While I am not a big fan of gossip television shows, I do enjoy the spots were they talk about the massive houses of the stars that are up for sale, sold and re-sold and re-sold. You see the point. Real Estate changes hands daily but there are certain landmarks that age with a history of it own. I read the stories in the New York Times, LA Times, Miami Herald and others about the sales and the storied past that goes with the article.
Recently, the story of El Fureidis, 631 Para Grande Lane, Montecito,California appeared.
It is one of those homes with a long storied past and an architects dream floor plan. It is the fabled home known as the Old Scarface Mansion. The house was listed for a mere $35 million but was marked down to $17.9. Roughly, a half price sale.
That article got me to thinking. Again. The real estate market can be a fickle business. The instability in the market and especially to the attachments and/or affections of its owners, move houses and also let them sit on the market, sometimes for years. While I was doing all that thinking, the eureka point finally materialized this morning as I was pouring my first cup of coffee. The real estate market is just like the steel business. If these two businesses are not twins, they most certainly are brothers and sisters to each other.
Over the years, I can recall one coil of steel sitting in a super large warehouse down off Jefferson in the old warehouse section of near Downtown Detroit. The coil sat in one bay, right on the corner of a cross isle were trucks would pull inside to load under an overhead crane. Nothing so unusual about that at first glance except, that the coil had been produced at the River Rouge Plant of Ford Motor Company's steel plant, which at the time was the 9th largest steel mill in the world. Another thing about those coils were that they were massive for steel coils, with 60 OD and weighing in 48,000 pounds. I have seen some that hit the 50,000 pound mark. The point being is that in the coil world, a coil that size is like having a 7-foot 6-inch center on a basketball team of 5-foot 8-inch players. It stood out like a sore thumb.
As I would walk through the warehouse, I would look at the tag. The names on the tag was always different. The coil had not moved an inch on the floor of the warehouse but the tag information told a whole different story. Going into the office and pulling up the information on the tag would bring up the coil sale price. That was where the story came about.
Sale 1
The coil came into the warehouse at a price of $18.00 per cwt (hundred weight). It sat for several months. Tag change. The coil now was sold to a steel company in Chicago for $13.00 cwt but the coil remained in the warehouse with a new tag showing the new owner.
Sale 2
Several more months went by and there was another tag change. The coil had been sold to a steel broker in Cleveland, Ohio at $15.00 per cwt. Once again, the steel coil never moved out of the warehouse. At this point you are thinking that someone should be charging rent on that thing. Well someone did. The warehouse collected the rent fee. The typical rent went like this: $1.00 in;$1.00 on; $1.00 out. That translates to one dollar per cwt when the coil came into the warehouse. One dollar per cwt added on each month of storage and one dollar per cwt when the coil shipped out of the warehouse. Does not sound like much but there are no expenses. The storage bay can be under roof for more than a quarter mile, It's hot in the summer It's cold in the winter. The lights are provided by the day and at night it is a place where horror movies sometimes got filmed.
Sale 3
The coil had another tag change. This time, nearly two years later, the coil was sold back to the original owner by the broker in Cleveland. The price was entered as $ 17.00 cwt. The original owner had repurchased the original coil, that he had sold to a Chicago warehouse at 13.00 cwt, for $17.00 per cwt. In essence loosing $5.00 cwt the first sale and spending $13.00 to repurchase. That is, if the original owner really did have $18.00 per cwt in the coil when the coil came into the warehouse the first time. Chances are he purchased the coil either from River Rouge or from a broker at $7 to $8.00 per cwt. Things like that happen in the steel business.
It's time to also mention that financial market conditions, supply and demand in the steel business, production at the mills, imports, exports, the automotive industry, the metal furniture business, the appliance industry all played a part in the sale of steel coils sitting in a warehouse owned by steel distribution centers, steel warehouses, steel brokers, individual fabricators, contractors and who knows who else excluding the scrap dealer.
The final sale
The shipping tag was finally placed on the coil some 5-years post arrival. It shipped to a steel ware house/service center near Richmond,Indiana where it was used in a small stamping plant that hammered out pieces for a metal casket company. The coil was a good buy at the time for both the seller and the end user.
So, in the long haul or in the short haul, steel coils sit as the unglamorous sisters of the real estate market. The are much the same, while being their own beast. The steel salesman, the warehouse owner, broker all have brothers in the real estate market. In the family of business every thing is much the same.
It was not so strange to find steel industry people in a Federal Golf League; a bunch of steel salesmen, warehouse owners, steel processors playing golf weekly with partners that were FBI, IRS, US Customs, Postal Inspectors, US Attorneys,US Marshall's. My partner, Barney, was IRS, God Rest His Soul. As it turned out, Barney was the best golf coach I ever had. He even knew my neighbor, an attorney husband and wife that both worked for the IRS.
