LAS VEGAS REAL ESTATE INVESTORS TUNE IN TO AIG STRATEGY
If you are one of Las Vegas’s real estate investors (or have been interested in how real estate stacks up against other investment classes), the insights of AIG investment honcho Doug Dachille would likely get your attention. Dachille is American International Group’s Chief Investment Officer. That makes him the decision-maker for the insurance giant’s $350,000,000,000 (that’s billion) portfolio. Last Friday, Bloomberg TV aired a candid interview on the subject of how he feels real estate investors are likely to fare. The attention-getting interview ran under the heading, “AIG’s Dachille Rejects ‘Bubblicious’ Critique of Real Estate.” It might seem that your typical real estate investor in Las Vegas has little in common with the director of such a gigantic bankroll, but that’s not necessarily the case. It turns out that insurer AIG—just like any local real estate investor—labors under the necessity to safely maximize returns in order “to back obligations to policy-holders.” With government debt interest rates unappetizingly low, it has set the giants (like AIG, MetLife Inc., and Prudential Financial Inc.) scrambling for investment outlets. One answer has been to enter the arena of real estate investors, principally as lenders. “Insurers hold funds for long periods of time…[so they] have been counting on real estate lending to obtain higher yields available to investors who are willing to sacrifice liquidity.” So where does the “bubblicious” headline come in? It turns out to be a rejection of an earlier analyst who appraised the current real estate market as looking “a little bubblicious”—one that could face shocks should interest rates climb. That kind of worrisome analysis could cause some sleepless nights for Las Vegas real estate investors with memories of the previous real estate bubble. A return to peaceful snoozing would have been restored if they happened to catch Dachille’s response. With a very sizeable ($22.9 billion) portion of AIG’s stake in direct commercial mortgage loan exposure, he sees the ability to raise rents as a satisfactory counter to the inflation risk. “Commercial real estate is very similar to an inflation-protected bond,” he said; “What’s…bubblicious?” Dachille regards the sector as presenting an attractive place for long-term returns—with a risk factor on a par with alternatives currently offering much lower yields. He revealed that AIG has been scaling back investments in hedge funds for a number of reasons. One that might ring true for Las Vegas real estate investors is many funds’ relative lack of transparency. As Bloomberg summarized, “He was uneasy about funds when he can’t track their trades.” Investors like AIG’s Dachille have a peculiar—and stupendous—problem in having to find suitable venues for billions in assets. For local investors, it’s a lot less complicated to uncover single opportunities in today’s Las Vegas real estate market. Call me if you are interested in exploring them!
FUTURE LAS VEGAS HOUSING CONSTRUCTION OUT OF THIS WORLD
When the name “Deloitte” is attached to futuristic predictions about any kind of industrial matters, most Las Vegas readers grow less skeptical than would otherwise be the case. After all, Deloitte’s quarter-million financial services professionals earn their keep by accurately advising enterprises worldwide on which way the commercial wind is going to be blowing five, ten, or 20 years hence. The folks in charge of the worldwide enterprises are keen that their capital expenditure planning won’t look stupid five, ten, or 20 years hence. So when a Deloitte Center for Financial Services blog describes the excitement a typical child will display when, in 2030, he’s about to “take his first trip to the moon”—well, that’s a blog that’s bound to get any Las Vegas readers’ attention. It got mine because it’s contained in a blog about the future of real estate and housing. The housing in question will be on the moon. Just 14 years from now. The basis for this science-fictiony scenario is the European Space Agency’s plan for constructing a “moon village” on the lunar surface beginning in the 2020s. Since it’s extremely unlikely that anyone—Europeans or Americans or Asians or anyone else—will be able to ship construction crews up there on short notice, the first rhetorical question Deloitte poses is, “But who will build all this?” If Deloitte is right, the answer could well become a major factor in the future of Las Vegas’s housing industry. Perhaps the major factor. The European Space Agency plans to use robotic 3D printers. Here it might be useful to again review the whole 3D printer thing. My own opinion is that 3D printers are called “printers” just to get our attention. Everyone