Socal Multiunit Real Estate

SOCAL MULTIUNIT REAL ESTATE SNAPSHOT – SEPTEMBER 2010

By Jodi Summers

This month, we’ll look at the big picture for multiunit properties – SMILE *< : ) - it’s all good. Apartment properties should continue to be a bright spot in your real estate investment portfolio for years to come. President George Bush’s tax cuts are set to expire on December 31, 2010. New Year’s Day, capital gains taxes will revert to 20% from their 70-year low of 15%. (To add insult to injury, the tax rate on dividends for top earners will jump from 15.0% to 39.6%, barring a slight of pen from Secretary of the Treasury Tim Geithner.) If history repeats itself, and a déjà vu of 1986 - when significant tax code revisions took effect and the capital gains rate increased from 20% to 28% - investor liquidations are likely to double the total realized capital gains from the previous year.

The current state of the apartment market offers more good news. Demand for apartments has moved well beyond employment gains with the absorption of nearly 46,000 units nationally during the second quarter -> the strongest gain since 4Q 2000. This aggressive lease-up of apartments resulted in a vacancy drop to 7.8%, a trend that should continue through year-end. Unless there is “a systemic shock that halts job creation,” the California Employment Development Department predicts that an additional 65,000 units will be absorbed through the second half of the year, dropping vacancies to 7.4% nationwide by year-end.

Multiunit investments are going to start looking really good. Since 2002 - the year before the capital gains tax rate was reduced to a 70-plus-year low - the number of 1031 exchanges has fallen by nearly half. As capital gains taxes rise, the volume of 1031 exchanges is expected to increase substantially, as sellers will be note be motivated to take profits from the investment real estate sector.

The future is bright. Expect the multiunit market to heat up. Regardless of the decline in investment values, many investors will adopt a liquidation strategy, locking in their profits rather than waiting for investments to appreciate sufficiently to offset the 5% tax hike.

Experts say perceived tax-related risks may encourage them to continue selling assets in 2011.

We’re here to help you with industrial properties. Please contact Jodi Summers - jodi@jodisummers.com or 310.392.1211, and let us move forward together.

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http://www.edd.ca.gov/About_EDD/pdf/urate201010.pdf

http://www.labormarketinfo.edd.ca.gov/?pageid=1003

http://www.santamonicapropertyblog.com/wp-content/uploads/2009/12/solar-multiunits.jpg

http://www.mredllc.com/photos/property/424/07588424.jpg

http://blog.marcusmillichap.com/

http://www.santamonicapropertyblog.com/wp-content/uploads/2009/02/cairo-pyramid.jpg

http://cdn.dornob.com/wp-content/uploads/2010/05/huge-multi-unit-condo-exterior.jpg

REAL ESTATE RETROFITTING STATISTICS

Edited by Jodi Summers

* Residential and commercial buildings consume 40 percent of the energy and represent 40 percent of the carbon emissions in the United States. Building efficiency represents one of the easiest, most immediate and most cost effective ways to reduce carbon emissions and save money on energy bills while creating new jobs.

* Existing techniques and technologies in energy efficiency retrofitting can reduce energy use by up to 40 percent per home and lower total associated greenhouse gas emissions by up to 160 million metric tons annually.

* Residential and commercial retrofits also have the potential to cut energy bills by $40 billion annually.

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http://www.energy.gov/news/8870.htm

http://www.matternetwork.com/images/Matter/house_insulation_installation_3251.jpg

http://apolloalliance.org/wp-content/uploads/2010/04/evergreen_solarmed2.jpg

http://content.usatoday.com/communities/greenhouse/post/2010/04/white-house-awards-452-million-to-retrofit-homes-businesses/1

SOCAL MULTIUNIT REAL ESTATE SNAPSHOT – AUGUST 2010

By Jodi Summers

It seems the Los Angeles multiunit market has turned the corner. No longer are owners and developers sitting idly by waiting for the loan market to change. A velocity study comparing three years of first quarter multifamily transactions in Los Angeles County, shows that sales velocity declined 10.6% in 2008 from 2007; then 18.8% in 2009 from 2008; but increased 19.2% for the first quarter this year over 2009.

