Thursday, November 30, 2006
The company rates manufacturers to sell its services to industrial purchasing agents. In a prepared statement, eMvoy CEO Craig Landy said: "There is so much confusion about the state of American manufacturing. The public perception is that, overall, U.S. manufacturing is weak. After looking at 100,000 manufacturers, we found that the state of U.S. manufacturing is not bad -- as long as you are in the right state.
Here are the Top 10 states in manufacturing competitiveness, as ranked by eMvoy:
9. New York
Wednesday, November 29, 2006
Let me go on the record. I don't like flipping. There is too much risk for the potential reward. And you don't get any of the tax advantages of long-term investing. It's quick money here and there, but does nothing to build long-term wealth. In the go-go 2005 market, when property flippers were "having their fun," sales and prices were being driven by what King calls the "greater fool theory" -- that is, buyers were paying inflated prices, assuming they'd find a "greater fool" who would pay even more.
So what happens next? "Every time speculative fever takes hold of a market -- any market -- it's just a matter of time before you run out of fools," King says. Boy is he right! It happens with stocks, coins, gold, futures trading and more. King points out the classic case of "Tulip Mania" that gripped the Netherlands in the 17th century. Tulip bulbs were traded on stock exchanges at outrageous prices and speculators were even trading in tulip futures. The Dutch lost sight of what a tulip is - a lovely flower to be planted, watered and enjoyed."
That's where the lesson sits for all of us, and Craig has hit the nail on the head. Homes and condominiums exist to provide shelter and comfort. They're intended to be lived in, loved, personalized, and enjoyed. When they turn into commodities to be traded for a quick profit, you can be sure that "silly season," as Craig calls it, is here. Seasoned investors and investment brokers understand this. When real estate is sold without regard to its underlying value or function, the pros will step out of the way and let the novices tear each other apart in a questionable profit feeding frenzy.
In a business networking group to which I belong, one colleague mentioned a friend who invested in and fixed up a Florida house to resell. The friend intended to take advantage of the outrageous appreciation that was taking place on homes there. Ultimately, he wound up upside down (owing more to the bank than the property was worth) because of sinking values. But my colleague (a human resources guru) says his friend admitted that he didn't know the Florida market very well when he got in, and used a real estate agent -- his wife -- who also did not live in Florida (nor, I suspect, did she know the Florida market). Someone talked him into jumping on the bandwagon without his taking a moment to look and see whether the economic wheels were tightly affixed, or in this case, ready to fall off. He crashed.
Feeding frenzy indeed....there is a lot of chum floating around in the flipping waters these days. It's what's left of those who don't do their homework, don't use an knowledgable real estate investment adviser to go to war for them, and who forget (or never learned) that property investments should be about ongoing income, not "one-off" turnarounds that are full of unnecessary and often unmanageable. Craig King says it differently: The novices "soon learn an eternal truth -- that at the worst possible time, the world will run out of fools."
Tuesday, November 28, 2006
Friday, November 24, 2006
There have been several news stories in the business media in which some analysts say that EOP may not have received the best price for the deal. “James Core, head of real estate investments at Cohen & Steers Inc. – which held 38.9 million shares as of September 2006 – stated EOP is ‘worth a lot more’ than $48.50 a share,” according to the suit.
And why do they think its worth a lot more? Because real estate provides higher returns they virtually any other investment and they don't want to be pushed out of the Equity gravy-train unless they have been adquately compensated. Stay tuned....this story will likely heat up further.
Wednesday, November 22, 2006
Monday, November 20, 2006
- Apartment buildings can be leveraged to a higher degree than other commercial properties.
- The tax shelter benefits have been favored, although investors usually do not purchase apartments solely for the inherent tax benefits. Benefits include cash flow, leverage and appreciation.
- Real estate has never been considered a liquid asset, and prior to the mid-1980s, apartments were usually more liquid than other real estate vehicles. In the late 1980s, the apartment market slowed as a result of the loss of favored tax treatment. After a period of adjustment, they are regaining popularity. The resale market is generally good.
- Less sophistication is required to own and operate apartment buildings.
- A utilitarian demand exists because people need a place to live.
- Variety of apartment sizes and prices allows various types of investors to enter the apartment ownership market. From "Ma's and Pa's" to major corporations and pension funds—all own apartment buildings.
- Responsiveness to entrepreneurial efforts. Unlike other real estate vehicles, apartment building value determinants (occupancy, income, expenses, financing, etc.) can be affected by the owner, and it is easier to do (as opposed to an office building, where major tenants have long-term leases that cannot be renegotiated until the end of the lease period).
