Did Not Expect This

Surprise of the day, I was in a room full of realtors and discussed social media.

Not everyone was sold on it.

Everyone has not bought into the New World of Technology and social media marketing.

Old School realtors you say?

Possibly…. Here’s the quick survey we conducted and the results;

We asked who among you is on the following and do you use anything

of these social media venues for your real estate activities?

Users of Facebook :  43.24%

Twitter :  10.81%

LinkedIn :  37.83%

Youtube :    2.7%

Blog writers and Blog sites :   10.81% ( including AR,Blogspot, WordPress ,… )

Google +  :   5.40%

Foursquare :  2.7%

How many have their own websites :  45.94% .

We were surprised, negatively surprised.

More socking was how many actually made any money as a

direct consequence of all this social media work, networking,

of postings, twittering,etc. and all the hours spent doing it.

Result for this last question was 8.10% claimed they could connect any money earned from this activity . 

So who is making money from all this activity on all these social media, blogs postings, internet activity etc.? When will we make any money from all this activity realtors are starting to ask?

This was not a scientific study or finding, however the group determined it was the high tech industry that benefited the most and all those involved in it and not necessarily the realtors and companies supporting, contributing and paying for these avenues.

What are your thoughts? Leave your comment below and share your experiences with us – thanks in advance.

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Toronto Leads In North America!

Just drive around this City of Toronto and you see and feel it.

You see the tall tall buildings rising, the condo showrooms and vip sale parties that roll out weekly.

The excitement and momentum that you feel when you drive, or walk around as the cranes work daily to

put up the pre-sold luxury condo residential units.

Seven residential condo projects,” totalling almost 3,800 new units, are close to or already

 under construction on  or close to Yonge Street south Bloor..” says Ben Myers of condo

research firm Urbanation. There are at least another seven, ” with a potential 3,565 units, are in the

planning stages, many incorporating heritage properties. It’s an unprecedented level of residential

construction along the subway corridor…” And there is more good news for the City and its real estate market,

no other North American city is said to come close to the 148 high-rises under construction now

according to a number of sources, dually referenced below.

 

“Buildings taller than 100 metres are counted as skyscrapers by the source for the above data (Emporis).”

(Globeinvestor Feb2012)


Things are going higher and higher in Toronto

Tridel’s Ten York residential condo project “was to be the tallest residential building in Canada at 75 storeys,

however Canderel’s Aura project just gained approval to increase its total to 78.” (Toronto Star)

So buildings will be getting taller and taller in Toronto with more density ( units ) in each project.

Is the infrastructure ready or being ready to handle the volume?

The TTC (subway and bus system operators) better be ready and much more efficient otherwise

we will be facing massive gridlock – only ways to move will be by bike or foot.

This maybe okay in the spring and summer months, however winter months with rain and

snow are usually less fun for most that need to get from point A to Z.

What are your thoughts , please share?

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Is Timing Everything?

They could have gotten more before, now they may have to settle for the best they can get when the commercial portfolio of properties comes to market.

Who can control time or the timing of going to market with your assets? Or for that matter when the best time to buy assets? Therein is the risk of investing and truthfully no one really knows, you leave when you are ready (or have to sell ) and you buy when you can ( have the money that needs a home).  In the article that follows there are some interesting points

“The leading office landlord in California’s Silicon Valley, Mission West Properties Inc., is preparing to sell itself to the highest bidder. But the selling price is likely to fall short of the $1.8 billion the company nearly fetched five years ago.

Carl Berg, the founder, chief executive and largest shareholder of Mission West, is giving suitors until Feb. 22 to submit bids. The real-estate investment trust owns more than 100 office buildings that stretch from San Jose to Cupertino, including sprawling research and development campuses that house Apple Inc. and Microsoft Corp.

“If somebody wants to get a position in Silicon Valley, this is the best opportunity they’ll ever have,” said Mr. Berg, 74 years old. He said the company signed about 60 confidentiality agreements with interested private-equity firms, other REITs and foreign investors since it announced in December that it was exploring a sale.

This is the second time that Mr. Berg has put the company up for sale. In 2007, Starwood Capital Group agreed to pay $1.8 billion for the company. But the deal fell through one week before closing when lenders pulled out as the housing market began to sink.

