Commercial real estate index dips a little

Amid continued strengthening in commercial real estate markets — attributable to broader economic improvement and strong capital availability — The Real Estate Roundtable's latest quarterly "Sentiment Index" dipped slightly in the first quarter, the Roundtable announced.

The dip came as survey participants expressed concern about typical cyclical issues; an array of international, homeland security and interest rate risks; and pro-labor policies that could hurt job growth.

"On the one hand, conditions for commercial real estate are quite good — and getting better — driven by improved job growth across the economy, improved business demand, and strong capital flows, as well as appropriate levels of construction and lending in key sectors," said Roundtable President and CEOJeffrey D. DeBoer. "The enactment of Terrorism Risk Insurance Act (TRIA) legislation inWashingtonlast month was also a huge relief, averting the threat of a real estate credit crunch and resulting downstream impacts on the economy."

At the same time, DeBoer said, "Q1 survey participants expressed concern about global instability, rising terrorist and cyber threats, falling oil prices, potential future erosion of underwriting standards, and what one respondent called 'unprecedented attacks' on businesses through pending labor regulations." This includes National Labor Relations Board (NLRB) rules affecting franchise operators (including hotel owners) and the so-called "quickie elections" ruling, which leaves businesses with almost no time to counter a unionization campaign on their premises.

Potentially higher interest rates are also of concern, particularly if they rise without sufficient job growth or demand, which influence net operating income, property values, and owners' ability to service existing debt.

At 72 points, the "Current" index is up significantly from its historical lows of 58 points in Q4-2011 and 63 points in Q3-2012.  Yet, the latest score is down two points from the 4^thquarter of 2014, and is accompanied by softening in the "Future" and "Overall" indices.  The Future index, now at 64, continued its recent slide from 65 in the 4^thquarter of 2014 and 67 in Q3. There is now an 8-point spread between the Current and Future indices —nearly the widest since the survey was launched in 2009.

Importantly, "non-gateway" markets are increasingly benefiting from strong capital flows into top markets — helping to broaden the recovery and strengthen property values (which plunged by as much as 50 percent in some areas during the financial crisis and recession). Yet, some respondents also spoke of secondary and tertiary markets still "muddling along" — particularly in areas whose economies are tied closely to oil prices.

Underscoring the nuanced quality of the survey responses, some noted better balance now between supply and demand (as compared to the pre-crisis period) — along with less leverage and more "disciplined" lending.  However, others warned about the potential for "excessive leverage by yield-starved, undisciplined" investors.

Data for the Q1 survey was gathered in January byChicago-based FPL Associates on The Roundtable's behalf. For the full survey report and The Roundtable's 2015 policy agenda (Next: Real Estate's Policy Agenda for a Sustainable Economy), visit us online atwww.rer.org. 

Staying home: Cat will transform downtown Peoria with new HQ

Caterpillar Inc. is staying home and plans to build a new headquarters that will take it several decades into the future, the company announced on Friday.

More than 250 people on hand for the announcement gave Caterpillar Chairman and CEO Doug Oberhelman a standing ovation when he said the words they were waiting to hear, “Caterpillar will stay in Peoria.”

That part of the announcement wasn’t that much of a surprise as the company had intimated on more than one occasion that it planned to stay in the only city it has truly ever called home. But until Friday there was no public knowledge as to what the company’s multi-year study of its global headquarters would lead. That answer was met with as much enthusiasm as the announcement itself.

In a news conference at the Caterpillar Visitors Center that was broadcast live and attended by Illinois Gov. Bruce Rauner, federal, state and local politicians and a host of other dignitaries, the company revealed a design for a new campus that:

• Will span 31 acres and six square blocks on the city’s riverfront;
• Focus on a building that will have three towers rising from a horizontal office building, each with eight occupied floors and sustainable design features to house up to 3,200 employees;
• An energy center using Caterpillar products and solutions to support the electrical, heating and cooling needs of the campus;
• Green space, walking and biking paths, food and retail options and employee amenities that will include fitness and childcare centers;
• An historical equipment display across Washington Street from the Visitors Center.

Most important, the company said, the new headquarters will have innovative work spaces and amenities “designed to retain and attract the finest talent in the world.”

