PRESSURE BUILDS FOR MORE OFFICE BUILDING CONVERSIONS

 

CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, JULY 5, 2024 OR THEREAFTER

 

BY THOMAS D. ELIAS

 

   BY THOMAS D. ELIAS
     “PRESSURE BUILDS FOR MORE OFFICE BUILDING CONVERSIONS”

 

        Almost no one wants office buildings these days, either to build them or buy them.

 

        In downtown San Francisco, the April sale of an empty 16-story office structure on lower Market Street brought just $6.5 million, less than the price paid for hundreds of California single family homes last year. That was 90 percent below the $65 million price the same building brought in 2016, the last time it changed owners.

 

        In the Arts District of Los Angeles, a fast-developing trendy area just east of downtown, plans to build a 10-story office structure containing many “creative spaces” were cancelled a month later by New York real estate developer Tishman Speyer.

 

        It’s the same all over the country, from Memphis to Maryland, from Manhattan to Market Street, where the commercial real estate firm CBRE the other day issued a preliminary report showing office vacancies in San Francisco at 36.6 percent, up about 1 percent from the proportion of empty office space at the end of last year.

 

        The vacancy rates are not quite so high in cities like Fresno and San Diego. Yet. But empty or mostly vacant properties nevertheless abound all over California and the nation.

 

        Not even real estate investment trusts (REITs) want to buy office towers anymore, with many trying to unload their current stock.

 

        It’s all because of the stay-home orders issued at the start of the coronavirus pandemic, which sent millions of white collar workers to new work spaces in their homes and allowed hundreds of thousands to move to less expensive quarters far from city centers where they formerly had to pay high rents because their presence was required in offices.

 

        When some employers early this year began requiring that workers return to offices at least part time, a wave of resignations ensued. It turns out workers enjoy being at home, away from the prying eyes and frequent demands of their bosses. This has also spurred new fluidity in the job market.

 

That all creates huge financial pressure for converting a major share of current office space into residential units. If REITs can’t collect rents on their properties, but still must make payments for them to banks and other lenders, they need to find another way to profit from buildings they are stuck with.

 

So an office building conversion movement – originally predicted in early 2020 by this column – is getting underway. But it’s not yet going fast enough.

 

        Billions of square feet of office space now lie fallow and could be converted to apartments and condominiums of many sizes and shapes. There can be low-priced units on the lower floors where street noises are common and high-priced penthouses far above them, free of most city noise pollution and enjoying sweeping views.

 

        But so far, only hundreds of thousands of square feet have been converted, leaving the vast majority of vacant space unused while housing construction lags far behind the millions of square feet state authorities say is needed.

 

        After dragging their feet on this for several years, Gov. Gavin Newsom and California legislators last year passed a measure easing the path toward building permits to convert office towers. The same for abandoned big box stores and their large parking lots.

 

        Still, only about 5,200 dwelling units were created via conversions last year in Los Angeles, and one-eighth as many in San Francisco. The numbers were even smaller in places like Sacramento and Oakland.

 

        But this is a movement that is both morally and financially necessary. Market-rate apartments in a converted office building ought to sell for far less than units in a newly-constructed tower. That’s because building and land acquisition costs are far lower for conversions than new structures. Plus, there are fewer legal challenges for conversions, which do not much change the profile and environmental effects of existing buildings.

 

        So expect a boom in conversions soon, with numbers multiplying by at least ten over the next five years. It’s what California needs and whatever this state needs, its people have generally created over more than 170 years of statehood.

 

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    Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough, The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It" is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net

AFFORDABILITY ANSWER: A NEW TAX ON HOUSING SPECULATORS?

 

CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, JULY 5, 2022, OR THEREAFTER

BY THOMAS D. ELIAS
     “AFFORDABILITY ANSWER: A NEW TAX ON HOUSING SPECULATORS?”

 

        The TV commercials and online ads are fast becoming ubiquitous: “We’ll buy your house as is,” they trumpet. “No need to spend any money fixing it up.”

 

        That’s commonly the message from housing speculators, often institutional investors including real estate investment trusts less interested in preserving or maintaining housing than cashing in as land values rise. It’s the land, not the houses, that interests them most.

 

        Says a Northern California citizens group called United Neighbors, “Non-wage capital, especially institutional and private equity, is entering the single-family market in unprecedented amounts.”

 

        That’s a big reason why, the group contends, “California housing costs have inflated at such a rate that housing costs have completely decoupled from their historical wage-based income basis.”

