According to Priscella Moranga, Deputy Board Clerk, this fee holiday will be limited to the first 30 applications, and no more than two applications from any applicant will qualify for the fee reduction.

The intended purpose of the Board’s action appears to be to encourage and facilitate residential growth in this county of approximately 50,000. Applications for commercial projects will only receive a deferral for the Facilities fees; there are no Parks and Rec fees levied on commercial properties. Normally paid upon application for a building permit, they will be deferred until building completion and occupancy.

County officials said that while several other California counties had instituted fee deferral programs, Amador County is the first county in the state to eliminate fees for a specified time period.

This writer hopes that other California jurisdictions recognize the wisdom of the County of Amador’s Board of Supervisors. The fee reductions are temporary, they are limited in number and scope, and address an economy that may be in recovery. Financing both residential and commercial project should be easier with a reduced burden, and the decision may spark builders to supply needed product that could not otherwise pencil or be financed.

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If you don’t think real estate is coupled to the economy and the stock market, then please rethink that assumption!

Not only to we look to the larger chain retailers and restaurants for guidance, the market tells us much about consumer behavior and the propensity to spend.

From RealMoney.com, a subscription site, by permission of the author

The Disciplined Investor: 12 Signs That We’ve Bottomed

By Gary Dvorchak
RealMoney Contributor
4/3/2008 1:53 PM EDT
Click here for more stories by Gary Dvorchak My partner, Chris Bertelsen, recently penned a powerful rationale for why we’ve seen the worst of this bear market. He has graciously allowed me to borrow liberally from his work. Here are 12 reasons why we may have seen the lows for this year:

1. Technicals recently showed that we had a 3%-plus rally in the S&P 500, along with 90% of stocks advancing and 90% of stock volume to the upside. According to Merrill Lynch, the only other times in the last 28 years that happened were in August 1982 and October 1987. Furthermore, the number of new lows is contracting meaningfully.2. Sentiment is just “Gawd-awful.” AAII (i.e., individual investors) measured the most bears ever at 59%. The put/call ratio touched an all-time high, and “da bears” have been loading the boat with puts. All this is truly tipping the nitro can for a significant rally. This past Sunday, CNBC changed its schedule to cover the 1,000-point drop in the Hang Seng Index and the collapse of the U.S. market futures, working everyone up to … an up day on Monday. After an exhausting nine months, there is too much anticipation of bad news.3. Bear Stearns (BSC - commentary - Cramer’s Take) is our “inflection point” crisis, similar to Orange County in 1994 and Long Term Capital Management in 1998.
4. We are in bear market territory, being 18% to 20% off the highs (depending on the index you use). The average bear market decline is in the 20% to 30% range, so we’ve already digested most of the medicine.

5. Ford Investor Services’ dividend discount model shows equities to be as cheap as they were in the early 1980s.

6. Forward P/E multiples are low, according to Smith Barney, well below the levels of the last 15 years.

7. The Fed, Treasury, Congress and ECB are now engaged, and it is very difficult to make money fighting the Fed.

8. Interestingly, equities like inflation, and inflation is here and working its way through the economy.

9. Dividend payouts are growing at almost twice the pace of the 1990s. Dividends matter! They account for about 45% of long-term equity returns. Buybacks have not faltered during this market swoon either.

10. Although the financials are fighting a debt problem, corporate America’s debt levels are the lowest since the 1960s. Corporate balance sheets are strong, and most companies can readily survive a mild recession.

11. The No. 1 reason for long-term bullishness is the “capitalism train.” With 3 billion new consumers poised to participate in the global economy, an awesome force for growth lurks right beyond our shores. The market will discount near-term financial system issues, but it will also soon discount a return to robust global growth over time.

12. The S&P 500 has twice tested and bounced off the 1275 January lows. We may test it a third time, but the fact that it is holding amid the firestorm occurring in the credit markets means that one must ask, what worse than what we’ve already seen can happen to drive the S&P lower?

Now, I must make one caveat: Being at a bottom does not necessarily mean that a rally is imminent! In fact, I believe we could tread water for quite some time as problems in the real economy are fixed, so being “past the bottom” is not necessarily a reason to pour into stocks. Better to pick your points, look at individual names with exceptional situations — such as Research In Motion (RIMM - commentary - Cramer’s Take) — and scale in over time.