Analysts now believe the company will be lucky to fetch $1 billion, or $10 a share, plus the assumption of $350 million in debt. Mission West shares were unchanged at $10.30 in Nasdaq Stock Market trading Tuesday.

Although the Silicon Valley economy is vibrant, values of commercial properties there and in many other suburban markets still haven’t returned to precrash levels as they have in some of the nation’s largest cities. That is in part because vacancies remain high.

Silicon Valley employers added 42,000 jobs last year, up 3.8% from 2010, according to a report compiled by two local nonprofits. Still, the area’s office vacancy rate was 21.9% in the fourth quarter of 2011, according to Reis Inc., a real-estate research firm. That was down from the 23% level in the second quarter of 2011.

AlamyMission West owns more than 100 office buildings, including the Microsoft campus above in Mountain View, Calif.

Mission West’s vacancy rate is higher than the average for the area. Even thought it owns some of the strongest buildings in the area, a large chuck of its portfolio remains battle-scarred from the technology bust a decade ago. About 30% of the properties have been vacant for the past five years and about half are located in the least-desirable areas of Silicon Valley in South San Jose.

“That kind of space is tough to lease,” said John Guinee, an analyst at Stifel Nicolaus. Nonetheless, some analysts say, the Silicon Valley market is too good to pass up, particularly for an aggressive investor willing to raise debt to finance the redevelopment of Mission West’s older properties. REITs aren’t likely to bid aggressively because they have a lower risk tolerance and would be uneasy about the high vacancy.

“We tend to think that opportunity funds are more aggressive in these markets,” Mr. Guinee said. He anticipated between five to 10 bids for Mission West, mostly from private-equity funds with a local partner.

Mission West’s funds from operations, a profit metric for REITs, improved in the fourth quarter to 16 cents a share, compared with 11 cents in the same period last year.

Mr. Berg, cited by Forbes magazine as one of America’s wealthiest people with a net worth of around $1 billion, was one of the first developers to enter Silicon Valley. He built his first office building there, spanning 30,000 square feet, in 1969 with his partner at the time, John Sobrato. Mr. Berg now overseas eight million square feet of space in Silicon Valley after taking Mission West public in 1998.

Although the company won’t sell for as much as it could have in 2007, Mr. Berg says he can still make a handsome profit that will allow him to quit real estate and focus on his venture-capital fund that invests in biotech and pharmaceutical companies.

“I’m having a lot more fun doing that after 40 years in real estate,” Mr. Berg said.

So it takes time to get there, in terms of business and life. Are you patient enough to wait decades to get rich in real estate?

Is this level of concentration in an area risky?

Or should an investor diversify more both geographically and category wise?

What are your thoughts on these questions? Leave a comment below and share your experiences…

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Great By Design

In a quick look at a book entitled Great by Choice by Jim Collins  and Morten T. Hansen, they

speak about 10X companies – a sample of which is Southwestern Airlines.

Although the air lines business is a challenging one and probably even a worst investment recommendation

for buy and hold investors the authors tell a great story about the yield an investor would have achieved .

Had this investor been lucky enough to have $10,000 in 1972 and put it all into Southwestern and  hold it there for thirty years.

This investor’s investment would have grown to be worth $ 12 million dollars by 2002 !

Extraordinary !

What was the annual average compounded rate of growth for this investor?

Here’s the math on it;

Using a HP 10 BII calculator ; set your compounding to 1 P/YR    END

Then plug in the numbers :     30 into [N]

10,000 [+/-] into [PV]     ,    0 into [ PMT]  ,  12,000,000 [FV]   and solve for  [I/YR] by pressing it.

Solution that should pop on your display is :  26.66 % average annual rate of compounded growth.

We are not recommended any stock investment, please speak to your financial advisor before buying any investment opportunity.

We still like real estate as our preferred investment vehicle.

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Living Large and Well in the U.S.

What a great blessing it is to be building large homes now, for both the people that

are being employed and the finished product which will be a wonderful palace for the family that resides there.

 The large amount of property taxes that will be assessed against all the new improvements to these

properties will benefit the towns and cities with the good fortune to be chosen to be the homes for these projects.

