April 25, 2012

Tom Hoban Awarded the Humanitarian of the Year Award at the national Sperry Van Ness conference in San Diego, CA

Tom Hoban, CEO of the Coast Group of Companies, which includes its commercial brokerage firm, Coast|Sperry Van Ness, was awarded the Humanitarian of the Year Award at the national Sperry Van Ness conference in San Diego, CA in April. “I am flattered to win this award” said Hoban. “My brother, Shawn Hoban, and I founded the first of our companies 25 years ago this year. This award symbolizes the way we see our role as business leaders and men serving our clients, our employees, our families, and our community.”

Based in Everett, WA with offices in Spokane, WA, Portland, OR and Boise, ID, The Coast Group of Companies provides commercial real estate brokerage, leasing, property management and investment services throughout Western Washington and The Pacific Northwest.
 

By Tom Hoban
Realty Markets

On page 77 of its 2010 annual shareholder report, Kimberly Clark Corp. reported it was budgeting $300 million to $600 million for the closure of its Everett mill and two in Australia. A last-minute deal with a buyer for Everett fell through in late 2011, so they stuck with their stated plan. Now it sits idle and it is perhaps the most talked about piece of real estate in Snohomish County today.

Given its potential importance, Everett officials placed a moratorium on any development or change of land use that Kimberly-Clark might consider. In the first post-moratorium public meeting, Mayor Ray Stephanson made clear he wants jobs and citizens said they wanted a sensitive environmental cleanup. Other suggestions were parks, a museum, tourist attractions, retail, public access and a cruise ship terminal.

This is one of those circumstances where the question is not “either/or.” This site affords an “and” where many things can happen in and around it. That’s because it sits on downtown Everett’s connection to its waterfront. It’s also flat, has abundant utilities, rail links, trucking access and deep-water frontage. Modern day light manufacturing, distributing and other jobs leveraging a deep local labor base would fit nicely. That’s why this site is interesting.

One imagines manufacturing in lower-rise buildings serving a technology-based economy sprinkled with some office and modest retail taking advantage of the distribution and supply chain that rail and trucking provide. With view lines and waterfront access blocked today, city-mandated height restrictions on replacement buildings brings value to downtown as well, giving more appeal to high-density, high-rise housing. Retail follows jobs and housing and that would be expected downtown.

Since it’s privately owned, the city’s only levers on what it becomes are zoning and land-use restrictions. If it wants more control, it would need to buy it. City officials say that’s not an option.

The city has an ace in the hole that government uniquely possesses. By indemnifying some of the environmental and clean-up risk, it could reduce the regulatory and clean-up burden to a buyer and Kimberly-Clark that might make it financially attractive to do something appealing there. In exchange, the city could get some public access. This is a common practice in other communities, but is rarely used where the environmental community holds sway over political decisions, as is the case in Everett.

But Everett is already sitting on a large undeveloped site on its riverfront where it spent millions of taxpayer dollars to clean up a publicly owned site with nothing to show for it yet. Without spending a dime, indemnification in exchange for public access could help facilitate a private-sector deal and it might come to be something much sooner because K-C has budgeted millions to reposition it for another use.

This is the city’s cause, to be sure, which places a high premium on leadership at a time when budgets and resources are thin. The Port of Everett owns the land on both sides of the mill but says it has too much undeveloped land of its own. The building permit process belongs to the city and any benefits to downtown Everett are outside of the port’s core mission anyway.

For these reasons, the city should play its ace early. A cooperative and engaged local government will get the attention of larger developers in an economy where competition is fierce. Leadership will need to be bold, noisy and promotional as it works to pull together environmentalists, labor and a fractious business community to a common vision. Economic Alliance Snohomish County could be a useful partner in such an effort.

Considering a recent run of stalled public projects and the loss of the second Boeing 787 assembly line to South Carolina, Everett needs a big win. Steering some of the $300 million to $600 million of budgeted private funds to what will work for all concerned is a gift in many ways. Working with the Kimberly-Clark’s of the world in a cooperative way is the pattern that has worked best in other American cities where mills have shut down.

Tom Hoban is CEO of The Coast Group of companies in Everett. Contact him at 425-339-3638, tomhoban@coastmgt.com or http://www.coastsvn.com.
 

