Cole Quoted in the Business Journal


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Talking Real Estate Investing with Ferguson Wellman 

Portland Business Journal
by Suzanne Stevens
February 4, 2016

Portland’s commercial and residential real estate markets are on fire. Home prices and apartment and office rents are soaring, and even with a full pipeline of new multifamily and commercial office buildings coming online in 2016, the consensus is that demand will not be sated.

Other U.S. cities are experiencing similar demand.

The environment has made real estate a prime target for investors.

Ralph Cole is executive vice president of research for Ferguson Wellman Capital Management. The Portland-based firm, with $4 billion worth of assets under management, manages a portfolio heavy on stocks and bonds, but it has been finding success in real estate as well.

The environment has made real estate a prime target for investors.

Ralph Cole is executive vice president of research for Ferguson Wellman Capital Management. The Portland-based firm, with $4 billion worth of assets under management, manages a portfolio heavy on stocks and bonds, but it has been finding success in real estate as well.

We talked to Cole about the current landscape for real estate investing and his outlook for 2016.

How has the booming real estate market influenced your investment mix? The main driver for us on real estate over the last five or six years has been the quest for yield. As people buy asset classes, they want dividends and real estate provides a nice steady cash flow. In capital markets people have been willing to pay up for Real Estate Investment Trusts. They’ve become very expensive. The question is, is real estate really expensive when related to other fixed income alternatives? If you can get 2 percent from a bank and you can get 5 percent from a real estate investment, you’re more willing to pay up for that yield if interest rates are going to stay low.

Looking ahead, are there deals to be had? There are very few bargains in the world eight years into an expansion and you have to start looking at things on a relevant basis. It might not be cheap but it’s cheap relative to other options. Does real estate end like it did lasat time? We don’t know. These cycles do end and hopefully you manage the risk associated with it. For the next year, though, real estate is in a good place.

When you’re making investment decisions, how do you factor in the fact that this up-cycle has been underway for years and that it will eventually? The main thing we look at in the later end of a cycle is the debt associated with any project. It will be the downfall of any investment. If we buy something in real estate, we’re going to make sure it’s low leverage. We know what we’re going for and it’s 7 percent to 8 percent. We want lower risk. It definitely offers a third leg to the stool, with stock and bonds.

We’re seeing a lot of new development, certainly in Portland, but elsewhere nationwide. What are you thought on investing in new projects? We’re not ever going to invest in development. There’s too much risk in it. It works until it doesn’t. (But overall), as we look at real estate, the fundamentals are dynamite. Rents are going up, jobs are plentiful. It seems if you find in-place real estate with a decent yield, that’s where we want to be.




Rainer Quoted in the Register Guard


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Lane Community College Celebrates Grand Opening of Center Renovations

Eugene Register Guard
by Junelle Hogen
January 28, 2016

Lane Community College student body President Ashley Jackson, standing in front of more than 200 people on the second floor of the college’s Center Building on Wednesday afternoon, smiled as she thought about what she won’t miss following two years’ worth of major renovations at the building.

“We’ll just forget about the sound of drilling that went on the campus this summer,” she said with a laugh.

“They’re going to come into this building, and they’re going to have dignity,” Jackson said.

After three years of planning, the college on Wednesday celebrated the completion of the $35 million renovation project at the Center Building, located in the heart of campus.

Construction began in June 2014, and the renovated building opened to students and faculty this past fall, three months ahead of schedule.

The project was funded through private gifts to the LCC Foundation and by proceeds from an $83 million bond approved by voters in 2008.

The project was affectionately called the Center for Learning and Student Success, or CLASS, school officials said. The project aimed to remake the center of campus into a “vibrant learning commons” that would increase student engagement, shown by research to help students complete their education.

Features of the project include a new plaza on the formerly dark west side of the building; a new first-floor food court; a renovated Renaissance Room demonstration restaurant and kitchen for culinary and hospitality students; and a new Titan Store bookstore.

The second floor features numerous group study areas, a student help desk tech center, the library, a multimedia lab, a space for student clubs and organizations, a print center, and the Robert Ackerman Tutor Central study center.

The third floor includes a quiet study area, additional group study rooms, a testing center and the second floor of the library.

The building is one of the oldest on campus. LCC Foundation President Don Rainer, who attended LCC in his student days before transferring to the University of Oregon, said the Center Building has long lacked for student spaces.

“I do remember spending more time in my car in the upper lot studying than here,” Rainer said Wednesday.

Lease Crutcher Lewis of Eugene served as construction manager and general contractor on the project, and local architectural firm PiVOT, along with Chicago-based Perkins and Will, completed the designs.

LCC President Mary Spilde said more than 60 percent of the project work was provided by local subcontractors.

“It truly was like remodeling your kitchen while still living in your house,” she said about the construction process, which mainly took place over the last two summers.

The 15-year bond approved by voters eight years ago was intended to renovate, upgrade and remodel workforce training and education facilities. So far, it has also been used to remodel several other buildings on LCC’s main campus in south Eugene, for construction of its building in downtown Eugene, for remodeling of its Florence center, and for a number of campus safety renovations.

