Lacking Diversity, Omaha Population Crawls to 1,000,000

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One of my great frustrations with the World Herald is its lack of context when frequently reporting stories about Omaha that are nothing more than thinly veiled boosterism.

Today, we learned that Omaha’s metro population will hit 1,000,000 by 2023 under reasonable demographic projections. The City surpassed 900,000 this year. With growth around 1% per year – a trend which has continued for many years now – Omaha can reach this pinnacle.

As a real estate developer, this is fair reassurance. 10,000 people per year translated into roughly 2.2 households per year, leads to solid housing demand in the 4,000 to 5,000 annual range.

It’s also a much better program than some metro areas of similar size – areas that are flat or declining: Akron, Dayton, Albuquerque.

But let’s not get the confetti out yet. Look at some more vibrant areas: Des Moines is growing by 10,000 people a year from a base that is only in the 500,000 person range. Denver grows at 45,000 people per year, Minneapolis at 35,000 per year and Kansas City at 15,000 per year. Denver’s rate is double Omaha’s and never abated during the recession.

What do these cities have that Omaha doesn’t?

Minneapolis has a large number of universities that continually replenish the youth culture. Denver has beautiful mountains and lots of sunshine. These are convenient answers. A look below the demographic hood reveals a City of Omaha that is seriously lacking a diverse population, particularly in the arenas of business and political leadership.

Dynamic urban regions need smart people, plenty of capital, and the creativity and ingenuity that is fueled by a population that is diverse.

I was at a business function yesterday morning with some of the City’s top professionals. Women made up less than 20% of the audience and I don’t think I saw more than one or two people of color.

Skilled and entrepreneurial young minorities want to move to places like Atlanta, Washigton DC, LA and Chicago – cities that have emerged from checkered racial histories to become cultural melting pots that offer more political and business opportunities for people of color.

Perhaps Omaha can make this leap. There are some encouraging signs:

Omaha’s election of Jean Stothert as mayor and Deb Fischer as Senator is a major leap forward. Omaha cast an electoral vote for Barack Obama in 2008, so there’s hope for greater minority representation. Even gay folks find Council Bluffs more hospitable with Iowa’s permission of same sex marriage.

But until Omaha empowers more minority businesses and political leaders, the city risks being a place where creativity is stifled by an echo-chamber of white guys in blue blazers, khaki pants, and oxford shirts who continue to be the power brokers. Omaha’s population growth can’t accelerate without diversity.

Thoughts on the Omaha Apartment Market – March 2015

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The apartment market will continue to experience healthy demand in 2015, but increasing construction costs and higher property taxes are producing strong headwinds. Supply will exceed demand by 300 units this year: not enough to cause discomfort for owners and developers, but enough to reduce occupancy rates by 1-2%. Vacancy, especially in the core submarkets, will stay below a tolerable rate of 6%.

The biggest challenge this year for developers won’t be demand, it will be construction costs. It is likely that many projects that receive building permits will be delayed due to cost overruns.

The Omaha metro area will have 1,500 units permitted in 2015, but not all will be started due to costs outstripping rents. This is the same number as 2014 but slightly higher than needed.

The market will experience 2% rent growth, but gross income will be up by 3% by passing through more expenses – especially water and sewer fees.

There are additional threats to the apartment market on the horizon:

Home buying will pick up this year as people gain more confidence in the jobs market. The “people don’t want/can’t afford houses” story has become a tired cliche.

The biggest challenge to existing properties is the property tax re-assessment which occurred this year for the first time in 5 years. Real estate taxes for multifamily units (especially B and C properties) are set to increase 20% to 50%. New taxes kick in in 2016 – a hellish wake up call for those who aren’t prepared.

The agricultural economy is down. I don’t think people realize how much the farm business filters into Omaha. With commodities down, you’ll see lending decline, cutbacks at Claas, less vehicle spending and shopping trips to Omaha etc.

The sewer separation project is another problem. Every massive infrastructure project run by the government has been over budget. The previous rate increases are already reducing demand as people conserve water. With less water use, The City is going to be forced to raise sewer fees again in 2 years.

Here is my wild card… a major corporate downsizing or defection will occur. We’ve heard about Yahoo! and Woodmen, but there are others in transition: First Data, ConAgra, CHI Hospitals, Gavilon, Kelloggs, and Gordman’s are all searching for ways to cut costs.

Crime is a major factor in choosing where to (or where not to) live. The gun violence rate is appalling for a city of our size. This poses a very challenging environment in which to continue to attract residents to emerging neighborhoods in east Omaha. Marginal developments at the fringes of downtown may struggle from oversupply and perceived lack of safety.

Do I have any optimistic trends? Yes!

  • Entrepreneurs are creating jobs shed by corporates at a healthy rate. Omaha has a diverse economy and has a creative group of young people that used to leave the city but are now choosing to stay.
  • The education “industry” is strong and growing as UNO adds sophistication and UNMC is enhancing it’s services and growing in prestige.
  • The PayPal spin off from Ebay could unleash some advancement in electronic payment systems.
  • Companies like Home Instead and Right at Home growing with the elderly trend.
  • The Omaha 1% annual population growth story has been intact for years – nice and steady – and it will continue.
  • More disposable income will result from tighter labor markets and moderate gas prices.
  • The Fed is unlikely to raise rates. The dollar is too strong.