Further, it said, Friday’s announcement represents “A commitment to invest and act as a catalyst in Peoria, helping revitalize the downtown and the region as a vibrant destination. While Caterpillar is truly a worldwide company with facilities that span the globe, Peoria remains its headquarters.”

While making the announcement, Oberhelman said the company’s long-term future is in Peoria, but that the company will manage the costs carefully and that it will likely take the better part of a decade before it is completed. Because of design work yet to be done and the need for a redevelopment agreement with the City of Peoria, he said construction will not begin in 2015. No price tag for the project was offered.

“Caterpillar’s roots in the Peoria area run deep, and this year we celebrate 90 years as a company – a perfect time to share our plans of where we plan to be anchored as we continue to build, develop and power the world,” Oberhelman said. “This campus represents an investment in both our people and community, with such features as collaborative work areas, improved technology, a more energy-efficient design, green space and an expanded showcase of our historical equipment, along with food and retail shops – an inviting destination not only for employees, but also for customers, dealers and suppliers from around the world.”

He said the new headquarters is a long-term, strategic investment aimed at improving our competitiveness. This new campus will position us for decades to come, serve as an engaging, more productive environment for our current workforce and improve our ability to recruit the best and brightest employees, who are hands down our most valuable asset. We also shouldn’t underestimate the potential of this project to serve as a springboard for regional economic development and look forward to continuing our strong partnerships with our key area stakeholders.”

Gov. Rauner, whose election in November was seen by Caterpillar as a positive step toward curing the state’s fiscal problems, was effusive in his praise of the company’s responsibility to the state. He noted that Illinois remains Caterpillar’s largest concentration of employees and facilities anywhere in the world, with about 22,600 employees and two dozen facilities throughout the state.

“This is a great day in Peoria, a great day in Illinois,” Rauner said. “We’ve been blessed. In Caterpillar, we have one of the best managed, most successful and most respected companies in the world. They could have gone anywhere in the world, to any other state, and they said no, we’re staying here. We thank you for that commitment to Peoria.”

Rauner said that even though Caterpillar was courted with promises of all types by other states and countries to relocate its headquarters, the company never came to him or his predecessor to ask for any special considerations to stay in Illinois. “They are doing this without any special deals and I will do everything I can as governor to work for this company,” he said.

Rauner said this kind of commitment will go a long way in attracting other business to Illinois. “We as a state government need to renew our commitment to job creators in Illinois. As Caterpillar and other companies prepare themselves to compete and grow in the 21st century, Illinois needs to make sure it is a help and not a hindrance to their efforts,” he said,

Peoria Mayor Jim Ardis said Caterpillar has long been and will continue to be the most important part of the local economy. The announcement, he said, “is very reassuring for our future, but I urge our business community not to be complacent. Central Illinois is ripe for growth.”

A model of the new headquarters, including the parking garage with offices and retail that will connect with the main building via skywalk, is on display at the Visitors Center. That model, like the renderings, show Caterpillar’s intent to raze its current headquarters at Main and Adams streets once the new one is completed. That space will become green space leading to the grand main entrance of the new building.

Further, Caterpillar will raze the office building it owns at Hamilton and Adams to create additional parking.

The block now bounded by Main, Washington, Fulton and Adams streets, where Chase Bank and other offices are located, will be cleared to allow for the parking and retail structure.

The new headquarters will total nearly 2 million square feet and the towers will rise approximately 200 feet above Washington Street. The current headquarters, which opened in 1967, is approximately 500,000 square feet and with nine floors rises about 150 feet above Washington Street.

When Caterpillar opened that building, about 1,500 employees worked there. There are now about 2,200 in the building and another 1,000 or so scattered in other offices downtown. All those will be consolidated into the new headquarters.

The company said the project leader is Turner Corp., a construction management firm with a regional office in Chicago. Other partners so far include Farnsworth Group, an engineering and architectural firm, and Gensler Architecture, Design & Planning, P.C., a design and architecture firm.

Retirement concerns: Where to live, medical costs

With approximately 10,000 Baby Boomers – America's largest generational group – transitioning to retirement each day, the pressures to plan for where they will spend their retirement years are significant, according to the Certified Financial Planning Board.

Soon-to-be retirees must ask themselves where they will be the most comfortable: remaining in their home, also known as "aging in place," or moving to a dedicated retirement community.