 

        That, they say, is the root cause of the affordability crisis. It is furthered by the fact that institutional investors, including pension funds like CalSTERS (the California State Teachers’ Retirement System) and CalPERS (the California Public Employees Retirement System) keep many purchases vacant while they await land value increases. This frees them from dealing with tenants and evictions when they decide to sell or to demolish existing homes and turn them into multi-unit properties.

 

        United Neighbors claims institutional buyers, including Wall Street investment banks, spent a record $77 billion on single-family California homes over the last six months of 2021.

 

        That makes them the ultimate house flippers, people or companies buying homes to hold for awhile before they resell at a hefty profit.

 

        It creates large vacancy rates in some places at a time when California supposedly has a housing shortage. The actual shortage is in affordable housing, as 73 percent of houses permitted in 2020, for just one recent year, were affordable only to households with incomes well over $100,000.

 

        All this has also seen vacancy rates rise among housing units built since 1970 – more than 50 years’ worth. Statewide, the vacancy rate on these “newer” units was 12.4 percent in late spring. In Los Angeles County, it was 16.3 percent, while San Francisco had an overall vacancy rate of 8.7 percent and more than 40,000 vacant units.

 

        All of which suggests none of the controversial housing bills passed with alacrity by the Legislature in recent years can be effective, including last year’s Senate Bills 9 and 10, which essentially did away with R-1 single-family zoning statewide and allow subdividing of almost all lots in those areas.

 

        The problem, it appears, is less a lack of housing – especially while California’s population is relatively stable and not growing fast, if at all – than the fact that wages and home prices have gotten out of the usual synch, partly because of institutional investments.

 

        This year, Democratic state assemblyman Chris Ward of San Diego, which recently “won” the ranking as America’s least affordable city, proposed a bill to tax the profits of house flipping, especially by corporations and pension funds. It died in committee, but deserves resurrection.

 

        His bill, known as AB 1771, aimed to place a 25 percent levy on after-capital-gains-tax profits from reselling any house within three years after it’s bought. After that, the rate would have dropped to 20 percent and then declined steadily before disappearing after seven years.

 

        Taxes collected would have gone to cities, counties and affordable housing funds, said Ward, whose purpose, he told a press conference, was to create a disincentive for equity investors, thus opening more opportunities for people who plan to live in homes they buy.

 

        This would especially help mid-priced housing availability, because institutional buyers are more likely to buy that type of housing than high-end homes, whose appreciation rates are far less steady and predictable, often selling for millions less than their asking prices.

 

        The bill was opposed by building trades unions, whose workers don’t much care whether or when the places they build are occupied, so long as paychecks arrive on schedule.

 

Those unions and the developers with whom they work have been the main drivers behind the Legislature’s recent spate of unwise, unneeded new housing laws.

 

The bottom line: Yes, there is a housing crisis, but it’s at least as much a matter of hoarding and waiting for profit as it is of supply.

 

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    Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough, The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It," is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net

THIS COULD BE THE MOST THREATENING TRUMP MOVE YET

CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, JULY 5, 2019 OR THEREAFTER


BY THOMAS D. ELIAS

      “THIS COULD BE THE MOST THREATENING TRUMP MOVE YET”

          As president, Donald Trump has spurred many actions that could eventually threaten the health of this planet and his own American people.

          He has cut down the size of national monuments and opened new lands to oil drilling, he’s trying to eliminate California’s longstanding authority to regulate its own air quality, he’s encouraged more coal-fired power, while pulling this nation out of the Paris climate change accords, to name only a few moves.

          But the harm from all those things will likely be long term, measured in rising sea levels, thicker smog pollution and more radical shifts in weather patterns.

          Now comes a move that could directly threaten the health – even the survival – of millions of Americans at completely unpredictable times, including a goodly share of California’s populace.

          This takes the form of a proposed plan by Trump’s federal Nuclear Regulatory Commission to cut back on inspections at atomic power plants, including the shuttered San Onofre Nuclear Generating Station near San Clemente and the Diablo Canyon Power Plant on a bluff near San Luis Obispo, which now produces about 9 percent of California electricity.

          Trump has filled four seats on the NRC with choices including former lobbyists for the nuclear industry and other backers of atomic deregulation.

          So it came as no surprise when the commission proposed a plan to let nuclear power plant operators like Pacific Gas & Electric Co. and the Southern California Edison Co. essentially police themselves.

          The recent history of natural gas explosions and wildfires in California demonstrates just how well these utilities have done in taking care of business safely while virtually unsupervised. Not very.

          Just now, NRC inspections seem most vital at San Onofre, where 45-ton canisters of spent fuel with atomic half-lives in the eon-length category are being stored on shelves in a facility 108 feet from a state beach popular with surfers.

