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Finance and economics generally focused on real estate

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My newest friend

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In my work, I’m fortunate to meet some terrific people.  If I attempted to write about each one, I’d never have time to actually accomplish anything myself!  However, my “newest friend” really rates a few minutes of my time.  Let’s also recall that the theme of this blog is the economy, with a focus on real estate.  Her work really has serious implications for people who do what I do.

Two months ago, I read a great article in Fortune about Frances Hesselbein, the former CEO of Girl Scouts of America who now actively heads up the Leader to Leader institute (formerly the Peter Drucker Foundation) in Manhattan.  Her institute is slated to be re-named in her honor, the Frances Hesselbein Institute, this coming year.  I want to stress that she is actively engaged as the leader of this institute, because Ms. Hesselbein is a very spry, very active 96.  (For a copy of the Fortune article, click here.)

Given my own interest in both the Scouts and in the work of Peter Drucker, the Fortune article was one of my favorite “reads” in November.  Thus, last week, when I met Ms. Hesselbein in Charleston, I instantly knew who she was, what she’d done, and what she was currently doing.  I won’t go to the effort of copying the article here — I highly encourage you to read it yourself.  However, it’s helpful to review Peter Drucker’s famous five questions, because they really do influence how we should run excellent organizations:

1.  What is our mission?

2.  Who is our customer?

3.  What does the customer value?

4.  What are our results?

5.  What is our plan?

Those are real attention-getting questions.  One of our resolutions for 2012 is to go through a mantra similar to that with every project we undertake here at Greenfield.  I would add to it the six points raised by Ms. Hesselbein in the Fortune article as key tactical take-aways from the Drucker outline, particularly as they apply to organizational doctrine:

1.  If a door opens, walk through it

2.  Have a clear mission

3.  Be inclusive

4.  Be on time

5.  See yourself “life-size”

6.  Look to the future

For more about Frances Hesselbein and the work she and her team are doing, visit the Leader to Leader Institute’s web site by clicking here.



Written by johnkilpatrick

January 3, 2012 at 12:54 pm

Job Search — from the CEO’s perspective

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Ahhhh…. it’s Spring again. The flowers blooming, bees buzzing, birds chirping, and a zillion freshly minted graduates out looking for about 0.1 zillion available jobs. We’ve been hiring at Greenfield — just added a few new entry-level-ers to the team, and plan to add a couple of more mid-level folks in the near future. This morning, I happened to read one of those little articles aimed at interviewees on how to improve their chances in the job market. It dawned on me that few of these articles are ever written from the perspective of the CEO who is actually hiring folks. In other words, why did we hire Jane as opposed to John? I don’t pretend to have ALL the answers to this question, or even a universally valid set of “almost” answers. However, maybe I can add my two cents worth, and it will help someone, somewhere. And, as always, if you have specific questions, don’t hesitate to e-mail me.

First, let’s divide the universe into two different categories — because we really do look at potential hirees this way: newbies and grey hairs. The most recent newbie we hired actually had a year and a half experience, and the most recent grey hair we hired is actually blond. However, this categorization seems to be pretty obvious.


There’s a lot of silliness out there that we don’t pay attention to your cover letter. Actually we do, but only the first couple of sentences. If you don’t grab us in the first paragraph, then the rest is useless. Indeed, there’s a lot of significance in that — in our business (and in most businesses that have desks, computers, and carpet on the floor) we’re expecting a certain level of communications skill coming in the door. If your cover letter reads like a 3rd graders, or if you don’t “get me” in the first sentence or two, you probably don’t evidence the sort of communications skill-set we need.

When I interview people (and note that by the time someone gets to ME, they’ve already been thru several rounds of interviews, tests, background checks, etc.), the first “formal” question out of my mouth is, “So, tell me about Greenfield.” Not, “tell me why you want to work here” or “tell me about how you were president of your sorority” but “tell me about ME AND MY COMPANY.” Please tell me that you’ve spent a LOT of time researching us and reading the stuff we write and finding SOMETHING that we do that intersects with the stuff you’re passionate about. PLEASE tell me you’re not wasting my time telling me how you’re a generic people-person and that you could work nicely for us or any other firm that has free soft drinks in the fridge and a great dental plan.

