Monthly Letter

March 1, 2010

RE: Monthly Letter

Dear Clients:

Do you ever have those days when you would prefer to stay snuggled in bed and not face the uncertainties of business or life?  When things are going well, it is only natural to feel certain they will continue.  And the same goes for when things are going badly.  But in either case, there is no certainty, just constant change.

Besides being a short month, I have to tell you it has been one with a great deal of mixed signals and data. A recent Congressional Oversight Panel stated:

“The withdrawal of small business loans because of disproportionate exposure to commercial real estate capital creates a negative feedback loop that suppresses economic recovery,” the COP report stated.  “Fewer loans to small businesses hamper employment growth, which could prolong commercial real estate problems by contributing to higher vacancy rates and lower cash flows.”

I attended the recent USD Commercial Real Estate Conference and had the pleasure of listening to Sam Zell the famous real estate mogul and billionaire.  A couple of highlights that weren’t covered in the news but I thought were worth sharing:

• If LIBOR stays below 3%, commercial real estate will avoid a collapse.
• We are in a demand recession.
• Residential has bottomed except in a few excess inventory areas (Vegas, So. Cal, S. Fla).
• The low velocity of money is why we haven’t seen inflation yet. 

Interestingly, he also touched on the fact that he is buying in Olay Mesa and working to develop a dedicated airplane border crossing with Tijuana Airport.  This could be a very interesting opportunity if successful.

Normally I like to report things that are looking up.  Here are a few things that are looking up but argue against short-term job growth and a sustainable economy.

• Interest rates will rise.
• The more competition there is for money (private and government), the more it will cost to borrow.
• Energy prices will rise.
• Recent storms, low reserves, and manipulation will drag prices higher.
• Food prices will rise.
• Higher energy, higher interest equals higher food prices.
• Inflation will rise.
• Increases in the cost of money, energy, and food will result in the dollar buying less.
• Taxes will rise.
• The only way to pick up the tab for our bloated government and pay back what we borrowed to cover the gap between what we spend and what we can afford.
• Litigation will rise.
• Investors, insiders, lenders, borrowers, agents, title companies, accountants, and attorneys.  We live in a “not my fault” society.
• Commercial defaults, bankruptcies, and foreclosures will rise.
• Banks will bring in partners as they do work outs and joint ventures.

Okay, so I am not considered a total downer, let me throw in a few more positive items.

• In December, more than one-third (35%) of executives surveyed predicted the worst of the economic crisis is behind us.
• The University of San Diego (USD) local index of leading economic indicators rose .7 percent in December and again in January.  The first time since April 2004, all six components of the index were positive. 

Recently, Governor Arnold Schwarzenegger announced the California Building Standards Commission unanimously adopted the first-in-the-nation mandatory Green Building Standards Code (CALGREEN) requiring all new buildings in the state be more energy efficient and environmentally responsible.  CALGREEN will take effect on January 1, 2011.  These comprehensive regulations are designed to achieve major reductions in greenhouse gas emissions, energy consumption, and water.

CALGREEN requires all new buildings constructed in California to reduce water consumption by 20%, to divert 50% of construction waste from landfills, and to install low pollutant-emitting materials.

The new code will also require separate water meters for nonresidential buildings’ indoor and outdoor water use, with a requirement for moisture-sensing irrigation systems for larger landscape projects and mandatory inspections of energy systems (e.g., heat furnace, air conditioner, and mechanical equipment) for nonresidential buildings over 10,000 square feet to ensure that all are working at their maximum capacity and according to their design efficiencies.  The California Air Resources Board estimates that the mandatory provisions will reduce greenhouse gas emissions by 3 million metric tons equivalent in 2020.

The commercial real estate market depends critically on employment.  We need meaningful, sustained gains in employment before we can expect a stabilization of trends in real estate fundamentals.  I think that is still a ways off.  The week from now through May will be very volatile as we ping pong from one crisis and uncertainty to another.  But the real danger is relatively low.  China is not going to kill its growth.  The Fed is not going to raise rates by 2 percentage points.  The real danger remains in the second half of the year when we could see the dreaded double dip.

In the meantime, I hope you can get a laugh from someone else’s distress…

Regards,

Don 

Don S. Zech

CDC Commercial, Inc.

Real Estate Services

Tenant Distress Calls

The toilet is blocked, and we cannot bathe the children until it is cleared.

