CHICAGO | General Developments

[aic4ever]

Originally Posted by Nowhereman1280

No, the SEC was reviewing it because they tried a type of accounting that ignores marketing costs which would indeed have inflated their potential for profitability.

Revenue - Cost = Profit

If you ignore ANY cost, you are lying. It's not an "accounting model." When you're lying to people to get them to give you money, it's called fraud.

I don't know what you don't understand here. You argue that Groupon is a "marketing company that uses the internet," yet you then turn around and seem to intimate that it's OK for them to IGNORE MARKETING COSTS in their business model.

If they are a MARKETING company, wouldn't ALMOST ALL OF THEIR COSTS be for MARKETING???

So Groupon's business model is hypothetically something like...

REVENUE FROM GROUPONS SOLD: $3 billion

COSTS OF...
Buildings
Utilities
Executives
Salaries/Benefits of People who don't work in marketing
Computers for people who don't work in marketing
Etc...

$2 billion

PROFIT - $1 billion

Hence...give us money!!!

But then it's just OK to ignore whatever their marketing costs are? What if their marketing costs are $2 billion? Then there's no profit!

I'm not arguing that they're not a successful business or that they're not profitable, because I obviously don't know the real numbers. I am arguing that they're "accounting model" is bullshit for ignoring costs. You don't project PROFIT without first acknowledging ALL of your costs. It doesn't work that way.

The SEC doesn't review business models for "sustainability", it reviews the applications to see whether or not they are misleading to the public. After all, there are plenty of unsustainable business models that people buy shares in knowing full well it's only going to last 5 or 10 years or whatever. All business models are unsustainable in the long run.

Unprofitable = Unsustainable. I wouldn't disagree that Groupon's IPO is going to be gigantic. Hell, I'll probably try to get in on it. But unless they can project a business model that means they are going to make money in the long run, the stock is going to get flipped like a 2006 condo. Buy it cheap, sell it high while the Groupon craze is still rolling, and run for the hills.

I don't doubt they'll be around for a good 5-10 years, but, to bring this all full circle, is that the kind of tenant we want to see in Wrigley building? Or do we not really care so long as somebody's in there?

[Nowhereman1280]

Originally Posted by aic4ever

Revenue - Cost = Profit

If you ignore ANY cost, you are lying. It's not an "accounting model." When you're lying to people to get them to give you money, it's called fraud.

You clearly have no knowledge of accounting. Accounting isn't black and white "we have x costs and y revenue". No, most of accounting is determining what assets and liabilities should be considered what kind of credit or debit. They weren't ignoring costs, they were counting Marketing Expenses as a one time expense instead of a recurring expense which inflated the long run profitability of the company. That choice was challenged by the SEC and they backed down. It was not fraudulent, but only another way of describing the same information that the SEC did not like. There are a million ways to skin a pig in accounting.

I don't know what you don't understand here. You argue that Groupon is a "marketing company that uses the internet," yet you then turn around and seem to intimate that it's OK for them to IGNORE MARKETING COSTS in their business model.

If they are a MARKETING company, wouldn't ALMOST ALL OF THEIR COSTS be for MARKETING???

Uhhh no. Leo Burnett is a marketing company and I guaranteeing you that less than 1% of their costs are marketing. Being a marketing company means you derive your revenue from marketing to others, it does not mean that you spend money on ads. However, Groupon is in a major growth stage and is therefore spending left and right on advertising for itself.

Making money by selling marketing services =/= to marketing expense. Again, you have no idea what you are talking about if you cant' tell the difference between the two.

Also, I already addressed the "tech company" comments in another thread as a casual comment that is in no way related to this argument.

I'm not arguing that they're not a successful business or that they're not profitable, because I obviously don't know the real numbers. I am arguing that they're "accounting model" is bullshit for ignoring costs. You don't project PROFIT without first acknowledging ALL of your costs. It doesn't work that way.

