EXPO REAL 2012 finished on a high note.

Participating were approximately 1,700 exhibitors. EXPO REAL 2012 also reported a rise in the number of participants in this 15th International Trade Fair for Commercial Property and Investment – to a total of 38,000, up by 1,000 on 2011.

EXPO REAL is all about meeting contacts; not just across Europe but globally too.   It’s also a great place to spend quality time with our European colleagues.

The market in Germany and its neighboring countries in Central Europe proved to be a particular attraction.  Visitors to NAI Global’s stand, from the host country and around the world, were particularly interested in its investment services capability alongside strategic property consultancy and brokerage services.   Environmental sustainability was also a hot topic, with energy efficiency a key driver for occupiers, investors and developers alike.

NAI Global, the premier managed network of commercial real estate firms and one of the largest real estate services providers worldwide, announces its expansion of coverage into the Commonwealth of Puerto Rico, with the addition of NAI Puerto Rico.

Headquartered in San Juan, NAI Puerto Rico is a full-service commercial firm offering a complete range of real estate services including tenant representation, marketing research, location consulting, project management, lease renewals/restructures and acquisitions/dispositions

NAI Puerto Rico was founded by Hector J. Aponte SIOR, an industry veteran with over 15 years of experience in the commercial real estate industry. Hector has completed a wide array of major real estate transactions in Puerto Rico, for private and government clients such as Bayer, Sanofi, Publicis, ConAgra Foods, WPP, CSA Group, Marsh & McLennan, Starbucks Coffee, U.S. Army, IRS, and the EPA.

“By joining NAI, we are expanding our capabilities and resources to many international markets; this will definitely boost our services and will keep us on top,” said NAI Business Director, Mr. Hector J. Aponte. “NAI gives us new technology, tools, shared resources, marketing, and access to over 350 offices worldwide, which will enable us to develop new opportunities for clients looking for extensive representation or international resources.”

“This is a key market for us, especially for our corporate and investor clients seeking to take advantage of the commonwealth’s attractive tax policies,” said NAI Global President, Jeffrey Finn. “With Hector and his team at NAI Puerto Rico, we now have some of the best real estate experts in that region to serve our clients. I am excited about our new partnership and look forward to working together in the coming months and years.”

NAI Global is among the largest commercial real estate services organizations in the world, comprising 5,000+ professionals in 55 countries in more than 350 offices. NAI advisors such as NAI Puerto Rico work in tandem with its global management team to ensure clients strategically optimize their real estate assets. NAI offices complete over $45 billion in combined transactions annually and manage over 300 million square feet of commercial space.

NAI Puerto Rico is located at Ponce de Leon Avenue #1072, San Juan 00928

About NAI Global

NAI Global’s extensive services include corporate real estate services, brokerage and leasing, property and facilities management, real estate investment and capital market services, due diligence, global supply chain consulting and related advisory services. To learn more, visit www.naiglobal.com. Follow us on Twitter (@NAIGlobal) and Facebook.

NAI Global, the premier managed network of commercial real estate firms and one of the largest real estate services providers worldwide, announced today its expansion of coverage into the Calgary province of Alberta, Canada, with the addition of NAI Advent.

Headquartered in Calgary, NAI Advent is a full-service commercial firm offering a complete range of real estate services including buying and selling, leasing, development, group investment and property management services. NAI Advent was co-founded by Garry Bobke, Sid Smith and Luke Stiles, all industry veterans with extensive experience in the commercial real estate industry.

“NAI Global is a tremendous commercial real estate organization with a global platform that will allow us to broaden our services and enhance our ability to provide world-class service to our clients,” said NAI Advent Business Director, Sid Smith CCIM. “We are excited about our affiliation with NAI and the opportunity it provides to partner with other firms to enhance our client services regionally and globally.”

“We are proud to have Sid and his team embrace and build the NAI brand across the Greater Calgary Area,” said NAI Global Executive Vice President, David Blanchard. “Our business continues its upward trajectory. Calgary is a critical Canadian market for us. We are excited and confident that NAI Advent’s extensive local knowledge, relationships, commitment quality and results will greatly benefit our corporate and investor clientele.”

