The Real Estate Report For Metropolitan Kansas City 2008 Block & Company Focus on the Future To maintain and reinforce our mar- development, and investment offices in those ket position we first expanded our offices cities where we have either accumulated a with our move to the second floor of the large portfolio of properties or where our cli- Plaza Steppes in March 2006. This allowed ents have requested our presence. Regard- us the room to add new, talented individuals less of where we expand, our primary mission in those areas of expertise that provide real to provide our clients with the best real es- value to our customers. We then focused on tate services and the best implementation of a new branding for the company with a new appropriate strategies remains the same. We tagline “Real Estate. Real Strategies. Real will carry our expertise, market knowledge, Success.” This new tagline says exactly what market leading technology and commitment we are all about: real estate is our business to community involvement to all our markets and we are knowledgeable in all parts of the as we transform into a 21st century com- commercial real estate field; we develop and pany with vertically integrated services and a implement real strategies for success no mat- commitment to excellence. ter what requirement our client has. Also, While we have experienced many we changed our Market Report to “The Real exciting changes over the last several years Estate Report for Metropolitan Kansas City” and have exciting opportunities in front of to emphasize the comprehensive nature of us, we cannot fail to mention the emotional our knowledge whether it concerns market loss our Block & Company team has suffered data for office, industrial, retail, multifamily with the recent passing of one of our most properties, or real estate investment markets. beloved, long time brokers, Phil Hansen. Phil Block & Company offices admidst the 2007 We then determined it was necessary for us left his mark on the real estate community as Tour of Missouri bicycle race, which featured to expand our operations to better serve our evidenced by the many people who expressed cyslists from all over the world competeing diverse customer base; therefore we opened their grief with his passing from brain cancer in a week long race that started in Kansas a small St. Louis office in 2006 for the man- on January 5, 2008. His past work with City, MO and ended in St. Louis, MO. agement of property in that market. Only brokers throughout the Kansas City and na- one year later, we expanded our St. Louis tional real estate communities, and his un- operation into a full service commercial real tiring work with our local real estate board, Block & Company, Inc., Realtors has estate office by the name of Block Hawley was a great gift to Kansas City. His willing- grown dramatically over the last few Commercial Real Estate Services. We re- ness to go the extra mile to help his associ- years but as always, this growth has mained true to our goals and found the most ates, his clients, and his friends will not be been driven by the values instilled talented individuals in the St. Louis market forgotten. While the loss of Phil will be diffi- in our company’s associates by our who understand the market dynamics and cult, our hope is to remember his great spirit, founder, Allen Block. can benefit and leverage our existing supe- humor, and kindness to everyone he met, rior service platform. To this end, we joined as well as his profound effect on our com- lock & Company’s success has been forces with Jeffrey Hawley, a leader and pany’s success. Therefore, we are creating driven by our clear focus on enhancing veteran of the St. Louis real estate market, The Phil Hansen Scholarship Fund for college Bfinancial outcomes for our customers. and his team of knowledgeable and success- undergraduates who are looking to begin a This is the real mission of our firm: a focused ful brokers. We expect to grow this office career in the real estate field. We know how commitment by each one of our associates substantially over the coming years with the much Phil gave back to our young associ- to address our customers’ needs and goals goal of becoming the prominent leader in the ates and others throughout the community and then succeeding in accomplishing them. St. Louis real estate market. and we hope to carry on his acts of kindness The leadership of Block & Company But our vision and goals do not stop and great mentoring through this scholarship has long known that succeeding in delivering here. Our clients have asked us to look at fund. Hey Phil, thanks for the memories. on our mission will result in market leader- other markets where we can provide our