- Professional management is usually available, but at a cost.
- Unit mix must be matched to the demographics of the area (e.g., studio apartments are less likely to succeed in a family area).
- Not having key or anchor tenants may be an advantage.
- Exposure to government regulations (primarily rent control).
- Institutional and seller financing availability.
- Apartment visibility and close proximity to major highways, labor, transportation, shopping, and residential housing tracts are good elements.
- Pricing apartment buildings involves the use of the gross-rent multiplier, price per square foot, price per unit (CPU), and capitalization rate as "rules of thumb," or value measurers.
- Deferred maintenance can be extremely costly and detrimental to achieving investment objectives.
- Ratio of land to improvements affects the amount available for depreciation, and this affects the tax benefits associated with the property.
- If the owner is required to pay utilities, it will substantially affect the expenses connected with the property.
- Vacancies affect the appeal of the property, as do the number of units on the market, and whether or not rents are in line with competition.
- Investors can move up to larger properties through IRS 1031 tax deferred exchanges, thereby delaying payment of capital gains taxes.
- Parking conditions and the number of spaces available, as well as the type (covered, carports, open).
Furnished vs. unfurnished affects the rental schedule and amount of depreciation available.
"The lack of public parking in the Short North has held us back, especially the business district," Lahoti told the Columbus Dispatch. Lahoti, who with his partners owns three Short North nightclubs and three residential projects including the Dakota, said Arms Properties would operate the garage through a third-party company. He said they’re still working out financial details, but he thinks the condos and garage could be built by the end of 2008.
Short North development projects have been generally successful. But the biggest objection I hear from businesses that like the area for a future move is lack of parking. This proposal would be a boost the area sorely needs.
Friday, November 17, 2006
State Teachers Retirement Furor Over Fees To Hire Real Estate Experts Dies Down On Word Of Performance Returns
This is another validation of real estate as a key investment strategy to building wealth. STR stated real estate doesn't just do better than stocks, mutual funds or other investment vehicles; the agency stated that real estate is far outperforming every other investment type in use.
Thursday, November 16, 2006
Despite higher long-term interest rates in the second quarter
and a modest slowdown in transaction activity, commercial
real estate loan origination and securitization activity in
2006 should surpass the record levels set last year.
REITs rebounded sharply in the third quarter from their
relatively weak second-quarter showing and should
outperform the broader equity markets for a remarkable
seventh consecutive year.
Although the near-term outlook for the U.S. property
markets remains healthy, slower economic growth will
affect investor and tenant demand for most, if not all,
For a copy of the full report, drop me a note and I will email the PDF.
With space market fundamentals across all major property
types healthier than they have been in years and with little
evidence that supply will outstrip demand in the next 12
months or so, private real estate should continue to perform
well. This year, we expect the NCREIF Property Index
(NPI) will deliver a total return at the high end of our
forecast range of 12% to 15%. Returns will likely moderate
further next year, but as long as the economy does not
weaken suddenly and long-term interest rates do not stray
too far from the 4.5% to 5.25% range they’ve been in for
most of 2006, the NPI should still deliver 9% to 12% in
Anyway, CREE is an organization of commercial/investment agents and brokers who specialize in real estate "exchanges." These are IRS 1031 tax-deferred exchanges, that enable the seller to indefinitely defer paying taxes on capital gains. We have weekly meetings to tell each other about properties we have listed, or properties we are looking for for our clients who want to buy. We don't just "pitch" properties to each other to see if someone is interested. We brainstorm and problem-solve to help each other sell listings. You see, I might have the third or fourth leg of multi-leg transaction, and be able to help the selling agent with one property put together the puzzle for the benefit of all our clients. A question about capitalization rates from a few weeks ago led broker Furman Tinon to discuss the issue at last week's meeting. Which led to more questions on overall rates of return. Bob stepped up to discuss cash-on-cash returns, after-tax returns, etc., which is what he and I deal in virtually every day with our clients. Something for everyone this morning. Heard about homes in the country, development land in and out of Columbus, investment rentals, a large restaurant near Cincinnati that might be perfect for an outdoors store or conversion to offices, folks looking for apartment complexes, and more. To the good for one of my clients, I learned about four new-build rental homes for sale at the resort area of Indian Lake, 90 minutes northwest of Columbus. I've got a client who is coming out of the sale of a duplex in the Ohio State University area and this might work for him in an exchange as he and his partners exploit the tax advantages of moving to ever-larger investment properties.