Monthly Archive for: ‘September, 2012’

  • APJ Morning Links 8.19.12

    According to the Marietta Daily Journal, John Wieland has been approved to build an upscale community in Vinings. discusses the differences that make a place authentic vs. fake. says that a retail project is in the work for area south of Glenwood Park.

    Mipimworld names Steak N Shake as the Retailer of the Week.

    The Cre Outsider talks about CRE innovations and what they mean to the market.

  • APJ on Sustainability – 9.18.12

    “So, what would you say you do here?” – Bob from “Office Space.”

    If you’re like me, you look around our burgeoning city and notice that we don’t really have a good answer to that question.  Should we be a smart city?  Pivoting to create a Smart City by Fast Company – – Or, maybe we should become a Blue Zone – Or, is status quo okay with everyone? Or, have I not been clued in to Atlanta’s driving purpose.

    The debate the emerged from the July 31st transportation referendum was rather informative.  It led me to two conclusions.  One, we need some major changes in this region.  And two, we can’t agree on all of them and certainly not all at once.  I promote that Atlanta needs to pivot and should start acting like a Smart City.  From another Fast.Co – – let’s do more small projects that have a chance for scalability, but won’t drown the city if they fail.

    Tell us about some project’s you want to see happen and maybe we’ll go get them done.

  • Book Review: Blink by Malcolm Gladwell

    Blink by Malcolm Gladwell

     Blink: The Power of Thinking Without Thinking

    Image courtesy

    What goes through your mind when you form your first impression of something? What types of decisions do you make in the blink of an eye?

    Those are the main two questions Gladwell addresses in Blink. He wants to know how we form our first impressions and what happens inside our minds in the milliseconds that we first recognize something.

    In Blink, Gladwell explores and explains the science of “rapid cognition” or “thin slicing”, as he calls it. He wants to know why we make our knee-jerk reactions to certain circumstances and if there is anything we can do to control or interpret those reactions more effectively.

    Gladwell’s best example, in my opinion, is the Getty Kouros. Some years back, the Getty Museum in CA was presented with an “authentic” Greek sculpture said to date back thousands of years. They spent months analyzing it, testing it, and scrutinizing every inch. After all that analysis, they decided it was genuine and paid $10 million for it.

    But as they started to show it to Greek sculpture experts around the world, they started to realize that they may have made a mistake. These experts would come into the Getty, glance at the Kouros, and feel like something was amiss. The couldn’t exactly verbalize what wasn’t quite right, they just knew from years of experience that something was off with this particular piece.

    Gladwell uses this dilemma for the Getty as an example where an expert’s first impression was more useful that a year of careful studying of the object’s chemistry and provenance.

    As usual, Gladwell is not afraid of controversial topics. He uses a police shooting in Brooklyn, where 4 white policemen shot an unarmed black man, to illustrate the negative power of thin slicing (or as he calls it “temporary autism”). He illustrates how, in the span of about 8 seconds, 4 police officers used misguided first impressions to deem the young man a threat and ended up killing him over the misunderstanding.

    My favorite example involves Atlanta-based Coca Cola. Gladwell delves into the New Coke fiasco of the early ’80s where Coke had been losing blind taste tests to Pepsi for a few years and had seen their dominant market share begin to slip. Concerned with the perceived weakening of the company, Coke (led at the time by Goizueta) created the sweeter New Coke to combat the surging popularity of Pepsi.

    People hated it. There was public outcry to bring back the old Coke and eventually Coke did just that.

    The problem that Coke ran into, as Gladwell opines, is that they were over-weighting first impressions. These taste tests were simple sip tests where the participants would just get a small sip of an unmarked glass of cola. Then they would write which of the two colas they preferred.

    The problem with that is that Pepsi is much sweeter than Coke. So at the beginning of a drink Pepsi would probably win a taste test. However, over the course of an entire can or bottle (how people ACTUALLY drink colas), the sweetness of Pepsi would dissipate and most people would actually prefer Coke.

    Plus Coke had the added benefit of being the original cola, having years of great branding, and fitting in as part of Americana. Coke had this history where its drinkers remembered holding that cold glass bottle on hot summer days as children. Coke had (and still has) nostalgia on its side. You can’t taste nostalgia in a sip test.

    So Gladwell uses the New Coke anecdote as a parable of the dangers of knee-jerk reactions and the need to understand the nature of thin slicing.

    He also cautions on the validity of our first impressions. He argues that you need the skill to recognize your first impression, the vocabulary to name it, and tool set to apply it. For instance, if professional food and drink critics had taken the blind Coke/Pepsi taste test they would have been able to identify the subtle differences in carbonation, vanilla levels, and the hint of oak flavor underlying the first taste of Coke. They wouldn’t have been overly impressed with the sweet punch of Pepsi on the first sip and there may have been no New Coke.

