Monthly Letter for January 2017

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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.

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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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Benjamin Franklin campaigned to have the turkey named as the United States’ national bird, but it eventually lost out to the Bald Eagle (how embarrassing would it have been if he’d won his campaign?).

I know that I usually have my story at the end (and I still do this month) but with us fast approaching the end of the political season and with the political state being what it is, I thought I would inject a little more humor…

It was getting a little crowded in Heaven, so God decided to change the admittance policy. The new law was that in order to get into Heaven, you had to have a really bad day on the day that you died. The policy would go into effect at noon the next day.

So, the next day at 12:01 the first person came to the gates of Heaven. The Angel at the gate, remembering the new policy, promptly asked the man, “Before I let you in, I need you to tell me how your day was going when you died.”

“No problem,” the man said. “I came home to my 25th-floor apartment on my lunch hour and caught my wife having an affair. My wife was naked, but her lover was nowhere in sight.”

“So, I started to search the entire apartment. Just as I was about to give up, I happened to glance out onto the balcony and noticed that there was a man hanging off the edge by his fingertips! The nerve of that guy! Well, I ran out onto the balcony and stomped on his fingers until he fell to the ground. But wouldn’t you know it, he landed in some trees and bushes that broke his fall and he didn’t die.”

“This ticked me off even more. In a rage, I went back inside to get the first heavy thing I could get my hands on to throw at him. Oddly enough, the first thing I thought of was the refrigerator. I unplugged it, pushed it out onto the balcony, and tipped it over the side. It dropped 25 stories and crushed him! The excitement of the moment was so great that I had a heart attack and died instantly.”

The Angel sat back and thought a moment. Technically, the guy did have a bad day. It was a crime of passion. So, the Angel announced, “OK, sir. Welcome to the Kingdom of Heaven,” and let him in.

A few seconds later the next guy came up. To the Angel’s surprise, it was Donald Trump.

“Mr. Trump, before I can let you in, I need to hear about what your day was like when you died.”

Trump said, “No problem. But you’re not going to believe this. I was on the balcony of my 26th floor apartment doing my daily exercises. I had been under a lot of pressure so I was really pushing hard to relieve my stress. I guess I got a little carried away, slipped, and accidentally fell over the side! “Luckily, I was able to catch myself by the fingertips on the balcony below mine.”

“But all of a sudden this crazy man comes running out of his apartment, starts cussing, and stomps on my fingers. Well, of course I fell. I hit some trees and bushes at the bottom, which broke my fall, so I didn’t die right away.”

“As I’m laying there face up on the ground, unable to move and in excruciating pain, I see this guy push his refrigerator of all things off the balcony. It falls the 25 floors and lands on me, killing me.”

The Angel is quietly laughing to himself as Trump finishes his story. “I could get used to this new policy,” he thinks to himself.

“Very well,”the Angel announces. “Welcome to the Kingdom of Heaven,” and he lets Trump enter.

A few seconds later, Bill Clinton comes up to the gate. The Angel is almost too shocked to speak.

Thoughts of assassination and war pour through the Angel’s head.

“Finally”, he says, “Mr. President, please tell me what it was like the day you died.”

Clinton says, “OK, picture this. I’m naked, inside a refrigerator……”

Joking aside, it is not a laughing matter that the only policy being addressed today is monetary policy (what the fed is doing with interest rates). We need our politicians on both sides of the aisle to come out after the election and address fiscal policy – taxes and loop holes, entitlement programs and spending.

When the ship is taking on water you really don’t care who the captain slept with or who they sent their last email to. Economists, with the clarity of hindsight, have finally concurred that the financial crisis of 2008-2009 was caused by a housing bubble. But who is seeking out that next bubble? Is it artificially low rates and financial engineering? Is it the collapse of the healthcare industry under the burden of Obamacare? Is it the over leveraged millennials from the college loan debacle? Is it the banking crisis as they pay all the fines imposed in 2008-2009? Is it the exposure of the press missing a story or the truth of stories that finally bursts a balloon?

American’s are about as wealthy as they’ve ever been (though it may not seem so). Unfortunately, the latest expansion of wealth has been driven more by rising asset prices (yes that includes residential and commercial real estate) than by improved economic fundamentals. The problem with big business is that they have continued to hold back on capital expenditures (including real estate), hiring and infrastructure. Instead they are borrowing at incredibly low rates, buying back their stock and thereby increasing its value (and their executive teams bonuses). Eventually rates rise and the debt strangles these companies because they have not invested in people and capital so have no way to grow themselves out of the problem (sounds eerily like our government). Ultimately this kind of “financial engineering” leads to insolvency. The stages of insolvency go like this; (1) sell assets, (2) sell stock, (3) convert debt to equity, and (4) government or lender bail out (if you haven’t watched the movie, The Big Short, if is a must see).

On the positive side San Diego’s unemployment rate improved again in September dipping to 4.7%. Strength seemed to come from educational and health services (we would echo that based on deals we have seen and are doing). Retail, construction and manufacturing were all down – not a good sign!

Assembly Bill 2093 is now in effect (but looks like it won’t be enforced until after January 1, 2017). The new bill requires even more disclosure with regards to ADA accessibility. The amended civil code requires landlords to provide prospective tenants with any report (CASp) and/or disability access inspection certificate issued by a Certified Access Specialist (CASp). We are reviewing legal, leases and procedures now – more to follow.

Lastly during the summer, I merged my office direct dial and my cell phone. So the only number you need to call or text me is (858) 486-9999.