If you aren't arguing that, then why are you getting so uppity about this? Again, you don't know what the hell you are talking about and you just admitted it. You don't know the numbers because you think they are "ignoring costs" when the issue is really that they are projecting some costs to decline in the future. I.E. Groupon thinks they will spend less and less on marketing as they become more established. Therefore they project their marketing expenses to drop. They aren't claiming they didn't spend X amount of money on marketing last year.

Unprofitable = Unsustainable. I wouldn't disagree that Groupon's IPO is going to be gigantic. Hell, I'll probably try to get in on it. But unless they can project a business model that means they are going to make money in the long run, the stock is going to get flipped like a 2006 condo. Buy it cheap, sell it high while the Groupon craze is still rolling, and run for the hills.

I don't doubt they'll be around for a good 5-10 years, but, to bring this all full circle, is that the kind of tenant we want to see in Wrigley building? Or do we not really care so long as somebody's in there?

No, unprofitable =/= unsustainable. Companies are frequently unprofitable in the short run. It's only continued unprofitability in the long run that causes them to fold. Just look at the airlines which constantly bleed money, but have so much capital built up that they continue to operate. This is no different than Groupon technically turning a loss (though it wouldn't be a loss when you take acquisition costs out which are one time expenses) for a year or two. As long as they make a profit over the long run they will be sustainable. That's what this whole SEC thing was about, how profitable they can project they will be in the future based upon which expenses are one time only and which are recurring.

Yes, Groupon is the kind of tenant we want there because they are likely the next Sears or Montgomery Ward, a completely new way of selling products and they will be around for a long long time. Venture Capitalists aren't idiots. They've done the math and see big money from Groupon which is, without question, the fastest growing company in the history of the world...

[J_M_Tungsten]

So back to general development questions and topics... Why is it that the Chicago Ave and Lasalle area have such a hard time building up? It's so close to the Brown and Red line, near major highway access, and close to the loop. But for some reason, the corner of Chicago and Lasalle consists of a giant billboard hovering over a surface lot, a 1 story currency exchange (with parking of course), a small 7 story building with a U.S. Cellular as its ground level retail, and my least favorite, the Moody Bible Institute. Have there ever been plans to develop this area at one time? Is this the gap someone was talking about when referring to filling in from Atrium village to the river? Is it realistic to think it will be developed soon?

[intrepidDesign]

Not that any of the above discussion is moot, but WSJ says no Groupon move to Wrigley, but maybe Lightbank.

Link

[aic4ever]

Originally Posted by Nowhereman1280

You clearly have no knowledge of accounting. Accounting isn't black and white "we have x costs and y revenue". No, most of accounting is determining what assets and liabilities should be considered what kind of credit or debit. They weren't ignoring costs, they were counting Marketing Expenses as a one time expense instead of a recurring expense which inflated the long run profitability of the company. That choice was challenged by the SEC and they backed down. It was not fraudulent, but only another way of describing the same information that the SEC did not like. There are a million ways to skin a pig in accounting.

So what, were they condensing projected value of all future marketing costs down to present value and considering it sunk? Or were they, as I said, ignoring future costs? It's a valid question, because marketing is never a one-time expense. Don't mistake my saying I don't know the exact detailed numbers for meaning I don't know what I'm talking about.

Uhhh no. Leo Burnett is a marketing company and I guaranteeing you that less than 1% of their costs are marketing. Being a marketing company means you derive your revenue from marketing to others, it does not mean that you spend money on ads. However, Groupon is in a major growth stage and is therefore spending left and right on advertising for itself.

Making money by selling marketing services =/= to marketing expense. Again, you have no idea what you are talking about if you cant' tell the difference between the two.

Also, I already addressed the "tech company" comments in another thread as a casual comment that is in no way related to this argument.

This is a matter of classification of costs. Again, without going through their application, I wouldn't know the numbers. I would be inclined to define "marketing" differently than you, perhaps. I look at Groupon and I all see that they do is marketing. Yes, they sell marketing services. A coupon is technically an ad for another company. But they have people working the phones and email all day long every day bringing the companies in to get the groupon set up. That's marketing to me. Everything involved with the sale until the deal generates revenue. So to me that made it seem like they were ignoring a huge bulk of operating costs.