Gary T. Dvorchak, CFA, is a managing partner at Aviance Capital Management, a Sarasota, Fla.-based institutional investment manager. Gary is the portfolio manager of the Landmark Capital Disciplined Growth Fund, ticker LCDGX. The portfolio is posted on Stockpickr.com under Aviance Disciplined Growth in the Professional Portfolios section. Gary’s column, The Disciplined Investor, appears weekly on RealMoney

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• While vacancy is still up 1.1% from 2007 at 7.2%, it began a trend downward in the first quarter.
• The only areas in where the vacancy exceeds 7.2% are Carmichael, Greenhaven, Rancho Cordova, Natomas(North and South), and Roseville/Rocklin. The average vacancy is weighted by the leasable square footage in each submarket.
• Notable improvements are in Elk Grove (4.3%) , Lincoln (6.1%) and Folsom (6.3%)
• Net Absorption is up from 2007, but trending down for the first quarter which saw 275,148 square feet leased.
• Construction is trending up from 2007 and up for the first quarter. Most of these 3.374M SF under development are large user deals, the new Elk Grove Mall, or projects to be delivered within 12-18 months. 242,000 SF was added to the GLA this past quarter.

” Although the retail market has slowed over the past twelve months…the Sacramento Region is poised to weather the storm. Torto Wheaton predicts job growth at 1.7% over the next two years, and an unemployment rate of 6.2%, against the California average of 6.1%. “

The article went on to say that the largest unemployment gains will be made in the government sector and in private educational and health services.

LocalCenters experienced our best leasing quarter since the 1st quarter of 2007. The prospective tenant quality is improving, and while rents have certainly softened for now, they appear to be firming up in the areas where vacancy is dropping.

More importantly, our tenant sales are improving overall. Our restaurants are doing OK to great, and all vacant restaurant space has been absorbed. Rents ultimately reflect the tenants’ ability to pay them, and the firming up is consistent with strengthening sales.

While nearly all tenants had a rough time in Q4 2007, especially during October, this is the time when those that bite the bullet and spend the money for advertising and offer value deals pull away from those who do not, and those tenants have a much higher chance of an ultimate failure rate.

Nationally the trend appears to be consistent with our local market. The quality retailers are reporting even to slightly higher same store sales, while the laggards are starting to fold. When this “thinning of the flock”has occurred in the past, it often serves as an indicator that we’re near a bottom and capitulation. From Associated Press:
“I think that the desire to sell is coming off,” said Thomas J. Lee, equities analyst at JPMorgan. The fact that the market has not been shaken by recent disappointing economic data “tells me that the recession is largely discounted.”
In addition to the congressional testimony, investors got a bit of relief from the Institute for Supply Management. The ISM said Thursday the services sector contracted only slightly in March — a stronger performance than in February, and a better reading than many economists predicted.

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Michelle, there are a few ways to assemble some of the contact you’re seeking.

Strip Mall Owners: TOUGH, as there are so many of them in any given area. The easiest way is to designate a geographic area and ask a friendly title company rep to give you a printout of the parcel ownership. If you have a larger area, you should probably be thinking about a data provider subscription, like CoStar.

If you wish to establish yourself as a retail expert, a membership in the International Council of Shopping Centers is always a good investment for both education and contacts. The downside is that many of the members own and lease larger centers and strip malls aren’t usually the main focus. Why do you think I started localcenters.com??

Mini-Storage Contacts:

Hands down, get in touch with the Self Storage Association. They are a very active and organized group, and most mini storage owners who have any kind of property belong to them. They have conventions and regional meet ups too. If you want to get to the smaller owners, call ‘em! Often the number on the sign will get you there. Hope this helps a little, Michelle.

Note to you entrepreneurs! Directories for Strip Malls and Mini Storage are ALWAYS Being Requested!

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Jennifer, the ability of the landlord to do that is totally dependent upon the lease terms. For example, if you have a 5 year lease with a 5 year option to renew and you exercise your option, you have a lease. Not only do you have a lease, but normally any buyers are “stuck with you.” Here’s the language from my lease:

35-6. Successor and Assigns. The covenants and conditions herein contained, subject to the provisions as to assignment, apply to and bind the heirs, successors, executors, administrators and assigns of the parties hereto.

Now, if I am a landlord and Wal-Mart want to make a favorable deal with me, here’s what I might do to get you to leave:

• Attempt to default you on any permissable grounds, like being one day late on the rent. Depending upon your jurisdiction, I may or may not be successful. In California, the judge would look at my tactics as not acting in good faith. In Texas, he might very well find for the landlord.