Statistics by Clarus Market Metrics confirm this study. Comparing July 08 vs. July 10 the number of multiunit properties in Los Angeles County sold by month is up 32%

And! The number of under contract properties by month is up 92% for the same period.

“It is clear that investors are back in the market,” observes Robert Leveen, a senior vice president of Lee & Associates investment services group. “There will always be a desire to acquire quality assets. They are buying it today at a discount from where it last traded…”

“Most buyers want the best deal they can get,” Leveen notes. “However, there are some that are more realistic and underwrite accordingly.”

Statistics confirm deals are to be had. Comparing July 08 vs. July 10, the median price of for sale properties is down 15% while the median price of sold properties is down 33%.

GlobeSt.com notes that L.A. developers have new 900 multifamily units in the works. Projects range from a 151-unit conversion of a hotel to brand-new luxury apartments and eight affordable housing complexes.

“There is sufficient demand in the marketplace and although there are discounts, certain product will trade with multiple offers, and the discount is not as steep as many buyers would want,” Leveen concludes.

Indeed so, contrasting July 08 vs. July 10: The number of for sale properties is down 40% and the number of sold properties is up 32%.

We’re here to help you with investment properties. Please contact Jodi Summers -jodi@jodisummers.com or 310.392.1211 and let us move forward together.

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http://www.globest.com/news/1704_1704/losangeles/300864-1.html?ET=globest:e22790:277110a:&st=email

http://www.globest.com/news/1702_1702/losangeles/300812-1.html?ET=globest:e22715:277110a:&st=email

https://www.terradatum.com/

LOS ANGELES WINS THE ENERGY STAR GRAND PRIZE…AGAIN

By Jodi Summers

Bravo to all of you greening your properties. According to our friends at the environmental protection agency, approximately 3,900 commercial buildings earned the Energy Star rating in 2009, representing annual savings of more than $900 million in utility bills and more than 4.7 million metric tons of carbon dioxide emissions. Impressively, nearly 9,000 buildings across the nation have earned the Energy Star for superior energy efficiency during the past 11 years.

A standing ovation for our beloved Los Angeles. The EPA ranked us as first on its annual list of metro areas with the most energy-efficient buildings. We led the field with 293 buildings labeled Energy Star in 2009, up from the 262 that qualified the city as No. 1 in 2008.

Kudos also go to our nation’s capitol. Washington, DC, ranked fourth place in 2008, is now in second, with 204 Energy Star buildings, up from 136 the previous year.

Energy Star is a voluntary labeling program run by the EPA and U.S. Department of Energy. In order to qualify, a building or manufacturing plant must score in the top 25 percent based , on the agency’s National Energy Performance Rating System and use less energy, reduce operating expenses and cause fewer greenhouse gas emissions.

Roll the credits - the top 25 cities with the most energy star labeled buildings in 2009 are:

1. Los Angeles, CA

2. Washington, DC

3. San Francisco, CA

4. Denver, CO

5. Chicago, IL

6. Houston, TX

7. Lakeland, FL

8. Dallas-Fort Worth, TX

9. Atlanta, GA

10. New York, NY

11. Minneapolis-St. Paul, MN

12. Portland, OR

13. Boston, MA

14. Seattle, WA

15. Detroit, MI

16. Sacramento, CA

17. San Diego, CA

18. Austin, TX

19. Miami, FL

20. Phoenix, AZ

21. Ogden, UT

22. Charlotte, NC

23. Indianapolis, IN

24. Des Moines, IA/Fort Collins, CO/Philadelphia, PA

25. Louisville, KY

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http://www.greenbiz.com/news/2010/03/23/la-takes-top-spot-epa-green-building-rankings

http://www.costar.com/News/Article.aspx?id=624F645516667EF93A09A56906607F8E&ref=100&iid=174&cid=383F14EEE265B182474DA2442BACBBBF

http://gateway.costar.com/imageviewer/GetImage.aspx?webimage=EPA+Energy+Star.JPG

http://lakelandflforeclosures.com/images/lakelandatnight.jpg

http://www.staronetickets.com/images/Seattle.jpg

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SOCAL MULTIUNIT REAL ESTATE SNAPSHOT – JULY 2010

by Jodi Summers

Apartment properties hover in that weird netherworld between residential and commercial properties. Oftentimes, the two markets are working in tandem, so it’s no big deal, but lately in Coastal Los Angeles, activity in the residential market has been on the rise while the commercial market continues to languish.