They are building projects like there is no problem and there is no tomorrow… in a recent Wall Street Journal article, by Juliet Chung, (February 10, 2012) she illustrates the large homes being built in the U.S. by those that can with money they earned or otherwise have received.

Also check out the Video presentation with exterior pictures of these awesome homes, they are beyond homes – they are commercial projects at this scale of construction. What are your thoughts? How do you define a home and what do you need today to be comfortable in a home?

( Leave your comments below)

“Architects and builders say it could be the largest single-family residential compound planned in the country: a 100,000-square-foot compound—more than 60,000 square feet of living space, the balance being space such as patios and garages—in the early stages of construction.

Architectural plans filed with the city call for at least nine buildings to make up the mountainside compound, some connected by tunnels or bridges, with a man-made river winding its way in a loop in front of several buildings. A pair of three-story towers containing slides would make up the “tower building,” dumping riders into a swimming pool below. A “spa building” would have massage rooms, a weight room, game room, salon and locker rooms. Other buildings planned for the property would include a guest house, a guard house, a pool cabana and a “retreat building” with eight bedrooms, two living rooms, a great room and a garage.

Made of three connected buildings—dubbed “wings,” on the plans—the main home, including roofed outdoor areas, would total more than 77,000 square feet. Plans show at least five elevators and a two-level basement with a basketball court, swimming pool, men’s and women’s locker rooms and a “vehicle display room.” In addition to the usual bedrooms and living areas, the house would include a game room, DJ room, music studio, theater and bowling alley. A ballroom would measure about 2,100 square feet, according to plans filed with the city; the master bath-and-closet area, about 2,900 square feet.

“It started smaller than this and it took on a life of its own,” says Sue Landreth, a supervisor in Scottsdale’s development services department, which reviews plans and issues permits for construction.”

Do you really need this kind of space?  Who these owners are and where/how they got the money is a secondary discussion point? The primary point of interest is; Is this what people want if they had the money? What do clients want in 2012 housing? Do they have the money to buy it , build it, and more important keep it? Who should qualify them? Is it the realtor’s job to tell a client “sorry you can’t afford this – you may end up losing it to either the bank or the government in the future”? What are your thoughts?

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U.S. Housing Weakness Impediment to Consumer Confidence and Recovery

Consumers and their confidence has been shaken, and they are not spending as they use to  because of the weak

housing market and it’s the impediment to a robust economic recovery for the U.S.

The catch-22 problem that fiscal and monetary policy makers face as they think of cures for the weakness and lack of confidence.

This is the summary comments of the Chairman of the Federal Reserve and their concerns going forward.

Some of the Chair’s other comments follow ;

Mr. Bernanke says the broader economy won’t fully recover until the depressed housing market turns around.

People are spending less because they are stuck in “underwater” homes, which are worth less than what

is owed on the mortgage. And home values are falling because of foreclosures and tight credit — even in

areas with lower unemployment.

“Recent declines in housing wealth may be reducing consumer spending between $200 billion and

$375-billion per year. That reduction corresponds to lower living standards for many Americans,” Mr. Bernanke said.

The Fed chairman said there’s no “silver bullet” to rescue the housing market.

Renting out foreclosed homes and reducing or modifying mortgages are among steps that could help.

“Low or negative equity creates additional problems for households,” Mr. Bernanke said.

“It reduces financial flexibility: Homeowners who are underwater on their mortgages cannot tap

home equity to pay for emergency health expenses or their children’s college educations.

There have been modest signs of improvement in recent months. Sales of previously occupied homes rose in the last three months. Homebuilders are more optimistic after seeing more people express interest in buying this year. And home construction picked up in the final quarter of last year, which helped housing contribute to broader economic growth.

Still, last year was the weakest for new-home sales on records dating back to 1963.

Sales of previously occupied homes have also been at depressed levels.

And home prices continue to fall. ( Globe & Mail, 2/10/2012)

Will time be the ultimate cure to this pain?

What are your thoughts? Share with a comment below.

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Envoy Capitol Realty Inc.,brokerage           Toronto ,  Canada

Feathers Were Flying !

Feathers were flying over the past several weeks in Toronto City Hall whether to

change the Official Plan and accommodating zoning by-laws to permit chickens.

Yes over chickens, raising them in one’s backyard.

