In today’s changing world, new products and services are introduced almost daily. Products that were used everyday just a short time ago are now obsolete. And the rest are in the process of becoming obsolete.

Getting up to change the channel, using carbon paper, creating documents on a typewriter: These are all once common tasks that no longer exist. Other items and services are on the path to extinction, such as film for cameras, landlines, and faxes.

There is another stage to this type of extinction: Products and services that are just beginning to show signs of obsolescence. Nowhere is it more obvious, unstoppable or dramatic than the change that seems to be affecting America’s regional shopping centers (RSC), which seem to have a very uncertain future.

...Read the rest of Regional Shopping Centers Move Closer to the Tar Pit

Because income property relies heavily on changes in the economy, the time of the investment is not as relevant as the means of acquisition. As the government deals with the current recession by continually spending in excess of revenues, the difference between how to buy and when to buy is even more apparent.

...Read the rest of Acquiring Income Property

From the information provided by the media, one would conclude the new buyer stole the property. After all, the property was purchased at a 65% discount from its previous purchase price only 2.5 years ago. For the naive, the story would end there and open the door to believing they found the deal of the century. Before running out to buy the next property at a discount to its previous purchase price, or giving money to a proclaimed bottom-feeder buyer, let’s look at all the facts.

...Read the rest of Bargain or Bust - 65% Off a New York Skyscraper

A real estate investor recently asked the following: “I’ve noticed that most if not all properties in my area offer a cap rate of 3.5%-5.5%, and when I ask the brokers why the cap rates are so low they say it’s ‘perfectly normal’ for this area. Am I missing something here?”

It was “perfectly normal” to buy mortgage backed securities without collateral before they collapsed. It was “perfectly normal” to invest with Madoff before his empire collapsed. It was “perfectly normal” to buy dot.com companies before they became worthless. History is replete with giving comfort to poor investments by considering them “perfectly normal”.

...Read the rest of Cap Rate Catastrophe

The presumed logic behind attempting to charge a lessee whose lease expired the same or more rent is that if the space is leased for less income, then the real estate will be worth less. Herein lies the illusion. Today’s buyers or lenders base their valuations of commercial property on collected rent, not scheduled rent. Scheduled rent is a wish for rent that doesn’t exist.

...Read the rest of Commercial Real Estate’s Recessionary Illusion

The purpose of FVA is to respond to the definition of a balance sheet, which is as follows: A summary of an organization’s assets, liabilities, and ownership equity as of a specific date (where the market stands). The argument against the above is that the prevailing realizable values of many assets are ‘artificial’ given the current market’s distress, and FVA works when markets are functioning, not when there is extreme volatility.

...Read the rest of Why the fuss over mark-to-market?

Reflecting on “Investors See a Glimmer and Shares Soar Worldwide” in the March 13 New York Times, the recent one-week stock market run-up has some of the experts (the same ones that missed the whole downturn) tripping over each other telling us the worst is over. They say we’re on the way to a 4th quarter recovery. That type of thinking is analogous to a person who is being tortured by 30 drops of water dripping onto their head being reduced to 25 drops. Conclusion: The torture is on the way to being over, and it should end in three minutes. On what basis?

The overarching problem is increasing unemployment for the economy and for income property value. We are still a consumer driven economy. The employment issue has been further exacerbated by the increased federal debt. Remember, when the amount of debt being borrowed increases, your interest expense increases. NetGain has calculated that currently we have to create 10 million new (civilian) jobs to support the increased debt. Are there any recent events that support a significant number of job creations? The answer is no, but hope springs eternal. On the positive side, there have been 32 recessions since 1845, and we’ve recovered (eventually) from every one of them.

...Read the rest of Fourth Quarter Recovery and Water Torture

The Journal nailed it when they said the problem was “a horrifying collapse of due diligence.” That summarizes the core reason for the entire economic meltdown. Due Diligence is a term used for a number of concepts involving either the performance of an investigation of a business or person, or the performance of an act with a certain standard of care. It is the gathering of information, and information is the vital food needed for making all decisions.

...Read the rest of Of Bernie and Due Diligence

The answer lies within the morality of the action. With very few exceptions, all commercial property bought and financed within the range of a current 5% capitalization rate was either a greedy and/or foolish transaction. These investors, like the management team at General Motors, created a bad business model whose continuing existence should not be supported. One of the strongest investment tenets in existence is “Don’t throw good money after a bad investment.” The marketplace will make all the appropriate adjustments.

...Read the rest of The Morality of Acquiring Commercial Real Estate

And the beat goes on. On one side the politically correct feel-good. On the other side, common sense. NetGain has repeatedly stated and made the case that jobs (civilian) are the foundation to our economy. Recessions by definition are two consecutive months of negative growth in the Gross Domestic Product (GDP). The historical overriding cause of recessions has been the disproportionate adjustment of excesses and abuses. This is followed by disappearing business profits, a scaling down of capital investment, and finally workforce reduction. The greater the length of time business takes to begin rehiring, the longer and deeper the recession.

The government is spending record amounts of money on many good and worthwhile projects. But until they direct their efforts toward stimulating the hiring of civilian employees the recession will continue to get worse.

...Read the rest of Obama - Ending Economic Crisis Won’t Be Easy