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The Bad News Report


tozmervo

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On 12/1/2020 at 8:56 AM, atlrvr said:

Belk's corporate debt is trading at 35 cents on the dollar today, and there was news report they haven't been paying their vendors.... apparently some vendors threatening lawsuits, others refusing to send more merchandise until they are paid.... guessing they are trying to hold on through the holidays and then will file BK ( likely restructuring) to shed all the small town stores.

Quoting myself re Belk. Still trading at 35 today, having ranged from 32 to 39 since my last post.  The market is betting on certain BK, and that 35 suggests that they could 1) emerge from BK if they could eliminate 60%+ of their debt, or 2) the company if liquidated would be worth only 40% or so of debt amount.

 

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  • 3 weeks later...

Its best to take these sorts of forecasts with a grain of salt, but I have been getting Moody's growth forecasts for Charlotte nearly every year for the past 15 or so years. Last year's report was pretty typical of the past decade, Moody's projected employment growth in Charlotte to be among the top 20% of metros for job growth in the country (see below).

image.png.2be98d2d5cf4733bcd11c7d66f527d34.png

The most recent Moody's Precis Metro report has significantly cut these projections for Charlotte. The Queen City is now expected to see well below average job growth. It appears Moody's models project near zero job growth for Charlotte in 2021 (off of a -5.8% change in 2020). In other words, Moody's expects Charlotte to be amongst the slowest job growers in the nation.   The Moody's models do not expect as big a decline in population growth (down about 15%), which is an interesting repudiation of the fundamental expectations of neoclassical economics (the expectation that people relocate to where jobs are being created)

image.png.e96a4221df5e5a1fc0a7dd605563405d.png

The November 2020 projections:

image.png.e9438e4b29764e8e442b8ee3fe8b7bdf.png

We could spend an unlimited amount of time nitpicking the Moody's model and debating its accuracy, and I do think this is a bit too pessimistic (Moody's numbers for Charlotte weren't even this low back in 2009). But, it is important to keep in mind these are the sorts of forecasts that CEO's and location consultants rely on in making siting and relocation decisions. In short, perception can become reality.

 

 

Edited by kermit
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the entire 800 plus US Bank employment base here in Charlotte started with some people leaving voluntarily or laid off from the big 2 banks at the time if I remember correctly.  I agree Charlotte will continue to grow as fast as the country as a whole if not faster.  That is the least of my worries for this area right now.  

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23 hours ago, kermit said:

Its best to take these sorts of forecasts with a grain of salt, but I have been getting Moody's growth forecasts for Charlotte nearly every year for the past 15 or so years. Last year's report was pretty typical of the past decade, Moody's projected employment growth in Charlotte to be among the top 20% of metros for job growth in the country (see below).

image.png.2be98d2d5cf4733bcd11c7d66f527d34.png

The most recent Moody's Precis Metro report has significantly cut these projections for Charlotte. The Queen City is now expected to see well below average job growth. It appears Moody's models project near zero job growth for Charlotte in 2021 (off of a -5.8% change in 2020). In other words, Moody's expects Charlotte to be amongst the slowest job growers in the nation.   The Moody's models do not expect as big a decline in population growth (down about 15%), which is an interesting repudiation of the fundamental expectations of neoclassical economics (the expectation that people relocate to where jobs are being created)

image.png.e96a4221df5e5a1fc0a7dd605563405d.png

The November 2020 projections:

image.png.e9438e4b29764e8e442b8ee3fe8b7bdf.png

We could spend an unlimited amount of time nitpicking the Moody's model and debating its accuracy, and I do think this is a bit too pessimistic (Moody's numbers for Charlotte weren't even this low back in 2009). But, it is important to keep in mind these are the sorts of forecasts that CEO's and location consultants rely on in making siting and relocation decisions. In short, perception can become reality.

 

 

Frankly, such a massive year-over-year swing in this model's output sort of invalidates the model in my opinion.  The scale of this swing almost seems to portend a nationalization of banking, or some other economic cataclysm.  This model says more about weak internal controls at Moody's than it does about Charlotte's prospects.

Edited by RANYC
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How is that bad for Charlotte? The headquarters is still in Charlotte, but they’re adding a distribution center in High Point. That’s good news!


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2 hours ago, thenewkage95 said:


How is that bad for Charlotte? The headquarters is still in Charlotte, but they’re adding a distribution center in High Point. That’s good news!


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There was another article that I interpreted as a complete relocation from Charlotte to High Point, but I could be wrong.

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6 hours ago, rancenc said:

There was another article that I interpreted as a complete relocation from Charlotte to High Point, but I could be wrong.

I read that too.  I think it was in the CLT Biz Journal but here’s the High Point edition.  They’re moving their manufacturing and distribution from CLT to HP because they claim CLT is too expensive for that work.  Doesn’t mention an HQ move specifically, but since it bills itself as a Distributor and Distribution is also moving there, I don’t know what could be left here.   
 

https://www.bizjournals.com/triad/news/2020/12/24/high-point-approves-incentives-for-hot-shots.html

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apparently, according to a recently-issued Milken Institute report, Charlotte is a Tier-2 city (Raleigh is Tier-1), and our ranking among Tier-2 cities went from #16 last year, to #36 this year.

Charlotte drops in Milken Institute's 2021 ranking of best-performing cities - Charlotte Business Journal (bizjournals.com)

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Just now, RANYC said:

apparently, Charlotte is a Tier-2 city (Raleigh is Tier-1), and our ranking among Tier-2 cities went from #16 last year, to #36 this year.

