May 2019 Monthly Letter

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May 2019 Monthly Letter

May 2019 Monthly Letter

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“You’re always going to have critics and naysayers and people that are going to tell you that you won’t, that you can’t, that you shouldn’t. Most of those people are the people that didn’t, that wouldn’t, that couldn’t.”            ~ Tim Tebow

the prosperity craneI have been fortunate to have been on several trips this month for business and pleasure and I am pleased to report that our national bird, “The Prosperity Crane” (more commonly known as a construction crane) has been prevalent everywhere. I was also pleased to read that the United States has more millionaires than Sweden or Portugal have total population!

One of my trips took me to Washington, D.C., where I was amazed, on one hand, what a fortress the town was and yet realizing just how fragile democracy is. It was thrilling to visit the museums, but I was disappointed by the focus on the exceptions, not on the exceptionalism of our country, it’s people and their accomplishments.

Speaking of exceptional. In February, the Department of Commerce reported that for the first time, online purchases took up a larger percentage of all sales of general merchandise than brick and mortar stores (General merchandise excludes cars, parts, food, beverages, and restaurants). The “retail apocalypse” is on. Fifteen thousand stores have closed since 2017 and 75,000 more are expected by 2026 according to UBS analysts. American consumers show no sign of slowing their online purchases with the average U.S. household spending 50% more online than they did a year ago.

However, there is no substitute for creativity. IKEA recently sent our newspaper ads that if you pee on, will show if you are pregnant and thereby qualify for a 20% discount on baby things – I haven’t figured out how you redeem the coupon though. We recently used Walmart’s grocery pickup service and were very impressed. We had a family reunion trip and had ordered our groceries online. We drove the rental car up and they loaded up the weekend’s groceries and we were on our way to the condo. Slick!

As happy as I am about the “Prosperity Cranes” and the economy chugging forward, I thought it was worth sharing a case study of a deal that we did so you could fully appreciate how long the “process” can sometimes take just to get you that little fast food place on the corner.

Twenty-five years ago, this city determined that drive-thrus were passé and shouldn’t be in their newly determined urban core.

Twenty years later (2012) a 5,000 SF sit down restaurant in that core closed because of changes in people’s eating habits (more food to go) high cost of labor and utilities. The team at CDC went to work and we found four replacement tenants and had four offers within 30 days. One from a mattress company, one from a franchisee of another sit-down restaurant and two different offers from national fast food restaurants with drive-thrus. The fast food offers were the highest but both required drive-thrus (40-60%) of their business. The LOI was negotiated within 30 days and the lease took another 60-90 days. Of course, the lease was contingent upon getting a business license, approved building plans and of course a drive-thru (there was a bank with a drive-thru next door and 12-15 others on the same street). The selected tenant was a “hot” chain that consumers and cities alike were clamoring for. The tenant had a team of architects, designers, and consultants. They met with community leaders, city staff and city officials. They were told the city liked their business (business friendly) but the area didn’t allow drive-thrus and perhaps they could just get by without one. The tenant explained that wasn’t possible. After six months it was determined that a general plan amendment could be made, a change to the zoning code and perhaps some kind of conditional use permit. This process, of course, could take 18 months or so. This, of course, was all on top of a demolition permit, grading permit and construction drawings and building permit. Finally, it was determined that the CC&R’s of the shopping center needed to be modified so those needed to be signed off by four different parcel owners in the project (each with their own concerns or wants). This process took 3-6 months to negotiate.

It was determined that environmental studies and traffic impact reports needed to be done – add 12 more months.

After six months of staff review, the project was scheduled to the planning commission who recommended approval to the city council. This approval scheduling and cycle took another four months.

With the drive-thru approved (after 50 months!), the deal became “non-contingent” and CDC was paid the first half of its commission! With the drive-thru approved, the city wrapped up its review of the demo permit and construction drawings – 3-4 months. Plans were put out to bid and contractors were selected – 3-4 months and construction begins, and the tenant began paying rent. Now, the irony – at the groundbreaking ceremony, all the city officials gathered and extolled their business-friendly city. Meanwhile, the tenant will employ 80 full and part-time workers and CDC got paid the second half of their commission – 6 years after negotiating the lease!

I can’t wait for our next deal! (I mean, I really can’t afford to wait that long!)

Thankfully all deals don’t take that long. But you can see how easily the ship known as our economy can be sunk. Hope you enjoy the story…


Most people don’t know that in 1912, Hellmann’s mayonnaise was manufactured in England.

In fact, the Titanic was carrying 12,000 jars of the condiment scheduled for delivery in Vera Cruz, Mexico, which was to have been the next port of call for the great ship after it stops in New York. This would have been the largest single shipment of mayonnaise ever delivered to Mexico. But as we know, the great ship did not make it to New York. The ship hit an iceberg and sank, and the cargo was lost forever.

The people of Mexico, who were crazy about mayonnaise, and were eagerly awaiting its delivery, were disconsolate at the loss. Their anguish was so great they declared a National Day of Mourning, which they still observe today.

The National Day of Mourning occurs each year on May 5th and is known, of course, as Sinko de Mayo.

 

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CDC Commercial Inc
About the Author – Don Zech, President at CDC Commercial, Inc.
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