CFP Board's Consumer Advocate Eleanor Blayney said there are key considerations retirees should take into account when deciding on living arrangements in retirement.

"Americans overwhelmingly prefer to stay put in retirement, remaining in their homes," said Blayney. "Some have no choice: costs of a dedicated retirement community may be out of reach. Others simply resist change, which is always difficult to navigate as we get older and set in our ways."

In her latest contribution to LetsMakeaPlan.org, Blayney shares some important factors to consider when deciding whether to not to "age in place."

• Living arrangements: Married retirees or singles living at home with other family members are generally good prospects for aging in place. The primary issue here is safety. As we age, we lose physical acuity, including our vision, hearing, and balance. 
• Suitability/adaptability of the home to physical needs: Open floor plans and one-level living are obvious wants and eventual needs for most retirees. As hale and hearty as you may be in early retirement, you need to be realistic about your physical needs in the future. 
• Services in community: How retiree-friendly is the community? Is it easy to get around by means other than driving? Are good medical providers and facilities easily accessible? Some communities with a high concentration of retirement-aged residents are designated as "NORCs" – or Naturally Occurring Retirement Communities – with special services for the aging-in-place retiree population.

Blayney also advises that when making the decision to "age in place," financial costs must be carefully evaluated. Retirees determined to stay in their homes need to plan for how they will pay for needed services such as in-home caretaking. Some of the major options to ensure retirees can afford these expenses include:

• Long-term care (LTC) insurance: Most long-term care policies today provide coverage for in-home caretaking services. Unfortunately, a 2014 Genworth Financial study found very few Americans have LTC insurance despite the high likelihood they will eventually need care. 
• Reverse mortgage: Rent or mortgage payments, property taxes, and depreciation may make staying in the home while receiving LTC services more expensive than the annual costs of a nursing home or continuing care facility. Reverse mortgages have, fortunately, become a more mainstream financing option and less expensive. However, retirees should still be mindful of the pitfalls involved, such as possible loss of the home if the stipulations of the mortgage agreement are not met. 
• Medicaid: A last-resort option that few retirees like to think about is Medicaid. Unlike Medicare or private health insurance, Medicaid does provide for caretaking services in the home, but only for those aging-in-placers who have exhausted most of their net worth. 

"While aging-in-place is the preferred option for most retirees, it isn't necessarily the best option from a financial point of view," says Blayney. "It requires taking a realistic and non-sentimental view of the potential costs that may be incurred in retirement, and comparing them to the costs of other less familiar and comfortable options."

Medical costs biggest worry about retirement

A recent Bankrate.com report showed that high medical expenses are Americans' biggest financial worry about retirement. It said that 28 percent of Americans gave this response; the highest-income households (over$75,000per year) are actually more concerned about high medical expenses than the overall population. Running out of money is the biggest fear for millennials (18-29 year-olds) and a close second overall.

One-third of Americans say they can't save more for retirement because they have just enough money for their day-to-day expenses; 14 percent blame other family obligations and 10 percent lay fault with their student loan debt (millennials were more than twice as likely to give this answer than other age groups). Also, 29 percent are satisfied with the amount they are currently saving.

Working Americans are realistic about Social Security's role in their eventual retirements: just 13 percent expect it to account for all or most of their retirement income, while another 14 percent expect it to account for half their retirement income. About one in four believe they won't get anything.

"The average Social Security payout is only around$15,000per year, so people are realistic to think they'll need to supplement that income," saidSheyna Steiner, senior investing analyst at Bankrate.com. "But despite all the gloom and doom about the future of Social Security, most Americans are optimistic that they'll get at least something from the program. That even includes millennials – 63 percent of them think Social Security will fund at least some of their retirement several decades from now."

The survey was conducted by Princeton Survey Research Associates International and can be seen in its entirety here: http://www.bankrate.com/finance/retirement/survey-americans-racked-by-retirement-fears.aspx

PSRAI obtained telephone interviews with a nationally representative sample of 1,003 adults living in the continentalUnited States. Interviews were conducted by landline (501) and cell phone (502, including 284 without a landline phone) in English and Spanish by Princeton Data Source fromJanuary 22-25, 2015. Statistical results are weighted to correct known demographic discrepancies. The margin of sampling error for the complete set of weighted data is plus or minus 3.7 percentage points.

