Browse Tag: multifamily

Build Better L.A.: Los Angeles Votes In New Requirements For Developers, Affordable Housing

Los Angeles is the second largest city in the ...

A significant initiative with commercial real estate effects was passed on last week’s ballot in Los Angeles. Expected to take effect this month, the measure changes, almost overnight, the labor and affordable housing requirements for developers building in the city, affecting multifamily projects with ten or more units, as well as other projects.

Measure JJJ, also known as the Build Better L.A. initiative, was sent to the voters in the general election of Nov. 8.  In Los Angeles City, JJJ passed with 64% of the vote at over 461,000 votes and according to JDSupra law blog, takes effect within ten days of the certification of vote results, or, on November 19, 2016.

Affecting projects that ask for a zoning exemption, a plan amendment, a height change or a authorization of residential use of land where previously not permitted, JJJ requires developers of projects with ten residential units or above to provide a percentage of affordable housing units on-site. Depending on the exemption sought, the percentage will fall between 5% and 40% affordable units.

Some alternatives to compliance are available.  Per JDSupra:

[T]he Initiative offers alternatives to compliance, including providing affordable housing units off-site, acquisition of “at-risk” affordable housing properties and converting the units into non-profit or other similar type of housing, or payment of an in‑lieu fee into the City’s new Affordable Housing Trust Fund. The in-lieu fee will be determined by a formula using an “Affordability Gap” multiplier as defined in the Initiative.  Additionally, projects that opt to provide off-site housing will be required to provide additional affordable units based on a formula that increases the number of required units based on the distance from the primary project.

Further, the Initiative requires that residential housing projects seeking discretionary approval be constructed by licensed contractors, with good faith effort to ensure that 30% of whom are permanent Los Angeles residents and at least 10% of whom are “transitional workers”—single parents, veterans, on public assistance, or chronically unemployed—whose primary place of residence is within a 5‑mile radius of the project.  Projects subject to the Initiative will be required to pay “prevailing wage”—an average of area wages based on a formula created by the state government—to all construction workers on the project.

(Photo credit: Wikipedia)

Airbnb Owners Program: Letting The Landlord In

In an attempt to formalize and normalize the apartment subletting craze brought to the mainstream by home-sharing website Airbnb, the website this week launched a program for building owners.  In a move that will serve to differentiate the home-sharing leader from its many competitors, Airbnb is now soliciting landlords directly through its new owners program to create a building status declaring the property “Airbnb friendly”.

The program lets property owners decide the rules of sharing and codify these into a set of rules tenants have to follow, as well as making sure that a portion of revenue generated by Airbnb sharing is kept by the landlord.

After a pilot of the program in April proved a success, the company moved ahead with purpose. From Kia Kokalitcheva’s piece in Fortune “Inside Airbnb’s Plan To Partner With The Real Estate Industry”:

For Airbnb, finding a way to involve building owners and landlord is critical. While the company regularly touts stories from hosts whose extra income from renting out their homes has allowed them to afford their rent or a much deserved vacation, it’s no secret that landlords have not been the biggest fans of the practice. According to Airbnb, this animosity largely stems from their lack of control over the activity as tenants are ones usually listing and renting out the homes. Airbnb’s solution: Involving them in the process and giving them control along with a financial gain.

The company began piloting this program in April, and to date, somewhere between 1,100 and 1,500 units are either participating or scheduled to soon join, according to Airbnb. The company declined to reveal much details about the building owners it’s been working with, though it did say they’re in U.S. cities including San Jose, Calif., Philadelphia, and Nashville, Tenn., among others. They also widely vary in size and type, from small “mom and pop”-owned properties, to large companies that manage 50,000 units.

The Plan Design Includes Design

A major evolution of Airbnb that figures in its Friendly Buildings program has been the company’s Samara division, concerned with design of communal housing  with the specific intent of community revitalization.

