Message In A Bottle

Posted on by Le Flaneur

This is a business proposal I presented during an on-line telephone conference with a group of California real estate investment and development professionals sometime in January 2016. While many of the “links” are no longer active, those that remain offer early evidence of the ominous plan for an elite suburban culture (“exurbs”)and the origins of the “15 Minute City” {https://www.theepochtimes.com/t-15-minute-city} long before the expression was commonly understood

SUMMARY:  The landscape of the nation’s real estate markets is changing at light speed, and the future of the real estate professional has never been more in doubt. Consumer demand for the professional sales agent diminishes as Zillow and Loopnet increasingly fulfill consumer demands for market transparency and competitive pricing for real estate services. Among the most significant background changes are the extraordinary effects of changing public policy and the enormous forces of fully empowered local planning authorities poised to implement the growing sentiment for politically progressive community design. It has become clear that the forces for the expansion of social equity are positioned with the power, and intent, to influence real property ownership and use at every level well into the foreseeable future.

The commercial markets have historically been an open market environment. The barriers to entry have been few, simplistic and relatively inexpensive. However as government expands it’s power investors and marketing professionals will, of necessity, be required to combine their talent and resources to identify new markets of opportunity, while unifying their efforts in an increasingly complex and predatory political environment.

The primary purpose of this open Business Plan is to promote a collaborative effort between real estate professionals and the apartment and commercial property community to meet the important challenges of the rapidly changing politics of land planning policy. Additionally, the active markets will be required to comply with a tsunami of new business, safety and environmental directives. This new regulatory environment will bring challenges seen as very threatening, or very exciting, depending upon how the real estate industry chooses to view this opportunity.

THE EMERGING POLITICS OF REAL ESTATE –
CALIFORNIA LEADS THE WAY

GENERAL OBSERVATIONS: On September 30, 2008, Senate Bill 375 received the blessing of Governor Schwarzenegger and became the law of the state of California. Promising a new vision for land use planning aimed at reducing greenhouse gas (GHG) emissions with a complement of regional mandates and local incentives.

4-29-2015
New California Goal Aims to Reduce Emissions 40 Percent Below 1990 Levels by 2030

SACRAMENTO – Governor Edmund G. Brown Jr. today issued an executive order to establish a California greenhouse gas reduction target of 40 percent below 1990 levels by 2030 – the most aggressive benchmark enacted by any government in North America to reduce dangerous carbon emissions over the next decade and a half.

10-7-2015
Requires State-Regulated Utilities To Obtain 50 Percent Of Their Electricity From Renewable
Sources By As Early As 2020

LOS ANGELES – Moving boldly to combat climate change and curb toxic carbon pollution, Governor Edmund G. Brown Jr. today signed landmark legislation – SB 350 by Senate President pro Tempore Kevin de León (D-Los Angeles) – that establishes world-leading energy efficiency and renewable energy goals for California.

SPUR
San Francisco Planning + Urban Research (SPUR)

SPUR operates as a non-profit land planning advocacy organization based in Northern California and is funded by member contributions combined with government and private grants behind the mission statement “Through research, education and advocacy, SPUR promotes good planning and good government in the San Francisco Bay Area.”. While SPUR maintains offices in San Francisco, San Jose and Oakland, and is recognized as a leading civic planning and advocacy organization claiming to promote an independent and holistic approach to urban issues. While SPUR is located in Northern California it is generally seen as a model for regional planning advocates throughout the country.