• Offer a buyout
• Offer a relocation to another center for the same or better terms

You asked about a 25 year lease. Are you thinking of becoming a “spoiler” Jennifer? That would put you in a very strong position. For a strip mall, however, it’s unlikey that you’ll get a 25 year lease, more likely 5 to 10 years with some options to renew on conditions, for either term.

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What is the average cost to maintain a strip mall (each year over a five year period)? What is the typical agreement between the leasee and the leasor ( in terms of: who is responsible for what when something breaks down)? What is the average rent paid for a space in an average sized strip mall?

This is a multi-part question and harder to answer than you may think. Let’s break them down:

Average Rent: The averaged stabilized rent (after free rent and when the tenants have been operating for two eyars or so) for a strip mall depends on several factors, among which are:

• Geographic location and market
  • Guaran-friggen-tee-ya that California is higher than Oklahoma!
• Location within the market
  • Translates into sales potential
• Market conditions
  • We’ve been hit hard here in Northern California, so our rents are generally stable to down from 2007. In Seattle, they’re up

  What matters more than anything else, Homer, is the sales potential. No matter where the retailer is located in the country, the margins are about the same. A sit down restaurant, for example, needs to have a rent factor about 12% of gross sales. So, depending on the average sales in the area, the stabilized rent could be between $18 and $48, with $24 a good medium market figure (but higher in California generally).

Landlord and Tenant Responsibility: This is totally dependent on the lease document. Here are some variants:

• Absolute Net Lease: Tenant does everything including grounds maintenance. These are typically free standing, single tenant buildings.

• Triple Net Lease, Shopping Center: This is the norm for most strip malls 30 years old or newer. The tenant pays his proportionate share of real estate taxes, common area insurance, and maintenance. The landlord takes care of the maintenance and bills the tenant back in the triple net or CAM (Common Area Maintenance) charges.

• Modified Gross Lease: The CAM above is included in the rent, and the tenant pays the increases each year.

Average Annual Maintenance Costs: Impossible to answer without knowing the age, condition, and climate. If there’s snow removal or security, that really adds some cost. In our new strip malls we might spend $6,000 a year for the first five years, and that includes landscaping and general maintenance. In a 20 year old building we might have to start replacing air conditioning at $1,500 per ton, or $6,000 per unit, average. Add painting, roofing, parking lot maintenance and the costs which go back to the CAM can easily be four times that of a new center.

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Pick Up Stix, a San Clemente,CA based chain of fast casual Asian restaurants, has shuttered 26 stores in Northern California, Nevada, and Arizona as of January 15, 2008. Apparently there was no notice given to the local employees, according to the buzz on Elk Grove, CA based Elk Grove Online (requires registration).

“We have made the difficult business decision to close 26 Pick Up Stix restaurants effective January 15, 2008. We took a hard look at our existing business in light of the current economic situation and at this time will focus on our core markets,” said Amy Freshwater, vice president of communication and public relations for Carlson Restaurants Worldwide, parent of Pick Up Stix restaurants, in response to The Strip Mall Insider’s inquiry as to the reason for the closures.

Carlson Restaurants Worldwide, a subsidiary the Carlson Companies, owns the Pick Up Stix and TGI Fridays brands. Carlson Worldwide owns and controls brands in the restaurant, travel and lodging verticals.

Pick Up Stix was founded in 1989 by Asian-American entrepreneur Charles Zhang. In July 2001, the company was acquired by Carlson Restaurants Worldwide.

Why Pick Up Stix closed 26 stores in a rapidly growing region of the country is still an unanswered question. This writer believes that the attempt to consolidate a fragmented submarket of small Asian restaurants that also dominate this region may have failed for this chain. What do you think?

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Strip Malls Soon To Get A New Player with Marketside

Today Wal-Mart announced plans to roll out “Marketside,” a concept intended to compete head on with the UK Giant Tesco, doing business in the U.S as Fresh and Easy.

The story is still developing, and the figures in the Forbes article below are incorrect. They state that the Marketside stores will be “a tenth the size of Wal-Mart’s 200,000 SF stores, even “smaller than Fresh and Easy stores that are 10,000 SF.”

First, Fresh and Easy stores in the U.S and 14,000 square foot, not 10,000 square feet, and clearly 20,000 is larger than 10,000 so we do not have the full store, which certainly is characteristic of the cloak of secrecy typical of Wal-Mart. No geo-targeting has been released from the giant discounter.

Strip malls are entering a new paradigm with the densification of the suburbs, and Marketside provides yet another fine mini-anchor for strip mall developers. A possible downside could be Wal-Mart’s ability to be a category killer, maybe with any size.

