take 9-12 months, fear of funding cut etc.. The increase in activity is welcomed, efficiently getting deals done is the challenge. Our experience helps but “time kills all deals”.

Hope the new guide helps…or gives you a chuckle.

An easy guide to keeping the political news in perspective
  1. The Wall Street Journal is read by the people who run the country.
  2. The Washington Post is read by people who think they run the country.
  3. The New York Times is read by people who think they should run the country, and who are very good at crossword puzzles.
  4. USA Today is read by people who think they ought to run the country but don’t really understand The New York Times. They do, however, like their statistics shown in pie charts.
  5. The Los Angeles Times is read by people who wouldn’t mind running the country, if they could find the time – and if they didn’t have to leave Southern California to do it.
  6. The Boston Globe is read by people whose parents used to run the country.
  7. The ChicagoSun-Times is read by people who aren’t too sure who’s running the country and don’t really care as long as they can get a seat on the train.
  8. The New York Post is read by people who don’t care who is running the country as long as they do something really scandalous, preferably while intoxicated.
  9. The Miami Herald is read by people who are running another country but need the baseball scores.
  10. The San Francisco Chronicle is read by people who aren’t sure if there is a country or that anyone is running it; but if so, they oppose all that they stand for. There are occasional exceptions if the leaders are handicapped, minority, feminist, atheist dwarfs who also happen to be illegal aliens from any other country or galaxy, provided, of course, that they are not Republicans.
  11. The National Enquirer is read by people trapped in line at the grocery store.

California produces 60 percent of American roses but the vast number sold on Valentine’s Day in the U.S. are imported, mostly from South America. Approximately 110 million roses, the majority red, will be sold and delivered in a three-day period.

We are all too familiar with the sobering statistics on marriage. Around 50% of marriages end in divorce, and often times the root of all that unhappiness is money. I recently saw a study that there are five money habits that most happy couples share.

  1. They make money a priority.
  2. They talk about and agree on financial goals.
  3. They set spending limits.
  4. They have joint bank accounts.
  5. They share responsibility for retirement planning and investment decisions.

At the end of the day, communication is the most important thing. I have been fond of saying that marriage is a contract that you negotiate the rest of your life. And good negotiations take good advertising, marketing and customer service. Gee… sounds like work…

Speaking of work, we at CDC Commercial like to consider selling as loving and serving people. We think that’s what makes us different than our competition.

Unemployment continues to drop in San Diego dipping to 4.2% in December. San Diego Airport passenger traffic was up 3.2 percent last year which is a good indicator for positive growth in our local economy. Tragically, the Chargers have decided to leave town. Regardless of where you stood on the issue, it will still be a hit of about 1600 jobs and $104 million in expenditures according to Allen Gin, an economics professor at the University of San Diego.

Taxes rarely make for exciting reading material but if you own investment property, you absolutely want to understand IRC 1031 (“1031 Exchange”). Keep in mind this does not mean you have to find someone to trade their property for yours. You actually sell like normal, use an accommodator to hold your money (title company) and buy another property. This allows you to defer capital gains taxes. I like to say that you should “defer until you die (at which time the tax goes away – in most cases) and refinance to live.”

After the sale, the clock starts ticking for you to find that new property. You have 45 days to identify a new property (or properties) you want to buy. You also must complete the purchase within 180 days. Since closing a property is unpredictable many chose to identify more than one property. And that is fine, provided you follow a few more rules:

  • Three-property rule: You can identify up to three potential properties to buy as long as you close on at least one of them.
  • 200% rule: You can identify any number of replacement properties you want to purchase so long as their eventual combined fair market value isn’t more than 200% of your relinquished property. So let’s say you sell a property for $500,000. The combined market value of your purchase should be no more than twice that, or $1 million.
  • 95% rule: You can ignore the 200% rule and identify any number of potential replacement properties for any amount as long as you buy 95% of the aggregate value of those properties. So if you sold a property for $500,000, you could identify five properties worth a total of $2,500,000. But you’d then have to actually buy at least $2,375,000 (that’s 95%) worth of those properties.

While these rules are complicated, they must be followed–there are no exceptions or extensions. If you mess up, the IRS could decide you don’t qualify for a 1031 exchange and send you a huge tax bill. So make sure you know how it works. If you’re in doubt, consult an accountant or real estate agent for more details.