knows that what traditional printers print is decidedly two-dimensional. Technically, the thickness of ink and paper may constitute three dimensions—but they’re more flat than not. So “printing” a gun or spare auto part used to be preposterous until inventors figured out how to spray jets of successive layers of stuff on top of each other to create fully dimensional objects. That’s 3D printing, and it’s how the housing on the moon can be done by robots. A footnote in the Deloitte blog points to the TechTimes website, which spells out the details. First revealed in a conference of 200 scientists in the Netherlands, the timeline is aggressive. “As planned, robots will arrive on the moon first to allow for human explorers to land later…” The “stuff” the base will be built from is moon dirt (called “regolith”). They are already testing 3D printers able to produce 6.5 feet to 11 feet of material in one hour. According to the ESA’s director general, at that rate, “the entire settlement can be produced in just one week.” By the robots. You can see why having Deloitte verify that this whole thing isn’t just an internet practical joke is an important part of the story. Because if the moon robots can build a settlement on the moon in “just one week,” what about settlements in Las Vegas? What about housing…and strip malls? Isn’t Las Vegas’s regolith at least as high quality as the moon’s? If this out-of-this-world planning has even one foot in reality, the major implications for the future of Las Vegas housing and construction are worth pondering. Perhaps later. For the moment, though, we have a great selection of non-robotically built, regolith-free Las Vegas properties. Call me for the down-to-earth details!
LAS VEGAS MORTGAGE RATES MAY NEED TO BE A LITTLE BIT MYSTERIOUS
Whenever you’re in the planning stages for your next Las Vegas real estate venture, the best available Las Vegas mortgage rate is a number you look for. Whether you are thinking of a purchase of a new Las Vegas home or simply refinancing your existing property, that rate determines how much you will pay each month. You would think that getting a good idea of what that number is should be pretty easy. Certainly, you would be encouraged by what you find on the web. That number—the mortgage rate—is available online almost everywhere you turn. It’s in TV ads. It’s on the radio. It’s almost looking for you. But as everyone soon learns, those numbers aren’t exactly the ones that you need. What appears in the ads and pop-ups isn’t necessarily that number (if by “that number” you mean the mortgage rate you will wind up paying). This whole topic was addressed this last weekend by USA Today in an article that did a good job of explaining why the actual mortgage rate that most applicants will be offered is not readily available. The rates in the ads are called the “published” rates. Unlike many other kinds of consumer advertisements, in mortgage financial parlance, a “published” rate isn’t the same as a “promised” rate. As this month’s survey by Freddie Mac specified, the mortgage rate average of 3.45% was on average only available to customers who chose to pay an additional fee—in this case, .5 point of the loan amount. For a $275,000 loan, that would cost the borrower $1,375 up front to get the “published” mortgage loan rate. That isn’t the only wrinkle. As USA Today put it, “Lenders also publish rates that have very specific prerequisites.” The rate may only apply to applicants with specific credit scores. The rate might call for a minimum loan-to-value percentage, too—or only be available in specific areas (which may or may not include Las Vegas). This might sound like a deliberate bait-and-switch tactic by the lenders, but when you get to the reasons for all the razzmatazz, it’s actually necessary. Las Vegas’s mortgage lenders are able to keep rates competitively low by only lending to borrowers who have a very good chance of repaying the loan. Those whose histories indicate that they pose a higher risk of not being able to keep up their monthly payments have to expect that they will be quoted a higher interest rate. The last time mortgage lenders stopped doing a good job of those risk calculations, it triggered what we now call “the great recession”—and just about everyone paid a price for that. So it may be inconvenient, but in order to really find out what your true interest rate will be for a specific real estate transaction, you have to go through the motions of applying for it. In this age of readily available instant information, that can seem like a run-around—but it’s necessary. I’m here to make this and every other aspect of your Las Vegas real estate doings as easy as possible. Call me!
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