Wednesday, December 29, 2004

We Are Blockbuster of Borg....

Blockbuster is initiating a hostile takeover of Hollywood Video. I foresee many empty boxes that will be difficult to find new tenants for, including the one up the street that I frequent. I also foresee even crappier movie rental selection than we already have.

And Another Boeing Sale

Boeing has sold 46 acres in Renton to Harvest Partners of Dallas and Transwestern Commercial Services of Chicago for $37.8 million. The site is adjacent to Fry's Electronics (and in fact includes Fry's parking lot) and includes the 10-50 Building, which is being torn down. The buyers say they are going to build a "lifestyle retail center." What that means, no one (including the City of Renton) knows, but everyone is keeping their fingers crossed.

The real issue is how much more of its 80 years of land acquisitions can Boeing dump to subsidize its operations?

Tuesday, December 28, 2004

Big Oregon Brother is Watching

I warned you that I would occasionally touch on topics other than real estate. Here goes....

Oregon depends on a gasoline tax for much of its road maintenance budget. Oregon is facing a shortfall in its road maintenance budget due to more fuel-efficient cars (First, what kind of screwed up system makes fuel efficiency sound like a bad thing? Second, what more fuel-efficient cars? All I see are more SUVs.). To counteract this, Oregon intends to implement some "revenue enhancement" in the form of a road user fee, and it is enlisting high tech help to do it. Oregon is working on a system using 1) GPS to determine when a vehicle is in a fee zone and 2) an odometer tag to count the miles the vehicle travels in a fee zone. When the vehicle pulls up to a gas pump, the system signals the pump how much of an extra fee to charge.

James Whitty, program administrator, does not believe there are any privacy problems because the system is not really "tracking." Apparently Mr. Whitty believes "tracking" only includes actually following someone down the road with a camera, a la O.J. Simpson in his white Bronco. Most people, though, would consider that knowing what town and neighborhood you are driving through and when is "tracking," and that Mr. Whitty should pull his head out of his cubicle.

Friday, December 24, 2004

Cross-Border Boards

Portland, OR, based Pope & Talbot is buying Canfor's Fort St. James for $31.5 million plus an additional amount to be determined for the value of the inventory. Cross-border business continues to build between Washington/Oregon/Idaho and British Columbia. And the timber industry merry-go-round continues as everyone undiversifies.

Boeing Continues Sell-Off

Boeing has sold another piece of its Pacific Gateway Business Park. Rreef of San Francisco bought the 29-acre, undeveloped parcel for $8.5 million. Rreef can build up to 700,000 square feet of box on this parcel. Guess Boeing needs cash more than it needs expansion space.

Bellevue Stocking Stuffer

WorldCo of San Francisco is selling Factoria Mall in Bellevue to Kimco Realty of New York and an unnamed partner for $102 million. Factoris Mall has always been something of a train wreck, especially after Ernst closed its doors, but it looking pretty good these days, with a major makeover and some new anchors.

More $500,000 McMansions

Two of the biggest players in Northwest residential construction have partnered up for a new development. Quadrant Homes and Murray Franklyn are going to build about 2,000 homes as Phase 2 of the Snoqualmie Ridge development, east of Seattle. Not exactly affordable housing ("Seattle affordable housing" is an oxymoron), but it will be a boost for contractors. Too bad these aren't condos; that would keep me happily litigating construction defect claims for the next 10 years.

Thursday, December 23, 2004

Cingular Sticks Around

Cingular is wrapping up its acquisition of AT&T Wireless and has purchased three (out of 10) buildings it was leasing in Bothell. The bad news? There will definitely be some serious personnel cuts, as expected. The good news? Cingular isn't pulling out of the territory completely. This should make a lot of people happy, including the folks over at Stokes Lawrence, for whom AT&T Wireless was a major client.

The Fannie Mae Effect

Well, Franklin Raines is out, and that $9 billion earnings restatement is looking like a sure thing. Fannie Mae will probably be compelled to be less aggressive than it has been. Effect on mortgages? Probably nonexistent. The market appears to have taken this mess into account already, and there is plenty of capital from other sources ready to fill the gaps Fannie leaves behind.

Record Office Sale

Seattle has its first $400/sf building. Hines sold the IDX Tower at Fourth and Madison to TIAA-CREF $368.6 million, which comes out to $411/sf. This is currently the newest of the downtown office towers and has a solid tenant in the law firm of Preston Gates & Ellis (The "Gates" is Bill Sr.). Still, with office vacancies in Seattle still pathetic (currently nearly 15.5%), you have to wonder what's driving a move like this.

It's not the only big office buy this Fall, though. In September Beacon Capital Partners bought the Union Bank of California Center from Walton Street Capital for $100.7 million, and earlier this month Trinity Real Estate bought the Seattle Tower (a personal favorite of mine with its amazing early Art Deco lobby) for $19 million.

Just last week DIFA-GRUND bought two of Adobe's buildings in Fremont for $65.7 million, perhaps showing that the effects of the German tax restructuring with respect to foreign real estate may have reached this corner of the country.

Wednesday, December 08, 2004

Financing Madness

Sometimes I wonder what the Bush Administration is thinking. Residential real estate has been propping up the U.S. economy for four years and frankly will continue being the only prop for the foreseeable future. The residential building industry was a big bankroller of Republican races this year. Bush therefore has two, good reasons to keep residential real estate rolling. Instead, he's undermining it. The budget deficit is driving the cost of capital up, especially long term capital (Watch that U.S. bond yield curve invert.). The budget deficit and the trade deficit are driving the dollar down, further tightening the capital markets (Ignore the news of the dollar "improving" in the last day or so. The fundamentals are still bad.). On top of all this, the White House may be planning a fatal mistake with its tax "reforms": repealing the mortgage interest deduction.

The White House plans some revenue enhancement this year by closing loopholes in the revenue code. We'll see, given that most of the beneficiaries of loopholes are big, Republican contributors. The mortgage interest deduction is for the masses, though, and so it doesn't have an industry automatically lobbying for it. All it does is fuel the economy by making mass home ownership possible. Let's face it, owning a home has a lot of extra costs. The deduction is compensation for that. Take away the deduction, and home ownership gets pretty marginal for a lot of people. Demand goes down. Prices go down. Construction goes down. The economy goes down.

What is up with that?

Thursday, December 02, 2004

Costco Cellars

Costco won the latest round in its fight against Washington's beer and wine distribution laws. A federal court is allowing Costco to challenge the distribution laws as violating the Sherman Antitrust Act. Washington doesn't allow manufacturers to sell directly to retailers and requires the intermediate distributors to charge at least a 10% mark-up. The odds of Costco winning? Washington used to have the same mark-up requirement for retailers, but Costco took it down in court. The effect if Costco wins? The big boxes and grocery chains will love it, the convenience chains ought to be OK, but the independents will be in trouble. If you're a strip mall owner effectively anchored by a liquor store, watch out.

Perhaps it's time for the independents to develop some joint purchasing power, a la the independent grocers' associations.

West Coast hotel for sale

Man, it's been a crazy couple of weeks. And not "good" crazy, either. Anyway....

Downtown Spokane needs to brace itself for yet another makeover. WestCoast Hospitality wants to sell the Ridpath Hotel and Crescent Court (along with a basket of other properties) to finance renovations of their Red Lion chain. Cresecent Court is the old Frederick & Nelson building (speaking of good things that are no longer with us). What will happen to these properties is anyone's guess at this point, but a walk around downtown will show that Spokane is overbuilt. It would be a shame to see them mothballed or torn down. My family has a warm spot for the Ridpath from a business trip/vacation nearly 10 years ago.