Landmark Links March 19th – Selfies Stick

funny-selfie-background-reflection-fails-24-58997fd75ff2f__605

Must Read: Real estate developers and architects are embracing social media in general and Instagram in particular as a way to draw attention to their projects.  As a result, new projects are now being constructed with Instagram-worthy features.

Economy

No Margin of Safety: A new survey found that 20% of Americans don’t have any savings whatsoever.

Stealth Mode: Seemingly minor events can reverberate through the economy in ways that often can’t be foreseen, making recessions extremely difficult to predict.  See Also: It’s been a long time since the last recession and that’s completely consistent with a trend that dates back to the 1800s.

Commercial

Late Adopter: Commercial real estate is famously slow to evolve with new technology.  However, a handful of startup tech companies are focused on everything from affordability to fostering community to instant purchasing.

Still Waiting: Believe it or not, investors are still waiting on clarification of major issues surrounding opportunity zones including “substantial improvement.”

Bumbling: How a long series of missteps brought Sears from the pinnacle of the retail world in the 1970s to completely losing the American shopper and eventually filing bankruptcy.

Residential

Backlash: Open concept homes have dominated the market for decades but some home owners are starting to miss walls.

Booming: In many – mostly suburban – areas of the US, new homes are popping up twice as fast as normal as strong regional economies, few barriers to entry, and relative affordability drive demand.

Alternative Use: Plenty of underutilized golf courses will eventually become parks and housing but home owners are not happy about it

Still on Top: Multifamily was the most actively traded US real estate asset class for the 3rd consecutive year in 2018 but limitations to the amount of available apartment stock in the value-add space will make it more challenging for investors to efficiently deploy capital in the space this year.

Profiles

All Clear: California is 100% drought free for the first time in nearly a decade.

Inspirational: Meet Tanitoluwa Adewumi, an 8-year old homeless refugee chess champion living in a NY shelter.  He’s the antithesis of the pampered adult children described in this New York Times story about how snowplow and helicopter parents are ruining adulthood for their kids.

Juggernaut: Brookfield Asset Management is buying a a majority stake in Oaktree Capital management for $4.8 billion in an effort to compete with Blackstone.

You Have to Pay The Right Person: This is probably the best take that I’ve read on the college admissions bribery scandal which is quickly becoming the Fyre Fest of 2019.

Fascinating: The twenty craziest investing facts ever.  Sample:

15. If you had invested from 1960-1980 and beaten the market by 5% each year, you would have made less money than if you had invested from 1980-2000 and underperformed the market by 5% a year (A Nicky Numbers Special)

Chart of the Day

The widely accepted narrative is that ecommerce is crushing brick and mortar retailing but actual growth and market share tell a different story.

Retail ecommerce sales growth worldwide and brick-and-mortar versus ecommerce share of retail (2021)

Source: Shopify

WTF

Gotta Hear Both Sides: A woman threatened hair salon employees with a machete and pooped in a police car after she was taken into custody because Florida.

Predictable: Microblogging site Tumblr banned pornography in December and subsequently lost nearly 100 million users or 17% of its total base.

Friend of the Year: An Oklahoma woman was arrested and charged with shooting contraband – including meth – over a prison fence with a t shirt gun.

Always the Ones You Lease Expect: A man with a giant neck tattoo broke out of jail, got caught then stole a cop car and escaped again. (h/t Henry Baskerville)

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links March 19th – Selfies Stick

Landmark Links March 15th – Opportunity Knocks

Bear knocking

Must Read: Develop, LLC and Esri have put together an analytics map that assesses and ranks nearly 8,000 opportunity zones across the US based upon metrics like population growth rate, median household income, retail sales, median home value, bachelor’s degree rate and unemployment rate.  It also overlays hospitals and universities.  I spent a while going through this yesterday and its fascinating.

Economy

Holding Off: Having kids generally makes people happy.  Paying for them, not so much.  The problem is that the cost of raising a child keeps going up and population growth is falling.