Some people in a few areas have taken upon themselves to raise chickens in their

backyards – not as pets, but for consumption.

This goes against City’s policies.

Those engaged in this chicken movement, raising them in their backyards claim it is a

fun and educational exercise.

They love their fresh eggs.

This urban agriculture movement is pushing for a by-law change to allow it.

The City considered lifting the ban on raising poultry – however in the end

decided not to go down that road…

What are your thoughts?

Should we all grow some of our own food supply in our backyard?

Or is it a bigger issue of whether our cities have been planned /designed to deal in a healthy

way in raising poultry and other farm animals? Share your comments with us…

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Building Permits Up!

The Canadian housing building permits are at a Five Year High!

Is this the beginning of a Canadian housing bubble which some fear is forming?

The is an interesting economic discussion at the following link which tries to explain some of these questions and more:

http://www.theglobeandmail.com/report-on-business/video/video-is-a-canadian-housing-bubble-forming/article2330632/

Chief Economist ( Altus Group ) Peter Norman says ;

” There is No Bubble right now.”

Things are relatively good and in balance.

Household formations now account for 50% of rentals ( as opposed to ownership ).

Canada’s population grew by 5.9% to a Canadian population of 33.5 million.

Mr. Norman says, ” The Degree of Debt being taken on by Canadians is okay and not out of line.”

The Journalist on BNN asked the economist a good questions which will need to be further explored in a future blog;

There is a whole lot of condominium construction going on in Toronto.

” Does Condo over building, which may cause a future price decline in Condo’s does this

result in a consequential price decline on the single family houses ?”

The answer Peter Norman gave was -” not necessarily. The single family homes are in good

balance on a supply and demand basis – in Toronto.”

At Envoy Capitol Realty Inc., we see the current equilibrium in single detached homes in Toronto.

There is always a difference whether a client is purchasing for own use versus investment considerations.

Always use the appropriate local professional who can advise on your individual circumstances for your protection.

What are your thoughts on this question? Leave a comment below and share your insights,thanks in advance.

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Grave Dancer On Commercial Real Estate

Real Estate is all about Supply and Demand!

The “good news is that nothing of any significance (volume wise) has been built since 2007 “said

Mr. Zell (aka the Grave Dancer on CNBC.

The “bad news is there has not been any material job growth to warrant the need for more commercial space thereby No Demand.”

We are not at any kind of bottom in commercial real estate – so we would not buy here.

We are not buying any, the situation is not opportune in commercial real estate.

The situation should change by end of 2013, says Sam Zell the chairman of Equity Group Investment.

That’s why I am using a mantra; “you must come clean by 2013.”

The prices are too high and do not relate to the rents / income being achieved by landlords to justify.

So our strategy right now is to wait, we may not have to wait long until some opportunities become available.

Yes Equity Investments is doing real estate things in Brazil, but not here U.S. – right now.

You have to buy right, buy low in order to make money.

Problem is rents are low and prices are high, right now. Something has to give, to make it right.

We at Envoy Capitol Realty Inc. agree, there must be value for the investor/buyer to be motivated to

purchase and take the risk with commercial real estate.

Always looking for the value proposition in the equation to invest and asking the question what is in it for me (the investor)?

Will this purchase get me closer to were we need to be, based on the criteria we established?

What are your thoughts? Leave a comment below and share your insights/ experiences with us.

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Is This A Private Fight or Can Anyone Join?

The Strategy changes as Goldman Sachs Group (its real estate fund) decides to hold on to this piece of real estate when in the past it choose to walk away. Goldman apparently is deciding to challenge its creditors rather than give up the ownership of this Chicago skyscraper. This is an interesting case study in the changing strategies used by  real estate investors in the market place.

“Goldman and its partner, property manager Golub & Co., are required to repay on Feb. 9 some $400 million in debt that they put on the John Hancock Center after they purchased the 100-story tower in 2007. But a default is likely because the owners haven’t been able to sell or refinance for that amount.” [ Wall Street Journal,2/4/12, by  Craig Karmin]

“Indeed, Goldman’s Whitehall real-estate fund last week requested a loan extension and is preparing to challenge in court any efforts by debt holders to take over the building, according to a letter from its attorney reviewed by The Wall Street Journal. The $400 million in debt consists of a $182 million senior loan that was converted into commercial mortgage-backed securities and the rest in three pieces of junior debt.”