June statistics for the Los Angeles County multiunit market reflects that dichotomy. Comparing Jun-08 to Jun-10, you’ll notice that the median price of for sale properties is down 7% and the median price of sold properties is down 48% - reflecting the huge drop in the commercial property market.

But, like the residential market, multiunit activity is way up. Contrast Jun-08 vs. Jun-10 and you’ll note that the number of under contract properties is up 95%

The rise Los Angeles is seeing in apartment building sales is happening country-wide. Nationally, through the first six months of 2010, $11.6 billion in multifamily property

traded hands, up from $7.7 billion in the first half of last year, according to 2010 CoStar first-half sales statistics. CoStar expects the prorated dollar volume for multifamily properties for 2010 to exceed $23.3 billion - a 17% increase over 2009.

Which is why, in a year-over-year comparison the number of sold properties is up 21%.

We have started our rise out of the mire. The midyear UCLA Anderson Forecast notes that the Los Angeles regional economy will likely recover faster than the rest of the state, even though the economic recovery in California is going to climb slower than the rest of the country this year. Already we are seeing signs of slow decline… state unemployment dropped a shred from 12.5% in April to 12.4% in May.

The state “will grow slower than the US and a slow recovery in jobs will leave unemployment at 12.1% for the year,” notes UCLA Anderson senior economist Jerry Nickelsburg, in the midyear forecast. “The latter part of our forecast (through 2012) calls for health care, professional and business services, exports, construction and technology-related manufacturing sectors to generate a bit more robust growth in California.”

We are on the march. Let’s look forward. This year is better than last year, and next year will be better than this year.

We’re here to help you with investment properties. Please contact Jodi Summers –jodi@jodisummers.com or 310.392.1211 for details.

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http://www.globest.com/news/1684_1684/losangeles/300380-1.html?ET=globest:e22415:277110a:&st=email

http://www.costar.com/News/Article.aspx?id=B4DDC752B7245C006B76C18CE64493DB&ref=100&iid=188&cid=383F14EEE265B182474DA2442BACBBBF

http://www.edd.ca.gov/About_EDD/pdf/urate201006.pdf

https://www.terradatum.com/agentmetricsonline/property_type_selection.td

SOCAL MULTIUNIT REAL ESTATE SNAPSHOT – JUNE 2010

by Jodi Summers

According to the California Department of Finance, on January 1, 2008 Los Angeles had a population of 10,363,800 residents. Statistics indicate that this is an increase of 844,500 persons since 2000. The County’s population would make it the eighth largest state in the nation, just behind Ohio and ahead of Michigan. Everyone needs a place to live – so if you think about it, multiunits are always a good investment in Los Angeles County.

Compare May-08 vs. May-10 in Los Angeles County, the median price of for sale properties is down 10% and the median price of sold properties is down 63%.

Smart investors know this the is bottom of the apartment market in the more desirable parts of
town. This theory is bolstered monthly by a variety of reports. The Case-Shiller Home Price
 Index notes a  very uneven housing market, with significant recovery in some places and
continued decline in others. Housing prices have held up better in wealthier and more
productive regions, with higher concentrations of knowledge, professional and creative work,
and high-tech industry as well as higher levels of amenity (measured as working artists and
cultural creatives) and openness (measured as greater percentages of immigrants). Sounds
a lot like Los Angeles, which is why the  Number of Under Contract Properties by Month is up
115% compared with two years ago.

Did you know that Los Angeles County has 112 public and private colleges and universities? Our higher learning institutions include UCLA, USC, California Institute of Technology, and the Claremont Colleges to top-rated specialized institutions, like the California Institute for the Arts, the Art Center College of Design, the Fashion Institute of Design and Merchandising, and the Otis College of Art. Medical education is also a strong point; Los Angeles has two each of medical schools, dental schools, and eye institutes, plus specialized research and treatment facilities like the City of Hope. The County’s community colleges offer many innovative programs, including culinary arts, fashion design, multimedia, and computer assisted design and manufacturing.

