Archive for the ‘Uncategorized’ Category
The NY Times has an interesting article today about a group of homeowners in Hollywood who are trying to stop charities from feeding homeless people in their neighborhood.
Adrian over at Curbed responded with a fairly reasonable take-down of the homeowners. After all, particularly at this time of year, it’s pretty hard to sympathize with people who are upset over the hungry being fed.
That said, I think the locals have a legitimate point. Put yourselves in their shoes: Every day, hundreds of homeless people congregate in the area immediately adjacent to their houses. These people are fed from a truck. Sure, someone picks up the trash afterward. But, where are people using the bathroom? What happens after they’re done eating?
Anyone who’s ever tried calling the police about quality of life crimes in LA knows that those kinds of issues end up pretty far down the LAPD’s list. They’re chasing murderers; they don’t have time to deal with someone pooping on your driveway.
And yet we all have a right to safe, orderly, clean neighborhoods. So, what is the city supposed to do?
The answer is that the city ought to put some sensible restrictions on free food distribution. For example: It probably ought to take place in commercially-zoned areas, as opposed to residential ones. Portapotties probably ought to be provided. And the charities involved ought to have to cover the cost of clean-up and some extra policing, in the same way that film productions do.
Obviously, it ought to be legal (and encouraged) to give away food to people who need it. However, the process of doing so ought to be designed in such a way as to minimize impact on our communities.
… for me, anyway.
Regular readers know I tend to buy beat up buildings. It’s not like there aren’t plenty of beat-up buildings on the market, it’s just that the sellers think they ought to be paid prices that don’t reflect the fact they’re beat up.
Interestingly, there are several reasonable buy-and-hold deals floating around, where someone can put down $200-500k and get a solid return.
If you’re interested in something like that, get in touch and we can see if any of the deals we’re eyeing fit your criteria.
Attended RealShare yesterday at the Westin Downtown. I’ve been to a bunch of conferences before and never really got much out of them. This one was different:
1. Met a family that makes bridge loans of the type that Jon and I can use to make our deals potentially much more capital-efficient.
2. Ran into a broker with whom I had been discussing an off-market deal that went away but may now be back.
3. Ran into a guy with a large project (which I stupidly passed on six months ago) that we may be able to help with.
Separate from the networking, it was pretty inspiring to see and hear from people at the absolute top of my business. I almost wrote “guys”. But the truth is that, while the top developers were 100% male, two of the highest-grossing brokers in the metro-LA area are women – Laurie Lustig-Bauer and Kitty Wallace.
About the only downside to the conference was the $37 I paid for parking for two hours in the morning at the City National building across the street. $0.12 / sq ft / hour is equivalent to $86.40 / sq ft / month. At that rent, I ought to be buying apartment buildings down there and converting them into parking garages!
I quit banking when I was 26 years old, convinced that I could do better by owning something, without exactly being clear on what that “something” was going to be.
I messed around for a few years working on projects that did OK but ended up being dead-ends.
By the time I really got started in real estate, I was 28 or so. Compared to a lot of people in the industry, that’s late.
It felt pretty bad to be beginning something new so late. It felt even worse that I had next to nothing in my bank account. (I even carried a credit card balance for a while, which is something I can guarantee you no one in my immediate family has ever done.)
To make things worse, a bunch of my friends who stayed in finance were getting filthy rich. Ouch.
But Lucy, my wife, kept me positive by reminding me of what I’m about to tell you:
When Lucy’s mom, Jo, got pregnant with Lucy, her first child, Lucy’s dad, Richard, was working at a small stock photography business owned by someone else and not making a lot of money.
Even worse, he was 35.
With a new kid on the way and not much in the way of savings, Jo and Richard decided that, to have any chance of providing the kind of life they wanted to provide to Lucy, they needed to break away and start their own business.
Through a some luck and a lot of hard work, Richard and Jo grew their little business until it employed 30-something people and provided a wonderful standard of living for their family, then sold out just before the industry collapsed.
Every time I start to think about how little I’ve accomplished in my 33 years on earth (which is daily), I remind myself that Richard hadn’t even started yet when he was my age.
If you haven’t been there, this story probably doesn’t mean much.
If you have, I bet you’re nodding to yourself right now in recognition. It’s not too late.
I generally avoid politics here, because it’s bad for business. You never want to offend potential clients, investors, etc. with your idiosyncratic views.
