I enjoy NBC’s “The Apprentice” featuring contestants vying for a job with billionaire developer/entrepreneur/golf course architect Donald Trump. The past three seasons have featured “celebrity” contestants vying for cash for their charity. (They’re fairly loose on the “celebrity” portion there – Rod Blagojevich, the former governor of Illinois who is in a heap of legal trouble, was on this season’s show and was fired after he couldn’t even use a cell phone.) Regardless of your opinion of Donald Trump, the show is probably the most entertaining and educational of the reality TV shows around. It’s a good lesson on many of the realities of business.

I’ve watched since season 2 – enjoying the laughs and learning a lot about human nature. Season 2 featured what would have been a dream job for me going to the winner – overseeing the construction of a Pete Dye golf course along the Pacific Ocean. Of course, Mr. Trump took credit for the design of the golf course, but that’s another blog.

Sidebar… I’m fascinated by Mr. Trump’s foray into golf courses. When I was maintaining my golf blog, I wrote several articles on Mr. Trump’s adventures in golf. I received several comments from people on the articles because Trump is just the kind of guy who is able to draw a ton of attention to himself. Some good, some bad, but a lot of attention, which in turn builds his brand and makes him worth more. He’s the ultimate proof of the cliche that it doesn’t matter what they write about you as long as they spell your name right.

I subscribe to the Trump Blog – most of the blogs are not very interesting and I skip a majority of them. However, I did notice the blog on the casting call for “The Apprentice”. Mostly out of curiosity, I penciled the time in to go to the Atlanta call, which was scheduled for April 7th. They said the first 500 who showed up would be seen.

Wednesday morning arrived, and try as I might, I just couldn’t get myself out of bed at 5 AM to drive to downtown Atlanta. I was able to get going at 5:30 AM. I arrived at the Marriott Buckhead at 6:30 AM. $18 a day to park at the hotel? Well, it is across the street from Lenox Square and Phipps Plaza – the two glitziest malls in Atlanta. I figured that there’d be a line out the door and down the block by that point. To my surprise, no line.

After parking, I made my way into the hotel and came upon the line inside the hotel. Apparently the first person showed up at 3 AM. I am not that dedicated. I mean I like the show and working for The Donald would be neat, but not 3 AM neat.

The line starts here

So, there I stood in line with folks of every age – 21 (the minimum because they have champagne in the Trump Tower to sip on while The Donald cans somebody) to a lady that was in her early 60′s. (At least that’s how old she says she was – more on her later.)

I was fortunate enough to have a very nice young lady – a CPA who had managed to negotiate time off during tax season (clearly a worthy opponent) from Knoxville, TN – behind me who was conversational, which helped pass the time of the several hour process.

The Casting Call wristband

The local NBC affiliate, 11 Alive, had their traffic guy, affectionately known as “The Commuter Guy”, there to do spots from the hotel. I assume they were broadcasting for the morning news. At 7:30 AM, they herded us into elevators and upstairs. At 8:45 AM, they passed out bracelets. I got number 84. As luck would have it, that’s not a very exciting number. I digress.

They then sat us in a huge hotel conference room in rows of nine. Turns out this row was pretty important because those nine folks would be who you’d be “auditioning” with when your turn came up. So, there we sat from about 9:15 until 11:00 AM, when they moved our row from the conference room to the hallway. There were any number of characters there – one guy was attempting to sell another guy a bar in midtown. He was wheeling and dealing and more than willing to give commentary on you if you so much as looked at him. We engaged in a lively exchange for a few minutes. He was not part of our row.

Standing in line

About 11:30 AM we were called into another, smaller conference room where a casting director for The Apprentice was waiting on us. They had placed four tables together to form a square and nine seats were placed around the square. I entered the room first and greeted the casting director. We handed over our completed application, which had more waivers in it than the Love Boat leaving port.

We then were instructed to give our name, our age, our hometown, what we were doing before the recession and what we were doing now. (This season is apparently going to focus on hard luck cases as a result of the recession.) Being the good engineer, I did as instructed – in order. Most of the rest of my crowd didn’t do so well. That probably makes them better for TV.

