Don Tishman's Real Estate Development and Investing Solutions

For over 50 years, Progressive Architecture choose from the submitted past year’s designs to award the best examples of progressive architecture. Although Progressive Architecture ceased publication several years ago, the Progressive Architecture awards have continued.  The 58th Progressive Architecture awards were published in Architecture earlier this year.  Architecture-the magazine of the American Institute of Architects is a  terrific publication. I heartily urge  you to consider  taking  advantage of their free daily and weekly reports.

Here is what Architecture said about this year’s awards:  “Sometimes an awards jury develops an overriding thesis and uses it to analyze the projects before it. In recent years, the Progressive Architecture Awards have taken on issues such as public housing, community planning, and disaster relief. When this year’s jury—Steve Dumez, FAIA, Lisa Iwamoto, William Rawn, FAIA, Dan Rockhill, and Zoë Ryan—convened, they decided to return to the program’s original purpose: identifying projects that push the envelope of progressive design, regardless of the building type.That doesn’t mean that the jurors didn’t bring their own causes to the table. Iwamoto was interested in “systems—some within the buildings, some material.” Rockhill and Ryan looked for sustainability, but not just in any old way: “Sustainability should just be a part of the project,” Ryan explained. “It shouldn’t be an add-on.” And Rawn went on the hunt for “big ideas, a driving force, an intellectual construct.”

Given a pool of nearly 300 entries, the jury selected only two awards and four citations.

“The winners may be few in number, but they are diverse in program, location, and design, ranging from an inflatable temporary museum addition in Washington, D.C., to a terraced office complex in China; a rigorously modern border station in Maine to a contextual wilderness center in Africa; a bamboo-clad information center in Taiwan to a structurally daring architecture school renovation in Atlanta. The early P/A Awards jurors—Eero Saarinen and Victor Gruen among them—would agree: Regardless of one’s interest in systems, sustainability, or big ideas, all of the winning designs are progressive in their own ways.”

Awards
• Hirshhorn Museum and Sculpture Garden Seasonal Expansion, Diller Scofidio + Renfro, New York

• U.S. Land Port of Entry, Van Buren, Maine, Julie Snow Architects Minneapolis

Citations
• Hinman Research Building Restoration and Adaptive Use, Lord, Aeck & Sargent in collaboration with Office dA Boston

• Ordos 20+10 Office Complex, Preston Scott Cohen* Cambridge,Mass.

*Winner last year also

• Taichung InfoBox, Stan Allen Architect Brooklyn,N.Y.

• Karoo Wilderness Center, Field Architecture Fields Group, Palo Alto, Ca.

GO TO THE WEB SITE OF ARCHITECTURE FOR MORE DETAILS

What did you think of these award winning designs?

Today I read this on the Bloomberg web site “Record earnings fueled by the highest profit margins since 1993 are giving executives more leeway than ever to boost dividends as the bull market enters its third year.  Margins will climb to 8.9 percent in 2011, the highest level in at least 18 years, according to data compiled by Bloomberg on non-financial companies in the Standard & Poor’s 500 Index through March 11. Greater profitability combined with dividend cuts during the credit crisis have pushed earnings to 6.53 percent of the gauge’s price, or 3.5 times more than its payout rate, close to the record 3.6 multiple in January.”

Bloomberg further stated: “A total of 95 companies led by Aetna Inc. and Carnival Corp. haveGreat raised dividends as the fastest economic expansion in six years and five straight quarters of earnings growth increased confidence among chief executive officers. Of the 380 that pay dividends, 378 are forecast to maintain or increase them, according to data compiled by Bloomberg using options prices, profits, management statements and peer comparisons.“The economy seems to be doing well and earnings are on the recovery path, which companies wanted to be sure about before they raised their dividends,” said John Carey, a Boston- based money manager at Pioneer Investments, which oversees about $250 billion. “I feel relatively confident that of the dividends out there are secure, and we’ll see some fairly broad based increases.”

Great news! What a pleasant surprise!~~Congratulations to the wonderful mangers who helped create these monstrous earnings.  This can mean more jobs, more consumer spending,  and a vibrant real estate market.

This corporations are paying $1 dollar to their stockholders for every $3.5 dollars of profit they earn or their investors are being paid 28% of profits.  Incidentally, a real estate developer or syndicator could never get away with only paying their investors only 28% of earnings. The general rule for real estate investors is that the investor receives a minimum of 50% to 70% of earnings.