Validated: The latest economic data releases show low inflation and softer economic growth, verifying the Federal Reserve’s rate hike pause.

Commercial

An Abundance of Caution: There is still plenty of capital available for commercial real estate but investors are increasingly underwriting deals with more conservative assumptions in the late stage of the cycle.

Bouncing Back: US construction spending notched its largest increase in 9 months in January.

Decoupled?  Massive demand and less use of leverage by institutional real estate investors has allowed the cap rate/borrowing cost correlation to weaken in this cycle. (h/t Steve Sims)

Residential

Run Up: Home owners in the United States now have more home equity than outstanding mortgage debt.

Not As It Seems?  Yes, tech IPOs are likely to create a lot of new wealth in San Francisco this year.  However, a closer look at the finances of your average employee, coupled with the incredibly high cost of a Bay Area home reveals that the predicted buying binge may not materialize.

Don’t Call It A Comeback: After being left for dead a few years back, the home ownership rate is staging a comeback.

Profiles

No Good Options: The average American can’t afford to buy green when environmentally friendly products are priced at luxury levels.

Crackdown: New York and Connecticut have attempted workarounds that would allow residents to bypass SALT deductions in last year’s tax reform law.  The IRS is fighting back.

Get in Line: Wealthy people are flocking to Miami for the tax breaks, and it’s creating massive waiting lists at the area’s elite private schools.

Chart of the Day

This chart is nuts until you read the small print.

Source: Krueger & Catalano

WTF

It’s Always the Ones You Least Expect: A rapper who goes by Selfmade Kash who wears a jewel encrusted credit card around his neck and bragged about credit card theft in songs was arrested and charged with…….credit card theft.

Goals: A woman got wasted after pounding a 6-pack of beer in a Target dressing room before being arrested for shoplifting.  I feel like any parent with young kids can relate to this (except for the shoplifting part).

Surprise Ending: A fox who broke into a hen house in France was trapped inside and killed by the chickens.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links March 15th – Opportunity Knocks

Landmark Links March 12th – A Song of Ice on Fire?

iron throne

Lead Storey: The growth of online grocery delivery coupled with grocers moving towards high tech cold storage distribution systems could be pointing to cold storage, which currently has only 180MM sf of inventory in the entire US, being the next hot new property segment for industrial investors.

If you take a step back, this makes a lot of sense.  Consumers mostly love grocery delivery, yet grocers view it as a necessary evil as they haven’t yet figured out a way to make it profitable.  Part of this profitability problem likely lies in the inefficiency of using facilities built for brick and mortar retail as delivery distribution centers.  Take Instacart, for example (full disclosure, I am an Instacart customer and consider it a godsend for working parents).  The front end of the Instacart product is excellent.  A member goes online, selects which store they want to shop at and fill their cart with groceries that they choose.  Once that shopper confirms their order and checks out, the it gets routed to an Instacart shopper.  This is where the process goes off the rails from an efficiency standpoint, IMO.  The shopper goes to the center where the store is located and has to park in an often-busy retail parking lot.  They then enter the store, select the items that the customer has ordered and wait in line to pay with other shoppers before getting back into their vehicle and delivering the groceries.

This process is time consuming but also expensive.  The items that the Instacart shopper purchased are stored in a retail location with expensive rents that is not designed for efficiency but rather for marketing – trying to entice in-person shoppers (as opposed to those using a delivery service) to spend as much money on high margin goods.  That’s fine for an in-store experience but delivery customers couldn’t care less since they aren’t in the store anyway.  Just imagine if Amazon and other online retailers operated this way – sending their delivery people to stores to shop for goods rather than routing orders through their sophisticated fulfillment network of big box and last mile facilities.  It would be an unprofitable and inefficient mess – which is basically what grocery delivery is today.