I hope that Democracy and the American Eagle soar at the polls on the 8th and may you be filled with turkey and not hot dogs at Thanksgiving. Hope you enjoy the story…

Regards,

 

 

The Hot Dog Stand

A man lived by the side of the road…and sold hot dogs.
He was hard of hearing, so he had no radio.
He had trouble with his eyes, so he had no newspaper, but he sold great hot dogs.
He put up a sign on the highway, telling how good they were.
He stood by the side of the road and cried, “Buy a hot dog, mister!”
And people bought.
He increased his meat and bun order, and bought a bigger stove to take care of his trade.
He got his son home from college to help him. But then something happened.
His son said, “Father, haven’t you been listening to the radio? There’s a big depression coming on. The international situation is terrible, and the domestic situation is even worse.”
Whereupon his father thought, “Well, my son has gone to college. He listens to the radio and reads the newspaper, so he ought to know.”
So, the father cut down on his bun orders, took down his advertising signs, and no longer bothered to stand on the highway to sell hot dogs.
His hot dog sales fell almost overnight!
“You were right son,” the father said to the boy.
“We are in the middle of a great depression.”

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First let me say thank you to all the well wishers for my eventful August. I am glad to report that I feel great and am back working at my “normal” frenzied pace. I am also back to all my physical activities including golf (running is on hold for another month but I am walking 5 miles a day plus swimming daily).

I suppose I am throwing myself at work so I can be rich. I suppose it is a worthwhile endeavor since I just read of a study by the University of Michigan that found that the richer you are, the longer you’ll live.

Well it looks like more of us are working because the San Diego unemployment rate dropped from 5.3% to 5%. This equals the national rate. For the month, the area gained 500 jobs in retail but lost 1500 in restaurants. Those retail jobs weren’t in the golf industry though, with the sale of golf balls and golf shoes being down 10% year to date Nationwide.

In a sign that the local area may be facing some turbulence, the USD Burnham Moores Center for Real Estate index slipped for the third consecutive month. It noted that there were only 28,000 jobs created locally in July compared to 40,000 last year. You may wonder why each month I focus on jobs and unemployment. Well after 30 years in the business, I can assure you that employment is the most direct indicator of the future of commercial real estate, construction and rent growth. Rule #1 in real estate: “Buy where more people are moving in than moving out.”

The most notable market trend I can report is that deals seem to be taking a longer time to get done again. I can’t tell you yet if it is people’s lack of confidence or continued bureaucracy and regulation. We currently have escrows that are 2-3 years old and lease deals that have taken 6-12 months! recently read that in the 1990’s, regulation cost a small mom & pop business $10,000 a year. Today that is $115,000. Compliance has become the fastest growing expense in business. On the topic of regulation, January 1, 2017 the implementation of AB 802 will begin (unless we are able to postpone or repeal it). Otherwise, we will be saddled with a law of questionable integrity and benefit that includes the following troubling elements;

  • Mandatory energy benchmarking and public disclosure of results by commercial and multi-family buildings of 50,000 square feet or greater on a regular, but unknown, basis going forward.
  • Non-compliant owners are now subject to civil penalties ranging from not less than $500 and no more than $2,000 for each day owner is out of compliance. (AB 802, unlike AB 1103, has very specific language related to penalties and fines.)
  • Parties to a CRE transaction no longer have a right to confidential energy use benchmarking data to help make leasing or purchasing decisions. Owners and tenants no longer have a right to privacy of confidential operating data. (Both of these rights were extinguished in the repeal of AB 1103.)
  • Owner are mandated to collect whole-building energy use data directly from the utility company for all meters serving the building including spaces, suites and meters serving tenant spaces – without and regardless of tenant authorization cooperation or agreed up lease terms.
  • Owners and tenants have absolutely no control over the management or further distribution of the private energy use data by the utility companies, the state of California or any third party with access to the published data.
  • Tenants are not mandated to provide to owner the additional occupancy characteristics required for accurate and comprehensive benchmarking analysis through the required reporting tool – energy star portfolio manager.

CONTACT YOUR LOCAL STATE REPRESENTATIVE!!!!

Another reason to work hard and save your money is that according to Moshe Vardi of Rice University half of workers jobs across the world will be replace by machines by 2025. Lest you be worried that our longevity and happiness is solely revolving around our jobs and money, I will point out that Harvard recently released a study that shows the single biggest contributor to happiness across all demographics, rich-poor alike, is good relationships. Social connections are good for us (loneliness kills). Not the number of friends but the quality of close relationships. We at CDC want to thank you for the close relationship we have with so many of you. Oh, and play more golf with friends ….

Regards,

Do you know who, in 1929, was:
  1. President of the largest steel company?
  2. President of the largest gas company?
  3. President of the New York Stock Exchange?
  4. The greatest wheat speculator?
  5. President of the Bank of International Settlement?
  6. The Great Bear of Wall Street?
These men should be considered some of the world’s most successful men, at least they found the secret of making money. Now, more than 55 years later, do you know what became of these men?
  1. The president of the largest steel company, Charles Schwab, died a pauper.
  2. The president of the largest gas company, Howard Hopson, was insane.
  3. The president of the New York Stock Exchange, Richard Whitney, was released from prison to die at home.
  4. The greatest wheat speculator, Arthur Cooger, died abroad insolvent.
  5. The President of the Bank of International Settlement shot himself.
  6. The Great Bear of Wall Street, Cosabee Rivermore, died by suicide.

