Archive for June, 2010
Top 20% of Leased Assets Yield Big Returns
Jun 30th
The Pareto Principle says approximately 80% of effects come from 20% of causes. Or to put it in real estate financial terms, 80% of sales/profits/savings come from 20% of properties. If you were to rank your leased locations in descending order by annual lease expense, you will find that the Pareto Principle is in effect and if you focus on the top 20% of those leases, you will see big payoffs in dollar savings. At the same time, the remaining 80% of those leases require most of your time and work. More >
Recapitalizing an “Underwater” Hotel Deal
Jun 30th
The number of hotels that are “underwater” financially is substantial and growing. The challenges of today’s economic and capital market conditions has brought even solid, experienced operators to their knees. So when looking at investing in a hotel deal today, should you recapitalize the current owner or acquire the property and start over?
For starters, it’s helpful to analyze the subject hotel in comparison to its competitors. If the property is maintaining its relative pre-down-cycle position with its competitive set, you might conclude that the problem is less likely due to the operator. By interviewing ownership and key employees, reviewing property records such as quality scores and operating statements and physically inspecting the property, an experienced investor can come to a reasonable conclusion about whether or not to consider recapitalizing a current owner. More >
The Supreme Court’s New Sarbanes-Oxley Ruling: A Tempest in a Teapot
Jun 29th
The Supreme Court Monday issued its decision in a case involving the constitutionality of provisions of the Sarbanes-Oxley Act (SOX), and held certain provisions unconstitutional. SOX was enacted in 2002 in the wake of the Enron and WorldCom debacles to tighten up accounting, auditing and reporting requirements for public companies. Under SOX, public companies are required to implement adequate systems and controls, including a process to ensure their real estate assets and liabilities are appropriately valued and to maintain an audit trail to support those valuations. Among the teeth in SOX were provisions that individual officers and Board Members could be held criminally responsible for the failures of a reporting company to implement appropriate systems and controls. In a 2004 letter to NAI clients and prospects I wrote: More >
Anatomy of an Accelerated Marketing Program
Jun 29th
No two properties are alike; there are geographic as well as asset attributes, such as age, condition and market availability that come into play. Realizing that a seller’s objective is to achieve optimal asset value, accelerated marketing looks at different sale scenarios and “designs a sale” for the property or includes the asset in a sale of similar assets that have gone through an asset stratification process.
What follows is a straight forward guide to aligning with a partner and getting started with a sale to achieve maximum exposure and the highest possible return for a seller. More >
Global Population Outlook – How its impact is redistributing Global Economic Expansion
Jun 29th
Over the next 40 years, economic expansion will depend heavily on the growth of newly industrialized countries rather than European and North American nations due to the increasing middle class population in the developing world. Twenty-first century international security will no longer depend simply on the population of the world, but on how the global population is composed and distributed.
The UN Population Division now projects that population growth will halt by 2050 and the world’s population will stabilize at about 9.15 billion people. Barring a complete failure to recover from the current economic crisis, global economic output is expected to increase by 2-3% each year, indicating that global income will increase far more than population over the next four decades. More >