By Tom Hoban
Realty Markets

The exponential proliferation of hand-held cellular and smart phones throughout the world may have as big of an effect on human lives as electricity and the internal combustion engine. More than 6 billion people carry a cellphone or smartphone. With the ability of information to move that quickly into the hands of so many, power has shifted to the people.

Consider the change in emerging and Third World countries alone. In years past, a poor sub-Saharan villager making his way to town to sell a basket of turnips might have only one buyer with whom he could negotiate a price after his long walk to market. Now armed with a cellphone, he can check prices that other buyers would offer him on the other end of town and in an instant he is able to negotiate a better deal. Soon, he will negotiate instantly via Web portals. His agrarian lifestyle won’t change, but how much of a living he earns from it will.

In developed countries and in business, things are changing rapidly as well. Office furniture manufacturers are keen to this and are designing offices and furniture on the assumption that everyone is connected all the time and the office now serves an experiential purpose for employees and customers. Lavish lobbies and front-desk staff designed to give a strong first impression are no longer in vogue.

The first impression today might be made long before when a 25-year-old salesman tweeted a message to a prospect, the prospect toured the company’s website, found the salesman on Facebook and then decided the company was worth her attention. Walking in the door is going to be a high-touch experience, not a first impression.

Offices will be designed to recognize that.

Changes to office settings are just one of the effects on real estate. The apartment market will need to adjust as well. Everyone is connected, so the need for social space in the cabana building is adjusted from a meet-your-neighbor purpose to a place where there[']s room for intimate high-touch type events that cannot fit into an apartment.
So many home businesses grow in this sort of environment that the pool table and hot tub are replaced by a business office and conference room. How individual apartment units are designed and built will change, too, as smartphones will be the portal through which the renter[']s energy consumption, security and access can be managed.

Older Americans adopted the digital era starting with the handful of broadcast stations on 13 available TV channels, then to the computer and all the way up to today’s information explosion.

Americans in their late teens and 20s know no other way of life than the current digital era and absolute instant global connectivity. They will look for office, housing and apartment settings that fit what make sense to them. Those who have answers will be the winners in getting their business. It’s a big group of Americans, too several million larger than the biggest part of the baby boomer bubble. Identifying and serving what they want requires embracing the reality that the digital era is no longer a decision. It is now literally the environment around us. Adopting it is no longer a choice.

By Tom Hoban
 

The vast majority of business advocacy groups support an efficient, high-functioning but limited government. They like politicians who agree with that view. The reason why isn’t greed, although some of that certainly exists everywhere in America. CEOs simply don’t have the luxury of being wrong very often and keeping their jobs. So they typically deal with issues proactively and pragmatically.

That pragmatic view of the world has some CEOs concluding that because government has run out of money, it might now be neutered and unable to keep growing and borrowing at the pace it has been on in the past few years. Starved of tax revenue from an economy that can’t get fired up under the current circumstances, government can say anything it wants but it can’t actually do much of it anymore. This practical reality extends from the federal government to most of the states.

Greg Zanetti of Talbot Financial, a Bellevue-based investment group, sees these circumstances as a sea change causing America to shift a bit to the right. In his January blog, he notes: “The change will take time. The effects will not be immediately seen, but will be healthy in the long run . . . albeit disruptive in the short run.”

Real estate and the local economy are linked to this discussion. Because only through reasonable risk and investment will expansion and sustainable jobs be realized. Viewing government today as dragging a big debt anchor, CEOs are now poised to at least measure the scope and size of a government and the impact that might have on their decisions today. It’s a math issue, not a political one to pragmatists.

The old ways don’t die easily, though. A generation of politicians that knows no other way is still in charge in many places. They keep trying to fix something few have the practical experience to know how to fix. In a Viewpoints piece in The Everett Herald (“Jobs now, jobs tomorrow,” Feb. 5), State Reps. Hans Dunshee and Mike Sells offer a state-backed, bond-financed package of infrastructure projects to kick-start the economy. There is no question that similar big projects such as the Tennessee Valley Authority or the interstate highway system ultimately benefited the private sector. But these have to be paid for. The distinction today is that such investments are coming from government with a cash-flow and balance-sheet problem, unlike past eras. Borrow a bit today to solve problems tomorrow? Makes sense unless you are already overleveraged.