NAI Global is among the largest commercial real estate services organizations in the world, comprising 5,000+ professionals in 55 countries in more than 350 offices. NAI advisors such as NAI Advent work in tandem with its global management team to ensure clients strategically optimize their real estate assets. NAI offices complete over $45 billion in combined transactions annually and manage over 300 million square feet of commercial space.

NAI Advent is located at 833 34th Avenue SE Calgary, Alberta T2G 4Y9 Canada

About NAI Global

NAI Global’s extensive services include corporate real estate services, brokerage and leasing, property and facilities management, real estate investment and capital market services, due diligence, global supply chain consulting and related advisory services. To learn more, visit www.naiglobal.com. Follow us on Twitter (@NAIGlobal) and Facebook.

As we enter the third quarter of 2012, we are seeing the pattern of unprecedented government intervention continue. Governments around the world are using the powerful tools at their disposal; spending, regulations, fiscal policy, and taxes to interfere with the free market in hope of sparking economic recovery. The result is that instead of recovery, we are experiencing further distress as the Euro crisis intensifies and even Brazil and China’s economies slow.

[View with PicLens]

One of the main culprits behind the escalation of government interference is the resurgence of the belief that “government does it better.” This sentiment usually focuses on China as the example where government “does it better” than the private sector. These refrains are eerily familiar to those about the Soviet Union, Mao’s China, and Japan à la 1980. But China’s growth over the past 20 years reflects less on how well they are doing today than on how horribly their government’s decisions impoverished China for many decades. From destitute starvation, there is only one direction: up. And even still, the little-known truth is that China’s dollar growth in per capita income remains below that achieved in the U.S. For example, in 2010, per capita income in China rose by $770 (at purchasing power parity), versus $1,870 in the U.S. That is, if U.S. living standards in 2010 rose by China’s, we would be in an even worse economic situation than we have today. The irony is that the belief in big government is occurring even as trust in the U.S. government (and most other governments) is near an all-time low. Big governments around the world generally result in concentrations of unemployment among the young and immigrants, as these individuals tend not to be voters. In addition, since labor market entrants do not yet have a job, the red tape and regulatory burdens associated with hiring fall disproportionately on them (to the benefit of those with jobs). As of March 2012, unemployment rates among 16 to 24-year-olds stood at 21.9% in the U.K., 35.9% in Italy, 51.1% in Spain, 16.4% in the U.S., and 21.8% in France.

Spending

The rise in belief of big government rests partly on the Keynesian theory that government spending has a multiplier about 1.5. In other words, some believe governments can spend their way to growth. If this was the case, the economies of the world would be experiencing unprecedented booms. Instead, they are stagnating. One thing on which everyone agrees is that Europe and the Euro face great uncertainty, as their social insurance promises and government spending relative to tax revenues place ever greater strains on their economies.

Only when European governments (or the European Central Bank) pump $1 trillion into Portugal, Ireland, Greece, Italy, and Spain (PIGIS) does the European economy muddle along. But once such injections are three months old, the weight of the long-term stress reappears. These short-term “fixes” have fixed nothing.

Like cortisone shots for athletes, they mask rather than cure the ailment, increasing the risk of even greater injury. As the actual economic outcomes have consistently fallen far short of the predictions of Keynesian multiplier models, Keynesian spending proponents simply say, “It would have been even worse absent this spending, so we need even more spending to stimulate the economy.” This is baffling given the presence of a simple alternative explanation: their models are wrong. In fact, sub-par economic growth in the presence of high levels of government spending is exactly the prediction of the microeconomic model that says there is no free lunch. This model argues that increased government spending means less private spending. This is because every fiscal action has an (almost) equal and opposite reaction. Thus, huge deficit spending causes private spending to decline as the private sector realizes that it has a greater future tax liability of equal magnitude. We have witnessed this in the U.S., almost dollar-for-dollar in deficit spending. This phenomenon is known as Ricardian Equivalence; recent experience has confirmed it as more than a theoretical concept, with private debt falling by an almost exactly equal amount as government debt has risen. This means that reduced government spending (and hence deficits) is causing offsetting increases in private spending. And since private spending is more productive than public spending, economic growth declines with increased government spending. Not only does the entire argument that more federal spending is needed to stimulate the economy run counter to common sense and the global experience over the past 50 years; it is absurd at face value. It completely ignores the nature of government spending.