Now the kicker – with the newly elected Congress and President, tax reform has been announced as a top priority, with a bill promised in 2017. Surprisingly, Sector 1031 may be eliminated. If you thought we were safe with a real estate guy in the White House, we are not. Congress is writing the bill. Once they pass it, President Trump will have to sign it (no line item vetos will be available!). Take action now – contact your congressmen and women. Click here to do easily. Deletion of this tax code will have a 13.1 billion dollar annual decline in annual real estate transaction according to Ernst & Young, LLP. That means it impacts everyone’s values (simple supply & demand).

Nick’s Numbers:

Hi all, thought I would share some numbers on total sales transactions and 1031’s in San Diego for 2016.

Total Market 1031s
# of sales 214 49
$ volume $628 mi $209 mil
Private 65% 76%
Institutional 35% 24%

When one of my kids was born the nurse told me that kids spell love -T-I-M-E. I have never forgotten that. So now I ask you to remember that time is how you spend your life. That means time should be spelled L-O-V-E. Be Happy! Hope you enjoy the story…


Sales and Marketing Perspective 

You see a gorgeous girl at a party.

You go up to her and say, “I am very rich. Marry me!”

That’s Direct Marketing.

You’re at a party with a bunch of friends and see a gorgeous girl.

One of your friends goes up to her and pointing at you and says, “He’s very rich. Marry him.”

That’s Advertising.

You see a gorgeous girl at a party.

You go up to her and get her telephone number.

The next day you call and say, “Hi, I’m very rich. Marry me.”

That’s Telemarketing.

You’re at a party and see a gorgeous girl.

You get up and straighten your tie; walk up to her and pour her a drink.

You open the door for her; pick up her bag after she drops it, offer her a ride, and then say, “By the way, I’m very rich. Will you marry me?”

That’s Public Relations.

You’re at a party and see a gorgeous girl.

She walks up to you and says, “You are very rich.”

That’s Brand Recognition.

You see a gorgeous girl at a party.

You go up to her and say, “I’m rich. Marry me.”

She gives you a nice hard slap on your face.

That’s Customer Feedback!!!


Welcome to 2017! As the Trump train enters Washington D.C., I am reminded of the words of Abraham Lincoln in his first inaugural address, when in the face of a very contentious environment, he invoked a call for “the better angels of our nature.”

For all my long-term clients, you will remember my annual Gold Report – our yearly forecast. Given the high speed of news delivery and the miniaturization of everything have made it obsolete, However, I will attempt to give you my prognostications for the year and a New Trump presidency in 14 bullet points:

● There will no doubt be a short-term stimulus to the economy. Tax cuts, reparation of overseas corporate profits, government spending on infrastructure will all provide a boost to the economy and probably inflation.
● Accompanying gains in consumer confidence will move the economy higher.
● Inflation is likely but if GDP can keep growing it should be manageable. Remember GDP is productivity times hours worked.
● The trade deficit will rise. That’s because a rising economy will lead to more Italian wine, German cars and Japanese game consoles. If tariffs are raised so as to lessen the deficit, prices will rise and recession will follow.
● Despite all the positives and froth in the economy, a recession (albeit slight) is a possibility. Lots of indicators; rising rates, unemployment near full employment, stock market topping, bond market reversing and yield curve flattening.
● Watch for the double impact of potential deportations. If we get rid of 2-3 million people (regardless of where you stand politically) it will have an impact on consumption. In the construction trades where Hispanics are as much as 50% of the work force, unavailable workers may increase already rising construction costs.
● Trade wars could affect costs; cement (most of our cement comes from Mexico), glass building facades and curtain walls (most comes from China) and lumber (a lot comes from Canada).
● Community colleges are likely to grow and get more funding as they train/retrain more trade workers and medical assistants.
● Freddie Mac and Fannie Mae may not survive.
● Dodd Frank to be gutted loosening up mortgage underwriting and less regulation.
● Congressional gridlock will ease with single party control of the three branches.
● Job creation, good demographic trends, wage growth and limited development pipeline bode well for commercial real estate.
● Rising interest rates will keep pressure on cap rates to rise (and lower values unless rents rise).
● Change taxes (lowering mostly) could influence yields and/or make more money available for investments.
Although most of you know Nick (my son) who has been working with me for the last eight years, starting this year we are going to carve out a section of my letter to share “Nick’s Numbers”:

