Archives for May 2023

Vernon Mulanix, a small business development center expert, is expanding Blue Kangaroo Packoutz, a cleaning and restoration services company, to Albuquerque.

Blue Kangaroo Packoutz opened its warehouse at 6819 Cochiti Road SE earlier this year. The company restores contents inside homes and businesses following man-made and natural disasters like fire, mold and flooding. The company uses Esporta soft goods cleaning and ultrasonic cleaning services to restore items such as furniture, upholstery, artwork, electronics, documents and clothing.

Mulanix and his team will serve homes and businesses in Albuquerque, Santa Fe, Los Alamos and Sandoval County, including Los Lunas. He added he bought the franchise for $180,000 and will hire a core team of four workers.

Mulanix was hired as an advisor for the University of New Mexico Valencia campus’ Small Business Development Center (SBDC) in 2018 before being promoted to director in 2020. During this time there, Mulanix said he’s seen business trends and financial cycles fluctuate. He has owned various businesses in industries such as telecommunications, construction, and health and wellness and said he believes this franchise is “recession-proof” because natural disasters are bound to happen.

Mulanix said part of his job at the SBDC is to help people start their own business and believes there is plenty of opportunity in New Mexico. He advises those interested in franchising to seek areas that appeal to the climate and lifestyle they desire.

“If you’re a smart operator and you have a idea that you believe in, you can do business anywhere,” he said.

He said he enjoys helping people, and said he’s looking forward to helping businesses get back on their feet.

“Everything I do helps somebody better their life, and therefore it has meaning,” said Mulanix. “The cool thing about this job is when somebody has their world blown up through fire, flood, mold, their whole world gets torn apart. The company can go in and we can actually help them put their world back together.”

Blue Kangaroo Packoutz has locations in 18 other states including Alabama, Arizona, California, Colorado, Georgia, Idaho, Kansas, Michigan, Nevada, New York, North Carolina, Ohio, Oklahoma, South Carolina, Texas, Utah, Washington and West Virginia.

Source: “SBDC expert bringing disaster restoration company to Albuquerque“

In a new analysis, Moody’s Analytics made a point about metro downtowns that is generally good advice whenever looking at data. That is, don’t be satisfied with the simple and obvious story until you’ve checked further, because situations are usually more complicated than easy answers.

Part of that is understanding that two sets of data may not be proxies for one another, even though it seems like they should be. Cell phone data and the figures of CRE markets in central business districts might seem via basic logic to be similar to one another. If the people, who probably carry cell phones, are there, then so must the real estate aspect, because otherwise you have a bunch of people who must be walking around in circles, doing nothing. Conversely, if the real estate data is strong, you know people are there—whether living in apartments, going to work, or at restaurants, shops, and entertainment.

“Potentially surprising, the relationship between the two respective datapoints is weak at best,” they wrote. “Metros with strong downtown multifamily and/or office performance have not necessarily ‘recovered’ as far as the cell phone data is concerned. The reverse scenario is also true.  Further, while the national level aggregate occupancy data shows multifamily and office trending in their typical cyclical manner (albeit at much different magnitudes), the relationship is not as clear at the metro level. Some metros have had astounding multifamily performance in spite of below average office performance.”

In addition to the recognition that two sets of data might not correlate the way people assume, there is a second cognitive bias. People often expect that averages are rules governing details rather than the other way around. The average is a product of the collection of those details that don’t all behave the same way or suddenly change their characteristics because someone calculated an overall view.

At the national level, multifamily and office performed in similar cyclical fashions, and this continued through the start of the pandemic. “As the economy gradually reopened, downtowns gained some business momentum again, as tech firms, in particular, took down a good deal of space,” Moody’s wrote. “As for residents, they came back to downtowns with a vengeance, prompting incredible gains to rent and occupied stock. This rebound continued for both office and multifamily, albeit at vastly different magnitudes, until elevated inflation and rising interest rate began decreasing economic activity late last year.” The multifamily rebound was driven more by “household formation, migration, affordability, and lifestyle preferences.”

While office continues through big changes, “multifamily performance in some markets boomed regardless.” Hence, there can be high cell phone use but low office occupancy. Office deterioration seems to depend more on high concentration of industries that are using large levels of hybrid work as well as challenging commuting conditions.

One lesson is that cities combining residential, office, and leisure as soon as possible into mixed use will have more compelling offerings for people and companies that are looking for a new location.

Another lesson, if you’re making investment decisions, get beyond averages and look deep into local areas.

Source: “CBD Survival Means Getting Retail, Multifamily, and Office to Pull Together“

LAS VEGAS—ICSC Las Vegas event panels were in full swing yesterday, with industry leaders sharing their experiences and insights on how they had been communicating with stakeholders during the challenging economic times. Moderator Glenn Rufrano, ICSC Chair and former CEO of VEREIT, posed a question to the opening panel, eager to uncover their strategies and approaches.

Rufrano turned to Alex Nyhan, CEO of First Washington Realty, asking about their communication methods and the time period and constituencies they focused on. Nyhan responded, emphasizing their commitment to reducing anxiety levels at the beginning of the COVID-19 pandemic. They achieved this by sharing extensive business information with their team members, ensuring transparency and keeping everyone informed.

When it came to their investor base, Nyhan explained that they adopted a more frequent update approach, surpassing their previous communication efforts. By sharing more information, they were able to provide reassurance and instill confidence, leading to increased investment during that challenging time period.