We can turn to China for an example. As was the case in the former Soviet Union and Japan, much of the government-directed output created in China today is of little worth. This is not to say that China has not made enormous progress in terms of improving infrastructure (an important government function), but rather that much of its spending is valued at (but not worth) full cost. That is, the U.S. is not the only country in which governments build bridges from nowhere to nowhere. Notable examples of this are China’s ghost cities, which were built at great cost, yet sit unoccupied. These projects boosted measured GDP as surely as did the endless security spending undertaken in the former Soviet bloc. But such wasteful expenditures add nothing to the nation’s well being.

Furthermore, would you expect enhanced growth if the U.S. government spent $5 trillion invading Canada? Or if they decided to spend $15 trillion building a floating bridge to France? Of course not. Such government spending would be destructive and wasteful, and would cause crushing economic declines as the money was redirected from productive private consumption and investment. It is the quality, not quantity, of government spending that matters for growth. Large and rapid increases in government spending are almost always destructive; as there is no way large sums of money can be quickly and prudently deployed “from on high,” particularly if this is the outcome of political horse trading. Thus, any reductions in federal spending would be welcome as commensurately fewer resources will need to be taken away from the private sector.

Regulation

Every economic bust creates calls for more extensive government regulation, in order to impede future financial fluctuations. The Obama administration continues to add more regulatory measures in the mistaken belief that it can regulate excessive behavior out of existence. However, most regulations are poorly conceived and hinder economic growth, while yielding no behavioral improvement. History shows that regulatory overload holds market forces hostage, leaving investors in regulatory purgatory. Increases in regulation induce prolonged flats in the stock market, reflecting an inconsistent environment that is not conducive to economic growth. The stock market flats of the 1970s, and since 1998, partially reflect regulatory activity under both the Bush and Obama administrations. The 1970s were defined by the policies of Presidents Nixon and Carter, who added a myriad of regulatory bodies to the government, such as the Environmental Protection Agency (EPA) and the Consumer Product Safety Commission (CPSC). The effects were clear, with the Dow Jones Industrial Average and the S&P 500 decreasing by 22% and 26%, respectively.

A study of the market reveals the same pattern of regulatory growth and economic stagnation. From 2001 through today, the Dow and the S&P 500 have only seen gains of 15% and 6%, respectively, compared with the 380% growth seen over the same time span beginning in the 1980s. From the peak in 2007 to the lows of early 2009, the Dow, the S&P 500, and the NASDAQ indices all declined by about 50% in response to unprecedented government tinkering. As of mid-June 2012, the Dow and the S&P 500 are still 11% and 16% below their respective 2007 highs, while only NASDAQ has managed to surpass the previous high, by 0.3%. Recent measures such as Dodd-Frank, SOX, and the hotly contested Patient Protection and Affordable Care Act (Obamacare) do little but add to the bureaucratic mess that is American government.

A look at the number of pages in the Federal Register reveals that the current state of affairs is starting to follow a trend last seen in the late 1970s. As of 2011, the number of pages in the Register stood at over 82,000, the highest level since 2000 and the third highest level ever recorded. The new regulatory efforts continue to undermine the business sector and discourage growth in a fragile economy.

The recent Jumpstart Our Business Startups (JOBS) Act highlights the fundamental flaw of increased regulation. In the name of spurring entrepreneurial activity, the JOBS Act defines how a company should be regulated as it grows larger, allowing smaller firms easier regulatory access to capital. But if lesser regulatory oversight is good for small firms, on what basis is increased regulation justified for larger, more established companies? As regulatory legislation becomes increasingly burdensome, businesses are at the mercy of an unfamiliar and ever changing political landscape. Without certainty of the rules of the game and a stable business environment, companies sit in a regulatory purgatory, unable to raise capital or hire workers. This means they cannot drive the economy forward. The strongest period of American growth coincided with Ronald Reagan’s presidency. As part of Reaganomics, the Reagan administration implemented measures to reverse the legislation signed during the Nixon-Carter era. Reagan appointees to the EPA, CPSC, Energy, and other departments pulled in their regulatory talons, and regulatory agencies saw deep real budget cuts and steep reductions in their regulatory power. It was not an accident that by the time Reagan left office, both the Dow and the S&P 500 were up approximately 160%. The country had been pulled out of regulatory purgatory and put on the track for sustained expansion.

