When trends analyst Eric Garland — a musician in his spare time — checked out the financials of the 262-location national musical instrument retailer Guitar Center, he heard a whole lot of noise. The company’s complicated history of involvement with private equity firms that seemed more out for themselves than to benefit the chain had, in Garland’s eyes, created another national retail disaster in the making. When he wrote about it last year in the piece “Guitar Center And The Magical Growth Curve” he ignited a firestorm from company executives, whose much sunnier outlook ran in contrast to Garland’s findings.
This month, after Standard & Poor has cut Guitar Center bonds to junk status, Garland is back with an compelling obituary for the chain titled The End Of Guitar Center. If Garland is correct, a major upheaval for US musical instrument business is already in the cards, with more than twenty dozen potential Guitar Center store closings across the US as just the most visible part of an ugly scenario.
While the jury’s still out on Guitar Center’s key bond payments, the fact is that Garland’s analysis is refreshing and welcome for its borrowing and elevating, a key concept from the immutable bylaws of commercial real estate. “This story will focus on the final days of this one company,” Garland writes, “but it is really about our painful transition to an economic system that obeys objective reality and serves people in a durable, holistic manner.”
Obeying objective reality is precisely what commercial real estate is all about. It is distinguished in the finance world for its rootedness in physical location, for an inherent illiquidity that makes it very resistant to the kind of reality-denying gamesmanship of whiz-bang over-financialization. Commercial RE supports and enables — not topples — companies, sectors and economies. It “serv[es] people in a durable and holistic manner”: it gives a roof to our economy in all its myriad facets, scales and dimensions.
When skilled researchers use the language of objective reality to asses business practices – especially in these times – it’s like music to my ears.