Perhaps I'm wrong on that classification, and therefore the severity of the way they "skinned the pig" with their shady accounting, but the premise of my argument still stands.

If you aren't arguing that, then why are you getting so uppity about this? Again, you don't know what the hell you are talking about and you just admitted it. You don't know the numbers because you think they are "ignoring costs" when the issue is really that they are projecting some costs to decline in the future. I.E. Groupon thinks they will spend less and less on marketing as they become more established. Therefore they project their marketing expenses to drop. They aren't claiming they didn't spend X amount of money on marketing last year.

But you already said they took marketing as a "one-time" cost. So which is it. They can't do that and then be projecting future costs for it, too.

I'm uppity about it probably for the same reason you are. They are a Chicago company that should be great, and I want them to be. But I've either been involved in or seen too many projects where people ignore the reality of the costs of the project, only to see it start and fail, or just never start, to be as enthusiastic about them as I would like to be given that report. Made it seem like they're playing games to even make it work.

No, unprofitable =/= unsustainable. Companies are frequently unprofitable in the short run. It's only continued unprofitability in the long run that causes them to fold.

Yes, Groupon is the kind of tenant we want there because they are likely the next Sears or Montgomery Ward, a completely new way of selling products and they will be around for a long long time. Venture Capitalists aren't idiots. They've done the math and see big money from Groupon which is, without question, the fastest growing company in the history of the world...

Here's hoping.

Now I wonder how long it will be before they demand their own TIF?

[emathias]

Originally Posted by J_M_Tungsten

So back to general development questions and topics... Why is it that the Chicago Ave and Lasalle area have such a hard time building up? It's so close to the Brown and Red line, near major highway access, and close to the loop. But for some reason, the corner of Chicago and Lasalle consists of a giant billboard hovering over a surface lot, a 1 story currency exchange (with parking of course), a small 7 story building with a U.S. Cellular as its ground level retail, and my least favorite, the Moody Bible Institute. Have there ever been plans to develop this area at one time? Is this the gap someone was talking about when referring to filling in from Atrium village to the river? Is it realistic to think it will be developed soon?

I think there is just a bunch of things holding it back, not any one thing.

I believe Moody owns the billboard lot on the corner of Chicago/LaSalle, although I might be wrong.

Reilly quashed a nicely dense proposal for the NE corner of that block (Clark/Chestnut) that probably sent a bad message to other developers.

It's only really been that last five years or so that Michigan Avenue traffic has really spilled over west to State Street. And the combination of the YMCA and the Holy Name parking lot is currently a very effective block for traffic going further west. There's also that parking garage facing Chicago between Dearborn and Clark that isn't good for pedestrian traffic.

That currency exchange isn't great, but I actually think it's the least of our worries. Having Walmart in the old Pearl space may actually help. As much as I dislike Walmart, it will generate foot traffic and provide retail incentives for the area. That surface lot across the street from there seems to be controlled by the Enclave nightclub. They may not own it, but I think they encourage the owners to keep it vacant, and there isn't much incentive for it not to be.

The surface lot between Wells and Lasalle on the south side of Chicago also seems to be ripe for development. I don't know why that hasn't gotten built. It might be owned by Moody, perhaps. It would be a perfect place to allow a high-density mixed-income, low parking-ratio mid-rise tower to go in.

Finally, all those lots along Chicago to the west of the Brown Line certainly suffered due to the proximity of Cabrini Green. But, with the success of Kingsbury Park and the area along Kingsbury north of Chicago, it seems natural that some nice buildings along Chicago will eventually appear. I think perhaps developers are waiting to see what happens with various transit proposals, such a BRT for Chicago Ave, or even a Clinton subway. Either (or both) of those could completely change the development environment for that area. Currently places like Kingsbury Park are kinda isolated from transit compared to the rest of River North, but either of those projects would help a lot.