Much of today’s existing cold storage space functions as distribution facilities for grocers and restaurants.  I suspect that we are going to begin to see a shifting market where the system of cold storage warehouse facilities begins to look a lot more like that of traditional warehouse space with large distribution centers and smaller last mile centers.  Those last mile facilities will effectively be grocery stores but set up to optimize efficiency and minimize cost – in other words laid out like an actual warehouse rather than a retail store with the associated lower rents and no consumer and marketing frills.  If I’m correct here, the Instacart shopper of the future will not even shop at the same grocery store as a direct customer.  They will instead go to that grocer’s last mile warehouse distribution facility to pick up orders that are assembled in-house once they are received electronically in facility that is designed specifically for that purpose.

I write this with the caveat that cold storage is far more expensive to build and operate than traditional warehouse and distribution facilities are so the investments will be more substantial upfront.  However, consumer trends indicate that it is highly likely that the trend towards grocery delivery will continue and that really can’t happen profitably without a large amount of growth in the cold storage space.

It’s no secret how much eCommerce has transformed industrial real estate in the last decade or so and that was a massive and mature market totaling billions of square feet.  Now, consider that the entire cold storage market in the United States currently consists of only 180 million square feet of inventory and it’s not hard to see how this could be a powerful trend if grocery delivery really is the wave of the future.  The calendar says that spring is nearly here but winter may be coming after all.

Economy

Hold Your Nose: The February nonfarm payroll report was a stinker with 20k jobs being created as opposed to projections of 178k.  However, the previous two months were revised higher.  Silver linings included  the decline in the employment rate (which should be expected after a government shutdown), increase in wages, and decline in people working part time for economic reasons.

It Was the Best of Times: Despite a lot of hand-wringing from some people residing in developed countries, the world really is getting richer as poor countries catch up.

Commercial

Different Story: As the previous economic cycle matured, office and retail were the hot commercial real estate sectors.  Late in the current cycle, its industrial and multi-family.

Rebound? REIT valuations have caught up with private real estate in the past few months, leading some to project an uptick in IPOs for 2019.

Residential

Power Shift: A new report from Zillow found that buyers are gaining negotiating leverage in some of the most high-priced housing markets.  See Also: Mortgage rates have continued their downward momentum in early march.

Coming Wave: A handful of massive IPOs of companies based in San Francisco will result in thousands of overnight millionaires with tons of cash to buy homes in an already-tight and astronomically expensive market.  As a result some sellers are holding homes off of the market waiting for the deluge of cash.

Proceed with Caution: Builders are pre-selling an increasingly higher percentage of homes, showing little appetite for building on spec and little confidence that demand will stay strong if interest rates go back up.

Profiles

Dual Meaning: This Wall Street Journal story about how pharma bro Martin Shkreli is running his former company via a contraband cell phone from behind bars includes the nugget that Shkreli goes by the nickname ‘Asshole’, which could mean more than one thing in prison.

Washed Away: Less than 1% of California currently falls under any kind of drought status, the lowest level since 2011.  But See: Trillions of gallons of water from recent rains is flowing into the ocean because California’s storm and water storage infrastructure sucks.

All Eggs in One Basket: Amazon has abruptly stopped ordering from many of it’s suppliers, forcing them to partake in its marketplace instead and shoulder more risk.  Reminder: if you own a business with only one client, that client owns you.

Chart of the Day

Household net worth took a dive last quarter, mostly due to the stock market slump.  Will consumer spending follow?

Source: The Daily Shot

WTF

Irony: An animal rights group stormed a pig farm in order to raise awareness about animal cruelty and cuddle newborn pigs.  However, they ended up killing two piglets because vegans.  Now those two young lives are lost forever and will never become the bacon that they were born to be.  Vegans are monsters.

Identity Crisis: A hipster tried to sue a magazine for using his image in an article about how all hipsters look alike only to find out that he wasn’t the hipster in the picture.

Gotta Hear Both Sides: A woman shot her boyfriend for snoring too loudly because Florida.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links March 12th – A Song of Ice on Fire?

