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April 15, 2014
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We wanted
to share something with
you that was a little
different from our
normal economic,
financial, and interest
rate updates and
analyses - hopefully a
little more fun!
As you are
probably aware, we
provide commercial real
estate financing as part
of our services. So, we
are active in a number
of real estate groups
and are always keeping
our eyes and ears open
for new and exciting
real estate projects.
One of those is
LakePoint in Emerson, GA
(Bartow County) - about
35 miles north of
Atlanta and 75 miles
south of Chattanooga
along I-75.
Big Time for Little
League
LakePoint is a planned development that is entirely focused on
youth athletics. "What's
the big deal about
that?", you may ask. "I
have a Y right around
the corner."
The scale is the big deal. This development is over 1,200 acres
in size and they are
moving mountains (OK,
maybe really big hills)
to make it. Some quick
facts:
-
17 sports will be
hosted
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30+
baseball/softball
fields
-
15+ soccer/lacrosse
fields
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A 250,000-sq. ft.
indoor
sports facility with
a dozen basketball
courts or two dozen
volleyball courts
-
A Wake Park
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A 300-acre Outdoor
Sports/Conservation
Area with 11 miles
of bike trails, a
zip-line facility,
and possibly horse
trails. And, Lake
Allatoona is next
door
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A Greg Norman
Champion Golf
Academy
Why is this important economically?
OK, back to our
roots...If you do not
think this is impressive
simply for the scale of
sports, let's talk about
economic impact.
This development will be the northern end of what is now being
characterized as a
sports corridor along
I-75 that will be
anchored on its southern
end by the new Braves
stadium at I-75/I-285,
with the growing
Kennesaw State
University's sports
facilities in the
middle.
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It is expected to
create over 20,000
jobs, many of those
permanent, in an
area with a base
employment
of roughly only
40,000 jobs
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More than 4 million
visitors are
projected annually
-
5 million sq. ft. of
retail, hospitality,
office, medical,
research,
entertainment, and
residential uses
on-site
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Entertainment (for
siblings not
competing and
adults) will include
dining, shopping, a
water park, a
bowling alley, and a
micro-amusement park
They are
concentrating what is
already a major tourist
draw for Georgia and the
Southeast in one place,
while providing for many
of the lodging, dining,
and entertainment needs
- all within
walking/hiking distance.
The
downside economically?
It could cost a number
of Atlanta venues, and
their surrounding
businesses, some
ancillary revenue.
However, it may prove to
be such a magnet for
youth sports that even
more groups will come to
Atlanta versus going
elsewhere in the
Southeast.
Youth Sports Medicine
Although
the original plans
called for some medical
facilities, the response
from the medical
community was so
overwhelming that the
developers added
a medical and sports
research campus.
What caused so much
excitement? This will be
the greatest
concentration of youth
sports anywhere -
apparently the perfect
"laboratory" for youth
sports medicine. There
is talk that North
Georgia could become the
center of Youth Sports
Medicine for the entire
country.
What Else?
The first sporting events will be hosted this year with the
opening of the south
campus for baseball
tournaments. Hotels will
start opening no later
than 2015 and other
facilities will be
opening over the next
few years.
Shaw is making this a showcase for their sports turf product,
Coca-Cola is opening a
PowerAde Hydration
Research facility here,
and Bass Pro Shops will
have a store on-site.
Oh, by the way, Bobby Cox is heavily involved, as well. |
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November 8, 2013
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Good
News on Jobs Today
We had some good news on
the economic front,
today, in the October
jobs report. Although
there was a slight
up-tick in the
unemployment rate from
7.2% to 7.3% (which was
attributed to employees
furloughed during the
government shutdown),
U.S. payrolls increased
by 204,000 in October.
That was quite a bit
more than the 120,000
expected by economists.
Also, the two prior months were revised upwards, which moved the
three-month average to
more than 200,000 -
numbers not seen since
earlier this year.
Unfortunately, another
720,000 people abandoned
the civilian labor
force, putting the
labor-force
participation rate at
its lowest level since
1978.
Interest Rates up This
Morning
So what
does this have to do
with interest rates?
There was a scare last
quarter in the markets
that the Fed was going
to start 'tapering' its
monthly bond purchases
and rates jumped in
advance of their
meeting. The Fed's
announcement put
everyone's mind at ease
that it would only do
that if it saw real
improvements in
employment numbers or
dangers of inflation
and, based on what was
happening at the time,
neither appeared likely.
Now, one
month before the
December Fed meeting,
there is good news on
jobs - not just for one
month, but for three
months. This surprised
the markets and the
Treasury Yields jumped
this morning after the
report was issued. Some
are arguing that the Fed
must begin tapering.
Our Thoughts
Though we have seen a
quick jump in rates this
morning, there are still
serious weaknesses in
the labor market. As
noted above, labor
participation is low.
Also, many employees are
only finding part-time
work.