Monetary Policy

The “government does it better” mentality also extends to central banks, which have aggressively been using monetary policy with unprecedented interventions in a futile attempt to prop up failing economies. Remember these agencies miserably failed in their job of bank oversight. They are hardly omnipotent! The initial quantitative easing (QE1) was, for the most part, justified in order to ensure that the banking system did not fail (even if it should have, given excessive risk-taking). But the combination of the Fed subsequently keeping interest rates absurdly low and QE2 has only served to distort investment decisions beyond all recognition. The Fed is intentionally forcing you to take on risk by setting the short-term rate at zero and forcing down long-term yields via quantitative easing.

Fundamentally, the Fed is commanding you to “choose your poison:”

• Stay in cash and receive zero return as inflation runs 3-5%.
• Price your investments off of 10-year Treasury yields of 2% and assume that rates do not rise, running the risk of rapid interest rate increases if the federal government is unable to finance its next debt auction.
• Or pursue alternatives that involve greater business risk than you have previously undertaken (for example, buying single-family homes to rent in an attempt to find yield not available via buying traditional garden apartments).

In each case, you take on greater risk than you have at any time in your life. Is it any wonder that you are confused? Welcome to the large and non-exclusive club of confused decision-makers. We are living in an “Alice in Wonderland” world, where sovereign credit downgrades may reduce their debt yields, and the demand for safety is such that negative expected real yields are being paid on U.S. and German government debt. The simple truth is that no one knows the answer to these questions. Even highly informed opinions on these matters are based on some educated guesses, logic, extensions of normal behavior to very abnormal conditions, and occasionally a tiny bit of related history. In fact, not even the Fed knows what the Fed will do in the future, as they too have never experienced such conditions that exist today. This is not to suggest that Mr. Bernanke and his Fed are evil or mal-intended, but rather that he is overmatched in his job. But then, anyone would be overmatched if assigned the job of fixing the “right” price for any important commodity (like money). Milton Friedman was the master at criticizing the conceit of Fed officials who believe that they can set the “right” interest rate. One of Friedman’s great insights was that determining the “right” interest rate is impossible, and the Fed’s constant interventions simply lead to unintended adverse consequences; hence his long support of rules of Fed behavior, rather than discretionary Fed interest rate setting.

The U.S. has come to resemble the Soviet Union, where attempts to set prices led to cascading unintended market distortions, which reverberated across the economy, greatly reducing economic growth. Current Fed policy is nothing more than raw price manipulation driven by a conceit that the Fed knows better than the market. The Fed’s low rate policy has stolen billions of dollars from savers, while creating artificial incentives to take unknown risks. Cutting interest rates in an attempt to stimulate sustained economic activity focuses solely on the incentives facing borrowers, while ignoring the fact that lenders face offsetting disincentives. Specifically, why lend long-term at low rates rather than wait until rates rise?

The Fed’s zero rate policy has been an unmitigated disaster for millions of retirees, who have seen the income derived from their life savings fall to zero, due to near zero interest rates. These people have had to liquidate far more of their life savings than they anticipated, leaving them exposed should they live “too long.” Their heightened risk of running out of assets causes them to reduce their spending, even as the government attempts to stimulate consumption. Meanwhile, Baby Boomers are realizing that the inheritance they once thought they would receive from their parents is rapidly being liquidated or devalued, leading to reduced Boomer consumption. As in physics, every action has an equal and opposite reaction.

Taxes

There is a great deal of talk about the Fiscal Cliff that promises to unfold in January absent government action. Specifically, taxes are set to rise when the Bush cuts sunset, while mandated federal spending cuts are also scheduled to go into effect at that time. As discussed previously, a reduction in federal spending would actually help the economy, as a decrease in public spending increases private spending according to Ricardian equivalence.

The other part of the Fiscal Cliff relates to increased taxes. This raises a very real risk of reduced economic growth. Research by the former chairperson of President Obama’s Council of Economic Advisors, Christine Romer, indicates that a 1% increase in taxes generates almost 3% lower GDP. And a recent survey of numerous economic studies on this topic concludes that every 100-bp increase in taxes reduces GDP growth by 15 bps: that is, a multiplier of 0.85, not the 1.5 multiplier commonly asserted by Keynesian proponents. This is the real Fiscal Cliff danger, which lurks if taxes are increased in January.

