The Day Solar Energy Died in Florida

The Day Solar Energy Died in Florida

Ladies and Gentlemen, boys and girls, children of all ages, step right up and be amazed at the sleight of hand being perpetrated by the State of Florida public utility companies.  Stare in awed wonder at Amendment 1 and the statements of how the utility companies have the public interest at heart.  Shame on you Consumers for Smart Solar for misleading the public into thinking that Amendment 1 will provide additional protections and opportunities for individual solar generation.

Let’s get something straight.  In its most basic form, Amendment 1 performs one very important, crucial function for the electric companies.  Amendment 1 does away with net metering.  What does this mean?  Currently, if you have a solar panel system, you generate electrical energy.  This energy does not go directly to your home.  It goes to the electric companies who provide you back a credit against the electricity that they provide to you.  Hence, you get a “net” benefit for what you provide against what you use.  By removing net metering, Amendment 1 will allow the utility companies to effectively charge you fees for providing them electricity.  Their argument is that since you are providing them energy along their lines, you are therefore using their services and should be responsible for paying for this right.  In this way, they claim to protect all the other people that don’t have solar.  This is both ridiculous and sad.  It is ridiculous to assume that providing electricity back to the grid is creating a burden on all electricity users.  It is sad because it is being couched in terms that make it seem like it is making solar more accessible to the general population.

There is no easier way to pierce this veil than to see who is behind the support for this amendment.  The Consumers for Smart Solar PAC has raised over $16,000,000 to promote this amendment.  The top contributors are FP&L - $4,145,000, Duke Energy - $3,987,000, TECO - $2,352,675 and Gulf Power - $1,659,450.

Amendment 1 is very different from Amendment 4, which was approved this past August.  Amendment 4 removed certain state taxes from solar systems, making solar installation more affordable.  Where a yes vote for Amendment 4 helped reduce the cost of obtaining solar, a yes vote for Amendment 1 will allow the utility companies to impose substantial fees for the use of solar.

The sad thing is that the language for the Amendment is very confusing.  It is couched in such a way as to appear appealing to the general public who desire a solar alternative, when in fact, it is anything but beneficial to the general public and solar users.  After all, who is not in favor of solar energy, right?  Unfortunately, as their contributions indicate, the only groups that will truly benefit will be the utility companies as they will be able to charge people more for their right to generate solar electricity. 

In an age of global warming and increased environmental enlightenment, the utility companies and proponents of this amendment should be ashamed of themselves.

Please do not be fooled.  Please share this blog with as many voting Floridians as you can.  Amendment 1 is not a push for solar.  It is a push to increase profits for the utility companies.  Vote a resounding NO to Amendment 1 in November.

Until next time…

Keep kicking the dirt!

Jeff Gersh is President of Gersh Consulting Services, a real estate advisory firm, headquartered in Orlando, FL.  He may be reached at jsgersh@gmail.com or 407-468-9328

Own vs. Rent - Why is it a financial decision?

Own vs. Rent – Why is it a financial decision?

As the real estate markets continue to recover, I read with fascination those reports touting that renting may be a better financial decision than buying, or vice versa, based on the dynamics of various MSAs and sub-markets.  The entire focus is on the cost effectiveness side of the equation. 

This type of cold-blooded financial analysis saddens me.  I have often considered buying a house as a process similar to buying art.  Buy it because you like it, because it makes you feel good, because it is a representation of who you are.  That does not mean that economics have no place at the decision table.  However, to boil down the process to a pure dollars and sense analysis misses the true point of buying a house.  At the end of the day, you should buy or rent based on the dynamics of where you want to live.  Is it close to schools and shopping?  Are you comfortable with your commute?  Do you like the neighborhood? 

While these choices are the same regardless of buying or renting, there is one other factor that is not the same.  How long do you plan on living there?  Renting is a more transient form of accommodation that owning.  You are usually not putting down permanent roots.  Even if an upwardly mobile family will only stay in the same home for 5 – 7 years, you usually do not find renters staying in the same apartment for such a long length of time. 

Whether people will admit it or not, everyone has a social impact to the community in which they live.  If you rent, you are more likely to have a short term perspective.  As such, you may not care to contribute as much of your time or resources to the growth and vitality of your community.  And, at the end of the day, isn’t that the real reason why we choose where to live?  When you ask someone where they live, how often do they identify themselves with their dwelling versus their neighborhood?   

If you feel a sense of permanence in your residence, you are more apt to take a larger interest in the growth of your community.  By extrapolation, if you find that you are invested in your community, won’t that, in turn, strengthen the neighborhood values, resulting in capital appreciation to your home?  I know I am turning my argument into a financial case, but if analysts are going to truly compare the rent versus buy decision, shouldn’t this factor into the equation? 

We always have financial choices in everything we do.  And, as a home is usually the largest purchase a family will ever make, costs play a huge role in the decision process.  However, let’s recognize that the buy versus rent decision is so much more than just a pure financial choice.  It is a life statement.  In an apartment, you keep the boxes for the next move.  In a home, you leave them at the curb for recycling.  What is your choice?