The same year, 1929, Arnold Palmer was born, he would go on the win the Masters four times, the U.S. Open once and the Open Championship twice. In 1960 at the U.S. Open at Cherry Hills, Denver he ordered a half iced tea and half lemonade. A woman sitting nearby overheard him and ordered “that Palmer drink,” thus giving the beverage its name – an Arnold Palmer. The King of Golf left behind a dynasty, will be remembered forever and played golf to his dying day.

Conclusion: stop worrying about business and play golf!

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Never have I been so happy to be writing this month’s letter (as you will see by this month’s story). But first if you will indulge me on my commentary on the coming election and the state of our country.
Long after this election is over Trump and Hillary will still be rich. Half of us will be able to claim we “won.” The other half will have four years to say “that’s why I didn’t vote for ___.” Just remember we live in a different America than they do. We have to live, work and eat with each other in OUR America. We don’t get to hop on a private jet and fly away from our communities’ problems. We are what makes this country what it is, not the President. He/she will not stop crime in our neighborhoods, he won’t stop people from stealing your identity, and she will not stop any one from shooting up our local night clubs. Hillary will not come teach your child right from wrong, but you can. Trump will not come to your house and teach her math, but you can. WE as a UNITED people with sound morals, values and ethics can make this country whatever we want.  Vote for whom ever you want, but remember WE are the ones that shape our communities, not them.
I recently hear a term that describes the problem we face. It is called “politically motivated asymmetry.” That is where you love and they hate causing 50% of the electorate to seemingly always be unhappy.
With a near zero interest rate environment (dare we say, possible less than zero environment), don’t be surprised if we continue to see unsustainably low cap rates for longer than any of us envisioned possible. Expect commercial real estate to continue to be seen as a store of value with a positive yield.
Although unemployment through July rose from 5.1% to 5.3% it is still below last year’s 5.5% at this time. A positive indicator is that passenger traffic at San Diego International increased by 3.3% from a year ago. Now my favorite positive indicator is that San Diego now has 121 breweries and only 111 McDonalds!
Speaking of transportation, I would be remiss if I didn’t point out that U.S. and Mexican transportation officials recently announced an agreement that will clear the way to rebuild a 70-mile stretch of railway between San Diego and Mexico. When done, Tijuana factories (maquiladoras) will be connected to the U.S. Rail Services. This will lessen traffic at the border and should contribute about $6 billion of lost activity back to our economy.
Property taxes are typically the largest single expense associated with real estate ownership. Many people are not aware that assessed property values can be appealed. I was recently contacted by the folks at Tax Appeal Consultants (www.taxappealconsultants.com). They handle the entire process and typically charge 25% to 50% of one year’s tax savings (and only if successful). Depending on your county, filing deadlines are either September 15th or November 30th.
After you read this month’s story you will be glad to hear that the entire team at CDC Commercial didn’t miss a beat, despite me missing a few….

Regards,

How being in shape and healthy nearly killed me!
As you may know I am pretty healthy and work hard at it. I run Marathons and Triathlons and walk when I golf. I also eat pretty lean and work hard to get all the fruits, seeds, nuts and vegetables into my diet. My Cholesterol levels are all low. I even had an appointment scheduled for my Birthday (August 9th) to have a Life Scan where they do a heart ultra sound and  EKG and bone density just to establish my baseline for being 55.
In late July, we went back to Omaha for our Niece’s wedding. I brought my golf clubs so a few of us could go golfing. I got on the escalator at Lindberg field (golf clubs first) and turned to pull my other bag on. What I didn’t realize was that the clubs were not on the step so they were getting taller than me and coming at me rapidly. I couldn’t step back so got pushed over my bag. Got a big bruise on my hip but none the worse for the wear. Came home 4 days later and went for my morning run. Told Candy it was just hard work. I chalked it up to flying, maybe a bug or being tired. Same thing a couple of days later but thought it was just the humidity.
Golfed on Saturday and got light headed a couple of times but chalked it up to the humidity and that I was playing with a new group who played at a 3-hour pace instead of my normal 4-hour pace (them riding and me walking). Came home and didn’t think any more about it. Next night had some pain in my chest, sat up and had a big burp – gas. Two days later same thing. Nothing for a day. Went for my run on Tuesday (2nd) and got 200 yards and said something is just not right. Walked home told Candy and said I should probably go to the doctor. Candy had an appointment and after it was done we decided to have her drive me to the doctor. She went to get her keys and I said I would call and see if I should go to the doctor or Urgent care. I couldn’t make the call and got up and told her never mind, call 911. Within seconds I went from a pain scape of 1 to 9.5 and went clammy and then sweated through a shirt to just hanging on to stay conscious. Paramedics got to our house in 5 min or less and spent less than 10 minutes there – best pit stop turn around ever! The amazing thing was that never while they were there or in the ambulance ride to Palomar was my pulse over 100 and my blood pressure stayed pretty stable and in normal ranges. Meantime, they were pouring morphine and Nitrix into me. I got to ER and doctor said, don’t bother, let’s go straight to the Cath Lab (OR). Two hours later and two stents I was recovering in my room. Next day up walking and within 3 or 4 days was back walking 5-6 miles a day. So the recap is that they think a clot from the bruise may have caused it. Fortunately, being in good shape, the blood flow rerouted through a smaller artery and kept me going until they could unblock it so the heart never stopped and everything kept working throughout (like a lawnmower sputtering as it runs out of gas!). 1 in 10 chance of survival.
Part II
I spent the week working and getting caught up. Doctor cleared me for all activities except running and lifting. Sunday (14th) at 4 am Candy said I was thrashing all about and then went still and pale. She yanked me out of bed and started CPR and called paramedics. They zapped me a few times and got me to ER where they zapped me 7-8 more times and installed a pacemaker. I woke up Monday and had no idea what had happened (I still accuse Candy of beating the crap out of me and then blaming it on a 2nd heart attack). I got out of the hospital Wednesday (17th) afternoon and have been back to work since the 22nd. The cardiologist shrugs his shoulders and says, “Stuff happens” and that an arrhythmia like I had can occur during the healing of the heart from the first heart attack. He said it is another 1 in 10 chance. My Doctor shakes his head and says I am the healthiest heart patient he has. And surviving two 1 in 10 events makes me the luckiest! God and medicine are good!
Lessons learned;
  1. Take lots of aspirin if you sustain a bad bruise, especially if you are flying.
  2. Watch your blood / cholesterol numbers
  3. Eat food like it was medicine
  4. Get a heart scan
  5. Make sure you and your significant other all know CPR.
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Experience is that thing you get a minute after you needed it.

