Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

29 responses to “Weekly Twitter Digest (Link Roundup) for 2012-04-21”

  1. Kary L. Krismer

    Tim, I think you might be surprised on the price thing when the April numbers come out, but again, I doubt that she has anyway of knowing that.

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  2. ray pepper

    that 460k Seattle House sure doesnt look like a half million dollar home..and btw…if it has a pool in the PNW knock 25k off the price so you can fill it with dirt ..I grew up with a pool in San Jose and nothing but work..use the one at the Gym or in my case the YMCA.

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  3. David Losh

    The Russel Investment property has always bothered me because I thought $115 million was a ridiculously low price, especially in 2009. The purchase also bothers me because the price is unsustainable. The fact a pension plan bought the building is of greater concern because it doesn’t feel like an investment. It feels like a manipulation in the market place.

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  4. Kary L. Krismer

    RE: David Losh @ 3 – It’s about occupancy. When bought for $115M it had very low occupancy, and the economy was very very questionable. They’ve now pretty much filled it up, so the value goes up. Commercial is all about rents.

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  5. David Losh

    The part about home ownership is that you have to own the home. You can trade up fairly easy if you make the investment compromises.

    What I think is that people look at the family home as a trophy. The good education, the BMW, the house, the kids, the dog, and you live happily ever after.

    It could work that way, but you don’t have that kind of time. I think pension funds, and retirement plans will be gutted by stock market manipulation.

    The family home can be the best investment you can make if you are smart, and play the game to win. It’s a game.

    Number one to remember is the bank is the Evil Empire. They are liars, cheats, and thieves, give them nothing. You buy the home to pay it off, quickly. That gives you mobility, and a stash, of cash.

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  6. David Losh

    RE: Kary L. Krismer @ 4

    and how did the building get emptied out?

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  7. Kary L. Krismer

    RE: David Losh @ 6 – Mainly because WAMU left.

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  8. David Losh

    RE: Kary L. Krismer @ 7

    WaMu is just another market manipulation. Russel could have come in to lease, but no, a deal was brokered to give some company, any company, an extremely excessive profit.

    That’s market manipulation. Some win, some lose, but when the federal government picks up losses we all lose.

    The second part is that a pension fund came in to give that profit.

    Let’s remember that Seattle has the Paul Allen development at South Lake Union. Diamond Properties has the development along Elliot. The tax payers paid for the Sound Transit Light Rail along a pretty desolute commercial corridor, all the way to the air port, which has yet to be developed. In addition there are investment holding companies that have waited for the CAP initiative to expire.

    Is Seattle really the place to invest in high rise office space if you don’t have a use for that space, or would it be better to buy, like Amazon just did?

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  9. WannaBuy2012

    One of the nice things about home/condo shopping in Japan was that EVERY listing had a detailed floorplan drawing. Example, click on a condo photo: http://used.realestate.yahoo.co.jp/bin/csearch?rps=4&lc=03&md=area&frm_rsrch=1&pf=13&search=1&sap=1&geo=13103&from=40000000&to=0&year=0&yearto=0&spfrom=0&spto=0&wlk=0&key=

    We often comment that we could save a lot of time house hunting if Seattle/US listings had floorplan layout maps. Very useful!

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  10. Dweezil

    Sometimes the King County parcel viewer will show floorplan sketches.

    I do spend a bit of time going back and forth between listing photos trying to figure out the layout. It would be a great addition to the listings, but if we’re still getting half-assed photos and descriptions, I doubt we’ll see the effort made to include layouts.on many places.

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  11. Kary L. Krismer

    By David Losh @ 8:

    RE: Kary L. Krismer @ 7 – WaMu is just another market manipulation. Russel could have come in to lease, but no, a deal was brokered to give some company, any company, an extremely excessive profit.

    Huh? Billions of dollars of equity lost in WAMU stock just to manipulate the price of one building?

    And Russell did come in to lease. They are one of the major tenants. That lease by the subsidiary of the owner leveraged the sales price.

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  12. David Losh

    RE: Kary L. Krismer @ 11

    Huh? Yeah they tanked the company to sell the building for cheap.

    What if WaMu held out? Do we know?

    As time goes on less, and less of the bank bail out makes sense, and this profit certainly doesn’t make any sense at all. Why wouldn’t you be outraged?

    That billions of dollars in lost equity looks to me like a transfer of wealth.

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  13. Kary L. Krismer

    RE: David Losh @ 12 – That’s what happens when you liquidate. You don’t necessarily sell at the right time. Many here wanted banks to liquidate their mortgage holdings in 2008-2009 because they weren’t that liquid. That would have been a much larger wealth transfer.

    But again, by moving their subsidiary into the building, they did leverage the value. It’s sort of the opposite of a sale-leaseback.

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  14. wreckingbull

    RE: David Losh @ 8 – So let me get this right. WaMu purposefully drove themselves into the ground, so they could be acquired by Chase, so that Chase could sell the building on the cheap, so that a life insurance company could come in and triple their investment in a few years..