Younger Americans are growing wise to these notions and starting to sound like CEOs themselves as they adopt a pragmatic reaction to government initiatives. They can do the math: Government doesn’t have money, I don’t have any to give to it, so government promises mean nothing to me anymore.

Interestingly, recovery comes now because government is forced to live within its means based on a pragmatic reaction to the math. Political rhetoric continues, but businesses can begin to lay bets on their own future because no matter what they say, politicians can’t spend and borrow much more. Consumers, perhaps forever changed from decades of excess, will follow.

For those who prefer government solutions, they ought not be concerned. Government won’t go away. It shouldn’t. It will have to become virtuous again, using taxes to invest in education, building infrastructure to support industry, serving core functions, paying down debt and, in doing so, keeping promises. Sprinkle environmentally conscious practices in the mix and you have the America we all want.

Tom Hoban is CEO of The Coast Group of companies in Everett. Contact him at 425-339-3638, tomhoban@coastmgt.com or www.coastsvn.com.

By Tom Hobam
 

It doesn’t take much complicated forecasting to realize we are all going to have to pay more taxes and receive less government services for quite some time. The math simply does not work out any other way even if we turn up the economy to full speed.

The hole we’ve dug is so deep at $40,000 per American and took so long to get here that it’s going to take time and a lot of effort spread around to get out of it. We’re still in denial, though, as evidenced by the the federal government continuing to borrow 40 percent of what it spends while still spending more than it takes in.

Some economists believe this behavior is that of a nation with more than just a fiscal issue at stake and suggests the road to recovery may take a cultural change to get our way to sustained economic recovery. We’re sick if we keep heaping more debt on younger Americans, they say, and they cite examples to show just how far we have yet to go to get healed. The Occupy and Tea Party movements are the best examples. Neither are complete solutions to a problem this big. Tapping more of the richest 1 percent of American’s wealth doesn’t really put a dent in the deficit. Broad cuts are probably the most critical step to healing, but they alone won’t keep the country together while we swallow this pill.

How Americans react to this reality in the November elections will say a lot about how deep into denial we might be still or whether we are ready to make the fixes through shared sacrifice.

Cultural attitudes are pervasive and take time to change, after all. Concepts like shared sacrifice, which might have been easier to implement a generation prior, are anathema to an America so dominated by the wants and needs of baby boomers that we don’t realize how selfish we’ve become. Quick fixes are difficult when we don’t see the problem and remain in a form of denial.

History is full of examples of this. A lost decade becomes be a necessary passage of time so that a different generation with its own value system comes of age and brings new ways of solving problems. Blaming Congress is laying blame in the wrong place.

Congress consists of people we elected who see the overspending problem from completely different perspectives. Expecting them to compromise when they were elected to stand on those principals says more about us than them and proves that we are still some distance away from permanent solutions to the federal debt question.

Half of Americans pay federal income tax. The other half benefit from them. We’re a split nation because we’re set up for it like at no other time in our history. Tax rates aren’t the issue. Who pays and who does not is the real problem. A generation of bathing ourselves in our own wants and needs without regard to the effect on the next generation is what separates this version of American leadership from others. Historians will not be kind to the baby boomers for having overindulged so.

America has a lot going for it and there are signs of recovery. Consider, though, just how far we have to go to reach a consensus on our state of affairs.

In December, the federal government announced that 40 percent of the U.S. population lives below the poverty line. That sort of definition has political motives behind it. More poverty, more government.

Yet many living under that line have a smart phone, a TV, live in a larger home or apartment than half of Europe’s middle class, own at least one car and can send their kids to a public school. Almost none in that category pay any federal income tax.

Any nation so full of self pity to define that as poverty needs an attitude adjustment before it can really get on the road to recovery.

Tom Hoban is co-owner of Everett-based Coast group of commercial real estate companies. Contact him at tomhoban@coastmgt.com or 425-339-3638.

It seems the rich-should-pay-their-fair-share proponents are getting lots of attention these days as economic malaise continues into a new year.