Until next time…

Keep kicking the dirt!

Jeff Gersh is President of Gersh Consulting Services, a real estate advisory firm, headquartered in Orlando, FL.  He may be reached at jsgersh@gmail.com or 407-468-9328

No Guts No Glory

No Guts No Glory

I would like to ask a question of the homebuilding community.  We often say we are interested in innovative product, plans, cutting edge technology and new design.  However, how many of you are willing to go that extra mile to deviate from the norm, to take a chance that may put your pricing above the market.  Will the market accept it, promote it and embrace it?  More importantly, will the market be willing to pay for it?  This is the $64,000 question.  

When a gamble works, you are considered a trailblazer, someone with vision who was willing to stick to your convictions.  You are recognized as an individual who not only has their finger on the pulse of the market, but has the uncanny ability to know what consumers want before they know they want it.  Like Steve Jobs if he had built homes instead of computers.  However, if you miss, you are considered a poor risk taker, someone who missed the market and did not recognize that you cannot sell what is not asked for.  Like what almost happened to Apple when Steve Jobs first left the company.

It is a fine line, and one which has no definitive answer.  I toured a top selling community the other week that has multiple builders and is located in a price sensitive sub-market.  Most product tends to follow tried and true layouts, and pricing per foot is fairly standard across the product segments.  Then one of the builders tried something different with a new product line.  While I would not call the changes radical, they are of a nature to be significant enough to be very noticeable.  Like test driving a BMW after looking at Fords and Chevys (sorry Ford and Chevy drivers.  No harm intended.)  It obviously carries with it an increased base price relative to competitive product, but you definitely get a home that feels more valuable than the other options available.  I am not talking upgrades here.  It is all about design, utilization of space and incorporation of light.

I don’t know if it will succeed or fail.  But I sincerely hope it succeeds.  I want to believe that homeowners will recognize value when they see it and will be willing to stretch a little further to invest in something that raises the bar.  I am not implying that all good ideas can sell at a premium.  However, it is refreshing to see an entrepreneurial spirit shine through now and again.  Regardless of what market research and consumer focus groups tell us, you never really know what will work until you can dedicate yourself to an ideal and have the courage to implement it.

It is good that Steve Jobs came back to Apple.  It is also good to see builders taking calculated risks with product and design.  But it is a gamble.  You may not be the next Steve Jobs.  But do you have the conviction to try?   

Until next time…

Keep kicking the dirt!

Jeff Gersh is President of Gersh Consulting Services, a real estate advisory firm, headquartered in Orlando, FL.  He may be reached at jsgersh@gmail.com or 407-468-9328

A Contrarian Perspective

A Contrarian Perspective

The real estate business is very much an emotional business.  You can see it, feel it and touch it.  It tends to be an extension of an individual or corporation and is out there for all the world to see.   It is a tangible investment.  Whether a commercial property, vacant land or other form of real estate, it is something that has visual substance.  And no one like to make a mistake on something that everyone can see.

Back in the late 80s and early 90s, no one would touch office or hotel properties.  They were overbuilt, vacancies were high and no one knew where the bottom was.  It drove return hurdles to ridiculous levels and drove prices down to bargain valuations.  

During the most recent real estate bust, the same was true of residential real estate.  Land could be had for pennies on the dollar and the markets were littered with destroyed companies and little liquidity.

In both cases, people were afraid to make purchases and investments as no one knew where the bottom was.  Opportunistic investors swooped in and made fortunes with contrarian investment strategies, not worrying whether their purchase was at the true bottom, but feeling comfortable that it was at least low enough to guarantee a substantial return whenever the markets would improve.

A similar phenomenon is occurring in current homebuilding lending practices.  As many smaller builders went out of business in the last downturn, institutional investment dollars have now flocked to the more established large builders.  They are perceived as more stable with a lower risk of project failure.  This has resulted in the reduction of an important source of capital for new start-ups to take shape.  Without so-called country club money, new builders have limited access to capital.  

From a contrarian perspective, this creates a huge opportunity.  Consider the following.  If a project performs poorly, who is more likely to pull out, a new or established builder?  If a deal is unconventional, who is more likely to figure out how to make it work, a new or established builder?  When trying to latch on to new trends and innovations, who is more likely to react quicker, a new or established builder?  In all three circumstances, I would argue on behalf of the new builder.  They cannot afford for any deal to fail, they are more likely to think out of the box for non-standard opportunities and they have less red tape to jump through to adjust for innovation.  In an improving real estate market, these seem to be compelling, but overlooked opportunities.  Additionally, everyone loves a fresh face.  

I understand that there is fear that the real estate markets can falter again.  After all, it is an investment and investments move both up and down.  We tend to get scarred easily and those wounds take time to heal.  Except for those contrarians who recognize opportunity.  In an improving homebuilding market.  For new homebuilders.  

Until next time…

Keep kicking the dirt!

Jeff Gersh is President of Gersh Consulting Services, a real estate advisory firm, headquartered in Orlando, FL.  He may be reached at jsgersh@gmail.com or 407-468-9328