From Forbes

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From Dennis in Keene, NH

Q: We have financing and are looking to make profit managing a 6-10 store strip mall. How can we get help in finding anchor stores for our project? thank you…

A. Dennis, if any of us had the definitive answer there would be no one to compete against us, right?

It’s a great question, and I will try to make the response somewhat specific to you and your vicinity. First, you used the word “anchor,” and we typically don’t have anchor tenants in strip malls. An anchor is a larger tenant like a grocery store, a discount box store, or a deparment store that activates the gravity model of a critical mass of on site shoppers. We don’t achieve that critical mass in strip malls, and as such we have to cater to the convenience tenants who are often essential services, not luxury or discretionary-based shopping goods.

In your case, your town is about 25,000 which is a small market but viable. In addition, I see arterials meeting in Keene from every direction, so your trade area is expanded, and that’s always a good thing!

Tenants come to you usually in one of five ways:

• Sign call
• Broker
• Referral
• Walk and Talk
• Direct Marketing

Signing: Brokers may tell you of their intense marketing plans, and if they do it that’s great. The fact remains that your prospects are usually not obvious, and about 65% will initially inquire from a leasing sign on site. That sign should look good, and the biggest line on it should be the contact phone number. And I mean BIG.

Broker/Agent: It’s unlikely there are any large firms in the vicinity like CBRE or Grubb and Ellis, so if you go with a listing leasing agent, and in your case as you’re not experienced I would, you will have to select an experienced commercial agent, not a house broker. They not only need to know WHO to talk to, but HOW to talk to them.

Referral: You seemed like a nice, talkative guy in your email, and as long as you’ve been in your particular business, I’ll bet you’ve met most people in Keene! Pick out some key local business people, get a good looking plan and duplicate it, and show it to them. Ask them if they have any ideas of someone who could benefit from that location. They will talk it up, I promise. Be sure to “remember them” with a nice bottle of wine or even a check if they have an idea that works out for you.

Walk and Talk: The difference between Referral and Walk and Talk is that you pick the prospects and go talk to them. If you’re not a salesman this can be intimidating, but once you make your third call you’ll get in the rhythm and will probably enjoy it.

One of the most exciting things about strip mall leasing is that everyone loves to talk about shopping and retailers. Even after 30 years in the business and owning a number of strip malls, I still “cold call” because there is an exponential progression of local knowledge to be gained by doing so. Don’t assume that the person you call on must say yes; but expect many to be your referrers to real prospects!

Direct Marketing: It used to be mailing to a prospect list, but we use email now. It’s effective if you think out the right prospect categories, and you can find most business emails on the internet. While we’re very careful about spamming the general public, most businesses are pleased that you thought of them, and they like to know about new projects too.

Hope this helps, Dennis. We will be publishing several articles in much more detail about each of these methods soon. Thanks for writing, and good luck being a developer!

John

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As such, Fair Tax advocates such as Ron Paul would not do our industry many favors over the mid term. Over 50% of all income producing properties purchased in the US are wrapped in an IRS 1031 Deferred Exchange agreement, wherein the purchaser elects to defer the payment of capital gain income taxes until the property, or its successor, is sold.

One may argue that the buyers of such property would have more after-tax capital in the event of a substitution of a national consumption tax for the current income tax, and thus more liquidity to purchase income producing properties. There is no argument there, however if there were not tax advantages for many income producing properties, and especially smaller properties like our strip malls, one could arguably postulate that those investors would demand a higher return rate (Cap Rate) than the 7% or so we are seeing today.

The worst possible scenario would be raising taxes and eliminating capital gains. Currently a 1031 exchange is predicated on a holding period equal to the capital gain qualification period. With higher taxes and virtually no tax incentives, cap rates could easily become double digit once again as we experienced in the late 70s and early 80s. With a chasm-like positive leverage gap created between the cap rate and the current mortgage loan constants, one of the two would have to normalize over time. I’d bet on the mortgage bankers, and you really don’t want to be on the wrong side of that bet.

The most significant Congressional act of my career was Tax Reform Act 1986. Prior to that reform, there were so many loopholes and incentives for purchasing investor real estate that there were actually promoters guaranteeing negative cash flow to unsophisticated investors. TRA 1986 jettisoned most of these tax advantages and shortly thereafter real estate was once again valued on…..cash flow! And that is as it should be.

Ron Paul is not a contender, but we’re still on the sidelines as buyers until we get a little clarity of what the new administration and the Congress might bring us in 2009.

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