          Edison, the plant operator, tried to keep a lid on news of one canister almost falling off a shelf and plummeting 18 feet to the floor of the utility’s “temporary” waste storage facility. The 2018 incident only came to light when a plant worker mentioned it in a public meeting.

          Essentially, the nuclear industry backs that secretive approach by Edison. Scaling back disclosure of problems at nuclear plants, top executives say, is “more responsible than to put out a headline on the web to the world.”

          Maybe some residents near nuclear plants agree, even if they live in the 50-mile-range that radioactive fallout could conceivably cover in a power plant accident on the scale of Russia’s failed Chernobyl plant.

          Consumer groups demur. “The deregulatory agenda at (the Trump administration) is a significant concern,” said Geoffrey Fettus of the Natural Resources Defense Council. “For an industry that is increasingly under financial decline to take regulatory authority away from the NRC puts us on a collision course with a nuclear accident,” adds the anti-nuclear group Beyond Nuclear.

          In short, the industry and its advocates in today’s government recommend a see-no-evil, speak-no-evil attitude toward possible radiation dangers.

          But the history of California’s atomic plant operators – from the “mirror-image” problem that saw Diablo Canyon initially built backwards to the Edison blunder that led to San Onofre’s 2012 shutdown – indicates they need all the supervision they can get.

          Yet, the industry worries that when the NRC makes problems public, they “get pretty rapid calls from the press…” and rate increase requests can also be adversely affected, said Greg Halnon, an executive of Ohio-based FirstEnergy Nuclear Operating Co.

          Certainly the reputations of Edison and PG&E have been affected by their responsibility for wildfires, a multi-fatal explosion, gas leaks and other accidents. So far, their rates have not suffered for any of this.

          But there is no way Congress or Americans in general should tolerate deregulating nuclear power plants and their potential dangers just so the companies can make more money and enjoy better public images.

          That would without doubt make public policy, as a rookie congresswoman infamously put it recently while discussing another subject, “all about the Benjamins.”

         

         

         

    -30-

    Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It," is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net

BROWN SAFETY, CORRUPTION MOVES INADEQUATE

CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, JULY 5,  2016, OR THEREAFTER

BY THOMAS D. ELIAS
      “BROWN SAFETY, CORRUPTION MOVES INADEQUATE”

          As he submitted his May revision of the state budget, now mostly enacted, Gov. Jerry Brown won praise both for its relative stinginess and for the fact it included one addition aiming to ensure more attention to safety from big utilities regulated by the state’s Public Utilities Commission.

          At almost the same moment, the PUC opened a reconsideration of its 2014 decision on distributing costs from the 2012 failure of the San Onofre Nuclear Generating Station, a ruling that previously dunned consumers more than 70 percent of the $4.7 billion cost for closing San Onofre.

          And Brown signed a bill requiring extensive testing of wells at the Aliso Canyon storage facility maintained by the Southern California Gas Co. in northern Los Angeles before that site can reopen and once again produce large profits for the company.

          And yet, all this is plainly too little and too late. Brown inflicted no penalties at all – not even a word of criticism – on his PUC appointees who repeatedly voted for the San Onofre ruling, even after the revelation that it was negotiated in a secret meeting between the PUC’s disgraced former president and an executive since departed from the Southern California Edison Co.

          He said not a word about blackmailing lies from the PUC, the state Energy Commission and other state agencies which co-wrote an April study threatening electricity blackouts unless Aliso Canyon is reopened soon. Those falsehoods – exposed, even conceded during a May legislative hearing – have nevertheless been repeated often since.

          Brown also punished no one at the state prison department after it admitted the falsehood of a longtime claim that serious criminals have never been sent to low-security firefighting camps.

          There’s been more since then, even some direct Brown hypocrisy over shipping coal from Utah through Oakland to Asian markets. Turns out Brown, who famously told Pope Francis last spring that “90 percent of the coal” reserves worldwide “can never be taken out of the ground” because of climate change, has a financial interest in coal trains and ships.

          “Oakland” magazine reported that public records show he owns a stake valued between $100,000 and $1 million in Evergreen Park Plaza LLC, a real estate venture that figures to profit if coal is exported through the former Oakland Army Base, where its parent company is the master developer. The parent firm is controlled by Brown’s friend Phil Tagami, who also hosted his 2005 wedding.

          Then there’s the small matter of the PUC and Energy Commission quietly entering into a confidentiality agreement without any public hearings. Their pact would “ensure the nondisclosure of any inspection, investigation or enforcement-related confidential information shared between the (commissions).”