I want some repairs done to my stove as it has backfired and burnt my knob off.

This is to let you know that there is a smell coming from the man next door.

The toilet seat is cracked: where do I stand?

I am writing on behalf of my sink which is running away from the wall.

I request your permission to remove my drawers in the kitchen.

Our lavatory seat is broken in half and is now in three pieces.

The person next door has a large erection in his back garden which is unsightly and dangerous.

Will you please send someone to mend our cracked sidewalk?  Yesterday my wife tripped on it and is now pregnant.

Our kitchen floor is very damp, we have two children and would like a third, so would you please send someone to do something about it.

Will you please send a man to look at my water; it is a funny color and not fit to drink.

Would you please send a man to repair my downspout?  I am an old age pensioner and need it straight away.

Could you please send someone to fix our bath tap?  My wife got her toe stuck in it, and it is very uncomfortable for us.

When the workmen were here, they put their tools in my wife’s new drawers and made a mess.  Please send men with clean tools to finish the job and keep my wife happy.

February 1, 2010

RE: Monthly Letter & Gold Report

Dear Clients:

December 1, 2009

RE: Monthly Letter

Dear Clients:

I have come to learn that there are four stages to life:

1)    You believe in Santa Claus

2)    You don’t believe in Santa Claus

3)    You are Santa Claus

4)    You look like Santa Claus

Wow, what a year! For over 25 years I have had the following quote hanging over my desk, “When the going gets tough the tough get going”. Being a salesman and in the real estate business means there are always problems, but it is solving them that gets us paid. If you’ve survived this year, you’re already a winner! Now it is time to find and take advantage of the opportunities that will present themselves.

Commercial property remains extremely stressed with high unemployment pushing up the vacancies, lack of available credit, and values still plunging that give little prospect for significant short-term improvement. The problems are now more clearly defined, but understanding them leaves us with a grim sense of reality. As our market bottoms out, there will be a long expected deluge of loan work outs, write downs, defaults and foreclosures, followed by the rush of patient, cash rich investors tapping the attractive bottom of the cycle buying opportunities.  The air within the commercial real estate sector is stale and still. Activity is needed to create a breeze and stir the air. This activity will come long before economic stability returns and it will be created by owners, lenders and brokers who begin to deal with the issues before them rather than continue to “kick the can further down the road”.

The primary problem for commercial real estate today is a lack of demand caused by an economic recession that includes significant job losses, a historic decline in consumer spending, a global slowdown in import and export activity, and the collapse of the residential housing market. For commercial real estate the key to any meaningful turn around hinges on job growth. Since December of 2007, the U.S. economy has shed nearly 8 million jobs. The widely reported unemployment rate (U3- people recently laid off) is 10.2%. However, U6 or “those who want a job but can’t find one” is 17.5% (for California it is 19.6%).

The silver lining in today’s environment is a general lack of oversupply in most markets. New construction has been below historic trends and is at a standstill now. Other bright signs at the end of the tunnel are:

• Leading indicators for the job market are improving
• Consumer spending is slowly recovering
• Pending home sales appear to be rebounding
• U.S. manufacturing over supplies of inventory are diminishing, which should lead to increases in production again
• Global demand is recovering, coupled with a weak U.S. dollar, will improve U.S. exports
• A recovering economy and week labor market which lead to higher corporate earnings

In a recent LA Times article there was a story of a lady who lost everything she had by investing with Bernie Madoff. You would think she had nothing to be grateful for this Holiday Season. However, what she had to say made me stop and think what it means to be blessed. You see, she said, for perhaps the first time she started noticing small things. Like the warmth of the sun on her back and the song of the birds in the morning. Apparently her loss brought her back to the moment and realized what was truly important.

As we count our blessings this Holiday Season I would like to draw your attention to Interfaith Services. Interfaith Services is a non-profit organization that has been helping people help themselves in North County for more than 25 years(92% of every dollar goes to the needy!). Interfaith partners with over 400 faith centers to help those in our community. We have seen an 88% increase in demand for services. The sharpest increase is in the first time clients, and two parent  families who are simply not able to make ends meet. I am on the Board of Interfaith and will again be serving in the soup kitchen on Christmas Eve. If you can or want to help by donating a food basket for a family, make a matching donation to sobering services, or adopt a unit (and its occupants – maintenance and mentoring) then call, email me, or go to their website; www.interfaithservices.org.