We sound like a smart group, and the strengthening of our real estate market confirms that Los Angeles would fall into the wealthier and more productive regions of our company. Actually, three California cities are in top six growing real estate markets, according to the Case-Shiller Home Price Index. San Francisco posted the largest gain — 16.2% over the past year. San Diego (10.8%), Cleveland (6.7%), Minneapolis (6.5%), L.A. (6%), and D.C. (5.6%) also posted significant gains.

The report notes that “Housing prices have fallen further in locations with lower incomes and wages to begin with, with blue-collar manufacturing economies, lower levels of skill, and lower levels of amenity and openness. Expect that pattern to continue.”

Savvy investors purchasing apartment properties over the past years have used a variety of
financing  methods to make up for the weakness in the commercial loan market. As the stock
market tanked,  many investors pulled money out and paid cash for multiunits, or worked out seller
carrybacks. Now  the Mortgage Bankers Association is saying commercial lending for multiunits
is coming back. The MBA’s Quarterly Survey of Commercial/Multifamily mortgage originations
states that 1Q 2010 commercial and multifamily mortgage loan originations were 12% higher than
during the same  period of 2009.  Sales are way up. Comparing May-08 vs. May-10 in Los
Angeles, the number of sold properties is up 72%

The National Association of Realtors confirms that the apartment market is strengthening. Chief economist Lawrence Yun noted that the only bright spot in commercial real estate is apartments. “Demand for units should increase in the second half of the year as new jobs are created in the improving economy and new households are formed,” he concluded.

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http://www.laedc.org/reports/LA%20County%20Profile.pdf

http://latimesblogs.latimes.com/money_co/2010/05/vacancy-rates-will-continue-to-rise-in-most-types-of-commercial-real-estate-such-as-office-and-industrial-buildings-until-the.html

http://www.theatlantic.com/national/archive/2010/05/housing-prices-and-the-great-reset/57287/

http://www.creativeclass.com/creative_class/_wordpress/wp-content/uploads/2010/05/YearOverYear.jpg

http://www.costar.com/News/Article.aspx?id=359D8A406145159176A40807B924DC84

https://www.terradatum.com/agentmetricsonline/report_chart_view.td

SOCAL MULTIUNIT REAL ESTATE SNAPSHOT – MAY 2010

By Jodi Summers

It’s been all over the news. Now is the time to buy multiunit properties. Today’s research, offered by Bank of America-Merrill Lynch, concludes that if the apartment market didn’t bottom out in the fourth quarter of 2009, then it did during the first three months of 2010. The L.A. County multiunit market is the most desirable it’s been all millinneum.

In Los Angeles County comparing April 2008 to April 2010, the median price of for sale properties is down 18% and the median price of sold properties is down 47%

The lack of commercial financing and higher vacancy rates have contributed to the huge drop in sales prices, Marcus & Millichap data shows that apartment-house prices have slipped to an estimated median of $128,500 a unit last year, down 4% from 2008.

And that’s why in L.A. County, the number of for sale properties is down 40% and the number of sold properties is up 82%. Those that don’t have to sell are not, and those that can buy are.

More encouraging reasons to buy a multiunit property? Axiometrics’ survey of some apartment managers in the top 20 national markets reported better rental revenues in the first quarter, as compared with the four preceding quarters. Overall occupancy ended the first quarter at 92.6% and effective rents were $1,106.33.

And that is why locally, the number of under contract properties is up 156%.

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http://netleaseinsider.blogspot.com/2010/04/us-apartment-uptick-net-lease-impact.html

http://www.globest.com/news/1644_1644/insider/184557-1.html

https://www.terradatum.com/agentmetricsonline/agentmetrics_online.td?__m_sid=121

GREEN BUILDING INSIDER SURVEY CONCLUDES THAT COMMERCIAL BUILDERS, BUYERS AND SELLERS FEEL GREEN IS GOOD, LEED IS O.K.

