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December 4, 2008

Further on the Washington Business Hall of Fame dinner we wrote about yesterday, a big hats off to those who conceived it 20 years ago and have built it into such an singular event: Washingtonian magazine, the Greater Washington Board of Trade, and Junior Achievement, to whom proceeds go for business education for disadvantaged kids. Huge thanks and congrats!


Tuesday morning, 550 execs from the legal, tech, trade association, and real estate worlds gathered at our Bisnow "New Washington" conference for a little crystal ball gazing, to divine what '09 holds for Washington business. The theory behind our event is that the confluence of so many new crises and policy priorities, coupled with the advent of activist government, means a new era of power and influence for the Nation's capital. Thanks to sponsors Patton Boggs, Deloitte, and Qorvis Communications for not only sponsoring, but helping illuminate the future.


We run this picture to show the mood was not entirely somber as our "Three R's" discussed the daunting economy: legendary real estate investor (and Fight Night founder) Joe Robert, former Homeland Security Secretary Tom Ridge (now of Ridge Global and Deloitte), and Carlyle Group co-founder David Rubenstein. On the other hand, Joe was just a mite pessimistic, likening the economy to the Mission Impossible scene where Tom Cruise slides down a skyscraper and the audience is in suspense not knowing when or how he will stop. He said that in 14 months, $150B in commercial mortgage debt will mature, with no capacity to refinance; and that attempts to bail out banks are limited because they account for only 25% of credit. The securitization market handles the rest, and in October exactly zero bonds backed by credit cards were issued, he said.


Quick, what's the positive side? Well, David predicted DC growth will come from three industries: government—he expects a stimulus nearing $1 trillion; influence—lawyers, lobbyists, PR; and, news—seriously, we didn't pay him to say that (we would have, but we couldn't afford it). 


DC Chamber president Barbara Lang and Vornado/Charles E. Smith president Mitchell Schear were two of nine all-star panelists. Mitchell tempered his confidence in DC's main sub-markets by admitting there would be no spec construction in '09. Barbara was also frank, citing an internal survey showing not only are small businesses facing contraction, but larger ones as well. She says as long as DC's cost of doing business remains worse than MD and VA, and our workforce is for jobs, "the worst is yet to come."


Upon hearing Mitchell declare that now would be a good time to resume hiring architects, our friend (and architect) Darrel Rippeteau gladly offered up his firm. He later suggested amending Shakespeare: "First thing we do, let's hire all the architects." But jobs for his employees are not his only passion. In a lovely thank you letter, Darrel wrote us: "What a terrific conference. I cried. I laughed. I ate three muffins."


Cardinal Bank DC president Kate Carr and National Federation of Independent Business CEO Todd Stottlemyer offered other veteran perspectives. Kate told the group, "This is not a banking crisis." She added that "headlines of fear" hide the fact that many local banks have seen good earnings, and are an engine growing the economy.


Leading local forecaster Steve Fuller, Director of the Center for Regional Analysis at George Mason (and Cardinal Bank chief economist), and Patton Boggs Managing Partner Stuart Pape. Steve said Q4 '08 will be a slog, but he expects healthier vitals as early as September '09. The housing market is one indicator that we're different from other cities, he said: NoVa is up over last year, and DC is already back to the same levels as '07. He says we'll survive because 39% of the DC economy is government spending and not goods such as cars or financial services. Stuart spoke to the lobbyists in the crowd and suggested they preapre for cash-strapped companies to ask, "Can we really afford that retainer?" You better provide an outside-the-box, high value service, he said, because "you can can't expense your way to prosperity."


Washington legal legend Bill Coleman (88 years young by our calculation), Secretary of Transportation in the Ford Administration, co-author of the landmark Brown v. Board of Education Supreme Court brief of 1954, and the first African-American to serve on the Harvard Law Review (long before a certain President-elect even), poses a question, too sophisticated for us to recount.


Ridge, acknowledging all the new money that will be spent, suggested nonetheless using the crisis to get serious about cutting other spending. Said the two-term Pennsylvania governor: "Nothing stimulates the imagination like a budget cut." And Deloitte Greater Washington managing partner Gary Tabach sees similar opportunity as the pendulum swings back to DC, suggesting the greater oversight and scrutiny coming in '09 will be an opportunity for local business.

Qorvis co-founder Doug Poretz, above, illustrated some companies' frayed nerves by pointing out that Proctor & Gamble and Netflix have cut ad spends over 20%. He predicted a growth in "supporterism" and a rush to create and deliver strong constituency group messages to policymakers; Doug's comments can be found on his blog, www.deathoftime.com.

Washington Board of Trade CEO Jim Dinegar brought a strong positive note to the conference, pointing out that DC has the most educated, compensated, and (based on having the most Starbucks-per-capita in the land) caffeinated talent base in the country.


We thought we should end on a positive note. Above, ValueOptions Steve Scroggs, Powers Brown architecture's Scott Forstell, Suffolk's Gary Ball, Reznick's Jeanne Parker, and London Ink's Bob London. Scott says their pipeline is starting to fill up again, and cited outliers like Frederick and Fredericksburg as areas of strength. (If he had said Frederickton and Frederickland as well, we'd start to get suspicious.)

Beveridge & Diamond
Reznick Group
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