Whether you had a great year or not so great year financially, we still have to be thankful. We real estate types are a tough resilient bunch focused on how to profit from tough times. Therefore, I suggest that it is time, “For the tough to get going” because we are on the upslope as opposed to last year’s slippery slope.

Thank you for the opportunity to do business with you. Let’s work to increase our relationship by doing more business together in 2010. I hope you enjoy this year’s Christmas story as we all seek the true meaning of Christmas.

November 2, 2009

RE: Monthly Letter

Dear Clients:

October 1, 2009

RE: Monthly Letter

Dear Clients:

Well, folks, this has been an interesting month. My “baby” daughter turned sweet 16, my mom had her knee replaced, the kids all went back to school (tuition numbers continue to stagger me), and it appears that the economy has started to resurface. Even an occasional Charger loss can be taken in stride (so long as they choose to relocate to Escondido!).

Hip, hip, hooray you say? That’s what I thought. However, several very smart people I read or listen to say the other shoe is going to drop and there is nothing we (or Washington) are going to be able to do about it.

• Christopher Thornberg with Beacon Economics says that there is “more economic trouble on the horizon with rising unemployment and additional waves of foreclosures. The second half of 2010 will be very weak, and 2011 will be very grim.”

• Mid month I attended a talk by John Cushman, the chairman of Cushman Wakefield. He highlighted the concern that I have had and that is the commercial real estate’s version of “mark to market.” It is called “Maturity Default.” This is when your loan comes due, and you can’t qualify for a refinance because the price has dropped and the loan terms have gotten tougher. Cushman talked about 1 trillion dollars of debt coming due between now and the end of 2010 and a billion a year every year thereafter until 2020.

NOTE: Did you know that if you subtracted a trillion seconds from today you would return to a time before we invented language? Now multiply that by 9 to get our deficit this year – I’m speechless!

• Gary London, a San Diego real estate economist and consultant, reports that commercial markets are in a “free fall.” He cites lack of demand for space, rising cap rates, and loan defaults all leading to a long-term over supply and/or under demand era.

• On the bright front, Alan Gin and the University of San Diego’s index of leading economic indicators surged forward in August lead by consumer confidence.

Two phrases have entered my recent vocabulary: “Pretend and extend” and “A rolling loan gathers no loss.” Well it looks like we are about to enter the era of “admit and unload.” Banks will need to take the tough steps of realizing losses and off loading billions of dollars of mortgages sitting on their balance sheets. Once these losses have been accepted, rents will be reset by new buyers forcing neighboring properties to do the same to avoid losing tenants. This process will take us through 2011 or 2012.

I know that you already know that government is here to help. A study by the state was just completed (it was due in 2007) entitled “Cost of State Regulations on California’s Small Businesses.” The study finds the total cost of regulation to the state of California (not the small businesses) is $493 billion which is 5 times the state’s general fund budget and almost a third of the state’s GDP. The regulations cost 3.8 million jobs which is a tenth of the state’s population (last time I looked we had 10% unemployment — hmm, let me see…).

Split-roll tax is back on the front burner. This is where they repeal Prop 13 tax protection for commercial property and reassess property every year or two. If you have NNN leases, let your tenants know. If you have gross leases, hang on to your wallet as your taxes go up.

Samuel Clemens (Mark Twain) once described the 1880s as a “bad mood era.” However, Henry Ford would later say, “Whether you believe you can or you can’t, either way you’re right.”

Fred Schnaubelt, a loan broker, investor, and guest writer for the San Diego Transcript hits the nail on the head:

What causes real estate booms and crashes?

“If nothing else, note, mark, and remember this basic premise. Increases in money and credit cause booms. Contractions in money and credit cause recessions. Booms are impossible without an expansion in money and credit to pay for across-the-board price increases — impossible without government interventions. Presently the Federal Reserve (our central bank) is trying to reinflate the economy by flooding the banks with oceans of money. Banks, in a panic, are not loaning out the money as they prepare for $200 billion or more in commercial loan defaults expected in 2010 and 2011. Those loans booked in 2000 and 2001 coming due. Today, economists predicting deflation before inflation are the most persuasive. Inflation is not on the horizon. Ultimately, the choices will not be between a Lady or a Tiger, but a savage tiger and a roaring lion. Forewarned is forearmed. No illusions, just least bad options ahead. Knowing what to expect alleviates anxiety, lets us sleep at night, and gives us an inner peace in the midst of calamity.”