Charlotte drops in Milken Institute's 2021 ranking of best-performing cities - Charlotte Business Journal (bizjournals.com)

See the post about the Moody's projections above (1/31)

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5 minutes ago, kermit said:

See the post about the Moody's projections above (1/31)

Yea, and Cousins was pretty negative on a call about the extent of Charlotte office space inquiries versus its peer cities.  Appears that Austin, Atlanta, Denver, Phoenix and others are eating our lunch at the moment.

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6 minutes ago, KJHburg said:

I would read this article about the Cousins call and about the Charlotte office market.  Not as negative and bad as stated and I would not call those other cities eating our lunch.  Cousins must believe in Charlotte since COVID they bought 2 huge development parcels for somebody and they really don't do spec space. 

Cousins Properties leaders bullish on Charlotte despite slower rebound in activity - Charlotte Business Journal (bizjournals.com)

""An analyst with Wells Fargo Securities asked about Charlotte's leasing prospects in particular, saying it wasn't a market mentioned as having a notable increase in leasing.  Hickson said Charlotte has been slightly slower in its resumption of activity than places like Atlanta, Austin and Dallas. Longer term, though, it may be one of the more optimistic markets for inbound economic development deals, he said.""

"eating lunch" comment wasn't about the Cousins call, but rather a reference to negative shifts in perception about Charlotte versus its peer cities.  In past, I've often subscribed to the notion that perception is reality.  With reports from the likes of Moody's and Milken coming out in rapid succession indicating a starkly negative trend, I do start to grow concerned.  these reports appear to have a strong high-tech bias and apparently charlotte falling somewhat short versus other high-flyer peers. 

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The Milken article sure seemed to focus on Charlotte's slower high-tech growth compared to other cities, which of course Raleigh has always done better at. The article also gave Charlotte promising long-term prospects once Covid is over. the summary that I took away was, Charlotte isn't fairing as well as other cities during covid with job prospects, but should will be gearing up for growth again after.

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Rant mode engaged.

I should know this but I don't -  Who's responsibility is it to deny an application like this? Where does the planning & zoning overhaul stand? I've lost track and I'm sure the non UP public have no idea. 

Would our city leaders even agree this is a bad idea? In my little world I don't see much of any attempt to move into the 21st century wrt to planning, zoning, re-use, **green damnit**  and on and on. We fail to implement or even share a vision.  A little bit more on roads and transit but far from being considered  a leader or even particularly competent. 

There will be a painful reckoning one day. All we have going for us is cost. Well, we all know you don't want to compete there with the Mississippi 's of the country on cost. They'll take us swirling down the drain with them.

I recognize none of this rant is helpful but I personally have no idea what can be done.

A random collection of thoughts:  We need a group of dedicated professional volunteers hounding these people. Attending all the meetings etc... and generally making life miserable for them.  Are there any strong college or university programs in these areas that could help? Are there cities in NC that succeed in all or some of these areas to show that it CAN be done even in a Redish Purple state?

Gosh it's hard to remain optimistic here.  

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8 hours ago, elrodvt said:

Rant mode engaged.

I should know this but I don't -  Who's responsibility is it to deny an application like this? Where does the planning & zoning overhaul stand? I've lost track and I'm sure the non UP public have no idea. 

Would our city leaders even agree this is a bad idea? In my little world I don't see much of any attempt to move into the 21st century wrt to planning, zoning, re-use, **green damnit**  and on and on. We fail to implement or even share a vision.  A little bit more on roads and transit but far from being considered  a leader or even particularly competent. 

There will be a painful reckoning one day. All we have going for us is cost. Well, we all know you don't want to compete there with the Mississippi 's of the country on cost. They'll take us swirling down the drain with them.

I recognize none of this rant is helpful but I personally have no idea what can be done.

A random collection of thoughts:  We need a group of dedicated professional volunteers hounding these people. Attending all the meetings etc... and generally making life miserable for them.  Are there any strong college or university programs in these areas that could help? Are there cities in NC that succeed in all or some of these areas to show that it CAN be done even in a Redish Purple state?

Gosh it's hard to remain optimistic here.  

Outside of Clayton's Save Hall House, I don't think there is anyone truly lobbying the city to stop th demolition of this building

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  • 2 months later...
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I know some of y'all follow this kind of thing and are well aware, but for everyone else, the construction bidding market right now is a complete bloodbath. It's really hard to describe just how unprecedented it is out there. I know of at least one project in town converting from wood studs to metal studs, not because it's cheaper, but because they can't get the wood studs. And it's not just wood, we're seeing massive price spikes in steel and gypsum now, too. Anyone trying to bid and/or build projects in the near future is screwed. 

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38 minutes ago, tozmervo said:

I know some of y'all follow this kind of thing and are well aware, but for everyone else, the construction bidding market right now is a complete bloodbath. It's really hard to describe just how unprecedented it is out there. I know of at least one project in town converting from wood studs to metal studs, not because it's cheaper, but because they can't get the wood studs. And it's not just wood, we're seeing massive price spikes in steel and gypsum now, too. Anyone trying to bid and/or build projects in the near future is screwed. 

I am well aware of this and driving housing costs up even further and saw a bunch of steel framed houses going up recently.  I absolutely think lumber prices will crash but when I don't know.  This all means rents will go up, home  prices will go and less new commercial construction unless heavily preleased. 

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