Here’s the group, as best I can remember…

• A lady in her early 60s (she looked like she was in her 40s) from New York who claimed to be in the financial industry once upon a time.
• A lady in her early 40s who owned a small business teaching adults how to dance.
• A guy in his mid 30s who was a regional sales manager for something.
• A guy in his early 20s getting his masters degree.
• A lady who I can’t remember anything about.
• A lady in her mid 40s who was a mortgage broker and interior decorator.
• A lady in her 30s who I can’t remember much about except she apparently looked like a Real Housewife of Atlanta according to other people in the room. (I’ve not watched that show.)
• The CPA lady I mentioned above.

So, that was our group. After the introductions, the casting director explained she was going to throw out a topic for discussion and she’d evaluate us on how we handled the situation.

Our topic:
The Recession and who is responsible for it.

Great. I’m not a big blame guy – I’d rather fix the problem and keep it from happening again. Well, the first person to speak was the Real Housewife lookalike. She throws the bomb in the middle of the table right off the bat, “BUSH!”.

Yikes.

I rolled my eyes and most everybody took her to task, thankfully. Regardless of your politics, blaming one individual shows a complete lack of depth. So, off we went – everybody jockeying to make their pitch. This was a total forced conversation because you were looking to talk rather than listen, something that I’m not used to doing. In a conversation, I like to listen and ask questions. This was the total opposite. Nobody was really listening to anybody so much as trying to weasel their way in to talking in an attempt to make an impression on the casting director. So, we talked and debated for about 15-20 minutes. Finally, the casting director cut the chaos off. She then said we were going to play a game. Good. I like games!

Well, maybe not this one. It was “Who would you hire?” or “Who would you fire?” Casting director lady chooses which question you’d answer. She picks me first. Great! Surely she’s going to ask me who would I hire, right? I mean, whoever goes first should get the easy question, right? Not so much.

“Taylor, who would you fire?”

Now, in my mind, I knew I had to make a quick decision. If you’ve watched the show, a good way to get yourself in the hot seat is to hem and haw on this question. So, I quickly pointed to the interior decorator. Except, that was not who I wanted to fire! Oops! I wanted to fire the Real Housewife Lookalike for throwing the stink bomb. Yet, the ship had sailed on that decision – I had to go with my initial selection less I look like somebody who can’t make a decision. So, I, admittedly, came up with a lame excuse to fire her – something to the effect of her lack of contribution to the group. Everybody else who got that question used the old, “I don’t want to have to compete against them because they’re so strong” excuse for firing somebody. Cheap way out, if you ask me. The poor dance teacher couldn’t make up her mind – she probably took at least a minute or more of hand wringing before she finally came up with the above gem.

After all of that, the casting director sent us on our way. We were told that if we were selected, we would get a call back either that evening or the next day. It wasn’t to be this time, but it was fun and a great experience none-the-less.

John McIlwain, ULI Senior Resident Fellow for Housing, describes the U.S. housing market, and how it will be affected by demographic trends. John’s talk was recorded at a gathering of ULI trustees on Jan. 26, 2010.

At the end of 2009, the area had 149,277 lots, down slightly from 149,782 in 2008, but above the 143,253 lots in 2007.

The inventory of lots kept rising because even has Atlanta’s housing market crashed, lots continued to be developed, said Eugene James, director of the Atlanta division of Metrostudy Inc., a residential real estate research firm.

“We were watching developments being reluctantly finished up,” James said.

In the 12 years Metrostudy has been recording data from metro Atlanta’s housing market, the area had the fewest new home starts — 4,400 — in 2009, James said.

That means in 2009, effectively only 500 lots came off the market in the metro Area, or about 1/3 of 1% of the available developed lots. Doing the math on new starts, 3,900 lots were developed last year in Atlanta.

At 4,400 new homes a year equates to a 34 year supply if no new lots were developed. A reasonable number of starts for the metro area in a normal economy is probably in the 20,000 unit range, meaning there is about a 7 year supply of lots. However, the reality is that anywhere between 10-20% of the current developed lots will likely never see houses on them either because of location or other factors including poor configuration and environmental concerns.

A good article from Inman News highlighted the area that many investment funds are headed to – residential lots.

As a result, finished lots are being dumped back into the market at 50 cents on the dollar — or much, much less — by builders and banks, which took back the properties due to loan defaults.

In bigger developments, investors have been buying these lots at 30 cents on the dollar, notes Nate Nathan, president of Scottsdale, Ariz.-based Nathan & Associates. In fact, well-funded investor groups have been sweeping up these long rows of unfinished lots by the dirtful leaving individual investors with no other option than to haunt smaller projects. And that, too, has been a worthwhile use of time and resources because, as Nathan points out, customized lots are selling for 10 cents to 20 cents on the dollar.

