Is the buy-sell disconnect connecting?

That's what this article claims is happening, at least in Orange County. On top of loan money often not being there, the disconnect between buyers wanting to buy low and sellers wanting to sell high might be narrowing. Until that happens in many more markets, and money is there to lend instead of being spent on raising banker salaries then you'll see slow activity. Oh, and it goes without saying that a soft leasing market does not help either, and that won't improve for so long as unemployment keeps rising. I am starting to sound like Chicken Little again and I don't like that, so I'd better stop writing.

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I hope you are not owed money by the State of California

That's right. The world's eighth largest economy is out of money and cannot pay its bills:

Facing a $42 billion budget deficit, State Controller John Chiang told the Sacramento Bee he has already borrowed $21.5 billion to try to cover the state's checks, but by Feb. 1, there will be no more options left but to simply stop paying some of the bills – including tax refunds, welfare checks, student grants and other payments owned to California citizens.

So, if you are owed money, you get an IOU. That's right. An IOU. I don't have much ground info yet on how Californians are feeling, other than perhaps that they want bailout money now.

(And no, Chapter 9 does not apply to states, or at least I don't think it does. I am a dirt lawyer, not a BK guru.)

Of course, one solution is ugly: raise taxes, especially property taxes. You have a Proposition 13 problem there of course, but I have always been a bit confounded by the fairness of Prop. 13. You can have two people with identical properties paying highly disparate taxes simply based on length of ownership.

Not that things are much better in Illinois. Here's an example of pharmacies not being reimbursed.

Thanks to Ken Nowak for pointing this story out.

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Thursday Tidbits - December 4, 2008

CoStar reports the ubiquitous Younan Properties is taking the plunge on 180 N. LaSalle, with a closing date of no later than December 17.

There's light at the end of the tunnel? That's what panelists were saying in Irvine yesterday.

If you own a title policy through LandAmerica or are closing a deal with them, don't panic. Fidelity has you covered. If you have a 1031 account with them, then, you may have a problem. That company and the holding company went bankrupt. Lawyers Title and Commonwealth Land Title did not and are being sold to Fidelity and are doing business as usual.

Bailout money and CRE: where's ours?

Doug Cornelius has a great post on the New York Daily News "stealing" the Empire State Building by preparing and recording fraudulent deeds. Apparently they conveyed the building right back the next day, but I agree with Doug (caveat: I am also not licensed in NY) that someone will get in trouble over this one way or another.

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Ooh, ooh! A proxy fight at Grubb & Ellis!

I guess Tony Thompson wants back in at Grubb & Ellis (the name of the consolidated company after the Triple Net Properties deal -- as you know Tony started that company):

Thompson, who has criticized Grubb & Ellis management for some time after leaving the company early this year, has mailed a letter to Grubb & Ellis stockholders that says, “We have watched in dismay over the past nine months as Grubb & Ellis has, in our view, lost its way.”

Thompson is just not happy that G&E has lost 82% of its value since he left. Join the club, bucko. The market's tough out there. Grubb responds by saying that Thompson may just want his company bought out or absorbed, also noting:

Thompson's suggestions offer “nothing that has not already been implemented or considered” by the board and “completely ignores the realities of the current economic environment and real estate market,” the company said in a letter to shareholders.

I do not have a dog or current client in this fight, although I did represent NNN in the past on some small matters. I guess if I had to choose sides I would go with present management. Nothing against Thompson, but he had his run and can go run his own company now. If someone knows something else or can shed additional light on this I'd like to know more.

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From big box to high end theater

Here's an LA Times story reprinted in the Tribune about super high end movie theaters coming to the LA area. We're talking $35 a pop, by the way, and amenities such a Belgian beers and gourmet pizzas.

Sadly, I didn't see any Chicago angle here, which means the cutbacks are precluding local reporting or people on the dirt beat at the Trib don't know about any local deals so they could add a graf or two to their story. Oh, well.

Another angle is the risk factor. I see these deals as risky in a way because we all know how theaters can go under and don't want to pay much rent. But in mitigation they can bring very heavy foot traffic and ancillary revenue, and if they blow out you have a shell that in some cases may not be so hard to retenant.

Personally? I almost never go to the movies anymore. And I love films. But we are blessed with a nice media room in our house. No screaming kids, no sticky floors, and you can pause for a bathroom break at will!

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If you are wondering what dirt lawyers are doing in California

This story may give you a clue. Some California real estate lawyers, especially on the residential development side, are not fully utilized, so they are using the time to work on restructurings, risk management and other related projects. The major California dirt boutiques mentioned in the story (interestingly filed under "small firms"...LOL) all say they are doing all right, and that while they may take some flat revenues or per partner profit hits, there are no plans to pull a Cadwalader. Heck, Allen Matkins is even larger by 15 lawyers!

As I have said before, this is a smart strategy. In the 1990s there was a dearth of junior real estate talent because no one joined the field for several years running. By maintaining numbers and not going nuts with growth and layoffs, there's more stability. In short, these firms learned what some firms (you know who they are!) did not learn in the last layoff debacle or two.

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Mid-Week Tidbits

Things have been crazy, so I've been remiss in not posting daily. I'll try to improve that. A few items from other blogs caught my eye this morning.

One is the passage of a green building code in California, voluntary until 2010 and mandatory thereafter. My take? The private sector is usually, in my opinion, the better way to go about making changes in how things are done. But then, California was the leader in the anti-smoking movement and I'm not sure those bans would ever have come into place without government intervention. We'll see whether this is a folly or a harbinger of things to come. I can already see the potential litigation coming out of this.

Commercial property prices are continuing their adjustment downward. Some of that may also have to do with the sales being predominantly in smaller properties where sellers are willing to take haircuts. People who can are holding on to their trophies.

Still more pressure on the retail side with Mervyn's on the verge of tanking. This can cause unforeseen problems on the legal side. How so? More than a few retail leases may have co-tenancy clauses that allow in-line tenants to walk or stop paying rent or pay reduced rent if anchors go away.

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California and eminent domain

I used to know more about this subject, but since leaving California in 1996 I don't follow it much.

But I did read that California voters yesterday passed one ballot initiative restricting takings on single-family owner-occupied homes, while rejecting a more sweeping proposition that would also have barred the taking of non-residential property for private use and phased out rent control.

The libertarian (small "l') in me would probably have voted for Proposition 98, the one that failed. I am still disgusted by cases like Kelo that give government such sweeping powers over private property when the land will be handed over for another private user. Perhaps Jeff Brown or some of you other Californians can edumacate me on the goings-on?

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So much to say, but....

Jordan Crouch has two great posts today on lending; one on brokers and the other on rates. Just go to his blog and look at them.

I saw an ad in the paper today mourning the loss of Kimco founder Martin Kimmel. David Bodamer has more.

Edward Roski has his latest proposal for bringing the No Fun League back to Los Angeles, this time with a 75,000 seat stadium in the City of Industry. Good luck. Apparently they only have to file a supplemental EIR, but even if someone wants to move a team to LA does anyone care anymore? With so much else to do (including USC and ucla football), I'm not so sure.

Why am I being so short? It is noon. I have largely finished my work for the day, and I am eager to go play at least nine holes. But there's a storm front coming soon, so I'd better hop to it!

Have a great weekend.

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