Finally, John Cushman also said in his talk that more wealth will be created over the next several years than ever in history. This will likely be the greatest real estate buying opportunity in our lifetimes. Keep your head about you — we could all be rich! Hope you enjoy the story!

Regards,

Don 

Don S. Zech

CDC Commercial, Inc.

Real Estate Services

Back in the old Wild West, there were two blond cowpokes, Jeff and Dave. One day, the two were enjoying a strong sarsaparilla in the local saloon when a man walked into the bar with an Indian’s head under his arm.

The barman shakes his hand and says, “I hate Indians; last week the bastards burnt my barn to the ground, assaulted my wife, and killed my children.” He then says, “If any man brings me the head of an Indian, I’ll give him one thousand dollars.”

The two blonds looked at each other and walked out of the bar to go hunting for an Indian. They were walking around for a while when suddenly they saw one. Jeff threw a rock which hit the Indian right on the head.

The Indian fell off his horse but landed seventy feet down a ravine. The two nuts made their way down the ravine where Dave pulled out a knife to claim their trophy.

Suddenly, Jeff said, “Dave, take a look at this.” Dave replied, “Not now, I’m busy.”

Jeff tugged him on the shoulder and says, “I really think you should look at this.”

Dave said, “Look, you can see I’m busy. There’s a thousand dollars in my hand.”

But Jeff was adamant. “Please Dave, take a look at this.”

So Dave looked up and saw that standing at the top of the ravine were five thousand red Indians.

Dave just shook his head and said, “Oh…my…God…we’re going to be millionaires!”

September 1, 2009

RE: Monthly Letter

Dear Clients:

Deciding if Brett Favre is going to be playing football this year or not is about the same as predicting if our economy is on the road to recovery or not. This economy wants to recover just as much as I want to start watching football!

Unemployment in San Diego stands at 10.3% (12.1% for California and 9.7% for the Nation). Significant job losses have reduced demand for commercial space and lack of credit has stalled tenants’ ability to do deals, owners to refinance, or buyers to make acquisitions. It is now critical that the Federal Reserve increase liquidity by purchasing commercial mortgage backed securities. Because commercial real estate always lags in overall economic recovery, it is going to be a while until we see a recovery in commercial real estate. Interbank lending has stabilized, investor and consumer confidence levels have moved off of recent lows; the USD index of leading economic indicators has had its fourth consecutive monthly gain; home sales are rising and aggressive corporate cost cutting have resulted in better than expected profits. However, we have a long way to go before returning to “normal”, but it does appear that conditions are improving and moving in the right direction. There might be beer money for those football games yet!

I’ve long been concerned by the term “bailout”. The only time I have heard this term used was in a leaking boat or in helping someone out of jail. In both cases, before you could be successful, you had to fix the problem. (The hole in the case of the boat and the behavior in the case of the jail bird.) Before all of these government bailouts began, we had much more of a free market economy going on. Now we must be careful that the treatment doesn’t kill the patient. These bailouts have been very kind to both Wall Street and to the banking industry while leaving the commercial real estate industry to fend for itself. These bail outs have definitely been masking how the stock market would have really been performing without bailouts.

In a recent article in The Wall Street Journal, former hedge fund manager Andy Kessler may have summed it all up best when he said:

“By buying U.S. Treasuries and mortgages to increase the monetary base by $1 trillion, Fed Chairman Ben Bernanke didn’t put money directly into the stock market, but he didn’t have to. With nowhere else to go, except maybe commodities, inflows into the stock market have been on a tear. Stock and bond funds saw net inflows of close to $150 billion since January. The dollars he cranked out didn’t go into the hard economy, but instead into tradable assets. In other words, Ben Bernanke has been the market.”

In addition, stock market analysts have done the calculations and have discovered that a recent $2.7 trillion jump in the value of equities in the stock market, corresponded with only a $400 billion drop during the exact same period in money market accounts. So where did this additional $2.3 trillion rise in the value of equities come from? From the bailout money being given to the U.S. banks and financial institutions, and the reinvestment of that money by these institutions directly back into the stock market!

If you doubt me, check out these two charts from the Federal Reserve.