Hi all, thought we’d start by looking at retail and office vacancy. As of the end of the 3rd quarter office had absorbed 540,655 SF with a vacancy rate decrease to 10.7%. There is still almost 750,000 SF of sublease space. Average rent throughout San Diego is $2.54 PSF. Retail vacancy has dropped to 4.1% after absorbing 336,053 SF.  Asking rents actually decreased slightly to $1.84 PSF. There is also 481,421 SF of retail space under construction in the County.
~ Nick

As we focus on a Happy and Prosperous New Year along with building walls and fences, I thought you would enjoy the story…

Once upon a time, two brothers who lived on adjoining farms fell into conflict. It was the first serious rift in 40 years of farming side-by-side, sharing machinery, and trading labor and goods as needed, without a hitch.

Then the long collaboration fell apart.

It began with a small misunderstanding, and it grew into a major difference, and finally, it exploded into an exchange of bitter words, followed by weeks of silence.

One morning, there was a knock on John’s door. He opened it to find a with a carpenter’s toolbox. “I’m looking for a few days’ work,” he said.

“Perhaps you would have a few small jobs here and there that I could help with? Could I help you?”

“Yes,” said the older brother. “I do have a job for you. Look across the creek at that farm. That’s my neighbor. In fact, it’s my younger brother!

Last week, there was a meadow between us. He recently took his bulldozer to the river levee, and now there is a creek between us. Well, he may have done this to spite me, but I’ll do him one better. See that pile of lumber by the barn? I want you to build me a fence. An 8-foot fence so I won’t need to see his place, or his face, anymore.”

The carpenter said, “I think I understand the situation. Show me the nails, and the post-hole digger, and I’ll be able to do a job that pleases you.”

The older brother had to go to town, so he helped the carpenter get the materials ready and then he was off for the day. The carpenter worked hard all that day – measuring, sawing, and nailing. About sunset, when the farmer returned, the carpenter had just finished his job.
The farmer’s eyes opened wide, his jaw dropped. There was no fence there at all. It was a bridge… a bridge that stretched from one side of the creek to the other! A fine piece of work, with handrails, and all!

And, the neighbor, his younger brother, was coming toward them, his hand outstretched… “You are quite a fellow to build this bridge, after all I’ve said and done.”

The two brothers stood at each end of the bridge, and then they met in the middle, taking each other’s hand. They turned to see the carpenter hoist his toolbox onto his shoulder.

“No, wait! Stay a few days. I’ve a lot of other projects for you,” said the older brother.

“I’d love to stay on,” the carpenter said, but I have many more bridges to build.


cdc commercial christmasWell with the election behind us there is nowhere to look but the future. One result of the election is the legalization of marijuana. Industrial and retail stand to gain from this law change. Growing at scale requires lots of space and consistent climate, boosting demand for large warehouse space. Edibles require packaging and distributor space. Even hard to lease former bank vault space is in demand to handle the large amount of cash storage (because banks still won’t accept or lend to growers). Legalization will also boost retail with marijuana shops proliferating like liquor stores. Also could be interesting to see if it boosts tourism as people travel as they do to Napa Valley or craft brew areas.

While we may see loosening of energy regulations under the new administration, you should look to take advantage of retrofit rebates while you can to lower your energy costs. If you are looking for a resource contact Jim Murphy at CEI – jmurphy.solutions@gmail.com. Your net cost should be zero and you will have new bulbs and lower monthly costs.

One thing that has definitely gone up and probably will continue to are rates. The 10-year treasury went from 1.71% to 2.36% from election night to present. Time to lock in still low rates or buy and borrow as long term as you can.

The USD Real Estate Index remains unchanged. Funny it is about where it was at the beginning of the year (but it’s been a rollercoaster through the year). The initial forecast for job growth is 30,000 for 2017. This is solid but less than 2016 and to put a further dent in unemployment. (Congrats to USD for publishing this bell weather index for 25 years now!)