    Please expand on this, I am really intrigued.

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  15. David Losh

    RE: wreckingbull @ 14

    That was sarcasm.

    This sale bothers me because it is an excessive profit. What other wealth was transferred during this period of closing banks, breaking them up, and selliing assets?

    I don’t really think about it too much, but do think about Bank of America. I’m suspicious of Bank of America because they are a heavy consumer credit lender that in my opinion benefitted greatly by converting consumer loans to second mortgages.

    I’m thinking more, and more that Chase, and Bank of America should be broken up.

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  16. David Losh

    RE: Kary L. Krismer @ 13

    So who handled the liquidation, and did the stock holders benefit?

    No.

    Our city lost a major employer, the building was emptied, and then sold at a fire sale. That was a manipulation.

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  17. T. Y. Lee

    I would have loved seeing floorplans (complete with room measurements) during my house hunt. There are a lot of houses I would never have bothered entering (and saved my realtor a lot of time) if I could have seen the layout and dimensions prior.

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  18. Kary L. Krismer

    RE: David Losh @ 16RE: David Losh @ 15RE: wreckingbull @ 14 – I looked it up, and per Wikipedia, Chase was the one that sold the building! Wreckingball was right on that. So my liquidating at the wrong time statement doesn’t really apply. Chase could have kept it.

    As to David’s comment, yes we are apparently dealing with a massive wealth transfer from Chase to an insurance company. /sarc

    What you’re really dealing with is assets can have massive swings in value. So it’s not really massive wealth transfers, but instead massive wealth fluctuations. Chase apparently sold at the wrong time, or felt they weren’t the right entity to get that building back in order.

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  19. Kary L. Krismer

    By T. Y. Lee @ 17:

    I would have loved seeing floorplans (complete with room measurements) during my house hunt. There are a lot of houses I would never have bothered entering (and saved my realtor a lot of time) if I could have seen the layout and dimensions prior.

    Most people don’t have blueprints for their homes. Some owners of relatively new construction, and condos might have marketing materials showing the floor plan, but most people throw those away. Thus it’s the exception rather than the rule.

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  20. Kary L. Krismer

    By David Losh @ 16:

    RE: Kary L. Krismer @ 13

    So who handled the liquidation, and did the stock holders benefit?

    No.

    Our city lost a major employer, the building was emptied, and then sold at a fire sale. That was a manipulation.

    I’m going to comment on this separately.

    When an entity is insolvent, the shareholders don’t benefit. You typically have to pay all of the creditors in full before a shareholder gets a dime (unless it’s a Chapter 11 reorganization being pushed by government to save the auto industry). That deals with WAMUs shareholders.

    Chase’s shareholders could have possibly done better, but as noted, perhaps Chase didn’t want the task of getting that building in order. But if anyone lost out here, it would be Chase and their shareholders.

    I really though have a hard time seeing how this is in any way market manipulation. As pointed out, WAMU wasn’t purposefully setup to fail just so this one building could be sold cheap. Some of the people making decisions for WAMU at the time probably lost more money on the decline and failure of WAMU than what we’re talking about with this building.

    What this really represents is how commercial real estate works. Commercial real estate is valued largely by the value of the leases. Few leases and you have a low value. 96% occupancy, and you have a higher value.

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  21. David Losh

    RE: Kary L. Krismer @ 20RE: Kary L. Krismer @ 18

    WaMu was liquidated as one of the largest lenders, direct lenders, in America by being sold to Chase.

    The building being sold was incidental, but a great example of what actually happened.

    Now why was WaMu liquidated? Toxic loans? Long Beach mortgage? Handing out loans like candy then selling the loans to the secondary market as quickly as paossible? WaMu as a player in the economy was huge, but what if they were forced to hold out and deal with the messes they created?

    This liquidation seems to have settled a lot of those scores.

    The building itself is just one example of many. There was no rush to sell. Selling an empty building doesn’t seem to have benefitted any one except the people who bought it and pocketed $300 Million. Stock holders of that company probably saw a benefit, but the people who held stock in WaMu or Chase didn’t benefit.

    I’ll continue with the fact a pension fund bought the building at what appears to me to be a top of the rental income market before every other project in Seattle is completed.

    So you are right, a building sells for rental income. The WaMu tower was prime Seattle Real Estate of that day. It was emptied out by selling the company, WaMu. The building, as an asset, was then sold at a fire sale price.

    That was not an arms length transaction. It was a created fire sale. The building could have been leased up first, and then sold, even if it was leased out for cheap it would have paid more.

    Everybody lost in this deal except for the company that profitted by $300 Million.

    I think this is a great example of how we all get screwed to benefit a very few.

    I can see your wheels spinning so I’ll point out again WaMu was a major employer, and a fixture in the Washington State economy. We will now never know what could have been if WaMu dealt with it’s own mess, and the sale of the company had been made after the mess was sorted out.

