Peter Pays Paul

The hotel industry is undergoing major stress. With incomes down and unemployment up, families are vacationing less. Fewer vacations means lower hotel revenues.

Many hotels were bought or sold during the height of the commercial real estate market. Take for instance the Casa Madrona Hotel in Sausalito, CA, which sold in 2005 for an estimated $20 million.

The San Francisco Business Times is reporting:

Sausalito’s Casa Madrona was sold at auction today for a reported $11.4 million — the estimated opening bid.

The article also mentions that this one hotel supplies almost half of Sausalito’s hotel tax revenue. It is no wonder why so many city and county municipalities are in trouble.

The San Francisco Business times reports:

Twenty-five Bay Area projects will receive funding totaling $189.85 million. By county, $47.6 million went to Alameda, $7.2 million to Contra Costa, $450,000 to Marin, $64.4 million to San Francisco, $21.8 million to Santa Clara, $1.4 million to Solano and $47 million to Sonoma.

The $7.2 million allocated to Contra Costa County will be split between Valley Vista Senior Housing in San Ramon and Lillie Mae Jones Plaza in Richmond. Both of these projects appear to be in the construction and development phase.

The San Francisco Business Times is reporting that More Lembi buildings sell.

Washington, D.C.-based Klingbeil Capital Management has paid about $10 million to acquire three San Francisco apartment buildings that were part of the Lembi Group’s rapidly disintegrating multi-family empire.

From the Square Feet Commercial Real Estate Blog

The Mercury News reported yesterday on a proposal by the Bay Area Air Quality Management District that could require some housing developers to go study air quality as part of their entitlement process. According to the article, developments within 1,000 feet of major transportation corridors seem to be those affected.

The Bay Area Air Quality Management District is the group in charge of regulating the pollution of the air in the San Francisco Bay Area. They are responsible for “Spare the Air” days that prevent private home owners from burning wood, wood pellets or manufactured fire logs on Spare the Air days.

East Palo Alto, in the San Francisco Bay Area, is suffering due to the default of the city’s largest landlord. The WSJ details the plight in Firm Takes Heat Over East Palo Alto Crime.

A wave of robberies and burglaries is hitting East Palo Alto, threatening to reverse the city’s recent period of stabilization. One reason behind the crime surge is the financial troubles of real-estate firm Page Mill, say locals, law enforcement and other officials of the town.

Page Mill Properties LLC, which began snapping up local apartments in 2006, became the city’s biggest rental-unit landlord and attempted to transform the town by redeveloping properties into higher-end condominiums.

Earlier this week I wrote about San Francisco’s Apartment Woes caused by the default of the Lembi family.

In both of these scenarios, inexpensive CMBS debt allowed the investor to buy property at unrealistic prices. “A rising tide floats all boats.” The acquisitions made sense so long as the price of real estate was rising and cheap debt was available.

However, once real estate values began to fall, financing dried up, and vacancy began to rise these over-leveraged investments don’t make sense and don’t cash flow. Lax underwriting by the CMBS issuers and unrealistic assumptions by borrowers are damaging the cities where investments were made.

Hopefully, the commercial real estate industry will learn from our mistakes and excess before this cycle is repeated.

I just created a new page with a calendar of San Francisco Bay Area commercial real estate networking events.

If you are looking for a chance to network or meet other professionals here in the Bay Area please visit the calendar for more information.

San Francisco Bay Area Commercial Real Estate Networking Events

As an aid to my San Francisco Bay Area readers I wanted to compile a resource of local events for commercial real estate brokers and agents, commercial mortgage brokers and bankers, and those interested in commercial real estate.

This not a comprehensive calendar but is a compilation from a variety of sources.

Organization Key

• 680 CIX – 680 Commercial Idea eXchange
• BAMA – Bay Area Mortgage Association
• BOMA – Building Owners and Managers Association
• CCIM – Certified Commercial Investment Member
• CREW – Commercial Real Estate Women
• ICSC – International Council of Shopping Centers
• IMF – Investment Marketing Forum
• IREM – Institute of Real Estate Management
• NAIOP – National Association of Industrial and Office Properties
• ULI – Urban Land Institute

EB = East Bay
SF = San Francisco
SV = Silicon Valley

NAIOP publishes a monthly trade organization calendar here: http://www.naiopsfba.org/pdf/MonthlyCalendar.pdf.

Mike Shedlock from Mish’s Global Economic Trend Analysis has a great article about the potential for municipalities across the nation to file Chapter 9 bankruptcy.

Mish’s Global Economic Trend Analysis: Massive Surge In Municipal Bankruptcies Coming.

John Moorlach, the accountant who predicted the 1994 Orange County bankruptcy sees Up to 10 Municipal Bankruptcies in Coming Year

Even more infuriating than the policy makers inability to demonstrate fiscal responsibility is their willing to stick both of their hands in the dole. Mike quotes the St. Petersburg Times article Double dipping rises despite outrage.

This year some of Florida’s public officials are giving a whole new meaning to the phrase “home for the holidays.”

It’s a new crop of double dippers, taking advantage of a loophole in state law that allows them to “retire” by taking 30 days off and return to work in their old jobs with a salary and a pension. Many also collect a lump-sum “retirement” payment that can reach hundreds of thousands of dollars.

It is sad that we live in an entitlement culture. Everyone thinks that society owes them something.

As Margaret Thatcher said of “society”,

There is no such thing! There are individual men and women and there are families and no government can do anything except through people…”

Politicians and people that demand something for nothing are holding back the more productive members of our society.

The Contra Costa Times is reporting that Fresh & Easy grocery store is delaying their planned expansion into Northern California and the Bay Area. Fresh & Easy styles itself as a smaller supermarket that insists on fresh food and quality produce.

The article states optimism about the future of the expansion plans for Fresh & Easy. I think that because of public distrust of publicly traded companies, some shoppers may prefer a local, known grocer/shopkeeper to a chain store. This could be a benefit for the smaller Fresh & Easy markets.

However, this may be a sign that people are less willing to spend extra money on “luxury” type food items. Whole Foods has seen a downturn in the present market.

Fresh & Easy delays local expansion – ContraCostaTimes.com.

NAI BT Commercial opened its fifteenth Northern California office this week in Pleasanton. The office, at 5000 Hopyard Road, will serve the Tri-Valley region.

NAI BT opens 15th area office – San Francisco Business Times:.