So why hasn’t inflation occurred yet? Although a lot of money has technically been created, much of it has not been used. Economists refer to the term “velocity” of money to describe how quickly money changes hands as it is lent time and again. Inflation is not just a function of the amount of money in the system but also it’s frequency of use. It appears that all the money is “in the bank” (banking reserves). With no banks lending we don’t have inflation – yet. Whether the pickup in money velocity leads to significantly higher inflation depends on how quickly the Fed pulls the reins back on the extra ordinary credit it is currently providing.

John Wooden, the greatest coach of all time (and who my business plan and company logo are modeled after), once said; “Be quick but don’t hurry”. I recently read an interview with John Kotter, author of a new book “A Sense of Urgency”. I thought he made a number of great points that all of us can take to heart as we try to push forward in making deals. The quotes that hit home with me were:

• “There are lots of signs of false urgency,” Kotter told Inc. “Frenetic activity. Everyone is exhausted. Working 14-hour days. One red flag is how difficult it is to schedule a meeting.”
• “A false sense of urgency,” he wrote in his book, “is pervasive and insidious because people mistake activity for productivity”
• But when people have a true sense of urgency, he wrote, “they think that action on critical issues is needed now… Now means real progress every single day. Critically important means challenges that are central to success or survival, winning or losing.
• “Underlying a true sense of urgency,” Kotter writes, “is a set of feelings: a compulsive determination to move, and win, now.”
• “When it comes to affecting behavior – creating alert, fast-moving actions that are focused… relentlessly…, pushing to achieve more ambitious goals despite the obstacles, trying to achieve progress each and every day, constantly purging low-value activities so that time is available to do all this.”

Gone are the days of making a profit in real estate by buying and selling a few years later. Today you must: 1) protect and enhance the value of your assets, 2) adapt to the changing investment climate and, 3) cut costs and reallocate precious resources. In doing this I thought it would be useful for you to know tenants top complaints.

1. Temperature – HVAC must be working (especially on 100 degree Augusts!)
2. Cleanliness – janitorial, bathrooms, common area. Clean space is a sign of a good landlord.
3. Elevator (if you have one) must be working.
4. Parking – must be easy. Not too crowded but not too empty.

At the same time, you should be watching your tenants for signs of stress;

1. Talk to them – know where they are at. Information is the new currency. Ask them: What are you doing right? What at the property supports your business? What can you do better?
2. How many empty desks or shelves do they have? How much inventory do they have?
3. Is the store or office busy?
4. How full is the parking lot?

Whether you are Brett Favre or a tired commercial real estate broker or investor, I hope you can summon the passion to find that sense of urgency to do just one more deal. As you look for that passion, I hope you enjoy the story below.

Regards, 

Don 

Don S. Zech
CDC Commercial, Inc.
Real Estate Services

KURTIS THE STOCK BOY AND BRENDA THE CHECKOUT GIRL

In a supermarket, Kurtis the stock boy was busily working when a new voice came over the loud speaker asking for a carry out at register 4. Kurtis was almost finished, and wanted to get some fresh air, and decided to answer the call. As he approached the check-out stand a distant smile caught his eye, the new check-out girl was beautiful. She was an older woman (maybe 26 and he was only 22) and he fell in love.

Later that day, after his shift was over, he waited by the punch clock to find out her name. She came into the break room, smiled softly at him, took her card and punched out, then left. He looked at her card, BRENDA. He walked out only to see her start walking up the road. Next day, he waited outside as she left the supermarket, and offered her a ride home. He looked harmless enough, and she accepted. When he dropped her off, he asked if maybe he could see her again, outside of work. She simply said it wasn’t possible.

He pressed and she explained she had two children and she couldn’t afford a baby-sitter, so he offered to pay for the baby-sitter. Reluctantly she accepted his offer for a date for the following Saturday. That Saturday night he arrived at her door only to have her tell him that she was unable to go with him. The baby-sitter had called and canceled. To which Kurtis simply said, “Well, let’s take the kids with us.”

She tried to explain that taking the children was not an option, but again not taking no for an answer, he pressed. Finally Brenda brought him inside to meet her children. She had an older daughter Jessie, who was just as cute as a bug, Kurtis thought. Then Brenda brought out her son, Zachary, in a wheelchair. He was born a paraplegic with Down Syndrome.