Who will win Oscar this year?

It has been said that it is easier to predict the Powerball numbers than to pick the winners of the six main Oscar categories. That is obviously an exaggeration, but when one really gives it true consideration, it may not be too far from reality.

Trying to read and predict the approximate 6,000 voting minds of the Academy of Motion Picture Arts is an exercise in folly, akin to asking Tom Cruise not to overact or getting John Travolta to sight-read an entertainer’s name. As Steven Spielberg can attest, many have tried and all have tragically failed.

So, why should I not step to the plate and give my predictions for the six major categories in this coming Sunday’s 87th annual Academy Awards?  I mean, in theory, a roomful of monkeys each given a typewriter will eventually write the complete works of Shakespeare, right? 

Here goes:

Best Picture

Nominees:  American Sniper, Birdman or (The Unexpected Virtue of Ignorance), Boyhood, The Grand Budapest Hotel, The Imitation Game, Selma, The Theory of Everything, Whiplash.

The scuttlebutt this year has been bouncing between “Birdman” and “Boyhood” with “Birdman” getting the most recent buzz, but I’m charged with picking the winners (I’ll give my choices if I were the sole voter, but alas, I’m not, so really who cares besides me?) so let us give attention to that issue.

“American Sniper” is pretty much out of any true consideration simply because there is no way Hollywood would vote for Clint Eastwood as its dog catcher, let alone give him its ultimate prize, after his 2012 empty chair stunt at the Republican National Convention. It is rather sad, too, because lost in all the hullabaloo that surrounded the Michael Moore comments was that “American Sniper” is a pretty damn good movie. 

It is not about whether the U.S. should have even been in Iraq, or whether snipers are cowards (that statement is beyond ludicrous). It is a remarkable film that captures well the sacrifices our soldiers make to defend our country in times of war and the difficulties they face readjusting to life once they are no longer in active duty. This young man, Chris Kyle, was a hero in every sense of the word, and his life is used as a device to thematically demonstrate what every soldier gives and gives up to serve our country.

“The Grand Budapest Hotel” is Wes Anderson’s best film thus far and, cinematically, is a remarkable achievement.  However, in my opinion it is not even close to the top 10 movies of 2014. It tried to be funny, clever, and witty, and most of the time failed miserably.

What is tragic about “Selma” is that it is an extraordinary film that captures exceedingly well both Martin Luther King and his personal struggles but also a biopic that encapsulates the civil rights movement in the United States in the 1960s. Americans born after 1980 have little understanding how tragically black Americans were treated as few as 50 years ago. “Selma” is in my mind the definitive black experience film and belongs next to “Schindler’s List” as necessary viewing for all American high school students.  For whatever reason, Hollywood has ignored this film and it is getting little consideration.

“The Theory of Everything” showcased a remarkable physical and emotional performance by Eddie Redmayne, but the biopic of renowned physicist Stephen Hawking offers little more than glitter and a drippy sugar-coating of Hawking’s life. I was captivated by Redmayne, but much like cotton-candy, when it was done and gone, I was left with little more than a nutrition-less stomachache.

That leaves “Boyhood,” “The Imitation Game,” “Birdman” and “Whiplash” as potential winners.

“The Imitation Game” is a heart-wrenching biopic of Alan Turing, who claims the title of “Most Important Man of the 20th Century Whom No One Knows.” He is the father of the modern-day computer, and breaker of German military encryption during World War II—saving untold lives—and Turing’s story is both fascinating and painfully sad. The acting is first-rate and someone would have to make a tremendous argument as to why this film is not the picture of the year.

Hollywood loves films about themselves and “Birdman” is a sensational achievement of the angst and tragedy that surrounds modern-day acting careers. It is one of the most uniquely and exquisitely shot films in some time, and Emmanuel Lubezki should earn the statue for cinematography if there is any justice in the world. The writing on “Birdman” was fresh and unique and aside from a couple of minor side-plot detours, there was not much I did not like about this movie.