While we usher in a new era of making America great, we need to be vigilant of how technology is likely to upend the globe. According to Moshe Vardi, a professor at Rice University, half of the world’s workers will be replaced within the next 30 years. Robots may take over many spheres of life. On the positive side, we will have more leisure time but the question remains, without a job how will you pay for it? Self driving cars could reduce the need for parking structures, curbside parking, parking lots and allow for more redevelopment, repositioning and densification of real estate sites. 3-D printing will move from on-demand component production to fully automated construction (as recently witnessed in China). The internet of things (IOT) will allow for more and more automation of buildings thereby making them more profitable. One I particularly like is on premises security where cameras are motion sensitive and a remote security monitor can see movement at your property at night and actually speak to the loiterer and warn them of an impending police visit or sound a siren.This allows one security guard to monitor 100’s of properties at once in real time, all of the time. Either way you look at it, a world without work is coming – it could be utopia or it could be hell.

Well besides celebrating the Holidays, I am pleased to announce that CDC Commercial will be celebrating 20 years in the business this month. As I reflect on this and the approaching Holidays, I want to thank each of you for the relationships we have and those that will grow in the future. If there is one thing the recent election has taught us is that we are a diverse society. Each of us is different in our own way but when harnessed together we can achieve great things. I hope you enjoy this year story….

The real story of Rudolph the Red-Nosed Reindeer
A man named Robert L. May, depressed and broken hearted, stared out his drafty apartment window into the chilling December night. His 4-year-old daughter Barbara sat on his lap quietly sobbing. Bob’s wife, Evelyn, was dying of cancer.

Little Barbara couldn’t understand why her mommy could never come home. Barbara looked up into her dad’s eyes and asked, “Why isn’t Mommy just like everybody else’s Mommy?”

Bob’s jaw tightened and his eyes welled with tears. Her question brought waves of grief, but also of anger. It had been the story of Bob’s life. Life always had to be different for Bob.
When he was a kid, Bob was often bullied by other boys. He was too little at the time to compete in sports. He was often called names he’d rather not remember. From childhood, Bob was different and never seemed to fit in.

Bob, after completing college, married his loving wife Evelyn and was grateful to get a job as a copywriter at the Timothy Eaton Department Store, in Toronto, during the Great Depression. Then he was blessed with his little girl. But it was all short-lived. Evelyn’s bout with cancer stripped them of all their savings and now Bob and his daughter were forced to live in a two-room apartment in the poorer area of Toronto. Evelyn died just days before Christmas in 1938.

Bob struggled to give hope to his child, for whom he couldn’t even afford to buy a Christmas gift. But if he couldn’t buy a gift, he was determined a make one – a storybook!

Bob had created an animal character in his own mind and told the animal’s story to little Barbara to give her comfort and hope. Again and again, Bob told the story, embellishing it more with each telling.

Who was the character? What was the story all about?

The story Bob May created was his own autobiography in fable form. The character he created was a misfit outcast like he was. The name of the character? A little reindeer named Rudolph, with a big shiny nose. Bob finished the book just in time to give it to his little girl on Christmas Day.

But the story doesn’t end there.

The general manager of the T. Eaton Store caught wind of the little storybook and offered Bob May a nominal fee to purchase the rights to print the book. They went on to print, “Rudolph the Red-Nosed Reindeer” and distribute it to children visiting Santa Claus in their stores.

By 1946, Eaton’s had printed and distributed more than six million copies of Rudolph. That same year, a major publisher wanted to purchase the rights from Eaton’s to print an updated version of the book.

In an unprecedented gesture of kindness, the CEO of Eaton’s returned all rights back to Bob May. The book became a bestseller.

Many toy and marketing deals followed and Bob May, now remarried with a growing family, became wealthy from the story he created to comfort his grieving daughter. But the story doesn’t end there either. Bob’s brother-in-law, Johnny Marks, made a song adaptation to Rudolph. Though the song was turned down by such popular vocalists as Bing Crosby and Dinah Shore, it was recorded by the singing cowboy, Gene Autry.

“Rudolph the Red-Nosed Reindeer” was released in 1949 and became a phenomenal success, selling more records than any other Christmas song, with the exception of “White Christmas.”

The gift of love that Bob May created for his daughter so long ago kept on returning back to bless him again and again. And Bob May learned the lesson, just like his dear friend Rudolph, that being different isn’t so bad. In fact, being different can be a blessing.


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