We expect the Fed will
not want to disrupt the
markets going into next
year and will maintain a
stable policy at their
December meeting.
Interest rates will
continue their slow
climb. |
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September 18, 2013
The announcement today of the Federal Reserve's decision to maintain its
bond purchasing program,
and not to begin
"tapering" it, has
temporarily eased some
of the upward pressure
on Treasury yields.
Over the late-spring and
through the summer, the
10-year Treasury rate
(an important rate in
commercial real estate
financing, especially)
had a couple of surprise
jumps and had reached
within a few
one-hundredths of 3.00%
today before the Fed's
decision was announced.
For perspective, this
rate had moved below
2.0% as recently as May
of this year.
Following the
announcement, it dropped
quickly and has been
hovering around 2.7%.
This should be
considered a brief
respite and not an
indication that these
longer-term rates are
stabilizing. The
expectation in the
market is that the Fed
will begin a process of
reducing its purchases -
it is just a matter of
when, not if.
This is an excellent
opportunity for real
estate investors to take
action before the rate
begins to creep upward,
again.
See Current and Recent Interest Rates
If you, a
colleague, or a client
requires financing for
their commercial real
estate, please
contact me so we can
determine their best
options.
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June 26, 2013
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Interest Rate Outlook (2H-2013)
US
Treasuries:
Rising
(10-year @ 2.56% today)
Financing that can be
impacted includes:
▪ Commercial Real
Estate
▪ Corporate Bonds
▪ Residential Adjustable
& Fixed Mortgages
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Treasuries have been on a slow, start-and-stop climb for the last year.
As an example, the
10-year Treasury
(considered a good proxy
for movement in Treasury
rates as a whole) had
moved up 1/2 point from
the summer of 2012 to
Q1-2013, then dropped a
1/4 point from March
through April.
But, since the beginning
of this May, the rate
has increased more than
3/4 of a point and more
than 1/2 point in the
last 30 days. This has
put the 10-year almost 1
point higher than 12
months ago.
Economic Update: Q1-2013
GDP growth was revised
down from 2.4% to 1.8%
in the latest revision
of the quarter's
numbers. Economists had
expected it to remain
unchanged, but consumer
spending and US trade
were not as strong as
thought. Higher tax
rates and slow global
growth may be dampening
growth more than data
had indicated.
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The 10-year Swap, used by many of our CMBS lenders to price
their interest
rates, is up
more than a
point in the
last 12 months
to 2.78% today.
The jump was
driven by the
Fed's discussion
of its plan to
eventually end
its $85
billion-per-month
bond buying
program, which
caused investors
to fear higher
interest rates
were on the
horizon. The
rates appear to
have tapered in
the last couple
of days (the
10-year had been
above 2.6%
Monday morning)
as the Federal
Reserve and
other central
banks have
rushed to assure
investors that
the days of easy
money are not
gone - yet.
Also, the
downward
revision in GDP
growth may ease
investors'
fears.
Outlook:
Large jumps like
this have been
rare and should
continue to be -
the Fed tries to
be extremely
careful with its
choice of words.
However,
everyone knows
that the Fed
will eventually
stop buying
bonds and, as we
get closer to
2014, the
expectation it
will happen
sooner, rather
than later, will
grow.
The markets
expect to see
growth similar
to the last year
with slow, but
inexorable,
increases in the
Treasury rates
(with a lot of
small,
up-and-down
movements). But,
as always, we
will keep you
posted on
developments.
See
Current and
Recent Interest
Rates
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May 9, 2013
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Economic Outlook - 2013 (Part 2)
The thoughts of Top Economists, continued...
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Here are
some more highlights
from the economic
forecasting conference:
GDP Growth (Update):
Tepid
The
Q4-2012 number, as
expected, was slightly
revised up to 0.4%. The
preliminary Q1-2013
number came in at an
annual rate of 2.5%.
Though up nicely from
the final Q4-2012
number, it is below what
economists were
projecting.
Inflation:
Cautious
Inflation (CPI) rose at
just a 0.9% annualized
rate in Q1-2013, down
from 1.6% in Q4-2012.
This is well below the
Fed's 2.0% target,
giving them more leeway
to continue their
liquidity programs. The
economists suspected
inflation would increase
more rapidly once
lending truly resumes.
Federal Reserve:
How do they stop?
The Fed
is buying $85 billion
each month in mortgage
bonds and U.S.
Treasuries. Some of the
concerns mentioned by
the economists were that
they do not know how the
Fed gets off the
treadmill (they were not
sure the Fed has an exit
strategy) and that they
may be limiting growth
by artificially
suppressing interest
rates for a fixed time -
businesses see no need
to hurry to borrow until
the economic picture is
stronger.
Employment Growth:
Slow
More
people have been added
to food stamps than have
found jobs. One
economist mentioned that
the big job creation
engine has always been
start-ups, which are
missing from the mix
this time. However, jobs
keep being created, even
if they are not keeping
up with population
growth. The headline
unemployment number has
stayed stable or dropped
due to people dropping
out of the labor force.
