Local Developer Hitting Rock Bottom? Time For Rehab.

February 22, 2010

It’s not easy being a local developer in a downturn. National builders have challenges, too, but they’re able to maintain presence in key housing markets and ultimately increase market share.

Lennar posted a gain for seven quarters. DR Horton, KB Home – doing fine. How many local builders do you know who are “doing fine?”

But let’s say you refuse to be weeded out. Fair enough. After all, you’ve worked too hard to give up. The local community knows and trusts you. You’ve earned your reputation with excellent service. You have a right to exist.

You’re a builder. So build. Maybe not homes or communities – at least not right now. Build PARTS of homes, a.k.a. rehabbing.

The people who trusted you to build great homes will also trust you to turn old interiors and floor plans into brand new ones, build additions and give tired kitchens, baths and basements a new lease on life.

There are no national rehab companies. Rehab is a local game. As a seasoned local builder, rehabbing is well within your ability. You just need to rehab you business model a little, so you can weather the storm.

When the market recovers, your name will have endured because you never stopped building lifestyles. You’ll go back to homebuilding but with an increased sphere of local influence.

Consider that 90% of the NAHB is made up of homebuilders who build only ten homes or less, annually. Small, local builders are in the vast majority. Let’s keep it that way. Weather the storm any way you can.

Rehabbing is merely one option for local and regional builders intent on keeping their name alive no matter what. For more options, contact us.

– Garrison Insider

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Chicago’s Real Estate Forecast And Why You Should Ignore It.

February 4, 2010

Found an interesting read by Dennis Rodkin in Chicago Magazine’s online version of the monthly “Deal Estate,” column. A collection of quick, mostly unsettling sound bites overheard at the Chicago Association of Realtors (CAR) economic forecast panel for 2010, which met January 28th.

Many of the sound bites involve the accurate (but not-so-original) notion that the economy is bad…and it will be slow to recover.

I have respect for the experts quoted – their perspectives are valuable to all of us. But somehow the tenor of Rodkin’s compilation reminded me of how much my team and I bristle at the constant repackaging of negative information.

Exchanging factoids about just how “bad,” things are has become a guilty pleasure for many in real estate, and possibly an unproductive one.

Here’s one (I can’t resist):

There were fewer permits to build new homes in the eight-county metropolitan area this year than permits issued for Will County alone in 2005.

Wow. Another way to meditate on how “bad” things are – by way of comparing everything to Will County in ‘05. I could give you hundreds more like that – but I don’t see the point.

There’s nothing better than awareness. Knowledge is power. But when we obsessively gaze at things through the most disturbing lenses possible, we’re doing it to build a case for inaction, or to paint ourselves as victims. We’re venting when we should be invented. Here’s another:

In 2009…

…foreclosures, short sales, and bank-owned sales made up 40 percent of sales of single-family homes and 24 percent of condos…

Yikes! What do you DO with that information? (Aside from saying “yikes.”)

Here’s what you do: keep it productive. Let it guide your business decisions. Let it direct the relationships you forge with lenders. Let it lead you to new opportunities.

Don’t fall into the trap of using statistics to build a case for you to feel powerless. That’s the enemy of progress in real estate.

I saw a brilliant billboard on the Kennedy Expressway this week. It said: “Recession 101: Bill Gates started Microsoft during a recession.”

Amen to that. Try to see the tremendous opportunity between the lines. If you don’t, someone else sitting next to you at the forecast panel will.

There are opportunities, there are answers, there is hope. That’s the attitude that made ‘09 a fantastic year for Garrison Partners and our clients. It can work for you, too.

For concrete techniques to improve your outcome in 2010, read the new Garrison Insider entry slated for this Monday: “Top Five Ways To Make Your Lender Your Partner.”

GB

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Be Cautious of Cautious Optimism!

January 22, 2010

An article posted by the NAHB today reports that the mood of attendees at this year’s International Builders’ Show was cautiously optimistic.

