Every 4th of July, the Liberty Bell in Philadelphia is tapped (not actually rung) 13 times in honor of the original 13 colonies.
Cheers to you and Happy Independence Day â may your day be filled with beer, hot dogs, family, and friends.
Two years ago in the early months of COVID (April 2020), I wrote about the impending pandemic and a history of my 35 years in the business. I also implored everyone to keep moving forward (running in my case) and remember that luck is when preparation meets opportunity. Now, two years later, I want to report back.
Two months after I wrote the above letter, I traveled to Arizona for the 4th of July (yep that alone is pretty contrarian!) and purchased a part of a shopping center named, of all things, Corona Plaza with a sports bar as a tenant! The proprietor is a fishing and hunting woman-owned sports bar and let me tell you, I have never met a more resilient tenant (who serves the best chicken wings anywhere). She never closed the doors and never missed a rent payment!
Oddly enough 2019 (pre-COVID) was our worst year and 2020 and 2021 were solid good income years. COVID was just another problem for us to solve in closing a real estate transaction. During the last year, we have done transactions with interesting users that arenât always in most brokers’ wheelhouse â churches, motels, non-profits, and schools (besides our normal retail, office and industrial users).
We saw spaces and buildings go empty and re-filled them. We also saw spaces that never went empty and others that have never re-filled.
In the last two years, I became a grandfather for the 3rd time, and despite published accounts that âno one was getting marriedâ, we were happy to witness two of our childrenâs marriages (yes â 4 for 4 are married!). Unfortunately, we lost both of my in-laws who died âwith COVIDâ but not âof COVID.â
On the running front, I have had to adapt. I havenât been able to run internationally for two years (kind of tough when you are trying to run a marathon on all seven continents!). As racing and travel have come back in the states, I am attempting to run half marathons in all 50 states. At a few per year, I might be done in my 70âs!
So, what is the point of the chatty letter this month? Well, I think that todayâs rising interest rates, dropping stock market and rising inflation are heralding an economic downturn which will be the second act of the 2020 recession we just came out of. I want to remind you once again to keep moving forward and look for opportunities to be lucky.
Elon Musk has been vocal that a recession is inevitable and near. During COVID we tried the PPP strategy (paycheck protection program) which cost us $6 trillion, however, Musk gives us a different PPP to deal with the coming recession.
- Predict â always stay multiple moves ahead. Live as if it’s here long before it arrives. Know that most successful start-ups started during downturns (Google, Uber, Netflix).
- Prepare â get ready for whatâs ahead. Put the big risk on pause, cut back on excess spending, reduce overhead, avoid high-interest debt and variable debt.
- Persevere â get ahead and stay there. Good reactions, good planning, and good execution. Weather the storm and stay ahead.
Speaking of $6 trillion of COVID PPP, a trillion is a lot of money! (We also just spent $5 trillion on Ukraine and Biden infrastructure and $5 trillion more on quantitative easing). Did you know that if you paid out $1 per second, to settle a $1 mil dollar debt it would take less than 12 days. To pay off $1 billion it would take 32 years. Paying off $1 trillion at a dollar per second? 32,000 years. Wow! I need a beer.
And speaking of beer, beer consumption spans almost the entire world but in San Diego, it adds $300 million to the local economy. Recent news of Stone Brewing being bought by Sapporo and Ballast Point and Modern Times also being sold leaves San Diego with plenty of breweries but no longer with a locally based top 50 brewer. Sapporo plans to brew its beers here which should nearly double the local breweryâs current capacity. Good news for Californians who consume about 25 gallons of beer per capita. We also have the most breweries at 1466 â double any other state.
Nickâs Numbers
This month I thought I would ride on the beer theme with my numbers. Itâs also a great consistent tradable commodity to track inflation.
If youâd like to catch a beer and discuss leasing or sales, I welcome the opportunity to share with you some of San Diegoâs finest craft breweries.
Please give me a call or email me if you would like an analysis of your propertiesâ value or discuss what you should be doing with regards to interest rates or inflation and their impacts on your business, tenants, or property (Nick Zech, 858-232-2100, nzech@cdccommerical.com).
Beer wasnât the only thing in the local real estate news. Apple recently signed two new office leases in Rancho Bernardo totaling 150,000 sf. That brings their total in RB to nearly 600,000 sf. This rivals the nearly 750,000 sf Apple has leased in UTC. All told Apple is one of San Diegoâs biggest tech footprints with a local headcount of about 5000.
I try not to repeat stories. However last month we did back-to-back stories by accident (good news, I still have a story for another month) but this month I am intentionally going to repeat a story that I used in October of 2007 and again in October 2019 (looking back at those dates I appeared to be prescient. I hope you enjoy the storyâŠagainâŠ
The Hot Dog Story
Once there was a man who had a stand on one of the busy streets downtown and he sold hot dogs. He sold good hot dogs and folks bought from him on a consistent basis. He put signs up advertising his hot dogs, he placed ads in the newspaper, and he told everyone in his community how good his hot dogs were. And he sold a lot of hot dogs!
So, he increased his inventory. He bought more buns, more hot dogs, more wrappers, and more condiments. He built a new stand and made it larger, added signs advertising his good hot dogs, and kept his sales area neat and clean. He made sure his hot dogs were always hot and that his customers always walked away with a smile. And his sales continued to increase!
He was so successful that he was able to send his son to Harvard University. After graduating with a masterâs degree in business, the son returned home to join his father in business. At the end of his first day on the job, the son said: âDad, I know youâre not educated in Economics, and you have not had the opportunity to read and study the latest journals on business and economic forecasts. But the overall economy is in terrible shape. The huge federal deficit, the trade deficit, oil prices, and the unemployment rates are undoubtedly going to plunge this nation into a horrible recession. I think you should consider these things for future planning.â
The man scratched his head and thought: âWell, my son has the finest university education from the most acclaimed business college in the country. He must know what he is talking about.â
So, the man reduced his inventory by half. He stopped advertising in the newspapers and took down his signs to save money. He quit telling everyone in his community about how good his hot dogs were, and he even went back to using the old cart from years ago. And his hot dog sales went down the tubes almost overnight!
âSonâ, the man said to his Harvard-educated offspring, âYou sure were right. Damnedest recession Iâve ever seen.â
So, whatâs the moral of this story?
A recession mentality starts in oneâs head. If you believe that a recession is coming and that times will soon be tough, then they will be for you. Like the old man in the story, youâll start to change your successful behavior patterns and replace them with less resourceful habits. Youâll sleep in later. Youâll take longer lunch breaks, make fewer phone calls, generate less e-mail, and go home earlier. Keep on selling your products, your services, and yourself. No one can stop you from succeeding but yourself!!