Europe:
Worried
They
expressed worry over
Europe for a few
reasons. They expected
growth for the big four
(France, Germany, Italy,
and the United Kingdom)
to turn negative and a
possible currency war
between Europe and some
Asian countries. Those
could impact exports for
the United States.
However,
if Europe turns things
around, it would reduce
the appeal of the United
States to foreign
investors, which could
impact interest rates
and the value of the
dollar for a start.
Energy:
Optimistic, but...
Everyone
has heard about the
explosion of domestic
oil and gas production,
despite the federal
government's best
efforts, on private and
state land around the
country. North Dakota is
even starting
construction on the
first refinery built in
the United States since
1976.
However,
even if the United
States (or North
America) reaches "energy
independence" that only
means producing enough
to match domestic use,
not freedom from world
markets - oil is a
commodity and will flow
to the highest price.
Refinery capacity in the
country is limited, oil
is valued in dollars
(which could face
devaluation), and the
world economy is only
limping along at the
moment - leaving the
door open for future
price increases for
refined products.
The lead economist closed the conference with a reminder for
everyone to, "Just
Breathe."
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March 26, 2013
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Economic Outlook - 2013 (Part 1)
The thoughts of Top
Economists...
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I was privileged to attend an economic forecasting conference
this past month. The
four speakers - three
top economists (one
corporate, one "Wall
Street" media, and one
academic) and a leading
real estate statistician
- had a huge amount of
information to share.
Here are some
highlights:
Gas Prices:
UP! and down.
Although
the economists
acknowledged the impact
of gas prices on
spending, they did not
spend much time on the
subject. It has been
noted that gas prices do
not usually affect
people's spending habits
if they do not break
records. Recently,
prices had a seasonal
peak below their 2008
highs and have fallen in
recent weeks (see my
2/27 e-mail for some
background on what was
reported as driving the
seasonal spike).
GDP Growth (Q4-2012):
0%
The
negative Q4-2012,
Year-over-Year,
GDP report was a little
scary for some. However,
the economists expected
it to be revised to a
slight positive and
considered it to be
effectively 0%. GDP was,
in fact, later revised
upward to 0.1% for the
quarter.
GDP Growth (2013):
2% +/-?
2013's
growth is expected to
move along at about the
same rate as 2012. None
argued that growth would
not be mediocre, just
how mediocre - the range
was roughly from 1.2% to
a little over 2.0%.
There was no fear of
recession, as long as
there are not any major
hiccups. Although, one
economist expressed
concern over how
continued sub-par growth
could cause trouble.
They
were looking forward to
2014 as the "break-out"
year, though noting that
"next year" has been a
constant refrain from
economists during this
recession/recovery (in
the past, there had been
expectations of 4%
growth rates in 2012 and
2013). Also, the
optimistic "break-out"
rate would probably be
growth in the upper-2%
range versus the 3% and
4% growth rates we saw
before the recession.
As this
is going a little long
for a "brief" e-mail
update, I will continue
with their thoughts on
employment, the Fed, and
more in Part 2.
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February 27, 2013
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Gas
Prices
What's pushing them up?
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AAA
notes that average gas
prices are up 47 cents
in the last month to
$3.78 per gallon, but
the "good news" is that
they are only slightly
higher than the same
time a year ago and are
still below their 2008
highs.
What has
been driving the
increase? Some of the
factors involved in the
spike include increased
Chinese consumption
(despite slowing
growth), a slight drop
in production from the
OPEC cartel, speculation
by traders on increased
gasoline demand as the
economy continues to
slowly improve, and
continued Mideast
problems (though this is
much less of a concern
that in past years).
However,
the biggest impact on
inventory and prices has
been from the scheduled
maintenance shutdowns of
refineries during
January and February,
usually a period of low
demand for gasoline,
coinciding with problems
caused by Superstorm
Sandy at oil terminals
and refineries.
This
could be exacerbated if
the shutdowns bump
against the
government-mandated
switch from winter to
summer gasoline blends,
though most market
watchers believe the
worst has been priced
into the gallon and that
increases should slow.
They
expect that the average
price will peak in the
spring at a level below
the peaks in 2011
($3.98) or 2012 ($3.94)
- though that still
leaves room for growth.
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News
Home-Based Businesses Need
Business Insurance
Federal
Reserve's Q4-2010 Small Business
Survey
2010 Tax Planning for Corporate
and Non-Corporate Businesses
2010 New Tax Law Letter
(Summary of Individual and
Business)
Federal Reserve's Summary of
July Survey of Small Business
Financing and Economic Outlook
(Q3-2010)
[MS Powerpoint]
Federal Reserve's Summary of
July Survey of Small Business
Financing and Economic Outlook
(Q3-2010)
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