Ending what some refer to as “corporate welfare” sounds good. But most tax breaks are designed to create incentives to people and corporations with taxable income to do things in the public interest. Some are pork and need attention. When tinkering with tax breaks, though, one needs to be very discerning or a baby might be thrown out with the bath water.

A great deal of low-income and affordable apartment housing built in the past 20 years would not be were it not for an IRS code that allocates tax credits to profitable corporations in exchange for building apartments laid with restrictions on how much they can charge for rent.

Commonly referred to as the tax credit program, the developer-owner who receives the tax credits must serve families and individuals considered poor or vulnerable — usually those earning less than 60 percent of the median household income in the county where the housing is built. It’s been a remarkably efficient way to deliver affordable housing to millions of Americans and has all but replaced the failed public tenement housing model of the 1960s and 1970s that put the government directly into the housing and construction business, leaving cities with blocks of highly concentrated areas of urban blight.

The tax credit’s simplicity and efficiency is what makes it work so well: The federal government budgets a certain dollar amount of tax credits and distributes them to the states based on their population. The states then push the tax credits out through an organized system that measures numerous factors. Developers and housing providers compete for the tax credits. They, in turn, usually sell the tax credits at a discount to profitable corporations and use the cash they raise to build.

Odds are you drive by one of these apartment complexes in your daily travels and probably have no idea it is low-income housing. Anyone is eligible to rent a unit so long as they can verify their income under the thresholds. No government red tape, no long waiting period for the individuals and families of modest or low income.

But little of this affordable product is being built right now because the market for tax credits dried up when the recession hit corporate bottom lines. Banks were major purchasers of tax credits, for example. Few are profitable today. Corporations that are profitable seem to be holding onto their cash until they can gauge the impact of the European debt crisis and the 2012 political election cycle in the U.S.

Thoughtful examination of every tax break delivered to corporations often spins out similarly. The best forms of tax incentives are geared to attract entrepreneurs and corporations to locate in your community and stay so that the jobs they create benefit your citizens. Communities that do this tend to see higher employment.

Tinkering too much with corporate tax credits and incentives is delicate business and fraught with unintended consequences if not done thoughtfully.

Thousands of people living in affordable housing in our region are depending on those in leadership positions to pay attention to the relationship between corporate profits and affordable housing under a program that has been working effectively for almost two decades. Let’s hope they keep that in mind.

Tom Hoban is co-owner of Everett-based Coast group of commercial real estate companies. Contact him at tomhoban@coastmgt.com or 425-339-3638.

According to Francisco Blanch, head of commodities with Bank of America, the U.S. was the single largest contributor to the global oil supply last year, with a net of 395,000 barrels per day. Most of the new production was coming out of North Dakota’s shale oil fields, but other domestic sources are proving strong as well.

An innovative process called hydraulic fracturing or “fracking” — breaking rocks with jets of water — has been a breakthrough technology to release oil from huge shale reserves throughout the U.S.

This is just one of the reasons that a new wave of optimism is building around the U.S. economy and reminding us all of its unbelievable resilience. There are others.

Chinese labor rates boomed in the past 10 years and are no longer a bargain compared to the costs of some areas of the U.S., most notably the right-to-work states in the American South. Productivity-adjusted wages will narrow even more between the U.S. and China, reports The Telegraph, a British publication.

“Costs to do business overseas, including shipping, reliability issues, technology piracy and others are shifting the advantage back to the U.S.,” The Telegraph concludes.

There’s real evidence of this change. Volkswagen and Korean electronics maker Samsung have begun investing in production plants in the U.S. Big American companies like Intel, GM, Caterpillar and others are opting to stay home rather than invest abroad. Boeing is bringing more of its 787 production chain back into the U.S. and simultaneously opening a second production plant in South Carolina, where skilled labor and a wage environment beat the overseas alternatives.

Another advantage we possess is that our population is still growing. Americans have a fertility rate above 2.0. Countries facing demographic decay under that rate include Japan, China, Korea, Germany, Italy and even Russia. We will eventually outgrow our burdensome federal debt obligations as more and more young Americans become productive and older citizens who depend on them die. The baby boomer bubble in the U.S. is an anomaly, not a permanent situation. Over the next 10 years, the boomers’ children — the echo boomers — will be in the workforce in larger numbers and replace them in positions of leadership and influence.