Landmark Links March 8th – Reformed Hoarders

Hoarders

Must Read: The self storage industry is fighting two headwinds: right now.  Marie Kondo-inspired de-cluttering mania and a potential glut of units in some markets thanks to new construction.  See Also: A global ‘Tidying Up’ frenzy sparked by Marie Kondo is burying donation centers with goods that truly nobody wants.  But See: While absorption still needs to catch up with new supply, self storage demand fundamentals remain strong.

Economy

Sticky: High tax states are making it harder than ever for rich people to leave, especially when they keep a second home there.  If only there were something that they could do to keep the wealthy taxpayers that they depend upon from fleeing to Florida…..

Credibility Gap: Anecdotal indicators suggest that the labor market is incredibly tight.  However, wages are still rising slowly while payrolls are on the rise, suggesting that the job market has more slack than it appears to.  A better answer may be found in the prime-age employment rate (25-54 year olds) which has recovered to 2008 levels but is still well below its all-time high.

It May Not Be Over: The Federal Reserve has signaled that they are likely to hold off for the next few months but after that, their next move is anyone’s guess.

Commercial 

Turncoat: Amazon has long been viewed as a threat to retail landlords.  However, with its move into brick and mortar, it is now increasingly being viewed as a potential savior that has the expertise to draw the right crowd of shoppers, given its trove of consumer data.  See Also: Amazon and Whole Foods are reportedly eyeing shuttered Sears and Kmart locations as potential sites for expansion.

Don’t Call It A Comeback: Downtown LA has been booming for years now and don’t expect it to stop with the Olympics coming in 2028.

Residential

The Long Wait: State law requires that municipalities zone enough land to meet local demand for housing but a new report from public policy group Next 10 found that, given the current building pace, some municipalities won’t hit their goals for nearly 1,000 years.

Bounceback: Framing lumber prices appear to have found a bottom after falling for much of 2018.

Thawing: Home price growth slowed last year but falling mortgage rates and continued economic stability point to prices heating up again in the spring.

Mobility Premium: The number of rental households earning six-figures or more in Los Angeles has increased 33% in the last decade, showing that a large amount of high-income earners are choosing to rent rather than buy (or possibly that even high earners can’t afford to buy a home there).  See Also: The median rent for a one bedroom apartment in San Francisco has reached an absurd new peak of $3,690, according to survey data from Zumper.  That’s nearly 30 percent higher than New York City and more than double the prices in Miami.

Profiles

Unsustainable: Uber and Lyft are using venture capital to subsidize their massive losses.  Unlike some tech companies that can spend upfront for customer acquisition and then grow profitable thanks to massive economies of scale, the rideshare giants are selling a physical service that is expensive to deliver and not scale-able (fuel, for example does not get less expensive with scale).  This will eventually result in ride share companies needing to raise their rates substantially in order to remain viable, possibly leading to sticker shock when customers discover the true cost of the service.

This Would Be Awesome: A new urban farming company in Germany has plans for grocery stores where you are able to pick your own vegetables in-store.

Chart of the Day

Source: AEI

WTF

Money Can’t Buy Everything: A 65 year old billionaire diamond trader died while undergoing penis enlargement surgery, becoming the front rummer for a Darwin Award in 2019.

Normal Saturday Night: A Virginia woman was arrested for DUI after allegedly getting wasted on boxed wine in a Target and the mug shot is just as awesome as you’d imagine.

All in One: Heinz is releasing mayo/mustard and mayo/bbq sauce hybrids that absolutely no one asked for.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links March 8th – Reformed Hoarders

Landmark Links March 5th – Shoot, Ready, Aim

Bad-Wedding-Photos-Smoking-Bride-Machine-Gun

Must Read: Developers are closing on opportunity zone parcels before they even know what they will build in an effort to beat the tax clock.

Economy

Keep on Trucking: Cheap retail goods are about to become a casualty of a massive truck driver shortage.

On Fire: Prolonged low unemployment is benefiting low skilled workers who were previously left out of the workforce.  However, the gains have largely not been felt in rural areas and the next economic downturn could be particularly painful.