With any luck, though, that entire Chicago Ave corridor between the Lake and the River could become amazing in the next 20 years or so if trends continue the direction they've been going and the City figures out how to add a bit to the transit system.

[Nowhereman1280]

Originally Posted by aic4ever

So what, were they condensing projected value of all future marketing costs down to present value and considering it sunk? Or were they, as I said, ignoring future costs? It's a valid question, because marketing is never a one-time expense. Don't mistake my saying I don't know the exact detailed numbers for meaning I don't know what I'm talking about.

...

I'm done talking to you about this if you can't understand this basic principle. They were not ignoring future costs, they were projecting that most of their current marketing costs would not continue into the future which is likely, but also possibly not the case. They weren't ignoring anything and "sunk costs" have absolutely nothing to do with financial accounting (which is what we are talking about here). That concept is limited almost exclusively to managerial accounting which is what is primarily used to make business decisions.

I'm not mistaking anything here, not only are you completely unfamiliar with the basic numbers and accounts here, but you don't even understand basic accounting and are bringing up topics that are more related to economics than to financial accounting.

Back to the topic of this thread...

[ardecila]

Originally Posted by J_M_Tungsten

So back to general development questions and topics... Why is it that the Chicago Ave and Lasalle area have such a hard time building up? It's so close to the Brown and Red line, near major highway access, and close to the loop. But for some reason, the corner of Chicago and Lasalle consists of a giant billboard hovering over a surface lot, a 1 story currency exchange (with parking of course), a small 7 story building with a U.S. Cellular as its ground level retail, and my least favorite, the Moody Bible Institute. Have there ever been plans to develop this area at one time? Is this the gap someone was talking about when referring to filling in from Atrium village to the river? Is it realistic to think it will be developed soon?

To simplify what emathias said, several institutions own large parcels in the area, including the Archdiocese of Chicago, Moody, and Loyola. Since none of them pay property tax, they have far less incentive to develop their land. Only Loyola understands proper urban protocol, probably thanks in part to Nowhereman who served on their Capital Projects committee or something.

Does anyone know if that Loyola project for the Business School is still a go?

[harryc]

Re-Decking last week.





West o the river

[spyguy]

^Fascinating, especially the ones where you can see the tracks below.

Harper Court demolition.


Harper Court/ Imageshack

Harper Court/ Imageshack
The future:



Signs up for Five Guys across the street:

53rd street blog

Part of the new agreement between the city and the University of Chicago calls for the university to make improvements to the 59th Street station and extend the platform to 60th. The city will make improvements to 53rd, Harper, and Lake Park.

[Rizzo]

Demolition of a home on Bellevue

[Nowhereman1280]

Originally Posted by ardecila

To simplify what emathias said, several institutions own large parcels in the area, including the Archdiocese of Chicago, Moody, and Loyola. Since none of them pay property tax, they have far less incentive to develop their land. Only Loyola understands proper urban protocol, probably thanks in part to Nowhereman who served on their Capital Projects committee or something.

Does anyone know if that Loyola project for the Business School is still a go?

Well I would love to take credit for helping with that, but Loyola still has a long ways to go. The real hero is Michael Brosko who is young and energetic and full of pragmatic, urban, solutions to Loyola's needs. He is the real driver behind Loyola's shift to decent design and above average urban planning.

He is also the brains behind this "Loyola Inc." program where Loyola now has a series of businesses that are 100% student run and a part of the business school. They spun off their property management department (which is huge considering they own dozens of buildings that they don't use) but I unfortunately missed that experience by one year.

Anyhow, the B-school is still a go last I heard. However, they are in the middle of a big fundraising drive and need to complete that before they will have the funds necessary to complete it.

[Rizzo]

Mather building. I brightened the interior in photoshop to highlight the ghost signage on the wall.

Also snapped a few shots of the Esquire theater. It would also be awesome if they did a green roof.


Finally a view of Ogden

[harryc]

Hayward I appreciate the ghost signage on the Mather building, hadn't seen that.