Well on the 9th I will turn the ripe old age of 55. I hear that 65 is the new 55 so I can only assume that 55 is the new 45! Groucho Marx used to say, “Anyone can get old. All you have to do is live long enough.” I was bolstered recently by two studies, one said that time starved people are happier than those who want more money. I don’t know about the money part but I must be happy as busy as I am! The second study said extremely busy people over 50 do better on cognitive tests. I am very happy though to be celebrating our 30th wedding anniversary this month. We have had a fun ride and have accomplished the “three E’s” with our four children; educated, employed, elsewhere!

Unemployment in San Diego took a turn for the worse in June edging up from 4.2% to 5.1% but remaining just below the 5.2% number of last year (so basically we are a wash). The Silvergate Bank business forecast reports the lowest confidence in 13 years from local business leaders. The biggest complaint is the new city minimum wage of $10.50 per hour (not to mention state increase to $15 in January). Time to assess the impact on your business or your tenants and how this will/could impact your rental stream.

As I have often preached, real estate values go up in places where more people are moving in than moving out. Gary London, a real estate consultant, recently reported that San Diego is in the midst of a “sea change” in how we are growing and how we are accommodating (or not) that growth. We have mostly run out of developable land, so most municipalities are instituting plans to grow vertically. This presents a number of tricky problems, below is a summary;

  • The unincorporated County contains practically all of the undeveloped land, and they put in place a new General Plan that can accommodate growth, but they have set a very “high bar” for new housing development.
  • The majority of new housing is planned to be multifamily, yet that is inconsistent with historical demand and housing preferences for single family homes. Aging millennials may disagree with being locked into “urban” units, as they start to raise families.
  • There is a long standing, and rising shortage of new housing construction. This is bidding up the cost of all housing and creating a regional inventory of housing that is unaffordable to many.
  • While the regional forecast is in sync with the many cities and County who say they will accommodate new housing through their General Plans, the “on the ground” experience of developers is very different. Project proposals regularly receive push back in the neighborhoods, resulting in no project or a smaller project.
  • The consequences of this can be dire including economic stagnation and decline; or San Diego may transform into a “boutique” region that is affordable only to the well-to-do.
I don’t know if it is just me aging but have you noticed the shift of healthcare uses moving into retail? Americans are spending more on healthcare and want to do so in locations that are convenient and safe. So now you will be able to get your blood pressure checked just steps from the steakhouse. The list of unconventional uses become conventional include, tattoo parlors, massage therapy, schools, gun ranges, churches and even funeral homes. Although the tenants may change, as long as humans are hard-wired to connect and congregate, the core purpose of retail will not change. It is up to the tenant what that experience will be.

Still on the topic of aging and real estate, I thought I would share the slides from a presentation on ADA that our office attended. Municipalities continue to tighten enforcement and we continue to see our clients being sued by advocates. This is a topic you should stay educated on:

As many of you know, I get obsessed with crazy challenges (trying to run a marathon on all 7 continents, trying to play golf in all 50 states, played 50 holes of golf on my 50

th birthday). Well for my 55th birthday, I am attempting to highlight volunteerism and my favorite charity, Interfaith Services (an Interdenominational Agency helping Veterans and homeless). Starting at 6am and ending at 5pm I am going to attempt to do 55 volunteer tasks. From you at minimum think about volunteering for something (it will make you feel younger and happier). If you feel so moved, please donate to Interfaith and my challenge – in the other section donate $55 and I will match the donation (of course if you wish to donate more feel free to).

If I would have known I was going to live this long, I would have taken better care of myself! Hope you enjoy the story…

Regards,

Senior Wedding
Jacob, age 92, and Rebecca, age 89, living in Miami, are all excited about their decision to get married. They go for a stroll to discuss the wedding, and on the way they pass a drugstore, Jacob suggests they go in.
Jacob addresses the man behind the counter: “Are you the owner?”
The pharmacist answers, “Yes.”
Jacob: “We’re about to get married. Do you sell heart medication?”
Pharmacist: “Of course, we do.”
Jacob: “How about medicine for circulation?”
Pharmacist: “All kinds.”
Jacob: “Medicine for rheumatism?”
Pharmacist: “Definitely.”
Jacob: “How about suppositories?”
Pharmacist: “You bet!”
Jacob: “Medicine for memory problems, arthritis and Alzheimer’s?”
Pharmacist: “Yes, a large variety – the ‘works’.”
Jacob: “What about vitamins, sleeping pills, Grotto, antidotes for Parkinson’s disease?”
Pharmacist: “Absolutely.”
Jacob: “Everything for heartburn and indigestion?”
Pharmacist: “We sure do.”
Jacob: “You sell wheelchairs and walkers and canes?”
Pharmacist: “All speeds and sizes.”
Jacob: “Adult diapers?”
Pharmacist: “Sure.”
Jacob: “We’d like to use this store as our Bridal Registry.”
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“Politicians are people who, when they see light at the end of the tunnel, go out and buy some more tunnel.”