The U.S. still remains the country with the most top universities, spawning innovation at a higher level than anywhere else in the world. We have a common language and very little internal strife.

We are still the center of venture capital in the world and have robust transportation systems.

While Mexico presents some problems, most countries could only wish for a neighbor as resource-laden and friendly as Canada.

Often underappreciated, American farmers are so efficient that we use only 1 percent of our population to feed ourselves and still have enough to be a net exporter to feed the rest of the world.

Our still-dominant sea power position and military bases in strategic locations means we control nearly every shipping lane on the globe.

These give us several advantages over Europe, Russia and China, making us still the safest big country in which to do business in the world. Once our president — no matter who he or she is — stops trying to tinker with a good thing, corporations will stop hoarding cash and banks will lend again. Their behavior is what we should expect when there’s uncertainty being created through political words and actions.

“This does not imply a healthy U.S. recovery,” reports The Telegraph, however. China needs to deflate its credit bubble and the Western economies still need to purge debt. That will take some time.

America’s greatest advantage, though, is that most of the world is better off when America is healthy. That and a still-strong hand suggest the 21st century may be American after all, just like the last.

Tom Hoban is co-owner of Everett-based Coast group of commercial real estate companies. Contact him at tomhoban@coastmgt.com or 425-339-3638.

Snohomish County Business Journal

Macro economic and political forces continue to mix together into an usual concoction this summer, making it hard for profitable corporations to get a read on the future and tempt them to pull cash off of the sidelines and into expansion and growth. Recovery from the Great Recession has been anemic as a result.

Meanwhile, venture capitalists are beginning to make moves right now, signaling the possibility that a meaningful recovery could be ahead. The companies they are backing are mostly technology concepts. Most of these concepts are software or processes that drive more efficiency into everything we do. It’s an encouraging sign, but comes with a twist.

Software and technology of tomorrow will be held in what is dubbed “the cloud.” Instead of our hand-held devices and computers holding the brains of the software application we load and use, a bank of servers and supercomputers held by companies entering this space, such as Amazon.com, will hold them all and effectively beam what we want back and forth to our devices. You won’t know any difference in certain respects.

Your smartphone, iPad or computer, for example, will still have icons on it. But you will be able to do many more things on them because you don’t have to buy a specific application, download it and then perform its function. The cloud will allow you to reach in and pay for only what you use when you use it and literally every application and function in the world will be available to anyone with a hand-held device or personal computer.

Ultimately, the massive amount of technology that can be housed in the cloud and used by businesses and consumers will drive a new wave of efficiency into the American economy that may exceed what Microsoft did for us in the post-recession era of the early 2000s. Venture capitalists are backing the early stage concepts that should be the winners in that space.

The bad news is that, unlike the roughly 24-month jobless recovery period after the last much shorter recession, the efficiencies coming our way through the cloud and new emerging technologies inside it will be so significant that many economists are anticipating the longest jobless recovery in modern history. Dr. Sam Chandan, an economist and adviser to the U.S. Treasury, predicted in May as much as a 48-month recovery without significant job growth.

Housing could see a boost from a healthier lending climate regardless of what happens in the cloud. But buyers need jobs. Housing will continue to see lower transaction volume as any real sustainable demand requires higher employment. This time, higher employment may be further off thanks to something called the cloud.

Tom Hoban is co-owner of Everett-based Coast group of commercial real estate companies. Contact him at tomhoban@coastmgt.com or 425-339-3638.
 

Snohomish County Business Journal

Several months ago, I queried a number of my colleagues around the country to construct a mosaic of the ideal commercial real estate salesperson. What started out as an earnest effort to find the traits, habits and characteristics that could be measured and then sought out in my own recruiting efforts revealed some rather odd and downright humorous outcomes. With the economy now entering its fourth year of this mess, it’s time for a laugh.

One needs to understand that commercial real estate sales people operate in an eat-what-you-kill environment. No base salary, really no boss in the traditional sense. Just heart, soul, 24 hours in a day, a world of properties attached to owners and tenants to serve and then earn a commission at the point of a transaction. You sell something, you eat. You don’t, you starve. It’s unlike sales in almost every other industry where a base salary and bonus are the norm.