Unfamiliar Investment Landscape

These government interventions have distorted the investment landscape beyond recognition. Spending has created unsustainably large deficits around the world, and an uncertain political climate is making it hard to know exactly when and how those deficits will be tamed. The best businesses can do is spend less to account for the almost certain rise in future taxes. Increased and uncertain regulations are further incentivizing investors to wait and see; it makes much more sense to invest when there is stability and confidence that regulations will remain fairly constant for the length of the investment. Moreover, central banks around the world are slashing interest rates to the point where investors are forced to take on more risk than ever before. In all, government activity is now deterring the very investment it was hoping to spur. Governments need to understand that businesses need stability and a degree of freedom to grow and create jobs. When that change in mentality occurs, the economy will be back on the path towards stable growth.

Download the PDF version here.

Every executive with whom we speak expresses utter confusion about the state of the global and U.S. economy and capital markets. As a result, they are in a muddle about their investment strategies. They closely monitor economic and capital market data for signs that “everything is all right,” yet even as the U.S. economy grows at a seemingly healthy rate, they remain extraordinarily ill at ease. Why?

Simply stated, this discomfort reflects the fact that even though U.S. real GDP and employment are growing at moderately healthy paces, we remain in totally uncharted waters in terms of both the economy and our capital markets. And when private decision makers are in unfamiliar (and unrecognizable) landscapes, they act very cautiously.

For example, we have not seen in our lifetime federal budget deficits as large as those which currently exist. Not only is U.S. federal spending as a percent of GDP at a peace-time high, but federal revenues as a percent of GDP are well below their historic norm, resulting in unprecedented budget deficits. Compounding the problem of unprecedented U.S. budget deficits is the fact that there is neither political leadership nor a political consensus on how to bring the federal budget back in balance. This is creating a situation in which the only clarity is that the current situation is not sustainable.

[View with PicLens]

Another aspect of uncharted waters is that outstanding U.S. federal debt has doubled in the last four years, resulting in a nearly $100,000 per household liability (and rising at the rate of $12,000 per year) associated with that debt. Who will buy this mounting debt, and at what rate, are questions everyone asks but for which there are no clear answers. Over the past 18 months, the Federal Reserve has been the primary purchaser of newly issued federal debt, with the private sector a net seller. Will the Fed be able and willing to purchase newly issued federal debt? This is an important question, as the Fed is artificially keeping interest rates near zero across the yield curve. But no one (including the Fed) knows what the Fed will do, because we have never before witnessed such monetary expansion by the Fed. And since one underestimates the staying power of a determined sovereign at one’s peril, we cannot be sure if today’s interest rate environment will continue another day, week, month, year, or decade. All we know is that since the collapse of Lehman Brothers, the Fed has increased the monetary base by some $2 trillion, nearly $700 billion of which has occurred over the past 18 months. The result is an unfathomable growth in the monetary base, with nearly four times as much money today as existed on September 1, 2008.

A related element of uncertainty is that the 10-year Treasury yield today is far lower than the current rate of inflation, even as inflation is rising. Making matters even more confusing is that sovereign credit downgrades have often resulted in lower — not higher — interest rates. And as seen in Figure 1 in our economic overview article, many indicators for the U.S. economy are in excess of a standard deviation beyond their historic patterns. Such deviations are well beyond the experience of today’s decision-makers.

Making the confusion greater is the fact that these phenomena are not limited to the U.S., but rather exist around the world. In fact, our problems are not as bad as those found in most European countries; as result, our exchange rate has strengthened even as we weaken, because we have weakened less than Europe. And Japan is in even worse shape yet.

One thing on which everyone agrees is that Europe and the Euro face great uncertainty, as their social insurance promises and government spending relative to tax revenues place ever greater strains on their economies. Only when European governments (or the European Central Bank) pump $1 trillion into Portugal, Ireland, Greece, Italy, and Spain (PIGIS) does the European economy muddle along. But once such injections are three months old, the weight of the long-term stress reappears. These short-term “fixes” have fixed nothing. Like cortisone shots for athletes, they mask rather than cure the ailment, increasing the risk of even greater injury.