Well the economy continues to muddle through a market of mixed signals. The rest of this year, like the whole recovery, should be good but not great. But by traditional standards, it has been a long upturn, however irregular. For the first time in a long time I am hearing whispers of a downturn coming. At the same time, the people in the trades are all VERY busy. Many working around the clock to keep up with the demand. On a recent visit to the barber I was reminded of something my dad had said. He said, “When they’re trading stock tips at the Barber shop, it’s time to be out of the market.” This was brought sharply to my attention on my last visit when the guy in the next chair and his barber were exchanging commercial real estate tips.

To further bolster this iceberg warning, take a look at this chart.

CRE-vs-Residential-1</>

The San Diego Regional Chamber of Commerce reported that their business outlook index had a sharp drop. Respondents cited, unknowns related to minimum wage increases. It takes a lot of courage to own a business; fear of the unknown is understandable.

Speaking of the unknown, we are entering the political season with both party’s conventions this month. Fasten your seat belt, drop your goggles down and hang on for a wild ride. Whatever the outcome, it does not portend well for the stock market and indirectly to the real estate market. Take a look at this chart and its massive correlation to presidential turnover.

Presidential chart

For those of you who remember the children’s story, “The King has no Clothes,” I think we are playing out this story in our economy and what I now call quantitative failure.

If my prediction is right and we see slowing next year, what can be done? Wise investors, tenants and brokers plan for the worst.

Treat each property (or even each tenant) as a standalone business, each its own profit center. You can further that strategy by boosting reserves and contingency funds. These safeguards prevent soft markets turning into loss of income or worse a liquidation event.

Besides the above advice, I thought I would share these 18 pieces of advice for real estate investors.

18 Pieces of Advice for the Real Estate Investor

  1. It’s not how much money you make that matters, it’s how much you keep.
  2. Don’t let friends, family, or co-workers talk you out of real estate investing unless they have more money that they know what to do with. If that’s the case, do what they’re doing.
  3. Free contracts are worth what you pay for them. Have your contracts approved by an attorney who will defend them in court. If you have to ask why, you’re new to the business.
  4. If you own real estate, it’s not a matter of “if” you go to court, it’s only a matter of “when.”
  5. Inspections are not an expense, they’re an investment. We have spent money to repair hidden problems that an inspection would have uncovered.
  6. You will pay for education, either ahead of time from a mentor or by the mistakes you make as you go through the process.
  7. We’re in the problem solving business. Find out what your customer needs, then craft a solution to their problem.
  8. Know your exit strategies (have several) before you buy.
  9. Manage your tenants, don’t let your tenants manage you.
  10. If a potential tenant doesn’t have enough money for their deposit and first month’s rent they won’t have enough money to make the monthly payments.
  11. If a potential tenant says, “the Lord will help me make my payments” you can be pretty sure you’ll end up evicting them both.
  12. A millionaire makes $500 per hour so if a job (painting the walls and repairing a toilet) can be done for less than $500 per hour, hire it out.
  13. Never get greedy. The best deals are the ones where everybody wins.
  14. In real estate, there is such a thing as good debt.
  15. Don’t wait until you know it all to get started. None of us know it all.
  16. It’s always a great time to be in real estate, you simply have to pay attention to the economy and real estate fluctuations to know how to direct your investments.
  17. Don’t wait to buy real estate, buy real estate and wait.
  18. Set up your real estate investment entities (LLC, S-Corp, etc.) early in your career to best protect you and your investments as well as to prepare yourself to take advantage of all the many tax benefits real estate offers.

Elephants have long memories and just keep plodding forward, like all of us in real estate. Just remember to not be lulled into a false sense of security…hope you enjoy the story.
Regards,

Elephant Story

In 1996, Peter Davies was on holiday in Kenya after graduating from Louisiana State University.

On a hike through the bush, he came across a very young bull elephant standing with one leg raised in the air. The elephant seemed distressed, so Peter approached it very carefully. He got down on one knee, inspected the elephant’s foot, and found a large piece of wood deeply embedded in it. As carefully and as gently as he could, Peter worked the wood out with his knife, after which the elephant gingerly put down its foot.

The elephant turned to face the man and with a rather curious look on its face, stared at him for several tense moments. Peter stood frozen, thinking of nothing else but being trampled. Eventually the elephant trumpeted loudly, turned and walked away. Peter never forgot that elephant or the events of that day.

Twenty years later, Peter was walking through the Chicago Zoo with his girlfriend. As they approached the elephant enclosure, one of the creatures turned and walked over to near where Peter and his girlfriend Misty were standing. The large bull elephant stared at Peter, lifted its front foot off the ground, then put it down. The elephant did that several times then trumpeted loudly, all the while staring at the man.