Hessam Nadji, president and CEO of Marcus & Millichap, emphasized the importance of aligning everyone’s efforts in the same direction. Nadji acknowledged the challenges of communicating with a large and diverse group of stakeholders. He emphasized that the current market downturn was just as confusing and threatening to their clients as the pandemic itself had been. Nadji stressed the necessity of providing a steady stream of information to clients, acknowledging the risks their equity faced.

According to Nadji, the key was not pretending to have all the answers but rather being there to offer perspective and share their insights but still updating clients on what they believed would happen based on the available data. Above all, Nadji stressed the importance of maintaining a consistent flow of information, even if the future remained uncertain.

Devin Murphy, president of Phillips, Edison & Co., added to the discussion by sharing their migration back to more traditional communication methods. While acknowledging the efficiency of platforms like Zoom, Murphy expressed their preference for face-to-face shareholder meetings.

According to Murphy, the social interaction provided a deeper level of connection and understanding, leading to more effective communication and collaboration.

Rufrano interjected, recounting a board meeting where someone had asked him if he was efficient. He redirected the focus, suggesting that the real question should be whether they were getting the job done. Rufrano expressed his belief that more face-to-face interactions would result in increased efficiency, emphasizing the importance of combining social interaction with effective communication.

Overall, the panel discussion shed light on the diverse approaches taken by industry leaders to communicate with stakeholders during the difficult economic times. From prioritizing transparency and sharing information with team members and investors to providing regular updates and perspective to clients, the speakers underscored the importance of maintaining open lines of communication.

Source: “ICSC Panelists: In Challenging Times This is How We Communicate With Our Stakeholders”

There is a famous 1972 kid’s book called Alexander and the Terrible, Horrible, No Good, Very Bad Day. The title, at least, seems to have become the playbook for the debt ceiling debacle currently unfolding far too slowly.

Examining best guesses on potential outcomes is the closest thing to scenario planning possible. There are two broad categories: President Biden and House Republicans secure a deal, or they don’t.

The most optimistic view, the first one, isn’t totally out of the question. On Thursday, House Speaker Kevin McCarthy said he can “see the path” to an agreement, according to multiple sources. “I think we have a structure now.” The hardline House Freedom Caucus wants no deal without a collection of heavy and weighted budget cuts, a measure called the Limit, Save, Grow Act, which Senate Majority Leader Chuck Schumer said wouldn’t have a hope of passing in the Senate.

But assume for a moment that something passes and there’s an increase to the debt ceiling. As Bloomberg reported, some experts like Ari Bergmann, founder of strategic and risk management advisory firm Penso Advisors think there will be pain even in a deal.

The problem is timing. A last-minute resolution, and that is the only type possible now, would leave the Treasury like a person who had been trapped underwater and suddenly broke surface, gasping. Only the air needed in this case would be cash.

“My bigger concern is that when the debt-limit gets resolved — and I think it will — you are going to have a very, very deep and sudden drain of liquidity,” Bergmann told Bloomberg. “This is not something that’s very obvious, but it’s something that’s very real. And we’ve seen before that such a drop in liquidity really does negatively affect risk markets, such as equities and credit.”

A fast run of Treasury bond issuance to pull in needed cash will pull liquidity out from everywhere else, driving up rates because government demand would outstrip the normal supply of cash. That could pull bank reserves, forcing the Federal Reserve to moderate quantitative tightening, changing the dynamic of fighting inflation.

Separately, the Secured Overnight Financing Rate (SOFR), which drives a lot of lending calculations, would rise because Treasury yields would rise, pushing down the value of already existing government bonds. That means refinancing CRE loans would become even more expensive than it is now.

“That’s directionally correct,” Arkhouse managing partner Gavriel Kahane tells GlobeSt.com. “That’s if it gets solved. I think the overwhelming likelihood it will.” But, as he says, “it will be the last second of the last minute of the 11th hour.”

Again, that’s the positive outcome.

Regarding a default, Moody’s Analytics sees two scenarios. One is a short-term breach. The initial reaction: “financial markets will be roiled” as they were when in 2008 Congress didn’t initially pass the Troubled Asset Relief Program banking bailout. Interest rates would spike and equity values would plunge. Short-term funding that is the oil for credit markets would likely seize up.

While Moody’s Investors Service thought that the U.S. credit rating would remain close to Aaa, “Standard & Poor’s downgraded the nation’s debt in the 2011 debt limit battle for much less, citing the political dysfunction at the time. Since then, that dysfunction has only intensified,” Moody’s Analytics wrote. However, a “downgrade of Treasury debt would set off a cascade of credit implications and downgrades on the debt of many other financial institutions, nonfinancial corporations, municipalities, infrastructure providers, structured finance transactions, and other debt issuers.”

“I think faith in the system would be forever impaired,” Kahane says. “But I guess investors have a short memory. An analog in real estate is that there are plenty of developers that have gone bankrupt or defaulted and five years later they’d back at it. The market will give our government credit once again even after default.” If the result was a loss of faith for everyone, the U.S. “might still be sitting at the front of the class” because of relative strength.

The worst outcome would be a prolonged breach.

“The blow to the economy would be cataclysmic,” Moody’s writes. “The federal government would have no option but to slash its outlays, since outlays could be no greater than revenues the Treasury collects. Assuming a June 8 debt limit breach that dragged on through July, the Treasury would have no choice but to eliminate a cumulative cash deficit of approximately $150 billion by slashing government spending. As these cuts work through the economy, the hit to growth would be overwhelming.”

The impact on faith among consumers, businesses, and investors would be beyond easy measure. “It is difficult to envisage what steps policymakers could take to mitigate the economic carnage.”

Source: “The Terrible, Horrible, No Good, Very Bad Debt Ceiling Day“