Getty ImagesThe John Hancock Building (black tower) in Chicago is 81% leased. Goldman’s Whitehall fund and Golub face repayment of some $400 million in debt that they put on the building.

The letter accuses some of the junior creditors with interfering with Goldman’s business plan to sell the building in five pieces. That plan “would have enabled the borrowers to repay the loans in full well before the stated maturity and to earn a meaningful profit,” the letter states.

Those junior debtholders—Chicago developer John Buck Co., a Morgan Stanley real-estate fund and NorthStar Realty Finance—declined to comment or didn’t respond.

Others familiar with the property say that Whitehall’s problem is primarily that the fund and Golub paid too much when they purchased the tower for $383 million in 2007.

At that price, the building would need annual office rents around $35 a square foot to be profitable, or about $7 to $8 more than it is getting, according to Jack McKinney, president of the Chicago real-estate-services firm J.F. McKinney & Associates. “That’s not achievable,” Mr. McKinney said. “They bought it for too much.”

Goldman’s tougher stand comes at a time when commercial-property battles are erupting throughout the country as loans made during the boom years come due. They often pit owners against junior debt holders who angle to take over properties by foreclosing and assuming the senior debt. Is this the real game being played here between these equity investor/merchant bankers?

What is unusual in the fight over John Hancock Center is that, if Whitehall ends up challenging lenders in court, it would represent a break from its recent conciliatory approach toward lenders. The once high-flying fund was humbled by a number of real-estate investments that collapsed during the downturn, and it has generally preferred to turn over the keys or negotiate with creditors when property loans soured.

Goldman’s adversaries for control of the tower may change because a number of investors are looking at acquiring a $98 million piece of junior debt held by the Morgan Stanley fund and John Buck, say people familiar with the matter.

These investors include private-equity giant Blackstone Group, people said.

Whitehall’s charge against some of its junior creditors is known as “lender liability” in real-estate circles.
Often used by owners facing foreclosure actions, it essentially tries to shift the blame for a default to creditors.

The Parts are Worth More than the Whole, That’s the Exit Strategy!

Whitehall believes that it would be able to make more than the $400 million it owes by selling the building in separate parts: the retail, office, broadcast tower, observation deck and garage. The letter, signed by Daniel Tabak, a lawyer at Cohen & Gresser, claims that this plan “received conditional approval” in 2007 from KeyCorp Real Estate Capital Markets, the servicer at the time of the debt that was converted into commercial-mortgage securities.

The letter also states that the original holder of the junior debt, Lehman Brothers, “was prepared to formally approve” the plan, too. But Lehman sold that debt shortly before the firm collapsed in 2008 to investors including the Morgan Stanley fund, John Buck and NorthStar. Those investors refused to approve the sales strategy, the letter said.

The lenders “were not acting in good faith” and their true goal
“was to wrestle ownership of the property from the borrowers,” the letter alleges.

Real-estate attorneys say it is hard to say how effective Whitehall’s legal case will be, and that claims that
exist on anything less than a formal written agreement can be tough to prove.
Some lawyers suggest it could be a Whitehall ploy to strengthen its hand in negotiations with creditors.

At 1,127 feet, the John Hancock Center is one of the tallest and most-recognizable towers in Chicago’s skyline.

The building’s is 81% leased, according to CoStar Group, a real-estate research firm.
The U.S. office rate in Q 3, 2011 was 17.9% available, this building is above the average, at 19%.[Studley]

The building isn’t in a prime office location for many companies, brokers say.
Its office tenants include advertising firms, diplomats and doctors attracted by the
property’s proximity to nearby upscale residential neighborhoods and Northwestern Memorial Hospital.

As the economy recovers, more financing starts to become available,office values may start to rise and the exit
strategy envisioned above  becomes achievable.

As the big boys wrestle it out in the courts and beyond what can we take away from this case study?

Time heals all ?

Don’t over leverage your investment positions?

What are your thoughts, share your insights with us below. Leave a comment below.

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Envoy Capitol Realty Inc.,brokerage       Toronto, Canada