I was there, and the energy was indeed more upbeat. The networking and communicating is great for the industry, and there’s a certain power in numbers, a sense of energy that breeds cautious optimism.

But I saw something else at the IBS show. Something very good for the industry: rational optimism.

Rational optimism bases your expectations on what you KNOW to be true.

Cautious optimism limits your expectations because of all the unknowns involved.

Rational optimism is earned by seeking out the projects you can grasp fully and get excited about. Putting in honest work and street-level research and taking your best shot, no regrets.

Cautious optimism happens when you lack information. It’s a result of moving forward into the unknown too quickly for your confidence to keep up with you.

Rational optimism can save the residential real estate industry.

Cautious optimism threatens to hold it back.

I’m involved with several projects right now for which I can be rationally optimistic. They’re the only projects I’m willing to take on. I’ve discovered that you can hold yourself to this standard EVEN IN THIS ECONOMY. In fact, it’s more important now than ever.

For banks, receivers and developers in particular, rational optimism is the holy grail. In order to achieve it, intelligence gathering techniques and depth of insight have to adhere to a new standard. Well, new to some. To us, it’s business as usual.

OK, admittedly, I can recall a few times in 2008 where I indulged in cautious optimism. However, I’m very optimistic it won’t happen again. (Rationally so.)

Garry

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Garry Benson: Are You Insane?

December 7, 2009

“THE MARKET HAS STOPPED GOING DOWN!” Skeptics today see those words as the sign of a charlatan or snake oil salesman. And it’s no wonder, developers and marketers have been crowing this claim like clockwork since the beginning of the collapse in late ‘07.

Two weeks ago I hazarded those same powder-keg words in a very public forum – a Crain’s article. But I based my observation on HARD FACTS and observations after witnessing 43 units (over $11 million dollars worth of real estate at about $278 per square foot) sell in 90 minutes. 90 minutes!

Yes, it was an auction. And yes the average purchase was 25% below last asking price. But the sheer momentum indicates something exciting is afoot. Namely that SOME people are very interested in buying real estate again.

Garry Benson: Are You Insane? That was the question posed on the Crain’s comment board by one Ryan C, arguing that I sound like a “snake-oil salesman,” as if I had some sinister ulterior motive, as if we in the industry are all in cahoots trying to hypnotize the buying public with disingenuous bullishness.

My answer to you Ryan is if I’m insane, it’s the good kind of insane…insane for loving this topsy-turvy industry, even the downturn, because the challenges energize the hell out of me. I don’t make my declarations lightly. If there’s a “buy now!” conspiracy going on, I’m not part of it. In fact, half my day is spent advising certain clients NOT to buy, at any discount.

And stop focusing on the deep discount, Ryan. It’s the fact that people bought at all. A good old-fashioned buying frenzy. That speaks volumes about that particular market, and other related markets, in my opinion.

My opinion doesn’t matter? Fine. But look at the CASE-SHILLER Home Price Indices that have shown an upturn in most major markets. Does it mean we’re in for sunny skies in Detroit? No. (Let me know if you want a link to the study, I’ll email it to you.)

FINAL ANALYSIS The auction is merely proof of this: some people are buying up real estate AGAIN, with a hunger and urgency I haven’t seen in a while. These are our SAVVIEST buyers and they are not waiting. I’m clearly not alone in thinking things have stopped going down, Ryan. I’m joined by a mob of people who put their money where there mouth is to the tune of 11 mil.

Ryan and other detractors, let me know your objections to my logic, if any, and I’ll be happy to continue this conversation right here.

Best,

Garry

For more information about our services, please visit our main website at www.GarrisonPartners.com or call our corporate office at (312)750-1610.

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Condo auction sets pace with 62 sales in one afternoon

November 17, 2009

“It’s a declaration that the market has stopped going down,” says Garry Benson, Garrison’s president and CEO. “This proves that once you establish in the minds of the public a price/value equation, there is absorption.”

To read the entire article at Crain’s Real Estate Daily, click here.

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