If some of these record breaking profits could be reinvested in the company, it could mean a better product at a lower price PLUS many new jobs!! A huge increase in the Gross National Product. This is what this nation needs to move out of the doldrums of the Great Recession. The benefits of these enormous profits needs to be enjoyed on Main Street as well as Wall Street.

Record Profits

The following are excerpts from Bloomberg

Analysts say S&P 500 profits will rise 16 percent this year and surpass $100 a share for the first time in 2012, helping persuade executives at companies from CBS Corp. to Pioneer Natural Resources Co. and Wal-Mart Stores Inc. to boost payouts. U.S. companies increased stock buybacks in 2010, making it the fifth-biggest year for share repurchases since at least 1985, according to Birinyi Associates Inc. With $76 billion announced, February was the best month for buybacks since December 2007.

CEOs are spending more on shareholders after stockpiling cash since 2008 when the financial crisis eliminated profits. They bought back $325.8 billion of stock in 2010, more than double 2009’s repurchases, Birinyi data show. About $191.1 billion of takeovers in the U.S. have been announced so far this year, on track with last year’s $198.2 billion as of March 11, according to Bloomberg data.

Companies that return the most money to shareholders have beaten the index by 11 percentage points since the bull market began, data compiled by Bloomberg show. Archer Daniels Midland Co., the world’s largest grain processor, has the biggest weighting in the S&P 500 Dividend Aristocrats index and has jumped 20 percent this year. The Decatur, Illinois-based company pays a dividend yield of 1.77 percent.

Dividends relative to share price exceed 6 percent for Dallas-based AT&T Inc., the second-largest U.S. wireless carrier, and Greensboro, North Carolina-based Lorillard Inc., maker of Newport cigarettes. Companies that pay nothing to shareholders include Seattle-based Amazon.com Inc., the largest online retailer, and Apple Inc., which produces iPhones and iPads from Cupertino, California.

The economic expansion that began in mid-2009 spurred the biggest jump in profits since 1988 last year, pushing cash to an all-time-high of $937 billion for companies in the benchmark U.S. equity index, S&P data show. This year, there have been 95 increases and no decreases to payouts in the S&P 500.

Corporations with dividends have climbed 3.8 percent on average this year, compared with a 2 percent rally for those without. That’s helping mutual funds that focus on companies trading at the cheapest levels relative to earnings and that pay the highest dividends beat their peers this year. So-called value managers overseeing at least $1 billion have returned 3 percent on average in 2011, compared with 2.5 percent for growth funds, data compiled by Bloomberg show.

“The market is continuing to be ready for rewarding quality companies, and in general those companies tend to pay dividends,” said Jay Kaplan, the co-manager of the Royce Value Fund that beat 96 percent of its peers in the past five years. “In this leg of the market, you have a good shot of quality companies doing well.”

Higher oil prices may cut profits so much that dividend increases won’t be enough to entice investors, said Walter Todd, who helps oversee about $900 million at Greenwood Capital Associates in Greenwood, South Carolina.

“If margins are rolling over, that could precipitate weaker earnings and then stock prices following that down,” he said. “The dividend’s going to help, but it may not offset the decline in price.”

Crude futures trading in New York jumped 28 percent to $106.95 a barrel from their low on Feb. 15 to the high on March 7 as political unrest in Egypt and Libya threatened to curtail supplies. A surge to $140 may spur a recession,Nouriel Roubini, the New York University professor and chairman of Roubini Global Economics LLC who predicted the financial crisis, said in Dubai on March 8.

Oil will drop to $99 a barrel in New York next quarter, according to New York-based Goldman Sachs Group Inc. U.S. gross domestic product will expand 3.1 percent in 2011, matching the level in 2005, according to the median estimate in a Bloomberg survey of 89 economists.

While the bull market just passed its second anniversary, dividends haven’t increased during a calendar year since the financial crisis began in 2007. Seventy-eight companies slashed them by a record $48 billion in 2009 to maintain cash as sales slumped, S&P data show. At the same time, corporate expense cuts helped prop up earnings, driving last year’s 36 percent growth and widening the ratio between yields on profits and dividends.

Exceeding Payouts

Earnings are exceeding payouts in the S&P 500 by a rate that preceded higher dividends in the past. On average, executives boosted payouts 16 percent during periods when the ratio topped 3, according to Bloomberg data going back to 1998.

CBS, owner of the most-watched U.S. television network, trades with an earnings yield of 6.9 times its dividend rate, a ratio that reached 7.1 on March 3, the highest since at least 2006, Bloomberg data show. The New York-based company outperformed the S&P 500 by surging 25 percent this year through last week, compared with the index’s 3.7 percent climb.