Funny thing about business.
20 July 2015 edit to change type points and take out a sentence to combine with another for clarity.
Recently, the story of El Fureidis, 631 Para Grande Lane, Montecito,California appeared.
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| Even this A-380 can move a house or a steel coil Funny Thing About Business |
That article got me to thinking. Again. The real estate market can be a fickle business. The instability in the market and especially to the attachments and/or affections of its owners, move houses and also let them sit on the market, sometimes for years. While I was doing all that thinking, the eureka point finally materialized this morning as I was pouring my first cup of coffee. The real estate market is just like the steel business. If these two businesses are not twins, they most certainly are brothers and sisters to each other.
Over the years, I can recall one coil of steel sitting in a super large warehouse down off Jefferson in the old warehouse section of near Downtown Detroit. The coil sat in one bay, right on the corner of a cross isle were trucks would pull inside to load under an overhead crane. Nothing so unusual about that at first glance except, that the coil had been produced at the River Rouge Plant of Ford Motor Company's steel plant, which at the time was the 9th largest steel mill in the world. Another thing about those coils were that they were massive for steel coils, with 60 OD and weighing in 48,000 pounds. I have seen some that hit the 50,000 pound mark. The point being is that in the coil world, a coil that size is like having a 7-foot 6-inch center on a basketball team of 5-foot 8-inch players. It stood out like a sore thumb.
As I would walk through the warehouse, I would look at the tag. The names on the tag was always different. The coil had not moved an inch on the floor of the warehouse but the tag information told a whole different story. Going into the office and pulling up the information on the tag would bring up the coil sale price. That was where the story came about.
Sale 1
The coil came into the warehouse at a price of $18.00 per cwt (hundred weight). It sat for several months. Tag change. The coil now was sold to a steel company in Chicago for $13.00 cwt but the coil remained in the warehouse with a new tag showing the new owner.
Sale 2
Several more months went by and there was another tag change. The coil had been sold to a steel broker in Cleveland, Ohio at $15.00 per cwt. Once again, the steel coil never moved out of the warehouse. At this point you are thinking that someone should be charging rent on that thing. Well someone did. The warehouse collected the rent fee. The typical rent went like this: $1.00 in;$1.00 on; $1.00 out. That translates to one dollar per cwt when the coil came into the warehouse. One dollar per cwt added on each month of storage and one dollar per cwt when the coil shipped out of the warehouse. Does not sound like much but there are no expenses. The storage bay can be under roof for more than a quarter mile, It's hot in the summer It's cold in the winter. The lights are provided by the day and at night it is a place where horror movies sometimes got filmed.
Sale 3
The coil had another tag change. This time, nearly two years later, the coil was sold back to the original owner by the broker in Cleveland. The price was entered as $ 17.00 cwt. The original owner had repurchased the original coil, that he had sold to a Chicago warehouse at 13.00 cwt, for $17.00 per cwt. In essence loosing $5.00 cwt the first sale and spending $13.00 to repurchase. That is, if the original owner really did have $18.00 per cwt in the coil when the coil came into the warehouse the first time. Chances are he purchased the coil either from River Rouge or from a broker at $7 to $8.00 per cwt. Things like that happen in the steel business.
It's time to also mention that financial market conditions, supply and demand in the steel business, production at the mills, imports, exports, the automotive industry, the metal furniture business, the appliance industry all played a part in the sale of steel coils sitting in a warehouse owned by steel distribution centers, steel warehouses, steel brokers, individual fabricators, contractors and who knows who else excluding the scrap dealer.
The final sale
The shipping tag was finally placed on the coil some 5-years post arrival. It shipped to a steel ware house/service center near Richmond,Indiana where it was used in a small stamping plant that hammered out pieces for a metal casket company. The coil was a good buy at the time for both the seller and the end user.
So, in the long haul or in the short haul, steel coils sit as the unglamorous sisters of the real estate market. The are much the same, while being their own beast. The steel salesman, the warehouse owner, broker all have brothers in the real estate market. In the family of business every thing is much the same.
It was not so strange to find steel industry people in a Federal Golf League; a bunch of steel salesmen, warehouse owners, steel processors playing golf weekly with partners that were FBI, IRS, US Customs, Postal Inspectors, US Attorneys,US Marshall's. My partner, Barney, was IRS, God Rest His Soul. As it turned out, Barney was the best golf coach I ever had. He even knew my neighbor, an attorney husband and wife that both worked for the IRS.
Funny thing about business.
20 July 2015 edit to change type points and take out a sentence to combine with another for clarity.