Go West: This is a really cool animated visual that shows how US population density has changed over the past 200 years.

Commercial

Scrape: Many of the shuttered Kmart and Sears stores that were not spared by ESL’s bid to save the company from liquidation will likely be bulldozed rather than re-tenanted.

Downmarket: Amazon once again is sending shock-waves through the grocery business by announcing that it is launching a new grocery store business separate from Whole Foods.

Don’t Call it a Comeback: Investors are high on REITs again, partially thanks to the Fed’s softened view on interest rates.

Residential

Buyers Remorse: A survey from Bankrate found that 63% of millennial homebuyers have regrets thanks to underestimating the full costs of home ownership.

Don’t Call It A Comeback: Pending home sales bounced back hard in January thanks to lower mortgage rates and an increasingly dovish Fed.  See Also: The home ownership rate is nearing a 5-year high.

Profiles

Supply and Demand: The fracking boom is on in the Permian Basin (again) meaning there’s no housing, hotel rates that rival Manhattan, a brisket shortage and barbers are pulling in $180k a year.

Custom Order: Amazon is starting to let Prime customers in the US pick which day of the week to receive deliveries in an effort to cut down on boxes.

Showtime: How Jeff Bezos went to Hollywood and lost control.

Chart of the Day

This is remarkable.

Source: Bloomberg

And so is this:

Source: JP Morgan

WTF

Ready for Shore Leave: A drunk captain crashed a massive cargo ship into a South Korean bridge because Russia.

Chowing Down: A 33 year old teacher is making millions by streaming himself eating 60,000 calorie meals on YouTube which is depressing in that I didn’t think of this idea first.

Totally Believable: A man who was accused of masturbating in front of children claims that he was just adjusting a hernia because Florida.

Fiends: Opium-addicted parrots are raiding poppy farms in India, creating headaches for farmers. (h/t David Landes)

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links March 5th – Shoot, Ready, Aim

Landmark Links March 1st – Chopped Up

chopped

Must Read:A startup called Roofstock plans to roll out a new platform that would let investors buy and sell fractional interests as small as $5,000 in single family rental properties.

Economy

Unsolved Mysteries: Despite record low unemployment, labor’s share of national income continues to drop, baffling economists.

Coasting: The Federal Reserve easing up on interest rate hikes could push the next recession out to 2021See Also: The Fed has already done a lot to delay the next recessionBut See: The 3 Month / 5 Year Treasury spread just inverted.

Buried: Debt among 19 to 29-year-old Americans exceeded $1 trillion at the end of 2018, according to the New York Federal Reserve Consumer Credit Panel. That’s the highest debt exposure for the youngest adult group since late 2007.

Lies, Damn Lies and Statistics: Yes, there are 1 million more auto loan defaults today than there were in 2010.  However,  transactions are also up and the percentage of borrowers in default is actually substantially lower than it was back then. (h/t Teryn Clarke)

Commercial

Taken Over: E-commerce is increasingly dominating the United States industrial real estate market.

Copycats: Legacy real estate companies are getting into the co-working business to compete with the likes of WeWork.

Residential

Tea Leaves: Weak housing construction likely points to lower economic growth ahead.

Under One Roof: Zillow is becoming the Netflix of houses.

Infill: San Diego is trying to encourage more dense urban development and less suburban sprawl.

Double Up: West coast real estate is now so expensive that married couples are moving in with multiple roommates in order to afford a place to live.

Profiles

Boondoggle: California’s High Speed Rail Authority was established to build out rail infrastructure 23 years ago.  During that time China has built 16,000 miles of high-speed rail.  The first phase of our (hopefully) soon-to-be-shuttered train to nowhere totaling 119 miles through the Central Valley won’t be completed until 2022.

Powder: After a long drought, record snowfall in the west has ski areas booming again.

Warning Signs: LA’s crumbling storm water management infrastructure could lead to a flooding catastrophe in the event of a 100 year storm.  See Also: California’s ‘big one’ could be a volcanic eruption rather than an earthquake alone.