Remembering the encounter in 1996, Peter could not help wondering if this was the same elephant. Peter summoned up his courage, climbed over the railing and made his way into the enclosure. He walked right up to the elephant and stared back in wonder. The elephant trumpeted again, wrapped its trunk around one of Peter legs and slammed him against the railing, killing him instantly.

Probably wasn’t the same elephant.

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“Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other.”
                                                                                                        –  Oscar Ameringer

Well I continue to struggle to gain control over my insane To Do List! Time management experts tell you to categorize tasks into important and urgent. Important things make life cool, fun, exciting, profitable or all of the above. The urgent tasks need to be done now, now, now. Things that are important and urgent are the things you should do first. Things that are neither important or urgent probably aren’t going to happen so you may as well scratch them off the list. The problem in my life is that the urgent stuff piles up because I’m busy working on the important stuff! That would all be fine except there is a reason they are called urgent. The more of them that stack up, the more stress I feel. The urgent things in life are a bit like broccoli. You know you should do them. You just don’t want to. I have another word for it, it’s called, “but first syndrome.” – you know, I’ll do it “but first I need to ….”

Well the classical business model is to hire more labor and/or increase productivity, typically through technology. In our case, we have increased the hours of our admin and we have hired a design firm to take over our flyer production. We’ve also been using an intern to get some of our task backlog cleared up. On a personal note, I went to a higher end Bluetooth headset ($200 Plantronics) and am using Siri to dial my calls, send and read emails, text messages and schedule appointments. I am also in process of transitioning to a Microsoft Surface as my computer and tablet and hope to eliminate the piles of handwritten notes that here to date, have had to be scanned into deal folders.

So why do I tell you all this? To illustrate how things are changing and how the working poor are going to be displaced by robotics and people automating more simple menial tasks. I remember my first computer and wondering how useful could it be. I remember my first smartphone and wondering why everyone didn’t have one right away. Let me just tell you, Siri (and its super sister Viv (coming soon), Cortana, Amazon’s Alexa, IBM’s Watson are all going to be a part of your life before you know it. Google’s CEO Sundar Pichal says the next evolution is AI (Artificial Intelligence). Soon we will all have intelligent assistants helping us through our day. On top of all that, think about the increase in productivity as we move to driverless cars. Imagine how much work you could get done during that 30 to 40-minute commute or drive to an appointment.

So we all know that productivity gains are good for our economy, GDP and Stock market but what impact will it have on our real estate. Take Carl’s Jr as an example. They are looking to bring back automated order kiosks and automated cooking lines The reality is that the working poor will be displaced by robotics. I am seeing security guards being replaced by cameras. Some are now live monitored where a guard can address a trespasser and tell them to leave and blast them with sound or light if they don’t.

Thankfully two of the faster growing sectors healthcare and technology are strong sectors in San Diego and probably why we have about 5% more people employed than at the peak in 2007. The unemployment rate in San Diego is now at 4.5%.

If you own real estate with a large bank or restaurant space, you might want to start thinking about how you can downsize and keep them in a smaller footprint. The 5-8,000 SF bank or restaurant is fast becoming a dinosaur with both looking at more like 3,500 SF now.

Well, as we keep our heads down getting all of your important and urgent tasks done I hope that you too are not infected with “But First Syndrome” …hope you enjoy the story.

Regards,

Butfirst….

It’s like when I decide to do the laundry -1 start down the hall and notice the newspaper on the table. Okay, I’m going to do the laundry – Butfirst I’m going to read the newspaper.

Then I notice the mail on the table. Okay, I’ll just put the newspaper in the recycle stack, Butfirst

I’ll look through that pile of mail and see if there are any bills to be paid.

Now Where’s the checkbook? Oops! There’s the empty glass from yesterday on the coffee table.

I’m going to look for that checkbook, Butfirst I need to put the glass in the sink.

I head for the kitchen, look out the window, notice my poor flowers need a drink of water. I put the glass on the sink and dam it, there’s the remote for the TV on the kitchen counter.

What’s it doing here?

I’ll just put it away, Butfirst I need to water those plants.

Head for the door and Ack! Stepped on the cat. The cat needs to be fed. Okay, I’ll put that remote away and water the plants. Butfirst, I need to feed the cat.

At the end of the day: The laundry isn’t done, the newspapers are still on the floor, the glass is still not in the sink, the bills are not paid, the checkbook is still missing, and the cat whizzed on the remote control.

AND,

When I try to figure out how come nothing got done all day, I’m baffled, because I KNOW I WAS BUSY ALL DAY!

I realize this condition is serious… and I should get help… Butfirst I think I’ll read all my e-mail!

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“Everyone has their own experience. That’s why we are here, to go through our experience, to learn, to go down those paths and eventually you may have gone down so many paths and learned so much that you don’t have to come back again.”

                                                           -The Artist formerly known as Prince

 

Myself, I have always found that experience is that thing I get about a minute after I needed it!

Retail real estate experts continue to insist that e-commerce is more of an opportunity than a threat to brick-and-mortar retailing, bolstering marketing outreach and customer engagement. On the surface it may seem that retailers’ fear of e-commerce competition has passed. For example, Simon Property Group (the country’s top retail center owner) recently released a report arguing that “mall shopping has a smaller environmental impact compared to online shopping” and cited the following statistics:

  • Online shopping has an environmental impact that is 7 percent greater than mall shopping if shoppers bought the same number of products at a mall as they did in an online store;
  • Thirty-three percent of online purchases are returned versus 7 percent of brick-and-mortar purchases;
  • Physical retail generates five times more jobs than online shopping for the same value of sales.