Wednesday’s grand opening ended in an atmosphere of celebration as the college’s mascot, Ty the Titan, danced down rows of chairs to join Spilde, Rainer and other campus leaders to cut a ceremonial blue ribbon put up in front of the library.

“I feel we’ve come full circle,” said LCC Tutoring Services coordinator Liz Coleman.

Follow Junnelle on Twitter @JunnelleH . Email


Staying the Course


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by Shawn Narancich, CFA
Executive Vice President of Research

Belaboring the Payroll Report

 At first glance, what some investors thought might by a perfect U.S. labor report for January met with a resounding thud in financial markets Friday.  It seemed to be one without so many jobs created that the Fed would be forced into raising rates at an uncomfortably fast pace, yet a report that was still strong enough to reinforce the notion of forward progress in the economy. Unfortunately, it ended up being another data point that investors viewed as the glass half empty.

Second Derivatives

Notwithstanding the world’s largest economy adding 151,000 net nonfarm jobs last month, blue-chip stocks are retesting their recent lows as investors fret about waning expectations for global economic growth and earnings. Will the Fed cast a blind eye to the increasingly easy money policies of Europe and Japan? Will it ignore the struggles that China’s leadership is having managing its economy to a soft landing? We don’t think so. We believe the Fed will respond as it did back in September following China’s surprise currency devaluation – it will defer further rate hikes that otherwise might happen if the U.S. dollar weren’t the transmission mechanism of global monetary policy.

A Toothless FANG

As money managers continue soldiering through an earnings season that has had its fair share of hits and misses, nothing better exemplifies its mixed nature than what has happened with the growth darlings of 2015. Facebook, Amazon, Netflix and Google (the FANG stocks) have declined by an average of 15 percent so far this year, roughly doubling the underperformance of the broader market. Investors were impressed with the accelerating mobile advertising growth reported by Facebook, as well as the strong ad revenues generated by Google parent Alphabet, from both its YouTube property and the search engine. On the other hand, Netflix’s premium valuation has failed to resonate with investors disappointed by the company’s waning U.S. subscriber growth.  Amazon’s stock has been similarly punished for reporting both top and bottom line misses for its fourth quarter results.

Remaining Steadfast

We continue to believe that the U.S. economy will expand this year, that the trade-weighted dollar will moderate, and that oil prices will recover. If we are correct, then the narrow, growth-stock led market that investors experienced last year should broaden to lift the stock prices of attractively valued companies in lagging sectors such as energy and the financials. As communicated in our 2016 Investment Outlook presentations, we advise investors against chasing the “hot dot” growth stocks like Amazon and Netflix, and express our belief that the seven-year-old bull market is not over.

Our Takeaways from the Week

  • Concerns about economic growth are permeating financial markets
  • We continue to foresee earnings growth and higher stock prices in 2016






Earnings Season Underway


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by Brad Houle, CFA

Executive Vice President

As of Thursday this week, roughly one-third of the S&P 500 companies have reported earnings for the fourth quarter of 2016. Of the 171 companies that have reported earnings 8 percent were in-line with expectations, 19 percent had a negative surprise and 72.6 percent reported a positive surprise. Overall, earnings for the companies that have reported are -1.6 percent lower than the prior period.

Earnings for 2015 have had the headwinds of a stronger dollar as well as the declining price of oil. The strong dollar makes goods exported from the U.S. to other countries more expensive on a relative basis than goods from countries with weaker currencies. For example, if Caterpillar is selling a bulldozer in Europe and the U.S. dollar has appreciated 10 percent versus the euro in the last year, all things being equal, the bulldozer is 10 percent more expensive to a buyer in Europe. A bulldozer from China would potentially be less expensive on a relative basis if the yuan had declined in value versus the euro.

The falling price of oil has impacted earnings of energy companies that make up the S&P 500. At the start of 2015, the energy sector was 8.4 percent of the S&P 500 and due to the drop in energy stock prices, the weighting has declined to 6.4 percent. The price of oil has tumbled 30 percent in the past six months due to oversupply.

We believe that the big move in the strengthening dollar has already occurred and the supply and demand in the oil market should find some equilibrium. The dual headwinds of the strong dollar and falling oil price should be less impactful to our economy and corporate earnings for the stock market in 2016. As the rest of the S&P 500 companies report earnings we will be watching what companies are saying about their expectations for 2016. With the sting of last year’s dual headwinds, companies that give earnings guidance for the coming year will most likely be conservative in what they are seeing for 2016.

There was positive economic data out this week. U.S. GDP rose 2.4 percent for 2015 and real after-tax personal income climbed 3.5 percent, which was the most since 2006. In addition, according to Bloomberg, household spending rose 3.1 percent, which was the most in a decade. The U.S. consumer, which makes up about 70 percent of the U.S. economy, continues to be in great shape.

Our Takeaways for the Week:

  • Fourth quarter 2015 earnings have generally been better than expected
  • The U.S. consumer continues to be in great shape