          This deal was part of the consent calendar in the Energy Commission’s May 17 meeting, where it passed without comment. It aims to keep the public in the dark about new safety problems that might arise at utilities regulated by both powerful commissions.

          This is all the very opposite of the transparency the governor promised in 2010 while campaigning to return to the office he held for eight years in the 1970s and ‘80s.

          Plus, this spring Brown vetoed a bill requiring that persons trying to influence state procurement practices register as lobbyists. The Fair Political Practices Commission had already labeled this bill, possibly influencing billions of dollars in state spending, as a “significant burden” where there is no “significant problem.”

          Brown echoed this in his veto statement, saying “I don’t believe this bill is necessary.”

          But that bill just might have helped save his former chief of staff, Gray Davis, who later became governor, only to be undone in part by a procurement scandal in which the Oracle software company donated $25,000 to his campaign less than a day after getting a large state contract.

          No one knows if a measure like this could have spared Davis all that trouble and humiliation and prevented Arnold Schwarzenegger from becoming governor.

          What’s certain is that Brown’s administration is anything but open and transparent, with few, if any, consequences for corruption and lies, even when they are copiously documented. The small positive moves Brown made in May didn’t go nearly far enough to fix this problem and he has yet to speak his first words about much of what’s been happening on his watch.

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    Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough, The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It," is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net

CENTRAL VALLEY REMATCH A POLITICAL WEATHERVANE

CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, JULY 5, 2013, OR THEREAFTER

BY THOMAS D. ELIAS

    “CENTRAL VALLEY REMATCH A POLITICAL WEATHERVANE”

          Jim Costa had to wait more than a year for the rematch that ignited his political career. Letitia Perez will only have to wait about two months.

    Now a veteran Democratic moderate congressman from the Fresno-Madera area, Costa lost to Hanford Republican Phil Wyman in a special election in the 16^th state Senate district in 1993, but came back a year later to win the seat and hold it until he was termed out in 2002.

          Perez lost the same seat to a Republican in a May special election – or so it seemed until all votes were finally counted. Perez conceded after the May vote, saying in a written statement that “I want to congratulate (Republican) Andy Vidak on winning this hard-fought race.”

          The Wall Street Journal hailed Vidak’s “victory” as a “farmers’ rebellion.” The state Republican Party looked on Vidak’s “win” as a sign it could succeed even in districts where Democrats have large registration advantages (17 percent in this case).

          But not so fast. Turns out it was no win for Vidak at all. Even though his share of the vote hovered above 51 percent all through Election Night and into the next day, when provisional ballots and late absentee votes were counted, he fell to 49.8 percent, while Perez’ total eventually crept near 44 percent, and the two headed for a July runoff.

          The questions for Perez, a rookie Kern County supervisor: Can she win the 5.6 percent of votes that went to the other Democrats in the race, both Latino like her? Can she get the 471 votes cast for a Peace and Freedom Party candidate?

          For sure, Democrats in May didn’t vote in the numbers expected in the populous Kern and Fresno county portions of the district. Meanwhile, Vidak, a Kings County cherry farmer who lost a previous race for congress to Costa, dominated in Kings and Tulare counties, while Perez didn’t win her key areas by the margins expected.

          As far as party control of the state Senate right now, this race means little. Democrats already hold 28 of the 40 seats there, while Republicans have only 11. That gives Democrats a veto-proof two-thirds majority, no matter who wins in the 16^th, even though they will lose one seat temporarily when Curren Price takes his newly-won seat on the Los Angeles City Council.

          But if Perez wins, she could hold the seat for as long as 13 years, since legislators can now serve up to 12 years worth of regular terms in the same house before having to leave. The 18 months remaining in the current term would not keep her from serving three more full terms if she can win enough elections.

    Republicans initially saw this contest as a very hopeful sign. Yes, they generally do better in special elections than in general elections when votes are also cast for president, governor and the U.S. Senate. Yes, this district (or parts of it, since it was reconfigured in 2012) has been represented by Republicans in recent years.

          But the “farmers’ rebellion” (presumably against environmental rules mostly promulgated by Democrats) wasn’t all the Wall Street Journal thought it was, despite the state GOP investing more than $200,000 in the race. The runoff might determine whether there really is a farmers’ rebellion of any significance.

          Now the main question is whether Perez can draw Democratic voters who stayed home in May. She won’t have to produce very many of them. And if she can win in an area whose elected offices often are decided by small margins, it will be a sign that the Democratic registration advantages so common all over California mean a lot.