    All in all, I would say that Gladwell, as usual, spins a compelling web of stories, anecdotes, and illustrations to show the strengths and weaknesses of first impressions and the psychology of our rapid cognition. I would have liked for him to delve more deeply into how to control and utilize those first impressions.

    Practically, I would be nice to be aware of when to listen and when to ignore my initial impressions. I suppose that is better left to Kahneman’s System 1 in Thinking Fast and Slow. I finished Blink and wanted to hear more about how to shape my first impressions and use them wisely. Still, Gladwell is always interesting and uses anecdotes well so that I have little doubt as to his theories or opinions.

    Would I recommend you read this book for business? Eh, maybe.

    If you read only one, go with Kahneman. But if you are fascinated by first impressions and their implications, or your career is built on influencing a tenant/client’s first impressions, sure.

    Blink in Two Sentences: Every day we make unconscious decisions and form impressions without ever knowing what or why we thought what we thought. These reactions happen in the blink of an eye and can have both great advantages and tremendous disadvantages depending on the circumstances and environment.

    Pros: Good historical examples, Easy read and interesting anecdotes

    Cons: A bit unsatisfying, Doesn’t fully explore applications

    Target Audience: Anyone interested in the psychology of first impressions and rapid cognition

    This book is best for: The casual reader looking for an introduction to first impressions and how we perceive our world in the blink of an eye

    Overall Rating: ♦♦♦ (out of 5)

    Here is the Amazon link to buy this book:


    Ratings Guide

    ♦ = Not worth your time

    ♦♦ = May be worth your time if it is specific to your industry or interests

    ♦♦♦ = A decent book and worthy addition to your library depending on your interests

    ♦♦♦♦ = A great book and an excellent addition to your library.

    ♦♦♦♦♦ = One of the all time classics. A must-read for anyone and everyone.

  • APJ on Sustainability 9.20.12

    I’ll bet you never thought of this.

    The Environmental Impact Of The Back To School – FastCo.Exist explains that all those new pens, notebooks, clothes, and computers can affect more then just your wallet. The quick summary, think of the cost impact on landfills. School supplies are necessary to education, but there may be some alternatives to buying new every time.

    Now that you’ve considered environmental impacts of school supplies, take a few moments to learn about what Sustainability reporting really is – – This is Triple Pundit’s succinct explanation about what a sustainability report actually is (and should be)

  • APJ Morning Links 9.18.12

    The Atlanta Business Chronicle reports that the Buckhead Walmart vote has been delayed.

    How long should the South Dekalb Rail be? says we won’t know till 2030.

    What is the Lifecycle of a Cool neighborhood? The Atlantic Cities website shares what a “hip” city is. attributes the changing face of CRE to the changing population. talks about how to source deals and how to build relationships to find great deals.


  • The Impending Demise of the American Analyst

    Sooner or later our deals are headed to Bangalore.

    Once upon a time, there was a young man who dreamed of a successful career in real estate.

    This bright young chap, diploma in hand, stormed the commercial property landscape at the ripe age of 22. He knew that his ivy league education and exceptional internships and extra-curricular experience would put him on the fast track to success.

    But our young hero faced a problem – paying dues. He was told to pay his dues, sit at a desk, and run numbers.

    “Be and ARGUS-jockey,” they said.

    “You have to know the numbers,” they said.

    “You have to know how to model a deal to have any success,” they said.

    Our hero was placed in front of a computer and told to model deals, stack leases, and build proformas. He didn’t leave his desk. He saw Excel more than he saw his family. He knew more about ARGUS than about how to save money. And every day, a little bit of that youthful exuberance, unbridled energy, and zeal for a career in commercial real estate died, crushed under the shear weight of computational monotony.

    He was forced to do this for 8 years, until he was thirty and everyone agreed he had now “paid his dues” and could actually have some responsibility and become the deal-maker. Unfortunately, most of his ambition and zeal had been beaten out of him one model at a time. He had been obtaining and rearranging data for so long that he forgot about creativity, innovation, pushing-the-envelope, and the joy of waking up every day to new and exciting challenges. The very skills he would need to succeed as a creative deal-maker were the ones he had no time to develop while he spent every day reading and stacking leases.

    He had gotten comfortable (and arrogant) in his ability to assess a deal and now passed the model-making to the hot-shot 22 year old new hire from Princeton, perpetuating the “pay your dues” commercial real estate career path. And another brilliant young mind is beaten into submission one lease abstract at a time . . .


    I know I’m exaggerating a little in the parable above, but, really, how far off am I? How many people enter our industry as deal-makers or with any real responsibility? If it is more than 1% I will be shocked.