As the technology ecosystem and Airbnb continues to force itself on the operational realities of commercial property, the company continually seeks ways to differentiate itself from a basic business model that, like so many others in the so-called “sharing economy” is utterly dependent upon other people’s stuff — in this case, on the inventory of landlords and property managers that appears nowhere on the company’s balance sheets. Samara’s attempt to become involved in property design boils down mainly to advocating space-sharing features such as smart locks and moveable walls. It’s high concept, unlikely to apply to the vast majority of their business, which is conducted in existing apartments. But it’s also absolutely critical to a business worried about prospering in a future where its competitors seem so numerous and easily spawned.

Recipes For Two $10K Multifamily Amenity Projects

Apartment Building with 4 Entrances USA

Adding value to multifamily property without adding staggering cost is a real trick. Investing in the right amenity upgrades can make the difference between struggling to rent out vs. setting up a waiting list for a very in-demand apartment development.

Brokers and property managers are constantly taking the pulse of the renting public, working their relationships with tenants into a deep understanding of what amenities are in demand and what’s ho-hum for the market. They’ve got the human intelligence that needs to be put together with the numbers that add up to an amenity paroject that makes all the difference. When market knowledge meets smart investing, the value-add is underway.

Low Tech Can Mean High Profit

Catching my eye this morning is this month’s post from Tom Brophy and Royce Monroe of ABI Multifamily, Having noticed that high-tech, millennial-pleasing amenities such as Wi-Fi come at a high cost, the writers aim instead at lower-tech projects that bring substance and lifestyle together — as well as the odd shipping container.

Setting out terms of the projects first, the idea is to use $10,000 to best effect in creating multifamily amenities.  The two projects: onsite storage units in a shipping container and a dog park.

The Container 

Enter the highly-stylized, adaptive re-use, multi-purpose shipping container! You’ve probably read that developers have repurposed shipping containers into housing, but what about storage? It’s portable, therefore no building permits, it’s structurally sound and better yet, you can store it on-site. There are quite a few companies out there which will pre-fabricate and drop-ship your storage facility to your location although it can be pricey.

For those a bit more enterprising and want to customize the storage units, below you will find a line-item breakdown to create five (5) separate storage units out of one shipping container. Prices include labor:

Costs
20’ Container + Drop Ship: $3,000
(5) Roll-up Doors: $3,000
Internal Dividers/Solar Electric w Backup: $1,000
Paint (local artist to add value): $2,000
Contingency: $1,000
TOTAL: $10,000

Rent
Gross Potential Rent per Unit: $65/unit (similarly sized off-site storage units rent for $56/unit/month)
Gross Potential Rent per Month: $325
Gross Potential Rent per Year: $3,900

Return on Investment (ROI)
Number of Years: 2.25 years
Value Increase (based on 6% CAP): $65,000

The Dog Park

Now that the creative juices are flowing, check out the second $10K project, a dog park, complete with cost and appreciation breakdown, at this link.

Standard disclaimer: Take nothing you read here at The Source as legal, accounting, or development advice!

(Photo credit: Wikipedia)

FiveThirtyEight: Airbnb Probably Isn’t Driving Up Rents Much

Data, data everywhere, but what are we to think?

A major consequence of the revolution in data collection is the rise of the data journalist – writers using tables of statistical data to tell useful stories in (hopefully) plain English.

What we do with these narratives is up to us, as is the decision of where we get them from. The leader in this kind of journalism is likely FiveThirtyEight.com, creation of Nate Silver, a statistical analyst and writer who moved from the world of baseball statistical analysis into electoral politics. Today, FiveThirtyEight.com also covers business issues, starting by counting some kind of event or transaction and extrapolating from there.

That basic formula is on display in the recent piece by Ariel Stulberg, who asks: are apartment rents rising due to the market influence of space-matching service Airbnb?

Not just yet, says Stulberg:

[A] FiveThirtyEight analysis of Airbnb booking and revenue data provided by consulting firm Airdna gives the most rigorous look to date at how many units Airbnb could be taking off the rental market nationwide. It shows that Airbnb’s impact is probably still small in most cities, but it also shows that a disproportionately large share of the company’s revenue comes from the listings that most worry its critics — homes that are rented out for a large portion of the year. That could give the company an incentive to focus on increasing such listings as it grows — something some experts believe may already be happening.

Airbnb disputed the analysis but declined to provide its own data.

