From a small northwestern observatory…

Finance and economics generally focused on real estate

Archive for December 2011

Lehman back in the news

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This is really an update to my recent post about BofA and Sam Zell’s acquisition of Archstone (http://wp.me/pqerO-7k).  As it turns out, the remnants of Lehman had HOPED to do an IPO on Archstone, something that BofA and Barclays had opposed.  Now, with Zell’s acquisition of BofA’s share, he has both put a stake in the heart of that hope, but also set a value for the assets at about $16 Billion.  Given the convoluted ownership structure of Archstone, Zell has a veto over any of Lehman’s restructuring plans.

Elliott Brown and Robbie Whelan have a great piece on this in tomorrow’s Wall Street Journal.  (http://tinyurl.com/749ffa4).  Zell wants all of Archstone, and with Equity Residential would be America’s largest apartment landlord, with stakes in more than 190,000 units.  Technically, Lehman could block Zell’s offer by coming up with the cash, and they’ve been talking with both Blackstone and Brookfield.   However, part of Lehman’s accounting was a valuation of Archstone’s management and “brand” at around $1 Billion.  With Zell already owning Equity Residential, that brand value is negligible to him.  In short, Zell is in a fairly strong bargaining position to get what he wants.

Written by johnkilpatrick

December 4, 2011 at 7:20 pm

Unemployment — better, or worse?

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Great article in CNN.com today about the new employment numbers, up 120,000 in the most recent report (slightly better than projected) and the unemployment rate is down to 8.6%.  While the stock market reacted positively on the news, the response wasn’t overwhelming.   Why?  First, creating 120,000 new jobs isn’t very good — our economy really needs to be creating about 200,000+ jobs/month to sustain really healthy GDP growth.  Second, the drop in unemployment was a manifestation of a large number of “employable” workers simply leaving the hunt and, for the time being, giving up.  That is terrible news, in the long run, for the economy.

November jobs report: Hiring up, unemployment down – Dec. 2, 2011.

Also, the bulk of the new job creation was in retail and hospitality.  Sadly, not all jobs are created equal, and while a person in a retail position is better for the economy than a person in the unemployment line, it’s still not the same as a person in science, engineering, or technology.

That same article deals with one of the big ironies of our economy — many jobs are vacant for lack of applicants, mainly in — double irony — science, technology, engineering, and math (STEM).  One would think that students would flock to major in those fields, and indeed about 22% of all college students start out in STEM majors.  However, nationwide, the STEM majors have a huge drop-out rate, and only 14% of college students end up graduating in those fields.  Columbia University, arguably one of the toughest in the nation, bucks this trend with a 96% completion rate in Engineering.  Of course, Columbia does a huge vetting process — simply getting into the program is tough.  However, they take a very pro-active stance at keeping students engaged and active.  Student-dropouts at other schools point to lack of preparation as one of the contributors to non-completion.

Economists are nearly universal in recognizing that the biggest key to a healthy economy is education.  K-12 needs to do a MUCH better job at preparing students for these technical majors, and colleges and universities need to work harder at engaging the students once they get them.  These are really critical issues, particularly at this juncture, for moving our economy forward.

Written by johnkilpatrick

December 2, 2011 at 10:43 am

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