Which brings us back to the cover letter — it should ALWAYS start with a sentence like, “Greenfield does this thing and I have some very specific ideas about that…” or “In 2007, Greenfield published this article and I used it as a basis for my senior thesis on…” or “Greenfield’s work in this particular project caused me to focus my entire academic career on being hired by a firm like yours.” Seriously. It’s gotta be THAT dramatic. Think about the opening 5 minutes of any James Bond movie. The opening sentence of your cover letter has to be THAT.

A few other random thoughts, then I’ll move on:

  • Make eye contact in the interview. Maintain eye contact. Don’t look off in the distance.
  • This is not about you. It’s all about the interviewer.
  • Whatever question you’re asked, turn the answer into an example of something the company did and how you could fit into that.
  • It’s SURPRISING how few people actually try to WORK their network of friends to get introductions, yet a very large plurality of jobs go to people who have networked There is a valid reason for this — successful networkers tend to be good at team building, sales and promotion, and client communications, and as such are very desirable employees. Older, successful friends will WANT to help you out even more than your peers.

  • Grey Hairs

    I think the “hire” process probably begins a few years before the job opening actually occurs. Mid-level and senior-career people who think that a job change may be in their future are well advised to begin the networking process many years before the actual job change occurs. Conversations at professional meetings or even over cocktails may include a sentence, “you know, we have this gap in our org chart” or “hey, how would YOU tackle this problem we’ve got?” Those really begin an interview process that can go on for months or even years.

    Really excellent firms are constantly looking for mid-to-upper level talent, and tend to hire “targets of opportunity” rather than hire for actual slots. A great case in point is how Google hired Dr. Kai-Fu Lee from Microsoft who ended up heading up Google’s China initiative (discussed in a recent issue of Fortune). Google was publicly thinking about a China initiative, and the Dr. Lee — who was well known to them but NOT on their radar screen as a potential hire — simply dropped them a letter about that initiative. A week later, he was hired with a bonus big enough to buy a big chunk of China.

    But, how does this help the newly-out-of-work mid-grade grey hair? Searching for actual jobs is the NORMAL route, but if you really bring something to the table, then you PROBABLY know who else is in the same “space” as your skill-set. Who else does the sort of stuff you’ve been doing for the past 10 – 20 years? How would you do what they do better? Find a key person at that firm, and make an appointment. Don’t tell them you’re looking for a job. Simply approach them with, “I’ve been watching how you guys do this thing for the past 5 years, and now that I’m not bound to my old firm I’d really like to share a couple of ideas with you. Then, in a few succinct bullet points, let them know you have a strategy for doing that thing better, either increasing market share or doing it more efficiently or improving quality or such and so forth. Also, let them know that you’re looking for a new place to settle down and put some of these ideas in place. “So, why didn’t you do that over at your old firm?” Answer — “I think if they’d been open to doing this, they’d still be in business.”

    Anyway, these ideas won’t work for everyone, or in every situation. But, in firms both large and small, there seems to be a consistency across the hiring process. Best of luck.

    Written by johnkilpatrick

    May 4, 2011 at 7:47 am

    JPMorgan-Chase settles military class action

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    This is a little bit off-topic (just a little), but the case of Marine Corps Capt. Jonathon Rowles, and the class-action suit which he began, has been a particular burr under my saddle since I first heard of it. Apparently, JPM-C has finally done the right thing and offerred to settle, but the fact that they got into this mess in the first place says a lot about their practices.

    In short, the Servicemens Civil Relief Act provides for certain protections against overcharging, fraud, and egregious foreclosure during periods when the servicemember is fighting overseas and unable to defend him or herself in the normal due process. Note that debts aren’t forgiven, but mortgage loan interest cannot exceed 6% during such time of service, and certain collection and foreclosure actions are prohibited.

    To say that JPM-C ignored the SCRA is apparently an understatment. Capt. Rowles repeatedly informed the bank of his active duty status, and made timely payments based on JPM-C’s own 6% calculations. Nonetheless, they apparently failed to credit him with the proper payments he made, and initiated collection and foreclosure actions against him and his family. For more details on the issue, read the court filings here.