GREEN BUILDING INSIDER SURVEY CONCLUDES THAT COMMERCIAL BUILDERS, BUYERS AND SELLERS FEEL GREEN IS GOOD, LEED IS O.K.

By Jodi Summers

The third annual Allen Matkins/CTG/Green Building Insider Green Building Survey reveals that 93.4% of those surveyed agreed that it is worth the time and effort to build green, but only 66.2% believe that obtaining LEED certification is worth the effort.

More than 900 green building professionals – from design professionals, contractors, subcontractors, construction planners to building owners - completed the survey.

Additional findings in the survey were that designers, owners and contractors each offered differing results when assessing the risks involved in green construction or whether green construction adds to the cost of projects.

Bryan Jackson, chair of the green building and sustainable construction group at the Los Angeles office of the law firm of Allen Matkins Leck Gamble Mallory & Natsis, confided to GlobeSt.com that, “…New LEED requirements being introduced this year include a carbon overlay that should bring many of the survey respondents back into the fold with respect to LEED certification. Another change in the new LEED requirements is that the certification process takes into account regional differences, which should also help the LEED process to regain some of its lost adherents.”

Tools are coming to make communicating green commercial design easier. Building Information Modeling employs computer-aided design to produce three-dimensional models of projects for incorporating green design elements from the very start of and throughout a project. Those surveyed estimate that green construction adds between 1% and 4% to the cost of a project, but those who use can BIM see a better rate of return.

“If you design for green and sustainable elements from the very beginning, you will be able to come out with a project in that could certify to Green, LEED, Gold or Silver without spending any more than conventional construction, which is pretty amazing,” Jackson says.

See the whole survey @ http://www.allenmatkins.com/emails/GreenSurvey/Third%20Annual%20Green%20Building%20Survey_v5.pdf

Info courtesy of:

http://www.globest.com/news/1354_1354/losangeles/177097-1.html

U.S. RESIDENTS STILL BELIEVE IN THE AMERICAN DREAM

U.S. RESIDENTS STILL BELIEVE IN THE AMERICAN DREAM

by Jodi Summers

Once upon a time, when the world was not a global village, foreigners believed that America was the land of opportunity, with street paved in gold. A recent poll by the Pew Charitable Trusts has concluded that nearly 80% of Americans believe it is still possible to improve their economic standing and remain optimistic that their family’s economic circumstances will improve within their lifetime and across generations.

“If you can’t do it here, where else can you do it?” asks Reda, who emigrated to the U.S. from the former Soviet Union.

The beautiful part of the finding, is that all people living here believe life can be better here. The conclusions hold true across racial lines and even among lower-income, less-educated and unemployed people, according to the national public opinion poll conducted for Pew’s Economic Mobility Project by Greenberg Quinlan Rosner Research and Public Opinion Strategies.

“Although the current economic crisis seems to be deepening each day and many families are feeling the pinch – either through company layoffs, decreasing home values or loss of retirement savings – Americans are taking a longer-term view,” said John E. Morton, managing director of Economic Policy at The Pew Charitable Trusts. “We may be struggling in our daily lives, but Americans are confident in themselves and their ability to get ahead in the future.”

A majority of those polled support a wide range of policies the government could adopt to encourage upward economic mobility, such as making college more affordable, investing in early childhood education, making retirement savings easier or providing job training and financial education. In addition, a majority (71 percent) think it is more important for the country to provide people a fair chance of improving their economic standing than it is to reduce inequality in the United States.

“This poll confirms the long-held American belief that hard work and talent brings a just reward, and our society should aim to provide equality of opportunity, not guarantee equality of outcomes,” noted Morton. “These results convey a clear message to policy makers – the solutions to the economic challenges facing American families should focus on promoting opportunity and upward mobility.”

OUR PRIOERTIES

By a 71 to 21 percent margin, Americans said that personal attributes such as hard work and drive are more important to economic mobility than structural issues such as the state of the economy and one’s economic circumstances growing up. Similarly, respondents said personal attributes, including poor life choices, taking on too much debt and lack of education, are the factors that are most likely to contribute to someone falling down the income ladder.