CBS posted an almost fivefold increase in fourth-quarter profit. The company cut the quarterly dividend in 2009 to 5 cents from 27 cents, and while earnings have surpassed estimates for six straight quarters, CBS hasn’t boosted the payout. Data compiled by Bloomberg shows it may increase the dividend to 8 cents a share when it declares on May 26.

‘Very Good’

“Our cash position is very good,” Chief Executive Officer Leslie Moonves said during a Feb. 24 conference with analysts and investors. A dividend increase is “something we are discussing very seriously, but no decision’s been made yet.” Dana McClintock, a CBS spokesman, declined to comment further.

At Pioneer Natural, profit will more than double to $3.07 a share in 2011, according to the average analyst estimate in a Bloomberg survey. The earnings yield is higher than the dividend payout after the relationship flipped at the end of 2009. The Irving, Texas-based oil and gas producer will double its payout on Aug. 29, according to Bloomberg projections. Its shares have risen 9.5 percent in 2011.

Susan Spratlen, a Pioneer spokeswoman, didn’t respond to a telephone message or e-mail seeking comment.

“We’ve seen that dividends are a huge way for you to lower risk and lower volatility in the assets that you’re buying,” said Dan Neiman, who helps manage the Neiman Large Cap Value Fund, which beat 97 percent of peers in the past five years. “The earnings growth we’re seeing is going to translate down the road to more dividend payout.”

Wal-Mart, the world’s largest retailer, raised its dividend by 21 percent to 36.5 cents on March 3. The Bentonville, Arkansas-based company has increased its payout every year since 1974, according to data compiled by Bloomberg.

Wal-Mart doesn’t have any plans to increase its dividend further than the March 3 announcement, according to Greg Rossiter, a company spokesman.

“The big multinational, big dividend payers continue to be where the value is,”Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York, said last week in a Bloomberg Television interview. He owns Wal-Mart shares and said he would “absolutely” buy more, “given the cash generation they do, the dividends they are going to be paying in the future, the kinds of things they’re doing for shareholders.”

To contact the reporters on this story: Whitney Kisling in New York atwkisling@bloomberg.net; Lynn Thomasson in Hong Kong atlthomasson@bloomberg.net.

This Bloomberg Report paints a far different picture of corporate profits than the dismal picture painted by these same companies lobbyists for Congress. In order for America to return to prosperity, we need to have one scenario from these public companies.

Change is a constant in real estate development. Here is a brief history of the of the changes in the size of grocery stores. It illustrates how consumer needs have influenced the size of new grocery stores.

When I was boy, there were no supermarkets.just  small neighborhood stores with parking only on the street. This was not a problem because most folks just walked to shop for groceries.  After WWII, things radically changed in the US. Home ownership became an available opportunity for American families because millions of returning veterans were eligible for GI home loans. A grateful nation offered these loans under the GI bill of rights to returning WWII veterans. The loans required a minimal down payment , long terms, and low interest rates. There was a sudden boom in suburbia.

For example, Long Island, just west of New York, before WWII, was just many potato farms. Suddenly, it had millions of new residents moving from New York City to the new housing subdivisions all over  Long Island. At first, there were only small grocery stores in these small towns with no parking lots to serve these new residents of suburbia. BUT these stores were not close enough to walk to. All over the US , innovative real estate developers  started building retail areas with at least three parking spaces for every 1,000 square feet of retail space. These were called shopping centers. They served an area within at least a 10 minute driving distance to the shopping center.  There was a huge demand for these shopping centers. In order to finance these shopping centers, the lenders demanded long term leases especially from tenants with a strong financial statement. Many of these strong tenants were  grocery chains. The size of grocery stores boomed to 10,000 and 15,000 square foot stores. As the demand for shopping increased so were the size of the stores increased.

At the time the largest grocery chain in the world was A & P. The lending institutions required a 15 year lease from tenants with strong financial statements. A&P would only sign a 12 year lease. Most lenders rejected the 12 year lease. In no time at all A & P  disappeared.

In the 1960′s I developed the first combined grocery and drug store for Krogers. As time went on the size of shopping centers increased as Department stores went from downtown stores to large shopping centers. Shopping centers had two supermarket chains. Then regional shopping centers excluded supermarkets.