    Now to be fair, I think it is TOTALLY reasonable to assert than anyone in our industry should know how to analyze a deal. If you don’t get the interplay of modelling and financing in commercial real estate, you will have a very difficult time finding success in our business. Every deal is based on numerical and economic assumptions and the most effective way to understand those assumptions is with a well-built model that you can manipulate and tweak as the market dictates. So understanding models is crucial, in my opinion.

    But here is where I break from the classic model and our sad story above. I don’t think you have to build models to understand them. And I don’t think Americans will be building models much longer.

    Here’s why –

    I didn’t build my car. I had absolutely nothing to do with my car’s construction. But . . . I know it pretty well and I know how to use it. I have taken the time to get to know it and what it can and can’t do.

    I know that is a bit of a silly example, but it rings true. Just because I didn’t physically input a rent roll into my model, doesn’t mean I don’t understand the occupancy rate, discounts, bad debt, etc. It is very easy for me to understand the output of a model without having done any of the input.

    If you sent me a completed discounted cash flow model tomorrow, I would check out the property type, address, units/sf, profit & loss, rent roll summary, and any projections. I would look at your rent/expense growth assumptions, occupancy/rollover, discount rate, hold period, cap rate, and projected returns and decide which of those I agree with. Maybe I even take 4 minutes on CoStar to see if I agree with your cap rate (if I don’t know the submarket). The point is, after minimal training, it’s not hard to figure out 1) the assumptions that went into the model and therefore 2) if I agree with the model’s output.

    So again I say that the only really tricky part of financial modeling is interpreting the output. The input is just shuffling numbers.

    And that’s the problem.

    For simplicity’s sake, let’s say that a 22-year-old analyst just out of college will be paid $50,000 per year or $25 per hour. Neat! Way to go, sport! Now sit at a desk and shuffle numbers all day, young fella!

    Or . . .

    Since it’s just number shuffling, I could pay someone in Pakistan $6 per hour to do it.

    Seriously. I’m not kidding.

    Anyone who has paid attention knows that off-shoring is spreading like wildfire in every industry in the country. Friedman’s The World is Flat, Pink’s A Whole New Mind, and Ferris’ 4-Hour Work Week all extensively profile the affects of off-shoring and the benefits it brings.  Off-shoring is real and here to stay. $6 per hour is not only a decent salary in developing countries, it will also get me an MBA-educated 30-something who specializes in analysis.

    Yeah, his English may not be great. Yeah, it may take me a while to work out some of the kinks. But, frankly, every analyst needs training and correction and I expect there to be kinks. If I am saving $19 per hour every hour, then I am totally fine with working out some kinks.

    The inherent beauty of the setup is the time difference. I can send 5 deals to my team of analysts on Bangalore at 7PM EST and having them ready and waiting for me in my inbox by 6AM the next morning. They work while I sleep.

    Let me say that another way:

    I am being productive while I sleep.

    Cool, right?

    So, you tell me. Would you rather pay an American financial analyst $25 per hour to stack leases and project cash flows during the day, or would you prefer to pay an offshore analyst $6 per hour to complete the model for you while you sleep?

    Seems pretty obvious to me.

    So, you heard it here from your buddy at the APJ. The days of the American analyst are numbered. In twenty years, we may have no more analyst positions in our industry based in the US. That doesn’t mean we stop needing to understand and interpret financial models. It just means we stop paying 4x as much for creating them.

    – Duke

  • APJ Morning Links 9.17.12

    How to use social media for better ROI.

    Buckhead doesn’t want a Wal-Mart, but Atlanta may NEED it.

    Today’s youth are becoming more and more disconnected.

    Technology affects everything, including CRE.

    CRE maps are getting more innovative and easier to use. Here are just a few to look at.

  • APJ Morning Links 9.14.12

    Transitions in CRE Leadership need planning and strategy.

    To have more walkable communities, businesses have to see the payoff.

    How does the baby boomer generation affect housing in the future?

    Buckhead may see new projects, $50,000,000 worth.

    More stats to show that the apartment sector has done well in this economy.

  • APJ Morning Links 9.13.12

    The 21st century has a style all its own, Sustainable Architecture.

    Top 10 High Yield Real Estate stocks are topped by Ellington Financial.

    Atlanta vs. Silicon Valley? Does it even compare?

    Florida commercial news looks a little different from the rest of the country.

    Should your city be bicycle friendly? Here are 9 reasons it should.


  • Anchoring and Priming in Commercial Real Estate


    He’s contemplating anchoring and priming

    After reading Thinking Fast & Slow, I was struck by two interesting concepts: anchoring and priming.

    Anchoring is the psychological concept of mentally attaching to an initial value. The most understandable example is retail discounts. Retailers will advertize the price of a good as steeply discounted from the original price in order to distract the buyer from the actual value of the product.

    For example, Bloomingdale’s will sell you a plate for $200, but will advertize it as “Originally $300”. That way, you focus on the fact that you are getting $100 and 33% off the original price rather than trying to determine whether or not the plate is actually worth $200.