Upon close vetting SPUR is by most any reasonable observation an organization comprised of an elite complement of retail, industrial and development leaders and entrepreneurs operating pursuant to progressive democratic principles in order to further advance their strong financial ties to the politics of urban development. Consider these recent published policy statements regarding:

    WEALTH TRANSFER & CLIMATE CHANGE     As a first step, MTC (Metropolitan Transportation Commission) should vote to establish the unified planning department. While MTC is the transportation agency, a single department would be far better at working on the interrelated issues of land use patterns and transportation investments. It could deliver better support and funding to local cities and counties. It could also begin to work on more complex issues around displacement, access to shared prosperity and how to fully prepare for climate change. (Why the Bay Area Needs a Single Regional Planning Agency. (http://www.spur.org/blog/2015-10-27/why-bay-area-needs-single-regional-planning-agency)

    FEES AND TAXES – USING PRICING AS A TOOL TO ACHIEVE BETTER LAND USE OUTCOME    Necessary regional land use changes will best happen when there are appropriate changes in pricing, particularly for parking, fuel and roadways. While we recognize that pricing has an indirect affect on land use, it is an essential part of a land use strategy. If we build great transit but provide free or cheap parking, we will not achieve the same reductions in driving if our transit investments are combined with appropriate responses to pricing for parking as well as pricing roadways that are currently free. (http://www.spur.org/spur-program/regional-planning)

    THE CONCENTRATION OF PLANNING AUTHORITY    Many of the Bay Area’s difficulties result from our fragmented system of governance. But this week, there is an opportunity to help move that system in another direction. On Wednesday, the Metropolitan Transportation Commission will vote on whether to combine its planning staff with that of the Association of Bay Area Governments (ABAG). We think this is the right move for the future of the Bay Area. “We call on MTC and ABAG to endorse a study commission that would explore a range of options for a single merged regional agency. In recent decades, there have been numerous attempts to merge ABAG and MTC. None has succeeded. SPUR believes the opportunity to begin by creating a single planning department provides our best chance of moving in the direction of what is best for the Bay Area” (White Paper Friday, September 11, 2015, http://www.spur.org/publications/white-paper/2015-09-11/improving-regional-planning-bay-area)

    HIGHLY CONCENTRATED POPULATION MODELS  –  CAPTURING GROWTH WITHIN OUR EXISTING URBANIZED FOOTPRINT    We should capture as much regional growth and development as possible within our existing urban and suburban footprint. This does not mean that we will never pave over another acre of undeveloped land. But to the extent possible, we should capture as much of the future residential, commercial, retail and other uses within developed portions of our cities and towns. (http://www.spur.org/spur-program/regional-planning)

    CONSUMER PROTECTION LEGISLATION    San Francisco Planning + Urban Research Association | July1, 2003 . . . . . it is extremely clear . . . the tax limits imposed by props 13, 62, and 218 should be overturned” (Democracy and Planning p. 9  –

(https://www.spur.org/sites/default/files/publications_pdfs/

Democracy_and_Planning.pdf)

     SUSTAINABLE DEVELOPMENT     Historically, land planning has accepted the common definition as “The efficient and ethical use of land within the cities jurisdictional boundaries pursuant to the present and future needs of the community, and concurrent with the preservation of its natural resources”. However, the modern planning paradigm has systematically morphed into the new political arm for social engineering, and the term “Sustainable Development” is the now the universal code word for the economic alliance of urban development activists (SPUR) and the progressive socialist politics of wealth transfer facilitated by the principles of global warming and the “green” culture extremists. See: Sustainable Development: Our goal: Reduce our ecological footprint and prepare for climate change. (http://www.spur.org/spur-program/sustainable-development)

THE UNIVERSAL CALL FOR “SUSTAINABLE DEVELOPMENT”

It should be clear that the universal view of “sustainable development” promoted by SPUR and thousands of similar activists groups throughout the nation’s planning community’s, and theeir sphere of influence, is cast through a narrow range of cultural optics including economic, social and environmental measures intended to concentrate society’s ecological footprint into an increasingly compressed environment in which air, water, space and even time will be increasingly allocated by a central authority.

This graphic is repeated throughout the sustainable development narrative and demonstrates, with clarity, how planning authorities across the country view the future allocation of economic, environmental and social resources. It seems clear that the “sustainable development” core will be closely surrounded by the elements of social equity (wealth transfer), sustainable economy (renewable energy) and the local environment (increased population density).

