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The Economic Base

The economy is now in solid shape. GDP is likely to grow 3%-3.2% this quarter. Consumer spending is growing at 3% and is likely to move higher as the…

Joel Ross

The economy is now in solid shape. GDP is likely to grow 3%-3.2% this quarter. Consumer spending is growing at 3% and is likely to move higher as the year progresses. Consumer debt vs income is at a record low, savings rates are 5%-6%, which is high, spending that is occurring is mainly out of current income or savings, and less on credit, the stock market is at record highs and home prices have mostly recovered, so there is a lot of potential spending power to come. Inflation is unusually low and likely will remain so for quite awhile. There are jobs for anyone who really wants one, and wages are likely to start to rise over the next year as labor shortages become worse. Bank regulation is being reduced, which will make it much easier to borrow for everyone. Bottom line, things for consumers are generally very good, and that is not likely to change for the worse over the next year. In fact, they will likely get better as tax reform will happen later this year and will be retroactive to January 1.

All of these factors bode well for corporate earnings over the next year. There may not be big growth in GDP, but there will be reasonable growth, low rates, and a recovery in Europe which will feed into better corporate income. Once the infrastructure program is in place , tax reform is approved late this year and repatriation of possibly $1.5-$2 trillion happens, then the stock market will push to new highs which will encourage new capital spending by companies who will be able to raise cheap capital with high stock prices and low cost debt. All of this is good for CRE.

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Joel Ross

Joel Ross

Joel Ross began his career in Wall St as an investment banker in 1965, handling corporate advisory matters for a variety of clients. During the seventies he was CEO of North American operations for a UK based conglomerate, and sat on the parent company board. In 1981, he began his own firm handling leveraged buyouts, investment banking and real estate financing. In 1984 Ross began providing investment banking services and arranging financing for real estate transactions with his own firm, Ross Properties, Inc. In 1993 Ross and a partner, Lexington Mortgage, created the first Wall St hotel CMBS program in conjunction with Nomura. They went on to develop a similar CMBS program for another major Wall St investment bank and for five leading hotel companies. Lexington, in partnership with Mr. Ross established a hotel mortgage bank table funded by an investment bank, and making all CMBS hotel loans on their behalf. In 1999 he formed Citadel Realty Advisors as a successor to Ross Properties Corp., focusing on real estate investment banking in the US, UK and Paris. He has closed over $3.0 billion of financings for office, hotel, retail, land and multifamily projects. Ross is also a founder of Market Street Investors, a brownfield land development company, and has been involved in the acquisition of notes on defaulted loans and various REO assets in conjunction with several major investors. Ross was an adjunct professor in the graduate program at the NYU Hotel School. He is a member of Urban Land Institute and was a member of the leadership of his ULI council. In 1999, he conceived and co-authored with PricewaterhouseCoopers, the Hotel Mortgage Performance Report, a major study of hotel mortgage default rates.

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