    Fortunately, Marines don’t scare easily, and Capt. Rowles and his attorney filed a class action suit on behalf of all service members similarly treated by JPM-C. Seeing the handwriting on the wall (the suit was filed in South Carolina — one of the most pro-military states imaginable), a settlement was forthcoming. For details on the settlement, click here.

    Sadly, this class action ONLY covers servicemembers. One has to wonder how many similar stories come from the civilian population?

    Written by johnkilpatrick

    May 2, 2011 at 4:40 pm

    Greenfield Named a “Best Place to Work”

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    A little bragging opportunity — and we’ll be sending out reams of press releases on this — but I thought I’d give you guys an early peek. Seattle Metropolitan magazine just released it’s list of the 20 best places to work in the Seattle market. You’ll recognize some of the names on the list — and We’re terrifically pleased that Greenfield is #9 on the list of best places to work in Seattle.

    Seattle is a great place to run a business — extremely bright people are attracted to live here, and as a result, a firm like Greenfield can pick and choose the brightest minds who want to get into real estate analysis. While we have two great university-based real estate programs in the state, we’re able to attract new hires from the top programs all over the world — indeed, one of our most recent hires had just finished his masters degree in real estate in the U.K.

    Conversely, to keep and maintain such a creative staff, we have to offer an exciting and intellectually invigorating place to work. When we’re in a fairly small city, and competing against some of the most creative and exciting firms in the world (e.g. — Microsoft, Costco, Starbucks, the Russell Group, Weyerhaeuser, Amazon, Expedia, Boeing, Paccar, Nordstrom, etc.), we have to constantly strive to be the best.

    Thanks for the chance to brag a bit. This is a REALLY big deal, and I’ll be bragging more and more about this in the coming weeks.

    Written by johnkilpatrick

    April 28, 2011 at 8:58 am

    Home-ownership vacancy rates

    Regular readers will recall that we’ve linked continuous decline in home ownership rates to price instability. In short, prices won’t start rising again until home ownership rates stabilize. (They’re down from about a recent peak of 69.5% to about 66%, and we believe they will continue to fall to about 64%). One MORE piece of important data just hit our desks, in the form of the Census Bureau’s 1st quarter home ownership survey.

    The report is full of useful data. For one, the number of owner-occupied units in the U.S. actually fell from 1st quarter 2010 to 1st quarter 2011 (as we would expect), while rental occupancies continue to increase. Rental market supply (in essence, construction of new apartments) is keeping pace with demand, and rental vacancy is just below 10%, slightly lower than the 10% -11% range we’ve seen in the past few years, but not so low as to put inflationary pressure on rental rates. (Of course, this varies from one part of the country to another.)

    Among “owner-occupied” homes, though, the vacancy rate continues to rise. See the chart below for a vivid explanation —

    If this was a classroom exercise, I’d ask the students to identify the pre-recession equilibrium level, which appears to be about 1.6% to 1.8%. We can then identify the point-of-inflection signalling the impending disequilibrium in the housing market (when vacancy rates increased significantly — 2005). This inflection point, of course, signaled a great time to start shorting mortgage-backed securities, since it signaled the beginning of an increase in default rates. Of course, once can point at this and say “hindsight is 20-20”, but we know that the folks inside many of the banks, who were hawking mortgage-backed securities to their customers, were reading those very tea leaves back mid-decade, and shorting the very same securities they were promoting as safe investments.

    Appraisal and Financial Reporting

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    Real estate appraisers are, by and large, behind the curve as far as International Financial Reporting Standards are concerned. IFRS is already the norm in most of the world, and will integrate in the U.S. with our accounting rules in the very near future. The Appraisal Foundation recognizes that many (most?) appraisers lack the knowledge and training to compete in the this new realm, and is taking proactive steps to address the problem.

    The “ying and the yang” of this — implementation of the IFRS, particularly following the real estate meltdown, will focus considerable attention on asset values rather than asset costs. This has become known as the “mark to market” phenomenon. In an era when everyone basically THOUGHT that asset values gallopped upward non-stop, reporting historical costs-less-depreciation was the norm, and a conservative one at that. However, in an era when real asset values have actually declined, the conservative approach is to mark these values to market. This necessitates regular appraisals. All well and good for appraisers, right?