So why have so many physical retailers been closing up shop? Retailers are pouring “high investments” into e-commerce, determining their physical stores are too big to sustain, according to Howard Davidowitz, chairman of Davidowitz & Associates, Inc., a national retail consulting and investment banking firm headquartered in New York.

“E-commerce is growing 12-13 percent per year, physical stores 2-3 percent per year, meaning there are less available dollars for physical retailers. That’s why we have store closures,” says Neil Stern, senior partner at retail consulting firm McMillian Doolittle.

Another area that we need to see hard work and creativity is from government (although unlikely in an election year). Monetary policy (The Fed & interest rates) are only able to do so much. We need our politicians (leaders?) to take leadership, be creative and provide for strong fiscal policy (taxes and regulation). Sam Zell was speaking at an economic round table recently where he said his greatest concern is that “this is the first recession since World War II where there’s more debt in existence since before the recession. So instead of marking to market, as the world has always done to recover from difficult periods, we’re not marking to market at all. We’re just rolling up more debt.” While the private sector is in better shape debt-wise than sovereign states, the latter “are all broke,” he said. “I’m not so sure I can remain optimistic about the private sector.”

While on the subject of politicians, fiscal policy and taxes, I thought you would find this Presidential Candidate tax calculator to be quite interesting to see what you might pay under various candidates.

Candidate Tax Calculator

In San Diego, office vacancy rates have dropped almost a half a percentage point to just over 12% in the first quarter. Average asking rents have increased by over 4%. Unemployment has dropped to 4.7% (down from 5.4% a year ago). Healthcare, tourism, defense and biotech lead the way for countywide growth.

Lest I sound too optimistic, but not to be a canary in the coalmine, there are some caution signs on the horizon; cranes on the horizon to be specific – though they mark new construction they also tend to come near the end of the cycle in S.D., election-year – notoriously not good years for our economy, tenant space demand is declining – even though we have positive absorption, doctors and general contractors are buying property – counter cyclical, and the Miami condo market is once again over built (always seems to be a boom bust market).

Real estate isn’t risky if you don’t do risky things but debt is cheap and  people are loading up on it again – countries, companies and people.

Life stagnates without challenges – bring us your challenges! We like to use our experience and creativity to help solve your problems.  Hope you like the story . . .

On January 24, 1975, 17-year old Vera Brandes, then Germany’s youngest concert promoter, walked on stage at the Opera House in Cologne. This was to be the most exciting day of Vera’s life. She had convinced the American pianist Keith Jarrett to perform a one-night concert.  At Jarrett’s request, Brandes had selected a Bosendorfer 290 Imperial grand piano for the performance. However, there was some confusion by the opera house staff and instead they found another Bösendorfer piano backstage – a much smaller baby grand – and, assuming it was the one requested, placed it on the stage. Unfortunately, the error was discovered too late for the correct Bösendorfer to be delivered to the venue in time for the evening’s concert. The piano they had was intended for rehearsals only and was in poor condition and required several hours of tuning and adjusting to make it playable.

The instrument was tinny and thin in the upper registers and weak in the bass register, and the pedals did not work properly. Jarrett arrived at the opera house late in the afternoon and was tired after an exhausting long drive from Zürich, Switzerland, where he had performed a few days earlier. He had not slept well in several nights and was in pain from back problems and had to wear a brace. When he found the wrong piano in place, Jarrett walked out of the concert hall. He went outside to sit in his car. Vera called and called to try and get the correct piano but it was too late. She went outside and stood in the rain and begged Keith Jarrett not to cancel the concert. Jarrett looked outside his car and saw this rain soaked bedraggled teenager and took pity and said, “Never forget – only for you”. So several hours later, he sat at the unplayable piano and the concert began. Within minutes it became clear that something magical was happening. Jarrett was avoiding the upper registers. He was sticking to the middle of the keyboard.

Consequently, Jarrett often used ostinatos and rolling left-hand rhythmic figures during his performance to give the effect of stronger bass notes. He stood up to pound on the keys so as to get enough volume out of the undersized piano to reach the patrons in the back row.  ECM Records producer Manfred Eicher said: “Probably [Jarrett] played it the way he did because it was not a good piano. Because he could not fall in love with the sound of it, he found another way to get the most out of it. The audience loved it! Audiences continued to love it because the Cologne piano concert by Keith Jarrett is the best-selling solo album in jazz history, and the all-time best-selling piano album, with sales of more than 3.5 million.

Jarrett had been handed a mess and maybe not at first, but eventually, he embraced it and soared. Sometimes we all need to remember how our frustrations can be turned around and made into our most creative moments. Despite the obstacles, Jarrett’s performance was enthusiastically received by the audience and the subsequent recording was acclaimed by critics. It remains his most popular recording and continues to sell well, decades after its initial release. The album was included in Robert Dimery’s 1001 Albums You Must Hear Before You Die.

Here is the concert from You Tube

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“If God had wanted us to vote, he would have given us candidates.”
–       Jay Leno

As we approach tax day, I cringe both at the amount of taxes we pay and our bloated economy that can’t seem to get out of its way. A few years back we did a deal with Congressman Hunter’s office and I saved this email because it still makes me chuckle to this day.