Today’s Charles Munger Wisdom

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“People chronically misappraise the limits of their own knowledge; that’s one of the most basic parts of human nature. Knowing the edge of your circle of competence is one of the most difficult things for a human being to do. Knowing what you don’t know is much more useful in life and business than being brilliant”

charlie-munger
“It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.”
He says he sees nothing worth investing in right now and hasn’t bought an investment in his personal accounts in at least two years. He is waiting for an irresistible bargain.
From Saturday’s Wall Street Journal (9/13/14)

OWH: Aksarben Village has another $82 million in development planned

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By Cindy Gonzalez / World-Herald staff writer

An additional $82 million in new construction projects headed to Aksarben Village — more office, retail, apartment and parking structures — will close up a couple of the biggest gaps left at the 70-acre midtown Omaha campus.

Not all of the tenants have been secured for those proposed properties, but developers say the village’s history suggests that won’t take long.

And except for a few hitches, such as the scrapping of a plan for owner-occupied town houses, the ongoing transformation of the old Thoroughbred racetrack grounds near 67th and Center Streets continues better than expected, said lead developer Jay Noddle of Noddle Cos.

So far, he said, the investment on projects built, under construction or planned at the village totals about $500 million. Original estimates a decade ago were about $150 million. That is just the village portion, not First Data Corp. or university-related buildings on the larger former Aksarben site.

City Planner Bridget Hadley said spinoff activity and property improvements in and around the village are what the city had hoped for: “Not only bringing forth more density, but a vibrant mixed use of work, play, entertainment and living options,” she said.

The latest changes, according to documents submitted to Omaha planners, total more than $82 million and seek $9.75 million in tax increment financing. The plans call for:

» An 80,000-square-foot office, retail and restaurant building on the corner of 67th Street and Mercy Road. A large corporate user reportedly has committed to occupying the top level of what would be a three- or four-story structure.

» A four-story retail and residential building fronting Frances Street that would have 10,000 square feet of retail and apartment lobby space on the ground floor; upper floors would contain 21 apartments.

» Another four-story building with 40 apartment lofts, facing west with a view of College of St. Mary softball fields and campus.

» As announced six weeks ago, a five-story building with Pacific Life Insurance Co. as anchor on the northeast corner of Mercy Road and Aksarben Drive. Restaurants, other retail shops and offices would occupy the rest.

» An 880-stall, four-story parking garage, replacing an existing surface parking lot and connecting by sky bridge to the Pacific Life building.

» About two blocks to the east, southwest of 64th Avenue and Frances Street, two apartment buildings. The largest would have four levels, 45 units and 31 parking stalls. A three-story eight-plex is designed in a “walk-up” style. Parking for both would be available in an existing garage servicing nearby businesses.

Construction on the Pacific Life building and connected parking garage are to begin soon, with opening of the office structure expected late next year, planning documents said. The other office and housing structures in the entertainment zone are to be done either next year or in 2016.

The other apartments are to be completed by fall 2016.

The TIF funding, a tool that allows property tax revenue from new construction to pay some redevelopment costs, is to be a topic at today’s City Planning Board meeting.

Alchemy Development, which is planning the new apartments at 64th Avenue and Frances Street, already has developed 183 other units at Aksarben Village. The next group would resemble the existing Pinhook Flats buildings, said Alchemy owner Bert Hancock, but have a distinct name and feature red and bold color elements to complement the neighboring DLR Group.

“We want to have an impressive corner element so when you’re looking from the new arena it will really attract people’s attention,” Hancock said, referring to the $88 million sports arena that the University of Nebraska at Omaha is to open next year at 67th and Center Streets.

Earlier plans by Noddle Cos. had called for the Alchemy site to be 21 upscale “live and work” town houses, the first owner-occupied residences in the village. But Hancock said people who could afford the homes typically are older and don’t like all the stair-climbing.

“If everything had gone as planned, there would have been more town homes, but that market really evaporated in the recession,” Hancock said. “We adjusted course, added apartments and everybody is happy. It has added to the amount of people that live and work in the area.”

The other proposed apartments and office/retail structures are projects primarily of Magnum Development and McNeil Co., which previously partnered on Aksarben Cinema.

John Hughes of Magnum said that new chunk would, for the most part, finish off the 8-acre entertainment “Zone 5” bordered by Stinson Park, Aksarben Drive (parallel to the Keystone Trail), 67th Street and Frances Street. (Also in that zone is the theater and businesses including DJ’s Dugout and Aspen Athletic Club.)

Securing TIF funds is an important part of making the proposed parts fall into place, Hughes said. He said he is in negotiations with various tenants to fill the space.

The land remaining lies mostly in Zone 6, the vacant block where the $50 million Waitt Plaza is to rise. Announced six months ago, the eight-story office and retail building with a parking garage is scheduled to be completed at the northeast corner of 67th and Frances Streets by early 2016.