Adding to the widespread confusion are near-record oil prices driven by growing global GDP in the face of relatively flat oil production. Specifically, real global GDP has risen by approximately 40% over the last decade, while oil production has grown by a mere 10% (and by 0% over the last eight years). The short-term inelasticity of oil demand means that large run-ups in oil prices have occurred even as shale fracking has caused natural gas prices to plummet. And what happens to oil prices as Syria tumbles, Egypt grumbles, and the Iranian situation darkens? Again, no one knows. These uncertainties are well beyond our normal bounds of experience and are occurring in the midst of a highly contentious election year in the U.S. and around the globe (including China’s recently installed government).

Meanwhile, the Fed is intentionally forcing you to take on risk by setting the short-term rate at zero and forcing down long-term yields via quantitative easing. These interventions are historic in magnitude. The truth is that not even the Fed knows what the Fed will do in the future, as they too have never experienced such conditions that exist today.

Fundamentally, the Fed is commanding you to “choose your poison”:

1. Stay in cash and receive zero return as inflation runs 3-5%.
2. Price your investments off of 10-year Treasury yields of 2% and assume that rates do not rise, running the risk of rapid interest rate increases if the federal government is unable to finance its next debt auction.
3. Or pursue alternatives that involve greater business risk than you have previously undertaken (for example, buying single-family homes to rent in an attempt to find yield not available via buying traditional garden apartments).

In each case, you take on greater risk than you have at any time in your life. Is it any wonder that you are confused? Welcome to the large and non-exclusive club of confused decision-makers. We are living in an “Alice in Wonderland” world, where sovereign credit downgrades may reduce their debt yields, and the demand for safety is such that negative expected real yields are being paid on U.S. and German government debt. The simple truth is that no one knows the answers to these questions. Even highly informed opinions on these matters are based on some educated guesses, logic, extensions of normal behavior to very abnormal conditions, and occasionally a tiny bit of related history. Thus, however risky things appear, we believe that they are even riskier.

LNR and CIII are selling a tremendous amount of product through a large auction now and the FDIC has another $700 million portfolio to be sold in the 3^rd quarter 2011.

We believe we are at the tipping point towards a more normalized market where new originations will commence in early in 2012 reflecting normal CMBS output and lending patterns similar to 2005 and 2006.

Though 2012 will see more distressed debt opportunities we see an overall slow down as the economy and its recovery finally impacts real estate positively.

Last month I interviewed Sam Zell where he stated that inventory (supply) would be waning since little new real estate product has been constructed in the last four-and-half years in either multifamily or office development.  Sam noted that demand is still weak but the sheer lack of new inventory will increase the value of existing real estate as certain properties become more obsolete and placed out of service.  Eventually demand will return, which will  push values back up.

So, what has occurred since then? What sectors are hot?

From February 2009 to June 2010, 102 multi family properties were sold at auction and the variance between asking and sell price was 90%. From July 2010 to April 2011, the variance was 82%. More sales occurred however, with 132 multi-family properties with a total value of over $2 Billion sold at auction in just a ten month period.

The number of office properties sold at auction increased significantly. While only 108 office properties sold at auction during the February 2009 to June 2010 timeframe, the number increased to 202 sold during the recent ten month timeframe. The total dollar volume was just over $1 Billion. During the earlier period, the variance between asking and sell price was 75%. The gap closed during the most recent period, with average asking versus average sell at 99%. The data suggests that the overall average does not reflect steady monthly occurrences but rather sharp peaks with average sales prices surging in some months and dropping in others.

Industrial/flex property auction sales are up as well. Last year, when we compared half year 2010 sales to 2009 sales, we found a ten percent increase in number of transactions brought to market. During the entire earlier period, 132 industrial/flex properties sold at auction and average asking price to average sales price was 65%. When we look at just a recent 10 month period, the number jumps to 174 industrial/flex properties valued at just over $300 Million traded at auction. Prices during the earlier period were becoming more aligned and have continued. The former data showed a slight increase in the variance between asking and sell price, or 67%. Of interest is that the gap has narrowed in the most recent 10 month period with average asking to sell prices showing a variance of just 81%.

