September 2009


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We’re sort of in that one-year-on mode from what happened in September, 2008.  I was paddling up in the Chesapeake Bay when the message came over my Blackberry that our German investment group had pulled out of a large apartment we were getting ready to develop.  No, I didn’t have the Blackberry in the kayak with me, but saw the little red blinking light when we got back to the car.  The tone of the e-mail was chilling – something about “we do not wish to invest in the United States at this time.”  When I got back to Nashville, we scrambled to replace the financing, but the world was falling down around us.  I did what I always do in times of crisis – head to the backyard, put a killer kielbasi on the grill and quaff down a couple of Sam Adams.  In honor of that event, this week’s selection of links re-visits and catches us up on those tumultuous days.  I don’t know if we are out of the woods yet, but just in case, I’ve got some Motor City brats sitting in the fridge.  Enjoy!

1. Time of Crisis – This is a powerful piece done by Reuters.  It has a painful video and then an interactive timeline.  Makes you think.

2. Bubblemeter – David and James run this blog out of the D.C. area.  It’s well written and documented – the next time you hear the term “green shoots,” click over here and get a little dose of reality.  A post from earlier this week – “housing prices expected to fall another 14%.”

3. Roubini’s Blog – Nouriel Roubini predicted this thing – he obviously follows some data that the others don’t.  He’s cautious about where we are right now…I check in over here on a weekly basis to get the latest.

4. Baseline Scenario – Heavy hitting bunch of bloggers over here including former McKinsey consultants, head of the IMF and an MIT Professor.  They have assembled a tool box of information at this link to really help you understand what led to the crisis.

5. Beyond the Bubble – This was a piece that appeared in the Wall Street Journal last week.  It’s another good summary of where we are now one year later.

If  you have any other sites that are worth a look on this topic, please send the links along.

Remember, chew your food twenty times, then swallow…sip of beer…repeat!

The Annual Meeting of the Nashville Downtown Partnership was held today at the Renaissance Hotel, with all the luminaries of downtown’s real estate, retail, philanthropic and political establishment in attendance.  I was there in my capacity as a Board Member of the Urban Land Institute since the Keynote speaker was Patrick L. Phillips, our new CEO for ULI.

A couple of impressions up-front – the ball room was packed!  This is a good sign.  I remember attending these luncheons several years ago and it is remarkable how well attended they are now.  Second, I got the chance to meet Nick Zeppos, the Chancellor of my alma mater, Vanderbilt.  He is a very personable, warm man and has a great vision for where Vanderbilt is going and how inter-related the University and the health of Nashville’s downtown are.

Primary reason for the post though, was to share Patrick Phillips’ observations on the state of downtowns and why he is bullish on their health.  Mr. Phillips opened his talk with the rather bold statement that good downtowns are entering the “best 10 to 20 years in history.”  Given the current shambles that commercial real estate finds itself in, that is a startling statement.  It was enough to break up the game of Russian Roulette that several developers were playing at one of the back tables!  But Phillips backs up his forecast with four key points:

1. Demographics – the population of the United States is expected to grow from 270 million to 360 million over the next 20 years and up to 420 million in the following twenty.  That’s about 4 Nashville’s worth of folks every year.  Now, he acknowledges that most of those people will go to the suburbs, but even if only 5-10% of those people move to the downtown cores of leading cities, there should be some good development opportunities.

The second part of the demographic equation that Phillips discussed is the impact of the “Millenials,” the baby boomlet that was delivered between 1988 and 2000.  This generation seems highly motivated to adopt an urban lifestyle – and they will become renters and homebuyers over the next twenty years – another favorable trend.  The third and final part of the demographic push, is the baby boomers themselves – me included!  No one really knows what the retirement behavior of this generation will be, but the peak of the boomers is currently hitting their mid-50’s and, like the Millenials, they seem to like the urban feel.  I can vouch that our condo sales in midtown Nashville at 807 Eighteenth and 1101 Eighteenth were fueled by empty-nester baby-boomers, tired of the 2-acre yard in the ‘burbs.

2. The Economics of Development – Phillips believes that macro-economic forces on labor and material will drive cost budget up and will put greater pressure on developers to develop (and re-develop) lower cost, more compact urban developments.  Historically, this is why cities have grown and as downtowns improve and add population and amenities, that concentration will begin to feed itself as more services are required.  Clearly one of the “bigs” in this equation is the price of gasoline – once it gets back to $4 per gallon, that 4,000 sf house in the ‘burbs with the 35 minute commute each way doesn’t look so good.

3. Public Service Delivery – some of the same forces that the private sector will have to deal with in the coming years are going to affect state and local governments acutely and make it more difficult for regions to expand across new geography.  This will force a more compact development pattern that will help downtowns continue to turn around.

4. Climate Change – Phillips believes that awareness of climate change will influence more and more people to accept the densified lifestyle of the urban experience.  Further, legislative changes that impact building codes and tax laws will add to the pressure to re-develop and improve existing infrastructure with more efficient, “green” building forms.

Bottom line, and we here at M2H Group couldn’t agree more is this: compact development and re-development opportunities are the “low-hanging fruit” in development right now.  Now, if we could just get the credit markets to open up to allow for this wonderful vision to come to fruition we will be getting somewhere!