Looking to the future, more than two-thirds of people (72 percent) believe that their personal economic circumstances will be better in the next ten years than they are today and most parents say their own children will have a higher standard of living than they had (62 percent). Notably, Americans largely define the American Dream as freedom to accomplish anything you want with hard work or having future generations be better off than their parents. “Becoming rich” was one of the lowest ranked definitions of the American Dream.

THE OBAMA FACTOR

African Americans are the most optimistic group about their and their children’s opportunities for economic mobility. Eighty-five percent believe their economic circumstances will be better in 10 years than they are now, compared to 71 percent of whites and 77 percent of Hispanics. When asked whether their children would have an easier or harder time moving up the income ladder, whites are the most pessimistic, with 54 percent saying it will be harder to move up the income ladder, compared to 34 percent of African Americans and 41 percent of Hispanics.

“This research shows that Americans throughout our diverse society have an abiding faith in their ability to get ahead,” said Ianna Kachoris, project manager of Pew’s Economic Mobility Project. “However, our economic analysis has previously reported there are considerable racial gaps in mobility, as well as significant immobility for many Americans at the bottom of the income ladder. People’s perception of their ability to get ahead may not necessarily coincide with reality, and special attention should be paid to improving mobility for all Americans.”

For all the information please go to:

http://www.pewtrusts.org/news_room_detail.aspx?id=50022

http://geology.com/world/the-united-states-of-america-satellite-image.shtml

LOS ANGELES MULTIUNIT REAL ESTATE SNAPSHOT – APRIL 2010

By Jodi Summers

Experts say the multiunit market is leading the commercial real estate recovery. After a dismal year of increased vacancies in the high end areas (There were 141 properties available for lease in Santa Monica on April 1^st, and 133 in Beverly Hills, according to the MLS.), which forced landlords to cut rents and make leasing concessions, investors have a renewed sense of optimism. Essentially, there’s no place to go but up. Nationally, average vacancy rate sits at a historic high, hitting 8% at year-end 2009. This positive outlook is confirmed by a PricewaterhouseCoopers Korpacz Real Estate Investor Survey for the first quarter of 2010, titled, “Investor Sentiment Improves, But Challenges Persist in 2010″ notes the multifamily market, will “bump along the bottom” this year, but continued price drops are not in the forecast.

Similar to other property sectors, sales activity has diminished for apartments; conversely demand is high for well-located, high-quality assets. Los Angeles is reaping those benefits. In Los Angeles County, comparing March 2008 to March 2010 the number of properties under contract is up 188%…

While the average number of sold properties is up 88%.

Another positive sign, the average days on market is down 16%. Nationally, the average asset sold within 8.06 months this quarter, a 9.03% drop from the prior quarter.

The market surge may be attributed to the fact that nationally, cap rates for apartments fell over the final three months of last year, ranging from 5% to 11%, with an average of 7.85%, down from 8.03% in the third quarter of 2009. For the first quarter of 2010, cap rates have risen back up to 8.01%. Cap rates for properties that are selling tend to be in the 5%-7.5% range in L.A. County, again depending upon the neighborhood.

Investors are always happy to pick up what they perceive as a value in California. But, on a regional level, in less sexy areas, the performance of the apartment market has hinged on the performance of the individual markets’ employment scene. Take the very solid Washington, DC, market, for example. Jobs are on the rise, and vacancy rates have remained stable over the past six months. This success can be applied throughout the Mid-Atlantic region as well. Face it, real estate tends to be stronger on the coasts.

Another happy point, investors feel that multifamily market rents should grow by a national average of 2.41% over the next eight years…or the standard 4% a year in Los Angeles.

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http://www.globest.com/news/1624_1624/insider/184102-1.html

https://www.terradatum.com/agentmetricsonline/agentmetrics_online.td?__m_sid=121

http://pro.themls.com

http://www.loopnet.com/xNet/MainSite/Listing/Profile/Profile.aspx?LID=16322406&SRID=826306030&StepID=101

http://c.imagehost.org/0479/cp5_Kennedy-Warren_Apartment_Building1.jpg