That said, I’m going to take a moment of your precious time today to complain about the state of affairs in Washington.
No, I’m not going to place blame. I (obviously) have my opinions, but this isn’t the place to share them.
But I will say that I, and every other business-person with a brain, am fervently hoping that the dillweeds in DC:
- Avoid shutting down the government – This one is pretty straight-forward. Government spending represents something like 40% of the GDP of the country. While a shut-down won’t stop all the spending (things like the military and social security are exempt), it will definitely stop a bunch of it. And that will translate into a pretty large brake on growth, without even considering the impact of the consequent uncertainty on consumer and business spending, which make up the rest of the economy.
- Avoid defaulting on the debt – The one thing that we’ve had going for us since 2007 has been our ability to borrow cheaply, because US government debt is regarded as risk-free (or, the closest thing to it in investing). Even the threat of default is surely already causing some investors to consider whether they ought to park money in some other currency (Chinese renminbi? Euros?). This means less demand for US debt and, therefore, higher interest rates for the government to borrow. Paying higher interest rates on government debt means there will be less money to spend on roads, bridges, schools, healthcare, defense, parks, the space program, housing, etc. for a long time to come.
America is a wonderful country. We take punches and then we come roaring back. The economy is just starting to recover from the unpleasantness of the last five years. And now some MoMos in DC seem to want to push it back down by retarding growth and increasing our long-term cost of borrowing.
If you’re in business (or work for someone who is), you ought to be mad as hell.
Hat tip to The Eastsider for delivering this welcome bit of news.
Regular readers know that the injunction has been a pretty controversial topic in the neighborhood.
A small but vocal minority contends that the injunction is some kind of tool of gentrification and/or racially-motivated oppression.
Everyone else would just prefer that the local yobs (as they call them in England) stop tagging / drinking in public / selling drugs / shooting each other / etc.
We love Echo Park and have invested a ton of money, time, and care in making it a better place to live.
This injunction, handled appropriately by the much-improved LAPD, ought to make it an even better place.
Bravo to ex-City Attorney Carmen Trutanich (who originally requested the injunction), current City Attorney Mike Feuer (who followed up) and to the LA Superior Court (which approved it).
Regular readers know that I’m pretty heavily involved in buying and fixing up screwed-up buildings in improving neighborhoods. So, I’m not exactly an impartial observer of this discussion.
I spend a lot of time thinking about whether what we do helps or hurts the world. I can definitely see the “hurting” argument. After all, either directly or indirectly, we are pricing out some long-time residents of the neighborhoods in which we operate. That’s a fact, and no amount of argument can change it.
On the other hand, we’re also doing a lot of good:
- When we buy a building, roughly 1.5% of the purchase price goes to the city and county in taxes
- The seller’s broker and our broker, usually locals, make commissions equal to 5-6% of the sale price, feeding their families;
- The escrow and title companies earn fees, allowing them to employ escrow and title officers who are usually local;
- Because of Prop 13, when we buy, the annual property tax due on the property generally increases, benefitting the city and county;
- We and our contractors employ a ton of people to do the renovations, creating relatively high-paying construction jobs;
- We buy a ton of materials, which benefits local and national retailers and also generates a ton of sales tax revenue for the city and county;
- The new tenants in our buildings are more affluent and more apt to patronize local shops, restaurants, bars, etc., directly supporting a bunch more jobs and generating even more sales tax revenue;
- If we choose to sell a building, we pay 1.5% of the value to the city and county again, and the annual property taxes increase again.
- Again, the broker who sells the property for us and the broker representing the buyer earn commissions;
- And escrow and title earn fees again.
It would take someone a lot smarter than I am to fully-quantify the impact of our business on the economy of the city and county. But, that’s not really the point, is it? After all, gentrification is always going to be justified economically. But, what about culturally or morally?
I guess all I can say is that my own family, like those of many eastern European Jews, has been pushed and pulled around the globe by strong forces – economics, war, genocide, etc.
My personal take-away is that the status quo is fragile, that individual humans are always one election or coup or turn of the economic tide from having their worlds upended. Nothing is assured and nothing is permanent, including where we live.
Today the JOBS Act went live, allowing for public solicitation for unregistered securities.
Here’s a summary from the NY Times. In case you’re too lazy to click:
- Companies can now raise up to $1MM for unregistered securities
- They can also advertise the offerings publicly (on TV, radio, blogs, etc.)