level ship. However, having a mission alone does of service and real estate expertise. Accord- Contributors include: Kenneth G. Block, SIOR, not translate into market leadership without ingly, we continue to search for opportunities CCIM, Principal and Harry P. Drake, CCIM, CPM, intelligent strategies and aggressive goals. to expand and open full service brokerage, Senior Vice President BLOCK & COMPANY Kansas City INC ., REALTO R S OVERVIEW HI G H L I G H TS OF 2007 The federal government continued its measured focus on managing the growth of the nation’s GDP (Gross Domestic Product) causing the 2007 TRANSACTIONS: GDP growth to slow to 2.4% from nearly 3.4% in 2006. BLOCK Again COMPLETED IT’S BEST YEAR EVER WITH TOTAL he plan, however, was not to slow GDP interest rate reset dates. In essence, econo- SALES AND LEASING TRANS- this much, as previous expectations were mists at the University of Michigan dubbed this ACTIONS IN EXCESS OF $879 Tfor GDP to be 2.8% for the year. Simply “Ponzi Financing.” MILLION. put, some things are not in the federal govern- The sub-prime woes finally became ment’s control and the unraveling of the lend- widely visible in late 2006 and early 2007 MANAGEMENT: ing market due to the sub-prime crisis in the when family after family were not able to meet summer of 2007 changed everybody’s expec- debt obligations as interest rates were adjusted BLOCK’S MANAGEMENT tations for 2007 and beyond. upward. At first, it was not quite as visible be- PORTFOLIO REACHED 20.25 million SQUARE FEET, AN To fully understand this crisis, we need cause securitization had been utilized through INCREASE OF 2.25 million to look back at how the economy got to its the CMBS and CDO markets to sell these bun- SQUARE FEET OVER 2006. present situation. When the dot.com industry dled loan packages and therefore these pools shattered in 2000, much of the money that of mortgages made individual failures less vis- DEVELOPMENT/ had been invested in the stock market flowed ible. All of the big mortgage houses purchased quickly into other sectors, including bonds, these giant pools of sub-prime loans as if they CONSTRUCTION: and one not as well known: real estate. The were AAA-rated securities but in fact, they BLOCK COMPLETED RENOVA- majority of these funds flowed into residential were simply a pool of loans which ultimately TION AND DEVELOPMENt real estate and this produced the seeds of the behaved more like junk bonds. PROJECTS IN 2007 EXCEEDING next crisis, “the housing bubble.” In June 2007, the sub-prime implosion $174 million. ADDITION- In 2001, the Federal Reserve Board finally became totally visible. The Fed lowered ALLY, BLOCK CONSTRUCTION aimed to strengthen the economy and did so the federal funds rate 75 basis points by Oc- SERVICES, LLC, COMPLETED by dropping the federal funds rate from a high tober 31, 2007 but the resulting effect was PROJECTS TOTALING OVER of 6.5% to as low as 1.0% over a 24 month minimal, resulting in an “emergency” meeting 1$54 million. 1 period ending in the middle of 2003. With this in late January where the Board voted to cut continued easing of credit, 30 year fixed rate rates 3/4 points with the goal of staying ahead INVESTMENT mortgage quotes also dropped, hitting a low of recessionary pressures. It is now expected of 5.0% by mid 2003, and buying a house for that the sub-prime crisis in the residential mar- SYNDICATION: many first time home buyers was finally a possi- ket will slow the housing sector for all of 2008 BLOCK COMPLETED $426 bility. This caused a quick rise in housing starts and into 2009. How the sub-prime crisis in MILLION IN INVESTMENT and thereafter in home prices. With the increase housing will affect commercial real estate is SALES AND RAISED OVER $84 in home values came an increase in consumer not yet known but since commercial real estate million IN EQUITY FUNDS spending as higher appraisal values produced is based upon income streams, as long as the FOR SYNDICATION OF NEW overnight equity for home owners who quickly economy stays reasonably strong, commercial ACQUISITIONS AND DEVELOP- re-leveraged their homes to extract cash. Also, properties should continue reasonably stable. MENT PROJECTS. with the high demand for housing, all kinds of There are many events that could cause a fal- new debt instruments were offered including ter in the economy, including oil prices over COMPANY EXPANSION: adjustable rate mortgages (ARM’s), loans with $100.00 per barrel, geopolitical concerns low “teaser rates,” interest only notes, nega- throughout the Middle East, Africa and North BLOCK Opened a full ser- tive amortization loans, and loans based upon Korea, and the 2008 elections with the expect- vice Commercial Real Estate office in St.