    Not so fast, bucko. There’s nothing in the IFRS that requires an appraiser, per se, and in fact appraisers are so out-of-touch with financial reporting standards that CPAs (who are ultimately responsible for the reporting) may be loathe to use appraisers for these assignments. At best, CPAs are described as “skeptical” on the contribributions to be made by appraisers.

    One change will be the migration from “market value” (as is commonly preached to and by appraisers) to “fair value” which is enculcated in Statement of Financial Accounting Standards NO. 157. IFRS will converge Fair Value guidance with US Generally Accepted Accounting Principals with the pending issuance of IFRS 13.

    Other changes include new thinging about “market participants”, “highest and best use”, and a concept totally foreign to appraisers, “levels of valuation input.” This latter creates a hierarchy: Level 1, Level 2, and Level 3.

    Yesterday, the Appraisal Foundation sponsored a webinar featuring some great thinkers on this subject. Rather than get “down in the weeds”, they were good enough to keep the topic at 20,000 feet and thus cover a wide array of implications in a very short time. Clearly, there’s a lot of education and re-education needed if appraisers are going to have a role to play in this. In the meantime, appraisers can begin familiarizing themselves with the salient information at the IFRS web site,

    Written by johnkilpatrick

    March 17, 2011 at 8:32 am

    Post Thanksgiving, time to go back to work…

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    In past years (say, pre-2008), the Thanksgiving thru New Years period at Greenfield was always slow, as clients and projects seemed to hunker down for the holiday season. Naturally, 2008 was an aberration on a number of levels — the real estate let-down was in full force, and while our business flow was down, we were busy “hunkering down” for what we projected would be a long recession trough.

    Last year (2009) was unpredictable. The first half of the year was dreary, but the last half was a rebuilding period for us, as has been 2010. We’re not yet where we want to be (that is to say, back on our pre-recession growth curve), but the accumulations of lessons-learned have put us in a great position for the future.

    I’m commenting on our specific experience at Greenfield for a reason. I think our own company experiences are emblematic of what is happening at tens of thousands of other businesses across the U.S. and other countries, and has significant implications for the future of real estate, the economy, and finance for the next few years. I’m always reluctant to get into the prediction business (I’ll leave that up to Faith Popcorn and her ilk), but I can make a few generalizations, particularly as the parallel what I saw back in the 1970’s —

    1. Business profits (and valuations — as we see from the stock market) are headed upward, not so much from increased sales (flat across the board) but also thru extraordinarily increased efficiency. One might wonder, if firms are so doggone efficient today, why weren’t they acting efficiently a few years ago? Simply put, “efficient” firms don’t grow very well. Growth usually requires a significant degree of wastage. Hewlett Packard was famous for this — they would budget engineers a certain amount of time and support to just tinker with things, knowing that the sort of Edison-esque profitability that came out of such tinkering. At one time, Xerox was so inventive that they thru away lots of great ideas, the Graphical User Interface being the best known example. Additionally, efficient firms cut wa-a-a-a-a-y back on hiring, training, and marketing. We see this now on college campuses, as new graduates (even in the “vocational” schools like business and engineering) are getting no offers or offers far beneath what their big brothers and big sisters got a few years ago.

    2. This “hunkering down” not only cuts the demand for commercial real estate, but also means we may have a substantial excess supply of offices, warehouses, and shopping centers for some time to come. Ironically, business travel is coming back (as executives work harder to sell the same amount as before) but everyone is going “down” a notch on the hotel food chain — executives who used to stay at a Ritz Carleton are now at Marriotts, and former Marriott customers are now at Courtyard Marriotts. (Intriguingly, the Marriott organization is highly vertically integrated, and so actually takes great advantage of this phenomenon). The interesting off-shoot is that while aggregate hotel room counts are up, hotel employment lags (as customers move from “full-service” to “limited service” stays). The same is true with hotel restaurants, as dining-out budgets get slashed.