Kurtis asked Brenda, “I still don’t understand why the kids can’t come with us?” Brenda was amazed. Most men would run away from a woman with two kids, especially if one had disabilities – just like her first husband and father of her children had done. Kurtis was not ordinary… he had a different mindset.

That evening Kurtis and Brenda loaded up the kids, went to dinner and the movies. When her son needed anything Kurtis would take care of him. When he needed to use the restroom, he picked him up out of his wheelchair, took him and brought him back. The kids loved Kurtis. At the end of the evening, Brenda knew this was the man she was going to marry and spend the rest of her life with.

A year later, they were married and Kurtis adopted Jessie and Zachary. Since then Brenda and Kurtis have added five children of their own: sons Elijah and Kade, daughter Jada, and twin girls Sierra Rose and Sienna Rae.

So what happened to Kurtis the stock boy and Brenda the check-out girl? Well, Mr. & Mrs. Kurt Warner now live in Arizona, where he is currently employed as the quarterback of the National Football League Arizona Cardinals as they prepare for a new season. Is this a surprise ending or could you have guessed that he was not an ordinary person.

It should be noted that he also quarterbacked the Rams in the Super Bowl XXXVI. He has also been the NFL’s Most Valuable Player twice and the Super Bowl’s Most Valuable Player.

August 1, 2009

RE: Monthly Letter

Dear Clients:

July 1, 2009

RE: Monthly Letter

Dear Clients:

Happy 4th of July!  I’m very reflective this year.  I’ve seen outdoor grilling go from my first Hibachi to the Weber to the gas grill, and now I see outdoor cooking centers that include chrome, refrigerators, and even dishwashers!  I’m afraid it is a bit like our economy has been, great growth and improvement until we lost focus, overbuilt for our needs, and now need to find our direction again.  I hope for your sake and our economy that we can once again find one of the great joys of summer, that easy going, lazy family time, the old picnic table with the plastic tablecloth, the kids carrying bowls of potato salad and chips, and Dad slaving over the hot dogs and hamburgers on the barbecue with a spatula in hand.

As you read this, 77-year-old GM is going through bankruptcy, the US economy has gone through its worst decline in 50 years, economists are predicting hyper inflation, North Korea is suspected of trying to launch a 4th of July missile at Hawaii, the Taliban is trying to join the nuclear club and Israel is looking for an excuse to turn Iran into a glass parking lot, California is so in debt that it has to close state parks, and, oh yeah, the swine flu is predicted to come back in the fall.  Closer to home, your retirement portfolio is worth 40% less than 2007, your house is worth 20% less, and you’re scrambling to stay afloat because your friendly banker has cut your credit line. Did I get everything?

I’m reminded of the words from the movie Network: “I’m mad as hell, and I’m not going to take it anymore.”  More often than not, we can’t control what happens around (or to) us.  We do, however, have total control of how we respond.  Constant worry and fear is our brain’s way of “preparing us” for the worst.  It causes us to be on guard and brace for impact.  Wow, what an exhausting way for us to go through life.  No one can predict what is going to happen in the next few years.  We can say with absolute certainty, however, that every person has inside them the ability to cope and adapt to just about anything life can throw at us.  And that is one thing we can never lose.

Here are a couple of ways to channel your outrage:

1.    Speak up.  There is an urgent need to follow how members of Congress are voting: http://www.congress.org lets you sign up for updates and forms to e-mail them your opinions.

2.    Fight the spin.  The airwaves are filled with spin and misinformation.  Our country is undergoing unprecedented change.  Use Google to learn more.  Try http://www.sunlightfoundation.com to see the text of the bills and where earmarks go.  Be a watchdog.

Despite growing unemployment, continuing home foreclosures, and a crippling state budget deficit, there are growing signs that the economic slump in San Diego could be approaching a bottom.  The University of San Diego Index of Leading Economic Indicators has had its first uptick in two years.  If this trend continues, we should hit bottom by year end or early next year.  UCLA Anderson Forecast reports that California is moving out of “intensive care” but is still “very sick.”  The biggest problem ahead is probably the weakness of the recovery ahead.