The most common characteristic I found was a sense of self-reliance and hunger to compete. Said a colleague who owns a sizable firm in Chicago: “Male or female, they have to like to compete. I like athletes … football, soccer, basketball, golf.” Said another in Idaho: “My best salespeople have had a sports background and have been the ones that come off the bench. They know what success looks like, but have a chip on their shoulder. I give them the platform to go prove themselves a winner in real estate sales if the sports stuff couldn’t do it for them.”

The hunger to succeed comes from other places, too. The managing director of a firm in Indiana pointed out that her best salespeople have one common trait: a mortgage payment. “They’re committed to my market. It’s a monthly reminder that they need to squeeze out commissions somewhere to crack that nut.”

Other quirky characteristics seem to make up some. “No visible tattoos,” said a colleague in Southern California. “But it’s not a deal killer. I’m a USC grad. If a salesman had one that said ‘Beat UCLA,’ I might hire him-her on the spot.”

“I like the team captain or head-of-the-family types,” said another. “Male or female, they have to be willing to defend their teammates or brood. Working on behalf of a client sometimes feels like that. So I want the ones who are willing to stick their nose into a mess and sort it out.”

“I like hunters,” said the owner of a firm in Alabama. “The natural desire to outthink situations, adjust on the fly and measure success in pounds of meat translates very nicely to commercial real estate sales.”

“My preference is to hire geeks,” said the owner of a mid-sized firm in Seattle. “Today’s technology tools have moved to the point where the computer drives about 80 percent of communication.”

So there you have it. The ideal commercial Realtor is a scrappy, thoughtfully tattooed, slightly geeky hunter who played sports in his or her youth and has a mortgage payment.

Tom Hoban is co-owner of Everett-based Coast group of commercial real estate companies. Contact him at tomhoban@coastmgt.com or 425-339-3638.
 

Snohomish County Business Journal

After Kimberly-Clark announced this spring that it was putting its Everett mill up for sale, members of the community began worrying about what that might mean. Speculation began about what other uses that site could support and it quickly became a real estate topic.

From purely a real-estate standpoint, it’s a very interesting site on a lot of levels because it sits on Everett’s front porch with immediate connectivity to downtown Everett’s waterfront. Last month’s column examined it from that narrow point of view.

From a broader standpoint, Kimberly-Clark and its employees have been big contributors to the community, so nearly everyone seems to feel some stake in the outcome of this sale and is speculating on what it might mean to them. Facts are few and the discussion is raw at this stage. It’s a difficult time on Everett’s waterfront right now.

To say that the community is split over the discussion is an understatement, though. Passionate and angry might describe the emails and calls from a few Kimberly-Clark employees who read last month’s column. They are understandably concerned right now and didn’t like the subject of the sale being talked about at all. Some were very helpful, though. One Kimberly-Clark employee who asked to remain anonymous made clear that the Everett mill is profitable and speculation on its demise premature. That, of course, is a relief to us all.

Passionate and angry might also describe those who were offended when city leaders referred to their point of view in a public meeting as “elitist.” We may not like it, these folks say, but some contingency planning might be timely given the recent history of mills in Everett and misinformation around the motives of the sale. Planning ahead today might ensure jobs remain there without interruption.

The good news is that everyone wants jobs. If pulp and paper remains viable, then that ought to continue for as long as possible. The other good news is that unlike other former mill sites, that location offers a particularly appealing mix of utilities, transportation connectivity and other features that could make it an ideal industrial and mixed-use jobs center for generations.

If redevelopment were necessary, planning ahead might help would-be users to see what their options are to bring in jobs. Lower-rise buildings and public access in and around industrial, light industrial and other mixed uses fits the site best and brings other adjacent benefits to downtown Everett, as last month’s column noted.

Kimberly-Clark and its employees have been an integral and visible part of Everett for years. The news of the Everett mill being for sale is hard on some of them and concerning for others. In such unsettled times, local leaders would do well to make an affirmative statement about the community’s support for them in hopes that mill operations would last as long as they are viable there.

But contingency planning now would be reassuring as well, demonstrating a commitment to that area as a jobs center for generations to come. There’s nothing elitist about fighting for jobs, explained one reader. On that, we can all agree.