If there were an award for tenacity and perseverance, it would go to “Boyhood.” Shot over a 13-year period, the film tracks the life of boy from 6 years old to through the age of 18, ending as he prepares to go to college. While fascinating and worthy of high admiration for the filmmaker’s commitment to this project, the story ends up being rather mundane and pedestrian. However, it is an uncommon and unique work of art, and Hollywood often looks past substance to honor glitter.

The best film that no one saw, and possibly the best film of the year, is “Whiplash.” First made as a short film, its producers cobbled together enough money to make it a full-length feature and, to date, it has made only $11 million (although far recouping its investors’ money). The story studies what someone is willing to do and endure to become one of the best in the world—in this case, a jazz drummer. Actors Miles Teller and J.K. Simmons are simply mind-blowing in the depth of their performances. If you have not seen this film, it is a must-rent.

WHAT WILL WIN:  “Boyhood”

WHAT SHOULD WIN”  “Whiplash”

SHOULD HAVE BEEN AT THE DANCE:  “A Most Violent Year”

BEST ACTOR

Nominees:  Steve Carell, Michael Keaton, Bradley Cooper, Benedict Cumberbatch, and Eddie Redmayne.

This is as tough a choice as there has been in a long time, with only Steve Carell not a serious nominee here. Bradley Cooper is well on his way to establishing himself in the Cary Grant-Robert Redford-Tom Hanks leading-man, uber-A list category. Michael Keaton is finally getting recognition that he has for so long deserved, and Cumberbatch and Redmayne are in an elite category of actors working today.

No matter who wins, the other four have a valid argument that they were screwed.

WHO WILL WIN:  Benedict Cumberbatch

WHO SHOULD WIN:  Any of the them not named Steve Carell

WHO SHOULD HAVE BEEN AT THE DANCE:  David Oyelowo (Selma)

BEST ACTRESS

Nominees:  Marion Cotillard, Felicity Jones, Julianne Moore, Rosamund Pike, Reese Witherspoon.

I hate this category because seemingly this award generally is a lifetime achievement thing instead of what it should be. There is lots of buzz about Julianne Moore this year, and more times than not the buzz is a good predictor.

WHO WILL WIN:  Julianne Moore

WHO SHOULD WIN:  Felicity Jones

WHO SHOULD HAVE BEEN AT THE DANCE:  Jennifer Aniston

BEST SUPPORTING ACTOR

Nominees:  Robert Duvall, Ethan Hawke, Edward Norton, Mark Ruffalo, J.K. Simmons

No contest.  The other guys should not even show up.

WHO WILL WIN:  J.K. Simmons

WHO SHOULD WIN:  J.K. Simmons

WHO SHOULD HAVE BEEN AT THE DANCE:  Nobody; Simmons was that good.

BEST SUPPORTING ACTRESS:

Nominees:  Patricia Arquette, Laura Dern, Keira Knightly, Emma Stone, Meryl Streep

Okay, Meryl Streep is great. We get it. But enough already. Let someone else win. 

Unfortunately, none were as good.

WHO WILL WIN:  Patrician Arquette

WHO SHOULD WIN:  Meryl Streep

WHO SHOULD HAVE BEEN AT THE DANCE:  Anyone not named Streep

BEST DIRECTOR:

Nominees: Alejando Iñárritu (Birdman), Richard Linklater (Boyhood), Bennett Miller (Foxcatcher), Wes Anderson (The Grand Budapest Hotel), and Morten Tyldum (The Imitation Game).

The winner of this category has almost always historically gone hand-in-hand with the winner of Best Picture, but the last few years its winner has come out of left field.

However, the only two serious contenders this year are Linklater for “Boyhood” and his 13-year pilgrimage to seeing this movie to completion, and the remarkable “Birdman” by Iñárrittu.

WHO WILL WIN:  Richard Linklater (Boyhood)

WHO SHOULD WIN:  Alejandro Iñárritu (Birdman)

SHOULD HAVE BEEN AT THE DANCE:  Damien Chazelle (Whiplash)

There you have it, movie fans. 

The year was a great one for film and I hope Hollywood will recognize the successes of new and fresh scripts like “Birdman” and “Whiplash.”  Most important, Hollywood producers need to realize that not everything has to have Marvel attached to it in order to be both enjoyable and make money.

My last prediction is that I am going to bat .500 on Sunday. When one is trying to guess what Hollywood is going to do, that is a pretty good batting average.