Think of it this way, lots are being acquired below finishing costs, which if new construction proceeds means the land cost is negligible, if not zero-valued.

The article noted that investors are expecting to hold the unfinished lots for 3 to 4 years and that they aren’t expecting significant new building to start until 2012. It also notes that we’ll need 1.2 million housing units in the next 10 years for population growth alone. (1.1 million units were built in the previous two years.)

Residential News

The WSJ says we don’t need to get worked up about Monday’s home sales report. Meanwhile, the ENR reports that while there won’t be a recovery in housing in the immediate future, one person believes that we’ll see 15%+ growth towards the end of the year and into 2011. In line with the weak housing numbers, Tom Royce reports that the Builders Confidence Index has dropped. Finally, not surprisingly, the WSJ reports that the number of subprime mortgages currently with negative equity is 6 in 10 borrowers on both the national and Atlanta level.

Commercial News

CIRE magazine highlights market trends for all sorts of markets and Atlanta is mentioned several times. The AJC summarizes the Atlanta office market. Finally, the WSJ thinks the worst is over for the commercial real estate market.

GA DOT

Lots of news on the transportation front this week for Georgia. Maria Saporta says that if we can’t do transportation funding right, then don’t do it at all. The ABC reports that DOT is changing its accounting practices in an effort to get projects moving. B King at Terminal Station comments on both the Saporta article and the fact that the statewide sales tax to fund transportation is dead. Finally, it what seems to be a never ending string of articles on ranking traffic, this week’s flavor ranks Atlanta a modest 22nd worst, which is actually pretty good.

Gwinnett Airport Privatization

A story that will probably be in the news a lot this year is the possibility of the privatization of Gwinnett County’s Briscoe Field. The Board of Commissioners is proceeding with studying the topic and reports on this can be found here, here, here and here.

Miscellaneous

Poverty is rising in Atlanta’s suburbs. A small business snapshot in the southeast. A look at a potential huge mixed-use project on Atlanta’s south side.

The region’s homebuilders and Realtors both reported the pace of home sales had softened slightly since August. Despite this, homebuilders noted an increase in traffic with several reporting the credit quality of potential buyers had improved as well. Demand for low- to mid-priced homes remained relatively strong, supported by the first-time home buyer tax credit and increased interest by investors. However, most continued to note downward pressure on home prices from foreclosures and short-sales. The majority of homebuilders and contractors observed construction remained very low. The sales outlook among both builders and Realtors over the next three months was less upbeat than reported in August.

Private-sector commercial real estate activity in the Southeast weakened further in September. Vacancy rates continued to rise across all segments, and contacts continued to cite downward pressure on rents. Developers reported fewer backlogs and more projects were delayed or canceled. Contractors expected activity to continue to decline into 2010.

Turns out that the US Geological Survey is actually saying that in many cases, this was a 500-year event.

“It is epic!” said Brian McCallum, assistant director for the USGS Water Science Center in Georgia. “The USGS can reliably say just how bad these floods were.”

They are calling this a 500-year flood because of the likeliness of it occurring is so rare, said McCallum. “We could have another flood next year, or floods back-to-back and still be considered 500-year floods because of the probability.”

Here is where the big problem for flooding in homes of people who didn’t have flood insurance comes in. The National Flood Insurance Program offers insurance to those who have property in the 100-year floodplain, not the 500-year floodplain. The 500-year floodplain is actually shown on many FEMA FIRM (Flood Insurance Rate Map) panels. If you’re curious to see where you property sits relative to a floodzone, you can search for flood maps at this FEMA website.

The Army Corps of Engineers, which has been a frequent target of criticism in Georgia, once again is on the defensive with regards to water releases from Lake Lanier during the floods. The Corps had this to say:

“The corps curtailed its operations on Sept. 19, and only minimal releases of approximately 670 cubic feet per second released through the small house unit have continued,” Coghlan said.

Those releases, about 300,000 gallons per minute, equated to less than an inch at a gauge 30 miles south of the dam in Vinings, according to the corps.

“Releasing from the small unit did not contribute to the localized flooding in the metro Atlanta area,” Coghlan said.

Coghlan said the flow out of large dams is rarely halted completely due to adverse impacts on river environments. The small unit generates power for the dam and project offices and “assisted in maintaining viable conditions for essential habitat below the dam,” Coghlan said.