Plans for that block call for two other office/retail buildings. Noddle said marketing and tenant recruitment for all three has ramped up.

A few property patches “here and there” remain and could become homes to various users as the village further matures, said Noddle. “It’s those little eclectic pieces that get filled in and really round out the mix in the village.”

Never Mind the Bollocks: 34 Insights From Nassim Taleb

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Nassim Taleb, the author of The Black Swan and Antifragile: Things That Gain from Disorder with 34 insights from his facebook account:

(Note: Thanks to Farnam Street Blog for this list. FSB is an outstanding site)

1. The artificial gives us hangovers, the natural inverse-hangovers.

2. The only problem with the last laugh is that the winner has to laugh alone.

3. Intelligence without imagination: a deadly combination.

4. There is no more unmistakable sign of failure than that of a middle-aged man boasting of his successes in college.

5. Never trust a journalist unless she’s your mother.

6. One of life’s machinations is to make some people both rich and unhappy, that is, jointly fragile and deprived of hope.

7. [If] someone is making an effort to ignore you he is not ignoring you.

8. The danger of reading financial and other news (or econobullshit) is that things that don’t make sense at all start making sense to you after progressive immersion.

9. It’s a sign of weakness to worry about showing signs of weakness.

10. Friends, I wonder if someone has computed how much would be saved if we shut down economics and political science departments in universities. Those who need to research these subjects can do so on their private time.

11. I trust those who trust me and distrust those who are suspicious of others.

12. A good man is warm and respectful towards the waiter or people of lower rank.

13. Journalists feel contempt for those who fear them and a deep resentment for those who don’t.

14. When someone starts a sentence with the first half containing “I”, “not”, and “but”, the “not” should be removed and the “but” replaced with “therefore.”

15. The only valid political system is one that can handle an imbecile in power without suffering from it.

16. Journalists cannot grasp that what is interesting is not necessarily important; most cannot even grasp that what is sensational is not necessarily interesting.

17. Never buy a product that the owner of the company that makes it doesn’t use, or, in the case of, say, medication, wouldn’t contingently use.

18. Just realized that to politely get rid of someone people in Brooklyn say “call me if you need anything.”

19. Injuries done to us by others tend to be acute; the self-inflicted ones tend to be chronic.

20. We often benefit from harm done to us by others; almost never from self-inflicted injuries.

21. You will never know if someone is an asshole until he becomes rich.

22. When someone writes “I dislike you but I agree with you”, I read “I dislike you because I agree with you.”

23. A great book eludes summaries. A great aphorism resists expansion. The rest is just communication.

24. For a free person, the optimal – most opportunistic – route between two points should never be the shortest one.

25. What counts is not *what* people say, it is *how much* energy they spend saying it.

26. Used skillfully, a compliment will be much more offensive than any disparagement.

27. I trust those who are greedy for money a thousand time more than those who are greedy for credentials.

28. Just as eating cow-meat doesn’t turn you into a cow, studying philosophy doesn’t make you wiser.

29. It is a great compliment for an honest person to be mistaken for a crook by a crook.

30. Many want to learn how to memorize things; few seek that rare ability to forget.

31. High Modernity: routine in place of physical effort, physical effort in place of mental expenditure, and mental expenditure in place of mental clarity.

32. The ultimate freedom lies in not having to explain “why” you did something.

33. A book that can be summarized should not be written as a book.

34. If you have something very important to say, whisper it.

Read more posts on Farnam Street on:
Nassim Taleb • Philosophy

Lübeck: A turning point in World War 2

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Anyone who has read Slaughterhouse Five learned about the Allied destruction of Dresden during World War Two. Most accounts of the attack recall it with regret at the massive destruction of innocent life and property in one of Europe’s most picturesque cities.

Looking back on decisions made during warfare, it’s always easier to claim that one attack was more heinous than another. In the heat of battle, when the very notion of freedom and justice is under threat in the face of a ruthless fascist regime, all bets seem to be off the table.

And yet, there were some moments in World War 2 that seemed to cross a line. The idea that there were “civilized” rules of war that somehow implied that attacking ordinary citizens was wrong, now seems quaint in the present era when dictators will go so far as to gas their own citizens.

The Palm Sunday 1942 bombing of the German port city of Lübeck was one of the moments of war that seemed to indicate a new threshold had been crossed.

Lübeck was considered to be an architectural treasure and was largely bereft of military targets. The Royal Air Force decided that they needed to begin a program of bombing civilian areas in an effort to diminish German morale. They had also recently developed incendiary bombs and wanted to deploy them in an older city that was sure to burn rapidly.

The bombing caused major destruction and civilian deaths, but did little to diminish German morale. As a retaliation, the Luftwaffe initiated a series of bombings against English cities known for their picturesque charm rather than for military importance. Bath, Exeter, Canterbury and York were bombed by the Nazi’s, but with limited success.

These raids were known as the Baedecker Blitz because the targets were selected from a 1937 Baedeker travel guide of Britain.