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  22. Kary L. Krismer

    By David Losh @ 21:

    I can see your wheels spinning so I’ll point out again WaMu was a major employer, and a fixture in the Washington State economy. We will now never know what could have been if WaMu dealt with it’s own mess, and the sale of the company had been made after the mess was sorted out.

    Maybe I’m confusing banks, but didn’t a Senator from NY make that pretty much impossible by causing a bank run (not that it wasn’t a long shot before)?

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  23. Azucar

    RE: Kary L. Krismer @ 19

    “Most people don’t have blueprints for their homes. Some owners of relatively new construction, and condos might have marketing materials showing the floor plan, but most people throw those away. Thus it’s the exception rather than the rule. ”

    With all of the available technology out there (easy to use computer aided design software, laser measuring tools, etc.) it seems that there should be a market for the service of drawing up layouts of houses. I would guess that someone who has experience at doing it could make one up in a few hours or at most half a day – go in to each room and make the measurements and then use a drag/drop kind of software to plop down a “general layout” of the house (with the disclaimer that it’s not exact) to be posted on the web. Realtors go to the expense of “staging” houses and/or hiring professional photographers, I would think that doing a “rough” floorplan would be fairly easy. Especially to someone who does it all the time (i.e. a realtor or someone who provides the service for hire.)

    Is the reason that it’s not done because… in many cases, it wouldn’t help the house to sell? I guess there’s little benefit to the seller – they’re better off having anyone who might be remotely interested come by and see the place. Having a layout that shows something that someone might not like might end up just limiting the number of people who come to view the house (and, say, don’t like that one of the bedrooms is too small, but are wowed by the view from a deck or something like that). But it would be of great benefit to potential buyers, and would probably save a lot of time for their agents.

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  24. Howard

    RE: Azucar @ 23

    They architect that I have been using for my site projects could measure a 2500sqft house in under an hour and have a sketch done in another 2.

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  25. David Losh

    A blue print is a double edged sword, the same as all on line marketing tools. People dismiss what could be a good fit by what they see on line, and never look at the house.

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  26. David Losh

    RE: Kary L. Krismer @ 22

    I’ll also point out Country Wide being sold to Bank of America. Bank of America is another bank that made, and makes, massive consumer credit loans, but at the time of the Country Wide sale Bank of America was retreating from making those second mortgages that converted unsecured debt to secured debt, for the benefit of the Mortgage Backed Securities market I presume.

    I’m just starting to get a bad feeling about these bank mergers, and bail outs.

    The building that housed WaMu is alike a microcosm. They emptied the building then sold it for cheap. Did the “liquidators” of WaMu, and Country Wide gut the companies before the sale? and doesn’t the fire sale of WaMU, and Country Wide cover a lot of shenanigans?

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  27. Hugh Dominic

    RE: David Losh @ 21 – I don’t get it. How did the taxpayers or public get screwed on this deal? Can you connect the dots for us? It looks like Chase is the one that lost a big upside opportunity.

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  28. David Losh

    RE: Hugh Dominic @ 27

    Simple. the tax payers paid for the for bank bail outs, with the deals for the Mergers, and Liquidations that were encouraged by the government, Bank of America in particular.

    The building is, to me, an example of how the entire process of panic selling lead to the demise of WaMu over all.

    Did WaMu really have a “bank run” that caused it to be shut down? or was it shady business practices at Long Beach Mortgage that were covered up? Do we know, or was it like selling the building, it was emptied then sold for cheap?

    I think it’s Pegasus who has running battles with Kary about some banking conspiracy that at the beginning I didn’t pay much attention to, but this sale of the crown jewel of an asset, a city land, mark has always bothered me. Now that the building has sold for an excessive profit of $300 Million in three years, it’s like a slap in the face that gets my attention.

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  29. Kary L. Krismer

    By David Losh @ 28:

    Did WaMu really have a “bank run” that caused it to be shut down? or was it shady business practices at Long Beach Mortgage that were covered up?

    Huh? But for the “shady loan practices” (potential bad loans) throughout the company, there wouldn’t have been a bank run.

    As to the rest of your piece, you’re a step or two behind the part of the process that is important. When Chase took over WAMU they paid X dollars for a certain pile of assets and liabilities. As such, you don’t really know what Chase thought it was paying for this building originally when it got it. What we do know is that for one reason or another, Chase decided that it wanted to sell the building when it did, rather than wait to fill up the building and sell it for a higher amount. Maybe Chase isn’t really set up to run buildings. Maybe Chase had a particular need for a pile of money at that point. Maybe Chase thought that the recovery of the Seattle office market would take much longer than it did. Whatever the reason(s), they decided to sell, and the only people who could possibly complain about that would be Chase shareholders. They might not even care though because the difference in price might not even be a penny added to the EPS numbers if the building had been sold later.

    Also, keep in mind that over that same period of time, Chase possibly lost a lot more money by improperly handling short sales, and making bad decisions on short sales. If shareholders are going to be upset, they should be upset about Chase not handling it’s core business properly, not some sale of an asset they probably didn’t even want when they took over WAMU.

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