Chart of the Day

Source: The Daily Shot Brief

WTF

Pico de Guyo: A Tennessee man was arrested for dipping his testicles in a customer’s salsa before an online delivery after receiving a low tip on a previous order.  He was busted because he posted a video of the tea-bagging incident online where it was reported to police. (I would give a h/t here but lost track of how many of you sent me this article)

Cashing In: A man stole rare coins worth an estimated $33k and dumped them in a Coinstar machine, getting about enough cash for a 12 pack because Florida.

America IS Great Again: The Lucky Charms flavored beer that you won’t drink and certainly didn’t ask for will be available in stores this weekend.

If This Car’s A Rockin’: A police officer is in trouble for allowing a couple under arrest to smoke and engage in sexual activity while in the back of a police cruiser because Florida (h/t Scott Ramser).

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links March 1st – Chopped Up

Landmark Links February 26th – Picked Over

PAY-CEN_EmptyShelves_05

Must Read: Warren Buffet is sitting on a massive pile of cash but has not found any large opportunities worthy of investment in the past three years.  At the same time, private equity investors have a record $2.1 trillion in private capital ready to deploy (as of June of 2018) and are bidding against each other to buy anything that is not nailed down.  Someone is right here and someone is wrong.  I know who my money is on….  See Also: Smoothed returns – thanks to a lack of valuation adjustments – coupled with the ability to lever up continues to make private equity attractive to institutional investors.

Economy

Mirror Image: The boom in subprime corporate debt – where lenders repackage and sell their loan obligations – bears a striking resemblance to the mortgage frenzy that preceded it.

Losing Momentum?  The Federal Reserve says that the US economy ended 2018 with solid but weakening growth.

Pushed Out: The White House announced that it would delay substantial tariff increases on Chinese goods that were scheduled to be enacted next week.  The move could help keep inflation pressure at bay.

Commercial

Depreciating Assets: The Tax Cuts and Jobs Act expanded the federal income tax depreciation breaks available to real estate owners but there are some potential downsides as well.

Fools Rush In: Here’s eight common (and sometimes catastrophic) mistakes that high net worth investors make when buying commercial properties.  This is particularly timely given the current opportunity zone gold rush.  See Also: Non-billionaire investors in commercial real estate are playing an increasing role through direct purchases and closed-end funds.

Stand Out: It’s been choppy but REITs have been easily the best performing major asset class over the past year.

Residential

One Stop Shop: Zillow’s latest earnings report makes it clear that the company has ambition to become the place to go to buy, sell and finance homes.

What’s What: A field guide to boxy, stumpy apartment buildings.

One Sided: It now costs more to own a home than to rent one in every US state.

Profiles

Skin in the Game: Private equity funds are raising larger amounts of capital then ever before, meaning that limited partners are looking for increasingly larger co-invests. This in turn has created a separate industry that exists solely to finance GP capital. (h/t Steve Sims)

Transformation: How the Bloomberg administration’s foresight during the Great Recession turned New York into a technology town.

Back Door: Once hailed as unhackable, blockchains are now showing vulnerability as sophisticated hackers figure out how to manipulate security holes.

Chart of the Day

Are home builders too optimistic?

The January existing home sales report was awful.

However, inventories are low in both absolute and monthly terms.

Builder confidence and existing sales don’t often diverge but they are now.

Source: The Daily Shot

WTF

Blessing in Disguise: A bride uninvited all of the guests from her wedding who refused to pledge to eat a plant-based diet for the rest of their lives because vegans.  Bonus: the Carl’s Junior commercial on the video accompanying this link is either a coincidence or brilliant AI ad placement.

You’ll Never Believe What Happened Next: A woman in Northern Ireland called the police to report that her drug dealer sold her brown sugar rather than cocaine.

Soft: The University of Wisconsin suspended a fraternity because it made its pledges wear Dora the Explorer backpacks around campus mainly because college kids are overly coddled wimps.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links February 26th – Picked Over