          There’s also the question of whether Democrats can turn out voters better in July in Republican-leaning Kings and Tulare counties, which are dominated by farm interests to a greater extent than Kern and Fresno counties, both of which contain large cities – Bakersfield and Fresno.

          Democrats pointed at heavily Latino towns like Lindsay, Woodlake and Dinuba as places where they can get more votes next month.

     It’s a quick turnaround, amounting to a rematch between Vidak and Perez, who were the clear frontrunners from the day the special election was scheduled.

          This runoff will also be more of a pure harbinger than the first go-‘round, if only because the less popular candidates are gone.

          The bottom line: If a moderate Republican like Vidak can’t win in an agricultural district like the 16^th, the GOP will once again have to wonder about its prospects anywhere outside its base areas of Orange and northern San Diego counties.

    -30-
     Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It," is now available in a soft cover fourth edition. For more Elias columns, go to www.californiafocus.net

ARE FOREIGN GRAD STUDENTS GOOD FOR AMERICA?

CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, JULY 5, 2011, OR THEREAFTER

BY THOMAS D. ELIAS
“ARE FOREIGN GRAD STUDENTS GOOD FOR AMERICA?”

The University of Southern California enrolls more foreign students as both undergraduates and advanced graduate students than any campus in America. Stanford, UCLA, UC San Diego and UC Berkeley are all among the top 15 in both categories, too.

Which means that foreign student tuition, often paid at premium out-of-state levels by temporary legal immigrants from places as varied as Saudi Arabia and China and Indonesia, is in some large part responsible for keeping California universities from collapse. An academic disaster would likely be imminent if prominent campuses had to depend purely on the state subsidies and federal grant money that also make up significant portions of their revenues.

So foreign students are good for many American universities, including plenty in California.

But are they good for America? That’s a question for continual debate as high technology and biomedical ventures become ever more common in countries like China, India and the Philippines, to name just a few.

It turns out that more than 60 percent of the Ph.D. level scientists who people those enterprises were trained in the United States. Now they’ve gone home and founded or taken jobs with companies that compete directly with American firms, including many based in the Silicon Valley, Orange County and other California hotbeds of new technologies.

At the same time, newly released figures from the National Science Foundation (NSF) show that foreigners account for 40 percent of all science and engineering Ph.D. holders now working in the United States. Which means that industries from electronics to construction to pharmaceuticals would be unable to function or develop new products if American universities were not training foreign grad students.

The same NSF report reveals that 62 percent of foreigners who got student visas and earned Ph.D.s in science at U.S. universities in 2002 (the latest year studied) were still in this country in 2007. Among foreigners getting advanced degrees in 1997, 60 percent were still here much of each year, 10 years later. The NSF used tax data to track who stayed and who did not.

Virtually no one disagrees with Michael Finn, an analyst at the U.S. Department of Energy national laboratory in Oak Ridge, Tenn., who says, “Our ability to continue to attract and keep foreign scientists and engineers is critical to…increase investment in science and technology.”

But there’s also another side, say some scientists who supervise foreign graduate and post-doctoral students.

“My main worry is over the 40 percent to 50 percent who go back to their home countries,” says one prominent researcher at the UCLA's medical school who has supervised M.D. and Ph.D. holders from a variety of countries. “They steal our way of thinking because there is little tradition of creative thinking in their own countries. There’s a real ripoff occurring.”

This scientist, who asked that his name not be used here because he needs to continue employing foreign professionals, worries that “Americans don’t understand the theft that goes on. The Chinese, for example, have no real higher educational system of their own, so they send people here to learn not only methods but also our ways of thinking. If even 40 percent return home, it’s a terrific investment for them because now they have people who can start biotech and electronic companies without having to educate them themselves. Sometimes I think they are way too wily for us, and we’re way too naïve to realize that we are being unpatriotic when we accept these guys.”

In short, this scientist contends, while elementary and secondary school students in many countries perform better than their American counterparts, those same students are accustomed to rote learning and not the kind of creativity that has long been an American hallmark.

What the NSF statistics also don’t show is that many of the foreign-born Ph.D.s listed as staying in the U.S. after they graduate also are working in their home countries.

Says a Stanford scientist, “I have had a technician in my lab for almost 20 years who leads a double life as a full professor in China, going back there four times a year for two or three weeks at a crack. He’s training them in our methods and ways of thinking, so they can compete with us.”

Which means the real need is for American schools and particularly those in California to motivate students (pay them?) to stick with academe long enough to get advanced degrees. If we fail to do that, there’s a good chance other countries will eventually be using our own methods and thought patterns to surpass America in the very fields where we excel most today.

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Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough, The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It" is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net