What will become, then, of the management and control of those assets not dedicated to the core of sustainable development. It would appear that more than 70% of the remaining economic, cultural and natural resources available for consumption will be controlled by political and bureaucratic arbiters to be allocated as they determine to be appropriate.

One answer might be that while urban planners are preparing strategies to compress traditional “commuter” communities into high density sustainable development, suburban planners are quietly building “exurbs” for a growing population of affluence seeking a prosperous area for a child-friendly, low density living communities outside the “sustainable” precincts, and beyond traditional suburbia boundaries.

The end game is most likely found in the finalized text of the United Nations “Plan For Sustainable Development” which opens with the following:

Preamble

    This plan, designated as “Agenda 21” is a plan of action “for people, planet and prosperity”. It also seeks to strengthen universal peace in larger freedom. We recognize that eradicating poverty in all its forms and dimensions, including extreme poverty, is the greatest global challenge and an indispensable requirement for sustainable development.

All countries and all stakeholders, acting in collaborative partnership, will implement this plan. We are resolved to free the human race from the tyranny of poverty and want and to heal and secure our planet. We are determined to take the bold and transfomative steps which are urgently needed to shift the world onto a sustainable and resilient path. As we embark on this collective journey, we pledge that no one will be left behind.

The 17 Sustainable Development Goals and 169 targets which we are announcing today demonstrate the scale and ambition of this new universal Agenda. They seek to build on the Millennium Development Goals and complete what these did not achieve. They seek to realize the human rights of all and to achieve gender equality and the empowerment of all women and girls. They are integrated and indivisible and balance the three dimensions of sustainable development: the economic, social and environmental. (http://www.waynevisser.com/report/sdgs-finalised-text)

CONCLUSION:

For the sophisticated real estate investor and professional consultant the future market will be situated in the sustainable development core with the remainder in the more distant undefinable regions of the emerging “exhurbs” (Hunger Games inverted). Planning policies of the past which partitioned residential, commercial and industrial land tracts into sprawling subdivisions are being replaced by high density mixed-use planning districts within walking distance of employment and public transit. This will continue well into the future as long as the “sustainable” think tanks and environmental advocates continue to control the highly politicized development narrative. Therefor, the future of the marketing, sales and investing professionals will be determined by their ability to build strong relationships with local and regional planning authorities by becoming intimately familiar with the elements of the local General Plan, and nurturing the social progressive principals that motivate them.

A NEW NETWORK OF REAL ESTATE PROFESSIONALS

Most real estate professionals and investors continue to be driven by the fixation on such things as capitalization rates, gross rent multipliers, unit cost and cash flow. While having some relevance to current operational considerations, these concepts have little to do with the commercial and investment value of any property. And, never have.

The apartment and commercial real estate markets are rich with opportunity, but they can no longer be defined by traditional metrics. The massive amount of local wealth and indiscriminate money seeking to enter real estate as an alternative to the traditional equity markets have rendered any value these measurements may have as irrelevant, and those who choose to employ them are on “the road to investing perdition”.

No longer will the informed investor purchase real property based on the current income of the property. Capital growth of the investment is the principal reason for investing in real estate. Income, alone, is insufficient justification since well managed alternative investments offer greater immediate passive cash flow returns without the added capital and management risk. There is simply no exception to this time tested observation. The current value real of property is not found in any CAP rate model, but in an accurate and well informed prediction of the “present and future value of the income stream”. How the property’s physical characteristics and location survive the certain economic, lifestyle and cultural changes that will occur, and what the investor does to affect the outcome, is critical to determining the present and future value of the investment and business decision. Traditional investment metrics are ill informed and cannot be used to meet this test.