Because Airbnb has developed from its origins as a site matching travelers to spare rooms into a site that includes so-called commercial listings of whole units rented out full-time, the economic impact is worth looking at.  Sharing economy technologies tend to be very disruptive in their effect upon established industries.  Airbnb commercial listings, according to the piece, add up to only one tenth of total listings but account for over a third of host’s revenue. With that kind of balance on display it would be fair to assume that traditional apartment inventory in certain markets could be lost to the general market in the chase for those revenues.

On the other hand,  the balance between “commercial” Airbnb listings is very uneven between markets.  West coast towns such as Portland, OR and Los Angeles are where nearly half of all cash spent by Airbnb travelers goes to commercial hosts.  Meanwhile, NYC shows about only 30% of the same kind of spending.

If apartment inventory trends in any of the top 25 markets in the US is of importance to you, check out the rankings in Stulberg’s Airbnb piece here.

 

Secondary Market Multifamily Opportunities: The New Normal

Watching the commercial property markets at the national level is tough: trends in one corner of a region need to be placed into context with trends in others in order to form a coherent national picture. National players such as Fannie and Freddie (the GSEs) have lending policies that provide some of that context, but these too are subject to change as regulators and Congress attempt to put the brakes on the kind of systemic risk that torched everything in 2008.

A particularly good job was done this week summing up the above while framing the multifamily property marketplace in secondary markets.  A piece at NREIOnline by Geoff Smith and Jay Thomas, a pair of Managing Directors at commercial property financiers Walker & Dunlop, put the secondary real estate markets under a microscope and managed to expose some usable insights concerning causes and effects in the multifamily sector.

Of particular interest is the role of falling oil prices.  Energy production and employment in the post-meltdown world is what first attracted capital back to secondary market apartment plays. While falling oil prices have made these plays less attractive in oil-heavy markets, the appetite for secondary markets generally has only grown, and lenders have leveraged their familiarity with the earlier plays to move out into the country’s many other opportunities at secondary population levels. An excerpt:

While the demand for mortgages against properties in secondary locations has experienced strong growth over the past four years, key aspects of its character are experiencing historic shifts. One of the best examples of this is within the central region of the country, in cities like Oklahoma City, Okla., and secondary markets throughout Texas, where the availability of capital has been very strong because of the growth of the oil and gas industries. As those employment markets have grown weaker as a result of falling oil and gas prices worldwide, the mortgage market outlook in those areas is also waning, requiring a more conservative investment approach and allowing other previously less attractive secondary markets to take center stage.

[…]

It is safe to say that the availability of debt and equity capital for secondary markets has successfully “come back,” with cap rates and acquisition prices now at or above their pre-recession levels for most commercial real estate asset classes. While at the height of the recession, between 2008 and 2011, many industry players and investors remained firmly on the sidelines of acquisition activity within the multifamily market, eventually this turned into cautious “toe dipping” back in, first in primary, then in secondary markets. This, in conjunction with low interest rates, resulted in compression of cap rates, and spurred the influx of new construction projects in non-primary markets.

Check out the entire piece here at NREIOnline.

 

Commercial Real Estate News Roundup For January 12, 2016

English: Rubber city with the spirit of Akron ...
Akron, OH. (Photo credit: Wikipedia)

Four areas of retail real estate to watch in ’16, heightened apartment demand stemming from soft home demand, spotlight on Indiana, and a big deal closes in Rubber City, aka Akron, OH — it’s all here in today’s National Commercial Real Estate News Roundup.

Office

Multifamily

Industrial

  • United Pipe And Steel Renews 100K SF Lease – REJournals Jan 10, 2016 – Franklin, IN tenant keeps its footprint right where it is.
  • Five Ways To Get Large Commercial Property Tax Refunds – Orlando Business, Jan 9, 2016 – It pays to understand the appraisal process.
  • Triangle Industrial Market Remains Model Of Good Health – News & Observer, Jan , 2016 – A low vacancy rate and considerable storage needs for local businesses are driving the NC Triangle’s industrial market.

Retail

Video Gallery: The Fed Has Raised Rates, But Is More Coming?

