If you know anything about me, you know that I have strong opinions and that I enjoy sharing them. You know that I also consider myself a perpetual student and am always learning, due to the fact that I often surround myself with people who are more intelligent than I am.
That said, I launch this blog for real estate professionals with the goal of not only sharing my thoughts with you — my friends, colleagues, clients and partners — but also with the goal of hearing from, and learning from, you. I encourage you to join the conversation by letting me know what you think via the comments section.
To get this all started, I thought I would share with you an email I sent to my Bozzuto colleagues last week.
At the risk of imposing on your time, I thought I should write to you to give you my perspective, for whatever that’s worth, on what is going on in America and specifically on Wall Street right now. More importantly, what I really want to do is reassure you that despite the nuttiness of our representatives in the nation’s capital, and the seeming panic of investors in our capital markets, there is nothing I have seen yet that makes me think there is any reason to change our business outlook for The Bozzuto Group.
The interesting thing to me about what we are seeing in the capital markets is that there is very little that occurred to justify this sudden sell-off in the stock market. Yes S&P downgraded the US’ credit rating, but they did that not because we can’t pay our bills but because our political system is dysfunctional. And that’s news? Anyone who has watched Washington at all closely or for that matter read any history knows that our system is dysfunctional. That’s what ultimately makes it work over the long term. Political systems that are truly efficient are called dictatorships.
In any event, the principal reason the markets have tanked is not because of Standard & Poor’s but because of the European debt crisis and more importantly, fear that we will have a recurrence of the recession, or a “double-dip.” Let me deal here with the latter of these and how I think it will affect us.
I have no more idea of whether we will have another recession soon than does anyone else. What I know is that we still have a very high unemployment rate and at best a slow recovery. What I also know is that the homebuilding business is still struggling to recover from the depths of 2008. I also know that Washington and the northeast in general have been far less negatively affected by the recession and slow recovery than the rest of the country but things still aren’t absolutely wonderful here either. This is not much different than it was in January when we built this year’s business plan.
The demand for apartments continues to grow. Occupancy across our portfolio averages more than 95%. We will be losing some apartments that we manage yes, but we will be gaining a number as well. Right now, we manage more than 32,000 units. We have a pipeline of development deals that is bigger and better in quality than at any time in our history. We have equity partners for almost all of them and construction financing for a number of them, and we should be starting at least four projects totaling something in excess of 1,500 units this fall. In addition, our construction company has a number of third party projects they expect to start over the next twelve months. On top of all this, our homebuilding company has sold five houses in the past two weeks, all while the Washington and the Wall Street were coming unglued.
So, my counsel to you? It is not: “smile, be happy,” and ignore what’s going on. It is: don’t panic, just because everyone else is. The world is not ending. Over the long run, no one ever got rich selling America or the American people short. We will be fine. We need to stick together, stay focused, remember where we are going with this company long term, and we will be fine.
Thank you for joining me by reading and following this blog. And like I said before, let’s make it a conversation.