Retail property auction sales are also up. Retail properties being offered for auction dropped by more than 40% during the first half of 2010 as compared to the last six months of 2009 and were 20% less than the first half of 2009. During a 17 month period, 341 retail properties sold at auction and the variance between asking and sell prices at 70%. More consistency is found over the recent 10 month period when 299 retail properties with a total value of $1.1 Billion were sold at auction. We witness sharp peaks with high average selling prices surging in some months and dropping in others, with overall “average prices” suggesting a gap of just 1% or a variance of 99% when comparing average asking to sell prices.

While we had not considered land sales at auction last year, there were 191 transactions with a total value of over $1 Billion during the July 2010 to April 2011 timeframe. Average sell prices were 65% of average asking prices.

NAI Global has also witnessed increased interest in auction sales, with greater activity in sealed bid PowerSale, live and online auctions programs over the same period.

To learn more about NAI Global’s accelerated marketing program, visit www.naiglobal.com/powersale, or contact Patricia Faulkner at pfaulkner@naiglobal.com.

“How is it possible to have 25% increases in healthcare costs, which account for roughly 17% of GDP, and not have serious inflation?” said Dr. Linneman. “As inflation takes hold, generations that have never witnessed inflation will experience its destructive power. It is essential that [investors] are aware of the damage that inflation can wreak on [their] net investment position.”

The white paper analyzes the impact that inflation will have on commercial real estate, forecasts the direction of interest rates and provides investment and financing strategies for property owners seeking to shield themselves from inflation’s destructive power.

Beware of Inflation assesses the potential destructive power of inflation and its impact on commercial real estate.

This latest white paper follows A Disastrous Decade, Dr. Linneman’s scorecard for the 10 years from mid-2000 through mid-2010, reviewing how the economy has changed over the first decade of the 21^st century. NAI Global’s white papers and research resources are available for free download at www.naiglobal.com under Publications/Articles & White Papers.

One of the most critical aspects of any sale transaction is to accurately assess the certainty of closing with specific buyers.  The most proficient seller or seller’s broker should personally interview each offeror and buyer’s broker (if so represented) and should request a description of their company, internal approval authority and process, and source of funds and track record over the past several years (including whether they have purchased any property in the last 24 months).  In addition, you should request a list of at least two references from unrelated sellers, who the buyers have previously purchased investment or user properties from in order to ascertain whether or not they have re-traded the price following due diligence.

Armed with the above information, you (or your broker) should then compile a comprehensive spreadsheet, comparing the offering terms and the results of your investigations.  Based on your due diligence and the recommendations of your trusted consultants, develop your best choice for a limited secondary field of offerors.  Once you have made a decision as to whom to move forward with, request a “best and final” bid by a definite date.

Upon selecting the final bidder, try to keep those quality offerors who were not selected in a fallback position, so that, should the chosen buyer decide not to move forward for any reason, you can move on to the next most likely candidate without having to return to the market.

However, achieving that ideal has been elusive because there is an inherent conflict between debt and equity brokers.  Simply said, the equity broker is programmed to seek a sale of the asset from the client while the debt broker would rather that the client refinances that very same asset.  What is lacking here is a protocol that is in the best interest of the client which is identified before the debt and equity brokers begin selling their services. 

Integrating debt and equity brokers has been a challenge in our industry for years.  When compensation is tied directly to a capital event such as a sale or a refinance how can the true needs of the client be foremost in the brokers’ minds?  This inherent conflict continues to be a challenge in most brokerage houses to this day.  The goal of integrating the debt and equity brokerage disciplines can be compared to finding the Holy Grail – a never-ending search. 

The solution to this challenge does not lie in how fees are shared and does not lie solely in the hands of the client.  Often the client does not know the solution and is seeking advice in a conflicted environment.  The solution lies in the integration of the thinking between the debt and equity brokers themselves. 

The better the members of a capital markets team know each other, the better the communication – which leads to minimizing conflicts.  Often a joint call to determine the needs of the client results in the client’s satisfaction with the advice received and a broker-to-broker determination of how fees will be shared.  This can only work if the brokers know and respect each other and realize that both of them are in this business for the long term – AND THAT THE CLIENT COMES FIRST. 

Those who manage debt and equity brokers cannot underestimate the value of team interaction.  The same value that is put on a broker/client relationship needs to be put on the equity/debt brokers’ relationship. 

Fostering this type of camaraderie is just good business.