"We now accept the fact that learning is a lifelong process of keeping abreast of change. And the most pressing task is to teach people how to learn. "

Peter Drucker 

Marketplace Reflections: Issue 136

ANNOUNCEMENTS

OPPORTUNITIES

341 MS Senior Tenant Rep Broker

One of our new clients is expanding their operation and has retained D&A to hire one or more well regarded and established D/FW TR brokers, in office or industrial. Do the words integrity, collaboration, client-centric and partnership resonate with your character and approach to success? If so, why not consider a new platform for 2011? Outstanding leadership, competitive splits, and a great atmosphere await you, and you can explore this with total confidentiality.

344 S Senior Retail Development Manager

Shanghai China, one of the largest and fastest growing cities in the world, may be calling your name! Our client, based in Jakarta and Shanghai, is building a major mixed use development, which includes a multi story retail component over 500K SF. We are engaged to hire a seasoned Retail Development Manager, who will report to the Chief Development Officer, who is of Canadian and German heritage. This is the first of a series of projects in Shanghai and other cities in China, so the position has long term possibilities. If you are seriously interested, willing to live in China, and have the requisite retail development background, please email your resume and development deal history to Sayres Dudley.

345 S AVP of Commercial Development & Management

This role requires a diversified skill set. It includes property/facility management, contract negotiation and compliance, construction management, lease negotiation, understanding of the development process, revenue and budget forecast/control, strategic planning, and land planning. This is neither a development management role nor a senior executive position, but more of a seasoned generalist. Background should include work for a developer, in a tactical day-to-day business management role as a landlord. Experience with natural gas leases a plus. For more information on this confidential opportunity, email Sayres Dudley.

MEETINGS

BOMA 2011
International Conference & The Every Building Show
June 26-28, 2011
Gaylord National Resort & Convention Center, Washington, DC
Click here for more info

Bisnow Dallas-Fort Worth
2nd Annual Multifamily Summit
June 29, 2011
Westin Galleria, Dallas
Click here for more info

Article

Bisnow Real Estate Summit, May 16, Westin Galleria 
650 people jammed the Westin meeting hall to hear a star studded panel of executives give an overview of the market. They included Andy Smith-CEO of L&B Realty, Jeff Swope-CEO of Champion Partners, Mark Gibson-CEO of Holliday Fenoglio, and Greg Krause-SVP of Invesco Realty Advisors. Moderator was Ron Holmes-Partner of Holmes Law Firm. 

The first question to the investors was, “What and where are you buying?”

Smith- Coastal apartments

Krause- Value add apartments, Coastal, DFW, Austin, Houston, Denver

Swope- Value add office in Texas. Jeff then remarked that for first time, Texas is a preferred location for international investors. The four major TX markets are grouped together in their minds.

Andy Smith added that Texas was redlined in past years, but not now. Corporate relocations and job growth has changes perspectives. Mark Gibson affirmed Jeff’s comment that Texas is the #1 economy in the view of most economists. HFF is selling a Texas office building, and three sovereign wealth funds are considering it.

Gibson said transaction volume nationally has shifted back to positive. In 2007, there were $550BB in trades above $5MM. 2009- $50BB and 2010- $110BB. One year ago, a buyer could not get debt on a vacant building; today that building can find 60% debt. The greatest risk to this cycle? International debt. Hopefully, the Fed will let the discount rate rest. Banks are finally having to lend again, because they simply can’t find enough good deals to deploy their capital.

The discussion then settled on apartments. Gibson stated that HFF was selling a D/FW m/f project, and the seller received a 3.85 cap rate offer. Seller declined, because the rent roll turnover is high each month, and it is throwing off a 20% return. This was driven by low rental rates the past few years, and now those rates are rising. Smith remarked that when rents hit a certain level, s/f housing will be attractive again, and the trend will move. Krause agreed, saying rates on their 48K unit portfolio were up year to date. Invesco is actively trying to buy.

Excerpt from Tea Leaf, written by Economist Jeff Thredgold, 6/21/11

For the entire article, click here

INFLATION CONCERNS

Consumer inflation has been on the rise during the past six months, one more “anxiety” issue to add to an already crowded list of domestic and global issues (see Tea Leaf dated June 7, 2011).  The consumer price index—the most well known if not necessarily the most highly regarded measure of consumer inflation—has now risen 3.6% during the most recent 12-month period.  That is triple the annual rate of just last summer.

The “core” rate of inflation, that which excludes food and energy costs and is one of the Fed’s preferred measures of inflation, has now risen 1.5% during the most recent 12-month period.  By comparison, the 0.6% annualized rise in core inflation late last year was the smallest rise in more than 50 years.

Oil Up, Oil Down

Yes, the rise in oil and gasoline prices had much to do with the sharp inflation rise, and yes, oil prices are now in decline.  However, the higher level of inflation will place a crimp in the Federal Reserve’s interest in a third round of massive monetary stimulus, affectionately known as “quantitative easing 3”, or QE3.

There is little doubt that Fed boss Ben Bernake has been more concerned about the threat of deflation rather than inflation during much of the past 2-3 years. Even as inflation pressures have climbed in recent months, the Fed chairman sees the increase as temporary.

Bernanke sees an inflation rise that will soon largely reverse direction as energy prices decline and global bottlenecks, particularly tied to auto part shortages resulting from the Japanese earthquake/tsunami, run their course.  He sees an economy where there is simply too much excess labor capacity to sustain any serious rise in inflation.

That Debt Thing

There is a school of thought that higher inflation is exactly what the economy needs.  The Wall Street Journal last Sunday ran a story, “What This Country Needs Is a Good 5% CPI”…noting that the economy’s primary challenge is high debt levels of individuals, corporations, and government entities.

The story suggested that higher inflation would make it easier for all debtors to repay high debt levels with less valuable dollars.  This approach, featuring much much higher levels of inflation, has been used by various nations all too frequently in the past, many in South and Central America, to repay fixed debts with currencies worth much less.

The story also suggested that it was higher inflation that helped end the Great Depression, along with global involvement in WWII.  In addition, the story discussed Japan’s long struggle with deflation, and the challenges of escaping a deflationary environment.

One could argue that temporarily higher inflation could help stabilize U.S. housing prices.  At the same time, however, keeping inflation at bay once it has become more pervasive is no easy task.