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Last week’s little adventure up in the Blackwater Preserve kept me away from the weekly grill, but we will do our darndest with this fresh batch of links to get caught up!  Even though it is after Labor Day, we can still keep the Weber on the patio and offer up some weekly delicacies:

1. Museum of American Finance – I have visited a lot of museums in New York, but this one has escaped my perusal.  I promise to allot some time next trip to take this in.  Their section on “tracking the credit crisis” is particularly intriguing.

2. Feld Thoughts – Brad Feld is a serial entrepreneur and one of those thinkers that flies at about 30,000 feet.  I enjoy browsing his blog periodically for interesting thoughts and ideas.  He is the founder of Mobius Venture Capital and the Foundry Group.

3. Freakonomics – I loved the book, Freakonomics, but did not realize there was a blog that featured content from the every whacky world of economics.  Worth the bookmark and a periodic browse!  If you haven’t read this book, click this image below and get yourself a copy!  Who can resist a book authored by a “rogue economist?”

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4. The International Living Building Institute – an off-shoot of the Cascadia Region Green Building Council in British Columbia, this site is still a little “green,” but if you are up for the membership fee, I expect it will grow as a resource going forward.

5. “How the Crash will Reshape America” – this is a link to an article in the March edition of the Atlantic Monthly.  I had put it on my “Read it Later” list and got caught up on the flight up to Baltimore last week.  It’s a sobering analysis of where we have come from and where we might be going.

Enjoy the links!  Pass the mustard…

Once a year I make a “boy’s retreat” and head off to do something insane…it keeps you young!  For the seventh year in a row, I have returned to the Eastern shore of Maryland to participate in the Wye Island Regatta:

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This is a 13 mile race circumnavigating Wye Island utilizing any “human powered form of aquatic transport.”  My weapon of choice each year is a kayak.

Traditions are stubborn things and so the day prior to the actual race, our group engages in an insane contest of kayak paddling and mountain bike racing.  This year’s paddling took place in the Blackwater Preserve:

blackwater_ali_2005147It’s called “Blackwater,” because, well, the water is really black!  Centuries of decay of vegetation has left the water coal black.  I am not exaggerating to say that you can’t see your paddle with a deep stroke!  This is an extraordinary place, the “Everglades of the Mid Atlantic.”  During the course of our paddle, we spied at least eight bald eagles.  Here’s a link to the webcam of one of the bald eagle families that lives in Blackwater.

The boats we used this year had a slightly higher freeboard than years gone by, which was a bit problematic in the steady 10-15 knot winds we experienced the first day and the 15-20 knot gusts on race day.  With the wind directly astern or straight on the bow, you could make good time.  Put it 5-10 degrees off the stern and the boat wanted to weathercock into the wind.  Straightline paddling was not much of an option – I was just glad there were no Park Rangers around to pull me for suspicion of DUI!

The wind made our 25-mile mountain bike race fun too.  There’s nothing like going full out in a big gear and feeling like you are maybe, maybe doing 5 miles per hour!

All in all, it was a fabulous, refreshing trip.  Here are a couple of shots from area:

Action shot from first day:

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The view from Shorter’s Wharf in Blackwater:

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3401001870_8d103e2328I’m getting ready to dust off the Weber for some serious Labor Day grilling!  Hope you are too.  To help get your creative juices flowing before those mouth-watering keilbasis come off the mesquite, here are this week’s offerings of useful or interesting links:

1. Thanet Earth – maybe this is one way to address food shortage…a greenhouse that operates 24/7 the size of “80 football pitches.”  Umm, that’s big!

2. Seedmagazine – if you ever wondered why some people like milk and others don’t – there may be more to it than you realize. This is a pretty interesting article!

3. Making Home Affordable – whether you like the Obama administration or not, you have to admit that they are a tech savvy bunch.  This is a link to a Treasury Department web site that is designed to convince you to re-finance your house.  It’s all part of a strategy to change your behavior, according to Nancy Scola at Frontier, who weighs in with this week’s #4:

4. The New Interface of Governance – I have to admit, this creeped me out a little, but it’s an interesting perspective!

5. CIA World Factbook – back in the OLD days of the Cold War, we used to say that our problem was we couldn’t get enough information on the Soviets…their problem was there was TOO much information about us.  Well, here, the CIA lays out a heck of a lot about what they know.  I always check this site before I travel!

Have a terrific Labor Day weekend!

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“Financial Fiasco, How America’s Infatuation with Homeownership and Easy Money Created an Economic Crisis,” is a terrific read.  In layman’s terms (the dang thing reads like a novel!) Senior Fellow at the Cato Institute, Johan Norberg lays out the case of the perfect storm that led to our recent difficulties.  In six short chapters, Norberg catalogs the combination of monetary and housing policy coupled with financial innovation that created the disaster.  It is apolitical in its disbursement of blame, despite coming from the conservative Cato Institute.

This is a very readable and understandable book that documents the massive failure of risk management in corporate governance and in the Federal government.  He ably lays out the results of the law of unintended consequences and frankly, paints a rather bleak picture for the foreseeable future.  He is strongly opposed to the historic levels of debt that are being incurred and is deeply troubled by the psychology of risk abatement that Federal bailouts has caused – the “too big to fail” mentality is leading to poor decision making and a potential repeat of what has occurred over the last two years.

This book should be a “must read” for all citizens so we better understand what has happened and (let us pray!) we can educate our leaders in the corporate world and in government on what NOT to do.

Click on the picture of the book above if you are interested in purchasing.