    3. The “trainee” employment picture is worsening in some ways, but may actually improve in others. As noted, new graduates are having real problems getting placed, and are having to accept entry-level jobs far below expectations. I spoke with a young woman recently who graduated in 2010 in Finance. She had great grades and a stellar resume, and fully expected to get an entry-level job commensurate with her expectations. Guess what? No one is hiring. After several frustrating months, she accepted a job as a teller at a Credit Union at about half the starting salary she’d previously expected. Is there a silver lining in this? Yes, two. From the business’ perspective, they’re getting entry-level talent at bargain basement prices, and if they’re willing to mentor and foster these kids, they’ve got talent who will have a much greater familiarity with the nuts-and-bolts of the business once expansion does return. From the “hiree’s” perspective, a foot in the door builds experience and puts her at the starting gate ahead of the rest of the pack.

    4. The early 1980’s recession was actually the last of a series dating back to the late 1960’s (the period was called “stag-flation”). While the early-80’s recession was the worst of the bunch, it seemed to have wrung the last of the “bad stuff” out of the economy, and set the stage for two decades of nearly continuous growth. Many credit the pro-business agenda of the Reagan Administration, but that ignores the tremendous pent-up inventiveness which had been waiting for an opportunity. Gates, Allen, Jobs, and Wozniak had been tinkering with computers and software for a decade, but needed a business expansion to really get themselves going. Sam Walton had great ideas about merchandising, but the explosive growth of WalMart depended in no small part on the availability of cheap construction and development credit to build mega-stores at seemingly every street corner. We decry the sloppiness of the mortgage market of the past few years, but no one seems to complain about the millions of construction workers and realtors who rode from apprenticeship to retirement on the wave of the housing boom. Recessions do not last forever, although this one does have the symptoms of lasting for a while longer. When 4% GDP growth returns (and remember, folks, that’s really all it takes), we should be poised for a period of expansion not-unlike the one that started in the mid-1980’s.

    Well, folks, that’s really it. Like most of you, I have a lot to be thankful for. I live in a fairly free country, with an economy that considers 9% unemployment and 2% GDP growth to be unacceptable. I get the opportunity to interface with students and young folks on a daily basis, and they constantly refresh my positive outlook for the future.

    Written by johnkilpatrick

    November 27, 2010 at 11:33 am

    Valuation Colloquium

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    I’m writing this from the audience at an invitation-only colloquium on real estate valuation, held at Clemson University and sponsored by a number of high profile groups, including Argus Software, the Appraisal Institute, the Homer Hoyt Institute, the Maury Seldin Advanced Studies Institute, and of course Greenfield Advisors.

    This is the third in a series of such advanced meetings, begun in 1964 and held roughly every 20 years. The first was at the U. Wisconsin, and the second at U. Connecticut. The purpose of these gatherings is to bring together both top academic scholars as well as the top practitioners to discuss the future of the profession, both organizationally and methodologically. The past meetings were decidedly U.S. in focus, while this year’s meeting is co-hosted by Nick French (U.K.) and Elaine Worzala (U.S.) and has substantial European, Latin American, and Pacific Rim participation. Consistent with the rapid changes in the field, future colloquia will be held more frequently, and the next one is tentatively slated for Oxford, England.

    Papers and proceedings of the meeting will be published in the Journal of Investment and Finance in the near future.

    Written by johnkilpatrick

    November 13, 2010 at 8:11 am

    More on BP Oil Spill

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    Just confirmed — I’ll be one of the speakers at the upcoming BP Oil Spill Conference in Atlanta (June 24/25). The conference is put together by HB Litigation Conferences, the successor group to Lexis/Nexis Mealey’s Conferences. I’ve spoken at their conferences before, and they do a great job (and without sounding too self-serving, they put together a great set of speakers). Other speakers will include both the plaintiff and defense bar in this case, and I’m scheduled to go on right before the luncheon key-note address by Robert F. Kennedy, Jr.

    For more information about the conference, please visit HB Litigation Conference’s web site.

    Written by johnkilpatrick

    May 18, 2010 at 2:13 pm

    …and yet another Seattle-centric post

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    I had the real pleasure of serving as Editor of the Central Puget Sound Real Estate Report for a number of years, a job which I gladly passed off to Matthew Gardner a couple of years ago. This is the 60th year of publication for this fine report. As local real estate markets continue to roil, it serves as a great touchstone for researchers, investors, and others with an interest in this market.

    For more information or to subscribe, contact Glenn Crellin at the Washington Center for Real Estate Research, Washington State University,, or visit their web site,

    Written by johnkilpatrick

    March 26, 2010 at 2:24 pm

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