[aic4ever]

Originally Posted by Nowhereman1280

...

I'm done talking to you about this if you can't understand this basic principle. They were not ignoring future costs, they were projecting that most of their current marketing costs would not continue into the future which is likely, but also possibly not the case. They weren't ignoring anything and "sunk costs" have absolutely nothing to do with financial accounting (which is what we are talking about here). That concept is limited almost exclusively to managerial accounting which is what is primarily used to make business decisions.

I'm not mistaking anything here, not only are you completely unfamiliar with the basic numbers and accounts here, but you don't even understand basic accounting and are bringing up topics that are more related to economics than to financial accounting.

Back to the topic of this thread...

Fine by me. You explained the situation in circles anyway. In one explanation they were sunk costs, in one they weren't. I was making what I thought were relevant points while trying to get more information on a vague topic, but you were too busy trying to prove I'm too stupid to be part of the conversation. More power to you there, if you'd like it, I guess. I understand accounting and it's subsets within a company structure just fine, including sunk costs and how to play with them.

I would point out, though, when you're talking about an organization whose revenues are well into the billions, that it's probably more reasonably talked about in terms of economics than in terms of accounting anyway. Perhaps a matter of opinion there, but those are allowed aren't they? Unless of course I'm still too stupid to be a part of your conversation.

[Nowhereman1280]

Originally Posted by aic4ever

Fine by me. You explained the situation in circles anyway. In one explanation they were sunk costs, in one they weren't. I was making what I thought were relevant points while trying to get more information on a vague topic, but you were too busy trying to prove I'm too stupid to be part of the conversation. More power to you there, if you'd like it, I guess. I understand accounting and it's subsets within a company structure just fine, including sunk costs and how to play with them.

I would point out, though, when you're talking about an organization whose revenues are well into the billions, that it's probably more reasonably talked about in terms of economics than in terms of accounting anyway. Perhaps a matter of opinion there, but those are allowed aren't they? Unless of course I'm still too stupid to be a part of your conversation.

I never brought up sunk costs, so I don't know what you talking about. What I think you are doing is confusing One-time expenses with sunk costs. The two are not even remotely similar.

I'm not sure why you are bringing economics vs accounting up. Micro Economics does not attempt to explain whether or not a particular business plan will be successful, it attempts to explain how a firm will behave.

[tintinex]

Originally Posted by spyguy

Harper Court demolition.

I used to go to that Hollywood video. This is definitely a great improvement and cannot wait to see how my old hood looks like when this is done

Signs up for Five Guys across the street:

53rd street blog

I love the minimalism of this sign. Maybe it's time I finally have one of those burgers I keep hearing about

[StormFire]

Originally Posted by Nowhereman1280

The only reason people were resistant to the Sears renaming is that Willis is even less loyal to Chicago than Sears is. Seriously. Who the fuck is Willis? They are a competitor to CNA and Aon which are both homegrown Chicago-based companies who own landmark towers that bear their names. Willis is a foreign company that took like what? 50,000 SF in a 3.5 million SF tower and paid extra so they got naming rights? The reason people are against Willis is that they are a shitty brand name with no local connection. If it had been Groupon going after Sear's naming rights, it would not only have been accepted, but probably met with "good riddance" against blood-traitor Sears. Or better yet, there was a chance we could have ended up with "Olympic Tower" or something had the USOC moved here from Colorado Springs. But Willis is a pansy-ass British name that is more bad-teethed and slouchy than it is white-teethed and big shouldered.

I just wanted to say that I love this post.

[ardecila]

Originally Posted by spyguy

Part of the new agreement between the city and the University of Chicago calls for the university to make improvements to the 59th Street station and extend the platform to 60th. The city will make improvements to 53rd, Harper, and Lake Park.

The 59th Street station already goes to 60th. There's a stairway there that's sealed-up in a very slap-dash manner. You just need to replace the platform decking and repair the stairs.

[J_M_Tungsten]

Oldtown
8-30-11