- For now, investment is limited to so-called accredited investors (people with net worth north of $1MM excluding their homes, or incomes north of $200K / year)
You might expect that I would be thrilled about the change to the law, but you would be wrong.
You see, this new status quo isn’t really new… it’s basically what prevailed prior to the 1930s. Before then, anyone could go around pitching investments. Guess what happened?
Tons of fraudsters stole lots and lots of money by advertising “investments” that were really ponzi schemes and the like.
Eventually, regulations were put in place to stop the shenanigans. Now, those regulations are going away. So, my guess is that the fraud is coming back. Over the long term, that’s terrible for my business, because my ability to grow depends on my ability to continue to convince investors to put their money with me. And, investors who have been burned before are very unlikely to trust anyone ever again.
My advice to all you accredited investors out there is to hold onto your wallets.
If you live in LA, you’re used to seeing people dancing on street corners holding signs for businesses.
Do you know why this exists? Ordinarily, there are pretty severe restrictions on business signage, particularly signage on public right-of-ways like streets and sidewalks. But, the First Amendment to the Constitution guarantees people the right to free speech, so no one can stop you from standing on a street corner with a sign. Businesses in LA have learned to take advantage of this right by hiring people to hold commercial signs.
We, as a society, have decided to tolerate this tacky, awful speech because banning it would threaten other kinds of speech that we wish to protect (for example, protestors holding political signs on corners).
And, there’s at least the side benefit that the people actually doing the work get paid for it, even if those jobs can be pretty awful.
Look, here’s a cute girl spinning a sign on Beverly Blvd. in Historic Filipinotown:
But, now check out this one from close up. It’s a job-killing, law-breaking dancing robot!
Totally disgraceful. You can see the thought process of the evil genius who sells these little monsters: “You can have signs on the public sidewalk without having to pay humans by the hour. Just make them humanoid robots, and no one will notice!” He exploits the wide berth we give to free speech AND kills jobs. And what he’s doing is illegal, because no one can just plop a sign down on a public right-of-way.
Fortunately, unlike other social ills (like graffiti), it’s very obvious who to blame… the businesses put their names and phone numbers on the signs!
We, as a city, ought to say, in response: “We’ll let you pollute our visual space with dancing humans, because we care about free speech and jobs. Do it with robots and we’ll bury you in fines.”
One day of active enforcement by the cops would do the trick…
[Note: I wrote the email below to the Silver Lake neighborhood council, which is debating whether to support the gang injunction proposed for parts of Silver Lake and Echo Park.]
To whom it may concern:
I write to set out some experiences I’ve had in renovating an apartment complex on Silver Lake Blvd in hopes that they will be helpful to you in your deliberations regarding the proposed gang injunction for parts of Silver Lake and Echo Park.
My client purchased two badly-neglected buildings on Silver Lake south of Sunset early this year and hired me to oversee the renovations.
Since before my client purchased the property, a group of gang-members and affiliates has congregated in front of the building immediately to the north. How do I know they are gang members? Because I have spoken with the lead LAPD officer in charge of the area and these individuals are known to him.
Several months ago, in broad daylight, a car pulled up in front of the Silver Lake Blvd. building, right next to my contractor and a property manager who previously worked for us. A young man stuck his head out the window, threatened my associates, pulled a gun out and fired it into the air a few times. Then the car sped away.
The police were called, but did not arrive in time to catch anyone.
Who was the gunman and why did he threaten my associates? I don’t think the gentlemen who congregate next to the property are crazy enough to do something like this so close to their home / main hang-out.
Instead, based on reports from people I know who grew up in the neighborhood and who know the relevant (bad-)actors, I believe the gunman was a member of a rival gang. He simply mistook my contractor and property manager, both of whom have darker skin, for members of the gang that congregates next door, and mistakenly threatened and fired on / near them.
Since this incident, the construction workers employed by my contractor have been afraid each time they venture out of our structures into our parking lot. They are rightly concerned that someone may mistake them for members of the gang next door and kill them. These are hard-working (immigrant) men trying to provide for their families.
Do you think they should have to live and work in fear of being killed? How about my dark-skinned contractor? Or any tenants of color who may move into the building when it is completed? Or the neighbors, passers-by, or commuters who might be hit by stray gunfire?