As is usually the case with the Corps, their statements usually lead to more questions. While I doubt that releases of 670 cubic feet per second did much to exacerbate downstream flooding, the Corps apparently does have the ability to cut off all flow from Buford Dam according to Coghlan. Under what circumstances would the Corps actually do this? Coghlan correctly points out that cutting off all flow from Buford Dam would have some fairly bad consequences for the immediate area below the dam – the river would essentially be dry immediately below the dam. But what is the “essential habitat” and is 670 cfs the minimum amount of maintain “viable conditions”? Coghlan maintains that releasing did not contribute to the localized flooding downstream, but hardly seems like an accurate statement. If it’s a matter of adding no water versus adding water, then releasing certainly would contribute to the flooding. It may have been immaterial, but it certainly did contribute. By it’s own admission, the release added an inch to a gage 30 miles away, so on one side they say the didn’t contribute, but then acknowledge that their gage data shows they did. Of course, the Corps has earned a reputation for gage reading too.

Unfortunately for the Corps, they’re stuck in a pretty difficult position given the current legal battles going on between Georgia, Alabama and Florida. The fact they’ve become a common target doesn’t mean they’re at fault every time the weather gets wacky in Atlanta – be it drought or flooding. However, their communication of what they’re doing, how they’re doing it and why they’re doing it leaves them open to criticism. They would be wise to be more open about their operations and less defensive about their actions.

That this is even an issue, despite the fact that the drainage basin of Lake Lanier is minuscule in comparison to the the total drainage basin at either the Alabama or Florida border, is stupefying.

As an side, Lake Lanier is getting closer and closer to full pool. Earlier this year, a state climatologist predicted that Lanier would reach full pool after a dry late summer and fall and wet winter due to the effects of El Nino. Obviously that prediction didn’t include the previous week’s rains which has moved the lake to within 3 feet of full pool this morning.

The rains dropped 5.51″ as recorded at my house on Monday, which is the equivalent of a 10-year storm event. However, with a total of 5.28″ of rain occurring over the previous six consecutive days, the event manifested itself as more like a 100-year event (7.7″ of rain in 24 hours) because of the saturated ground being unable to absorb much of the rain. The rain we got Monday is the most I’ve ever recorded at the house, which includes the 2005 tropical storm season and remnants of Hurricanes Ivan and Katrina, which both dropped less than 5″ of rain. Because of the nature of the week long rain events culminated by a 10-year storm, chances are that was a once-in-a-lifetime weather event. While we’ll certainly see flooding again at some point, the incredibly unique situation that occurred last week will likely not be repeated again anytime soon.

Real Estate and Construction
Reports from Realtors indicated that existing home sales were stabilizing overall. Florida contacts noted that the steady improvement in sales over the past several months moderated somewhat in April, whereas other parts of the District experienced minor gains over the month. Homebuilders noted that new home inventories were trending down on a year-over-year basis as construction remained at low levels and new home sales improved modestly. Home sales prices continued to decline according to most reports. The outlook for sales strengthened in April according to most Realtor and homebuilder contacts.

Commercial real estate activity remained weak. Vacancy rates continued to rise in many parts of the District, putting downward pressure on rents, most notably in the retail sector. Contractors reported more projects being postponed or cancelled. Commercial real estate contacts anticipate more space will become vacant in the coming months and that construction will continue to slow.
…
Employment and Prices
Labor market conditions continued to be weak. Many firms reported additional cuts in hours or had instituted mandatory unpaid days off for some staff. State and local governments were also reducing payrolls because of budgetary pressure. However, the pace of layoffs appears to have slowed, as fewer firms reported layoffs than earlier in the year. There were also scattered reports of increased temp hiring, although several contacts noted that these positions were largely seasonal in nature.

Homebuilders and manufacturing firms continued to report that prices paid for both raw materials and imported finished goods were below year-earlier levels. Retailers noted a reduction in price discounting compared to previous months, and a majority of merchants reported that selling prices were generally on par with a year earlier.

For the 12-month period ending in March, Atlanta saw 8,972 housing starts — ranking No. 5 out of the metro areas tracked by Metrostudy. Houston topped the list with 22,502 housing starts during the same period.

According to the study, Atlanta also had the fourth-largest supply of vacant, finished new homes with 8.8 months-worth.