    In the example, you as the consumer are anchored to the original “value” of $300 and ignore the intrinsic value of what you are buying.

    Priming is the idea that someone can affect your actions by conditioning your subconscious. Put another way, your conscious self can be motivated by your subconscious self.

    The classic experiment to demonstrate the phenomenon of priming is the word jumble experiment. In the experiment, people would be given 5 jumbled words and asked to make a four word sentence.

    An example would be: Happy, Men, Women, Make, Bingo

    Depending on your opinion, the sentence would be “Men make women happy” or Women make men happy.” The actual sentence is irrelevant. The “outlier” word is important. In this case it is “bingo” and in the experiment, all of the words were associated with old age. So they would give obvious 4-word sentences and then include words like Florida, Retire, Grey, Wrinkle, etc.

    The key part of the experiment was what the subjects would do after the word jumble. They were asked to walk down the hall to another room and those running the experiment would time that walk. They found that the walk down the hall after the word jumble was twice as slow as the walk before the jumble.

    The punchline is that the subjects’ subconscious had been primed to think about elderly people and the body then began behaving like an elderly person (walking much slower than normal).

    Kahneman gives several other examples that ring true and drive home the point, but let’s assume that I have convinced you that priming is a real phenomenon where your subconscious will cause you to do things your conscious mind might not be fully aware of and we can manipulate that subconscious.

    Big friggin’ deal, you say. What does it have to do with commercial real estate in Atlanta?

    Well, curious youngster, both have profound effects on our business and will be worth millions of dollars to you over the course of your career.

    I would argue that anchoring is one of the fundamental aspects of negotiation and pricing and priming might be one of the single most important considerations for developers, architects, and landscape architects.

    For the anchoring argument, let’s assume you are negotiating either the sale of a property or a lease of some of its space. You do your homework, figure out a realistic value range for the property and then need to advertize your price to the market. That initial advertized number is your “anchor” and you must choose it wisely. All ensuing negotiations and price discussions will be based upon a relationship to that number.

    If you advertize Midtown office space at $33 psf, then the tenant will probably want to settle at $26 or $27 psf. It doesn’t matter to them that Midtown office space is only worth $23 psf. They feel like they got a deal. Just like the Bloomingdale’s example above, they see only the discount to the original $33 psf rather than objectively analyzing the value of the space. Everyone wants to feel like they got a deal and if you wisely choose your original price anchor both parties will come out feeling like they had the better end of the deal.

    (*Note* – Of course, there is a limit to this effect. If you try to anchor at $55 psf in the example above, clients will ignore you and pass you off as ridiculous. But, done well, anchoring can serve you very well in your negotiations.)

     For priming, I would argue that developers, architects, interior designers, landscape architects, and any other “space creators” are in the business of first impressions and must understand priming. Bob Lutz of General Motors famously said that they were in the “arts and entertainment business” because he understood the value of consumer impressions. If he could position his cars as “works of art” and mobile entertainment centers, they would transcend the mundane Point-A to-Point-B machine that cars had symbolized for many of us.

    The exact same concept applies to commercial property. If you can convince tenants that this is a safe, relaxing, a beautiful place to conduct business or live (for apartments), I bet they will be interested in leasing your space. If you can convince buyers that this industrial park is well-maintained, clean, and efficient, I would be surprised if they didn’t put an offer on the table to buy the property. You can use the subtle effects of priming to make leasing and selling your buildings much smoother.

    If you can use things like beautiful landscaping, water features, clean hallways, organized parking, and other small features to “prime” your investor/client/tenant to think that this is a great property, then 95% of your job is done. Because in the end, almost all of us are selling the same thing:

    This is a great property and you want to be involved here.

    So, if that is what we are selling, then we should all be using subtle priming methods to convince others that this is first class and well done. We can dig into more of the details of this later, but suffice it to say that everything from the way you dress to the way you shake hands to the way you smile when you talk will affect the subconscious of the buyer or renter.

    So you want to “prime” people to buy what you are selling, no matter what it is. That’s why they tell telemarketers and phone sales professionals to smile when they talk on the phone. It makes them seem happy and we consumers like to buy from happy (friendly) people.


    Hopefully you can see that the subtle effects of anchoring and priming can have profound effects over the course of a career. If you can get an extra 5% pricing on your deals because you anchor well or you can close an extra 4% of deals because you prime buyers well, and then compound that over a 40 year career, look out. You can waive at me from your Maserati.

    I exaggerate a little, but please don’t miss the point. In this highly competitive business, you need to use every small psychological advantage you can over your competition.

    To bring it home, when was the last time you refused a deal you wanted where the salesman warmly smiled at you and offered you an immediate 20% discount off the asking price?

    See my point?

    – Duke

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