TRADITIONAL VALUE ADDED MARKETS OF OPPORTUNITY

If there is any secret to the present and future value of any property it is found in the value added potential of the asset, and how it is positioned with the emerging environmental and management compliance standards. The new networks will focus on identifying markets of opportunity that seek out the extraordinary added value present at the time of purchase by: (Please add your comments, or thoughts to the following recommendations.

  • Taking advantage of the unused, or overlooked, benefits of the property.
  • Creative and unexpected land use.
  • Discovering the unused or unrecognized value of the improvements.
  • Changing the use to meet the needs of generally unknown, unforeseen or emerging markets.
  • Re-configuring or redefining the site and improvements.
  • Realigning or reallocating the expenses.
  • Exploiting changes in the urban and suburban infrastructure, land use and public policy.
  • Accurately predicting the path of growth.
  • The creative use of purchase and financing techniques that create or enhance the cash flow potential of the property.

Added value is the defining test of the property’s future value and the potential to survive changing market conditions. The value added principle of real estate investing cannot be overstated, it must not be overlooked and it is limited only within the mind and by the imagination of the professional.

Unforeseen value has been found in the most unexpected and unprecedented places. The way in which new professionals embrace and engage this fundamental principle will mean the difference between success and failure. Even more important, this knowledge will add extraordinary value to their services as real estate professional, and investors

The professionals have always been required to gather and properly analyze information which is often confusing, erroneous and frequently deceitful. Real estate investing is directly related to understanding the source, and value, of the data selected and what to recognize as meaningful. However, never before has the requirement to organize the vast amount of public and private information needed to make an informed investment decision been more critical.

A NEW NETWORK

The Mentor Project Meetup Network is unique in that it is been created for the benefit of investors, and the professionals that serve them, in order to form an association built around public relations policy which includes all the activities of advertising, education political action, and publishing. The focus is the mutual collaboration between industry professionals, commercial property owners and the local planning authorities.

The Mentor Project Network will form a strong alliance with local and regional planners to facilitate within current guidelines efforts to:

  • Re-configure community improvements approaching functional and economic obsolescence.
  • Capture new markets specific to community demographics within the influence of the planning authority.
  • Re-branding improvements to meet the needs of the local community.
  • Advocate legislation to protect the community from the destructive influence of speculation in the single family market.
  • Bridge the growing communication gap between local statues and property owners (Environment, OSEA, Rent Control, Re-zoning).

The Mentor Project Network will form a strong alliance between industry professionals with property owners to facilitate:

  • An active and dynamic information “bridge” between property owners and the regulatory agencies.
  • A proprietary property data base for marketing and services.
  • Sales and marketing alternatives.
  • Unity between tenants and property owners.
  • Strong property management skills.
  • Identifying multiple streams of income.
  • Real estate investment alternatives for retiring owners leaving the investment market.
  • Training sessions and public meetings that promote broker/client relationships.

The Mentor Project Network will form a strong bonds between consumer, business and social organization to facilitate:

  • The exchange of information and resources relevant to common goals.
  • The promotion of real estate investing principles as vital “life skills”
  • The increased awareness of frivolous and deceitful investment practices.
  • The promotion of alternative real estate investments.
  • The promotion of greater industry participation.
  • Real estate investment alternatives for retiring owners.
  • Training sessions and public meetings that promote broker/client relationships.

THE POWER OF A UNIFIED NETWORK

Meetup.com offers a unique networking platform that can unify highly localized real estate interests with the broader demands of the Region.

The proposed network will facilitate:

  • The creation of strong local (micro) networks.
  • A unified investment philosophy and culture.
  • Shared local and regional Meetup events.
  • Leverage technical and marketing experience. (Public relations, website design, data base development. media production)
  • Leverage marketing and sales experience.
  • Communicate important political information across the greater network.

A CALL TO ACTION

We ask that all Members of the The Mentor Project Network apartment and commercial real estate investing join us in the execution of this Strategic Plan. Help make this organization relevant to you and your local community.