The cost of money has come up for the first time in more than nine years: the Federal Reserve Bank announced a raise in its short-term interest rate of a quarter point. For a quick look at various takes on the move, check out the following video gallery:

 

NAR: NAR Chief Economist Lawrence Yun Analyzes Fed Rate Hike

 

Bloomberg video: Fed Raised Rates Without A Hitch And It Only Took $105 Billion.

Bloomberg Video: Fed’s Lockhart Suggests Pace Of Four Raises Over A Year 

 

Bloomberg Video: Don’t Expect Big Profits At Banks In Wake Of Rate Raise

 

NPR: The Fed Raised Interest Rates: So What Happens Next?

 

 

Big, Bigger, Biggest: The Story Of The Skyscraper

https://www.youtube.com/watch?v=P7lWOkXuO8Q

The engineering and commercial histories of tall buildings tell an inspiring story of meeting and overcoming huge challenges in management, in materials science, in finance, in construction technology, and in environmental sciences.  Big, Bigger, Biggest is a beautifully made 45 minute film that covers it all, beginning in 1870 with the Equitable Life building in New York and culminating with Dubai’s Burj Khalifa, at 2,722 feet the world’s tallest artificial structure.

The film builds an amazing story with advance after advance in elevators, materials, architecture, heat management, craning, form construction and much much more. 100% worth watching or showing to anybody tasked with solving problems with space, this film is one of my favorite documentaries and I hope it will become yours as well.

Presenting the 2015 National Commercial Award Winners

2015commercialawards

At NAR Expo 2015, the announcement came for the year’s winners of the National Commercial Awards. We offer our deepest congratulations to these leaders in their markets and associations!

As is so often the case, the credentials are strong with this group – you have Certified International Property Specialists (CIPS), Society of Industrial and Office Realtors (SIOR), Accredited Buyers Representatives (ABR), Certified Commercial Investment Members (CCIM) just to name a few of the distinctions these leading professionals have amassed.

2015 Winners Poster

Pick up a poster with all the winners printed on it by downloading a PDF right here. 

2015 Winners Handout

Or get all the winners in a handy two-page handout format – grab that PDF from this link.

The Program

If you want to recognize the sterling achievements of a commercial professional in your association or market, it’s easy.  Contact Shara Varner at [email protected]

Risk & Finance Survey: Grocery Anchors Worth Avg 35 Basis Points

In the commercial property finance ecosystem, the cost of money is tied to widely used benchmarks such as the federal funds rate. Ongoing rumblings from watchers of the Fed are that the cost of money — aka the Fed’s funds rate — are soon on their way up for the first time in nine years. Remarks from Fed Chair Janet Yellen leading into he December 15-16 Fed meeting seem to support the idea that a boost in rate is on its way.

Ripple Effects

Anticipation of a hike in the cost of money means that spread risk is coming to a commercial property near you.  Spread risk is the risk of change in an interest rate that puts a lender or investor into less favorable terms than when the investment or loan was made.  Spread in this sense usually means the difference in interest rate between that given by effectively nondefaulting securities such as US Treasuries and rates negotiated in the field – rates that govern financing and refinancing for properties in every sector of commercial real estate.

Checking Out Risk Pricing

A fascinating study in rate spread risk was undertaken by Integra Realty Resources, covered by Paul Bubny in GlobeSt.  In “Where The Spread Risks Are,” we get a nice overview of the prices of risk, put into the context of various commercial property development types and loan-to-value ratios.

In the office sector, the widest average spreads can be found in single-tenant non-credit properties in three of the four LTV ranges. For the highest LTV category, 76% to 85%, that distinction falls to multi-tenant suburban properties, with spreads averaging 321 bps compared to 292 for single-tenant non-credit. Conversely, multi-tenant CBD office property loans were financed with lower spreads across all LTV ranges except on deals with an LTV of 76% to 85%.

[…]

For retail, IRR’s survey found that unanchored properties were financed with interest rate spreads averaging 35 bps higher than grocery-anchored properties during Q3. Financing of unanchored retail properties had a median interest rate spread of 264 bps during the quarter.

Read the entire Where The Spread Risks Are article here.