Nancy;

Thank you again for all of your help yesterday. I am asking Rhonda, our office manager, to send you a copy of what our standard gov lease looks like. We will have to confess regarding our current financial situation is that we are $16.3 trillion in debt, but we are working on raising everyone’s taxes to pay for it. But truthfully, we think that this will be a good fit and Rhonda will work with you regarding House of Reps requirements for the lease,

Thanks again,

Rick

District Chief of Staff

Congressman Duncan Hunter

In a rare case of repealing bad law, the State repealed AB-1103, effective January 1, 2016. If you remember I wrote about this law and the requirement to report all of the energy use of your commercial property. Supposedly, they are working on a replacement law to take effect next year. I can hardly wait (but at least no energy disclosure reports this year!).

Another article that I have saved for some time but thought was appropriate in this Tax Day month and election year filled with rhetoric. This is a brief history of commercial real estate by CRE blogger Chris Clark.

“In no other part of the civilized world is land made such an article of commerce and of such incessant circulation.” James Kent on American land use in “Commentaries on American Law 438” published in 1830.

Land wasn’t always an article of commerce as described by Kent. For centuries across Europe, land was an entity whose conveyance and use was governed by common laws concerned with the order of inheritance, alienation and protection from creditors. As a British possession, the American Colonies followed suit.

But the British Debt Recovery Act of 1732 altered this substantially, if not inadvertently, by allowing for the treatment of real property to be the same as chattel/personal property. Essentially, this gave debtors the right to seize not only personal property but land to recover costs. The British saw this solely as an additional means of debt repayment. But in the Colonies, where land was abundant, it was seen as an opportunity to use land as a substitute for money, i.e., an article of commerce.

While there was plenty of handshake agreements, lawyers were eventually the choice of sellers and buyers to record or transfer property title. The agent role evolved in order to find willing buyers for willing sellers. (To this day, real estate agents cannot perform the functions of a lawyer in real property transactions.)

Early real estate agents tended to be the people in town who knew everything and everyone. A fountain of local information they were paid in favors or fees to bring parties together. Unorganized and often acting independently, they could also be unscrupulous in their dealings.

Around the turn of the 20th century, the real estate industry of today emerged when the National Association of Real Estate Exchanges (1908 – now known as NAR) and real estate brokerage firms such as Cushman & Wakefield (1917) were born. Affiliation with these organizations inferred a higher level of ethics and service by their agents or members. Vouching for the honesty of their agents, brokerages and professional groups like these were meant to separate the wheat from the chaff.

By the 1930’s most state laws were written or appended to require that anyone who assisted in the transfer of real estate was licensed or registered with the state. The title insurance industry quickly followed in order to protect buyers and ensure more accurate legal recordings including the encumbrances, liens, restrictions, etc… that could be attached to land.

One of those liens – loans specific to purchase of real property (mortgages) – became more commonplace. Turning the British Debt Relief Act on its head, land was not only an instrument for debt repayment but a way to incur debt itself.

Extensive relationships and local knowledge have for years been the core services that real estate agents provide. Those services have been expanded to include consultation, marketing and information services all in the pursuit of connecting buyers and sellers. Additionally, numerous areas of specialization have evolved due to diversity of product, increased competition and client demand. It is these individuals who contribute to a world-wide industry handling assets in the trillions and accounting for over 50 percent of developed economies’ net worth.

Since a picture is worth a 1000 words I thought I would share this chart of the employment growth in North County over the last five years. This is how we have gone from 7.8% to 4.4% unemployment.

2016 North County prospects1 18
So whether you think there are too many real estate agents, or too many attorneys, just remember there are more IRS agents than there are FBI agents. Heck, I’m proud to be paying taxes in the United States but I could be just as proud for half the money! Hope you enjoy the story…

Regards,

Don Zech

A Lawyer You Have to Love

A New Orleans lawyer sought an FHA loan for a client. He was told the loan would be granted, if he could prove satisfactory title to a parcel of property being offered as collateral. The title to the property dated back to 1803, which took the lawyer three months to track down.

After sending the information to the FHA, he received the following reply…

(Actual Letter)

“Upon review of your letter adjoining your client’s loan application, we note that the request is supported by an Abstract of Title. While we compliment the able manner in which you have prepared and presented the application, we must point out that you have only cleared title to the proposed collateral property back to 1803. Before final approval can be accorded, it will be necessary to clear the title back to its origin.”

Annoyed, the lawyer responded as follows:

(Actual Letter)

“Your letter regarding title in Case No. 189156 has been received. I note that you wish to have title extended further than the 194 years covered by the present application. I was unaware that any educated person in this country, particularly those working in the property area, would not know that Louisiana was purchased, by the U.S. from France in 1803, the year of origin identified in our application.

For the edification of uninformed FHA bureaucrats, the title to the land prior to U.S. ownership was obtained from France, which had acquired it by Right of Conquest from Spain. The land came into the possession of Spain by Right of Discovery made in the year 1492 by a sea captain named Christopher Columbus, who had been granted the privilege of seeking a new route to India, was from the Spanish monarch, Isabella.

The good queen, Isabella, being a pious woman and almost as careful about titles as the FHA, took the precaution of securing the blessing of the Pope before she sold her jewels to finance Columbus’ expedition. Now the Pope, as I’m sure you may know, is the emissary of Jesus Christ, the Son of God, and God, it is commonly accepted, created this world. Therefore, I believe it is safe to presume that God also made that part of the world called Louisiana.

God therefore, would be the owner of origin and His origins date back to before the beginning of time, the world as we know it AND the FHA. I hope you find God’s original claim to be satisfactory. Now, may we have our damn loan?”

(The loan was approved.)

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