The Fed will probably control the road ahead with one of two scenarios:

1.    Ease interest rates higher to curb inflation.  However, higher rates will curb economic growth and housing, thus prolonging the recession and speed of recovery;

2.    Keep short-term rates low to encourage economic growth and higher employment.  This would create easy borrowing, and the Fed would be forced to either accept higher taxes to lower the deficit or monetize it by printing money to buy Treasures.  This could place enormous upward pressure on inflation not unlike the 1970s and scare China and other foreign investors who we rely on to finance our debt.  Neither scenario offers a pretty choice.

Jay Leno reported that the price of a postage stamp has gone up to 44 cents.  The government says they have to because fewer people are using the mail.  That’s government thinking for you.  Hey, nobody’s buying our product — let’s raise the price!

Here’s what we’re seeing in the market battlefield:

1.    We are working 2-3x harder for every deal.

2.    Lenders involved in more deals - pre-foreclosure decisions.

3.    Jittery tenants proposing cheap deals.

4.    Need for creative deal making.

5.    Weak and fearful existing tenants.

I am glad that our banks have apparently survived their stress tests.  I hope you realize I survive a stress test every morning when my alarm goes off for me to go to work!

As you settle in around the picnic table this weekend, please enjoy your friends, your family, and your freedom.  Hopefully, you’ll also be able to share this month’s story…a little bit of our patriotic history.

Regards,

Don 

Don S. Zech

CDC Commercial, Inc.

Real Estate Services

TAPS
 
We in the United States have all heard the haunting song, “Taps.”  It’s the song that gives us that lump in our throats and usually tears in our eyes.  But, do you know the story behind the song?  If not, I think you will be interested to find out about its humble beginnings.

Reportedly, it all began in 1862 during the Civil War when Union Army Captain Robert Ellicombe was with his men near Harrison’s Landing in Virginia.  The Confederate Army was on the other side of the narrow strip of land.  During the night, Captain Ellicombe heard the moans of a soldier who lay severely wounded on the field.  Not knowing if it was a Union or Confederate soldier, the Captain decided to risk his life and bring the stricken man back for medical attention.  Crawling on his stomach through the gunfire, the Captain reached the stricken soldier and began pulling him toward his encampment.  When the Captain finally reached his own lines, he discovered it was actually a Confederate soldier, but the soldier was dead.

The Captain lit a lantern and suddenly caught his breath and went numb with shock.  In the dim light he saw the face of the soldier.  It was his own son.  The boy had been studying music in the South when the war broke out.  Without telling his father, the boy enlisted in the Confederate Army.

The following morning, heartbroken, the father asked permission of his superiors to give his son a full military burial despite his enemy status.  His request was only partially granted.  The Captain had asked if he could have a group of Army band members play a funeral dirge for his son at the funeral.  The request was turned down since the soldier was a Confederate.  But out of respect for the father, they did say they could give him one musician.  The Captain chose a bugler.  He asked the bugler to play a series of musical notes he had found on a piece of paper in the pocket of the dead youth’s uniform.  This wish was granted.  The haunting melody we now know as “Taps” which is used at military funerals was born.

June 1, 2009

RE: Monthly Letter

Dear Clients:

Well with summer upon us you noble swingers of golf clubs can stand proud. A recent study found the average golfer walks about 900 miles a year. Another study found golfers drink an average of 22 gallons of alcohol a year. That means the average golfer gets about 41 miles to the gallon. Makes you proud – almost feel like a hybrid!

Like the Fed and Treasury, we are going to throw everything we can at a deal to get some movement.

Speaking of innovation, San Diego managed to buck the downward turn of venture capital investment. US Venture capital investment dropped 35% from the fourth quarter, yet San Diego saw a 22% increase. This is a good sign or as the “talking heads” say – “these are green shoots”. Now I just hope somebody talks to the banks about putting some water in the watering can!

If you want to keep up with the latest business going on in San Diego, feel free to click through to our website: http://www.cdccommercial.com where we have a live feed of San Diego business news courtesy of the San Diego Business Journal.

It is with sadness that I announce that Rob Pew has left CDC Commercial, but we’re having our own “greet shoots” as I am pleased to announce my oldest son, Nick Zech, has joined CDC Commercial, Inc. (nzech@cdccommercial.com 858.232.2100 ).

As we watch the auto industry and our economy evolve, I hope my story below gives you a glimpse of history and a lesson in good negotiating.

Regards,

Don

Don S. Zech
CDC Commercial
Real Estate Services

Regards,

Don

Don S. Zech
CDC Commercial
Real Estate Services