These regional shopping centers had as many as five department stores from low end to luxury stores. These centers only wanted an occasional shopper who was prepared to shop for a longer time than grocery shoppers. The key to shopping centers is sales per square foot. Over and above the stated rent, these centers charge an override % of sales. So the bigger dollar volume per square foot, the more the shopping center earns. Each owner and tenant were partners by virtue of the tenant renting space in the center. As a result of the competition for department stores , the department stores were able to only either buy or lease the land for their store. They built their own store according to the rules of the shopping center which included having an entrance to the store into the mall.

The grocery supermarkets stayed in what became known as community centers.

These centers were required to have large populations nearby. Thus small communities were not eligible for large shopping centers. Along comes Sam Walton who completely changed retail rules.

Walton started building large stores in small rural towns in Arkansas. The industry ridiculed him as being a country bumpkin who did not understand the basic principles of retailing. but w Regardless of this, Sam kept building building in small towns in adjoining states. Sam Walton offered quality goods that working families in agricultural areas could afford. These large stores in small, rural towns and villages became magnets. Customers came from far and wide to Sam’s store. His stores filled a gigantic heretofore untapped market. As Sam  Walton , the country bumpkin, became the world’s retailer, the ridiculers started following his lead. This was not easy to do. These rural folks were not easily flimflammed. They had learned to expect quality merchandise at affordable prices. Walton stores became one of the largest sellers of supermarket items. Although the grocery section was just one part of these huge stores.  Walton’s stores have taken a huge market share away from the large supermarket chains with his huge stores. Sam’s store approached  200,000 square feet.

This was part of the”Big Box” era. Shopping centers of chains that discounted prices and had very ugly buildings. Wal Mart is a leader in ugly buildings.  At least 40 years ago, I  friend of mine invited me to the opening of a new store that he had built and leased to a new chain that discounted national brands. This was during the first days the store was opened. When I  entered the store , I  noticed the floors were strewn with paper, etc.  I asked him why his tenant did not clean the floors. He told me that this was purposeful and deliberate part of their  sale tactics for the store. They advertised that they operated on slim margins without any frills. All the benefits of their frugality was passed on to the customer in the the form of the  lowest possible prices. This chain lasted about ten years- not long enough to finish the term of their lease.

Sam’s heirs have noticed that when a customer wants just a few items, they do not want to spend the time required to shop in their huge  stores. i was amazed by today’s story I read on the Bloomberg website that said Wal-Mart was opening 15,000 square foot  Wal-Mart Express stores in several small towns in Arkansas. The Express store is less than 1/10th the size of a standard  Wal-Mart store. Reminds me of the Depression era size stores of my childhood EXCEPT that each of  these Express stores will have 75 parking places. This is about 5 spaces per 1,000 square feet of store space.  There are many quick shopping grocery stores such a s 7/11. These stores charge higher prices than supermarkets to provide the convenience of a quick stop and these stores also have very limited inventories. This new move by Wal-Mart has been very hush hush. Wal-Mart did not disclose to Bloomberg anything about the Express store. The details were obtained from the building inspector of this 3,800 population town in Arkansas .

Wal-Mart is not afraid to admit a mistake, When they sour on a location, they close the store right now. As a result, although Wal-Mart is the most successful retailer, they are also the largest owner of vacant retail space.

I am sure that this new store size by Wal-Mart was done after much market study and feasibility studies. We should follow this to see how this affects retail development

To determine feasibility of a super market, FIrst estimate the the RATE of return an investor would want to buy a store with a long term lease3 from a credit worthy  tenant.When I was building super markets there was a simple formula for the feasibility of a store – figure what the shell of the store will cost including land, hard cost, financing, permits, etc.The tenant pays for all the improvements within the leased space including all the equipment the store needs.

what return will the investor ask for. SAY THE TOTAL COST IS $1,000,000- the investor asks for a 8% return- or $80,000 per year, TO SEE IF THIS WORKS TAKE THE NUMBER OF HOUSE HOLDS IN THE MArket area, find the median household  income for the market area, multiply the number of households by the median income. ASSUME that the typical household  spends 20% of its income for groceries, take 20% of the total dollars for what the total $$$$$ spent on groceries in this market area. How many stores share this market? say your prospective tenant is the dominant supermarket in the area = they generally generate at 30% of this figure- so take 30% of the total grocery total. When I was building super markets, we charged an over ride of 1.5% of the gross income of the store-take 1.5% of the business total this chain would gross.does this equal the return of the investor wants after deducting for operating expenses, taxes and insurance- if not move on

now you  can match wits with Wal-Mart and think about developing super markets for tomorrow’s markets!