Socal Multiunit Real Estate

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/

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

WILL THE NEXT TREND BE FOR MULTIUNIT OWNERS TO MOVE TO NNNs?

Edited by Jodi Summers

Savvy investors know that now is the time to move on multiunits. Virtually all real estate reports are showing that the US apartment market seems to have reached its bottom and is poised for a rebound. Vacancy rates have flattened, and those nasty rent concessions of the past year and a half seem to be disappearing.

James Brennan Esq., LL.M. is Managing Director and Corporate Counsel of Exchange Solutions Group, a specialist in 1031 exchanges. He was interviewed by Net Lease Insider on the strength of the U.S. multiunit marketplace. Here are the highlights.

Q: The U.S. apartment building market is coming back to life. What is the next wave in this cycle?

James Brennan Esq.: The Baby Boom generation flocked to real estate as an investment class, particularly multifamily. Many of those B and C investors are looking to get out of active management. After living through this cycle, they want out more now than ever.

Q: What makes apartment owners keen to move from an active to passive asset?

JB Esq: Passive triple net leases are net insurance, net utilities, and net taxes to the tenant. Apartment owners that have built a net worth over $5 million are looking to create annuity-like income for their heirs who often are not in the real estate business. Triple net leases provide credit-rated tenants with predictable cash flow.

Q: What type of investor is moving out of multiunits to NNN properties?

JB Esq: Apartment developers are often drivers or family stewards. These decision-makers have built wealth from the ground up often not in a traditional white-collar methodology. These hard-driving decision-makers have provided for their family, and also probably have setup life insurance trusts to allow for estate planning liquidity. Triple net leases go well with this concept of transitioning wealth to the next generation without many opportunities for losing value by the heirs. The family stewards have built wealth and are now simply trying to preserve it.

Q: How does this type of diversification work in estate planning?

JB Esq: In an effort to defer capital gains while family stewards are still living, the patriarch or matriarch often engages in a like-kind exchange to transition between apartment assets and net lease assets. In a like-kind exchange you can trade into multiple replacement properties. Therefore, if you have three children and you sold your apartment complex for $15 million, you can buy three $5 million dollar net lease assets that produce income that can be divided up amongst the heirs. This avoids management by the one heir that may be more real estate savvy.

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

4 GREEN BUILDING TRENDS 4U

4 GREEN BUILDING TRENDS 4U

By Jodi Summers

Green building concepts are being embraced with as much wild abandon as kids grasping for the coolest new video game. It started pretty basic – green construction, then evolved into green renovation, and now it’s branching out in all directions. Here are 4 green building trends to watch and invest….

1 - Modular Green Homes – One of the most successful investors in history, Warren Buffett, recently expanded one of his business subsidiaries, Clayton Homes, to produces a line of green modular homes. These 750-square-foot eco homes, dubbed “i-houses,” can be purchased online for less than $75,000. It’s a good bet that if Buffet is invested in it, the area will grow. Our hero is second richest man in the United States with a net worth of $40 billion.

The i-houses are constructed as modules in a factory and then assembled in the field. I-houses are marketed as “affordable luxury in a green, energy-efficient package.”

Beyond Buffett, there are others, such as Zeta Communities and Blu Homes in the green prefabricated market. Modular home construction will be a wise choice for builders going forward because it may allow developers reduce risk, allowing the development of large sites to take place as sales come in rather than building a planned community in larger phases before the units are sold out.

2 – Energy Retrofits – California state measure AB 1103, which requires the tracking of the energy use of all nonresidential buildings for disclosure to prospective buyers and tenants, is a fine example of how critical energy retrofits will be in the future. Much of the country’s real estate is old and wastes energy…eventually these properties will need to be upgraded or replaced. Not to mention, this is a cornerstone of President Obama’s post recession job creation movement.

Energy Star, the government, and local utilities have been offering rebates for property owners on measures like energy audits, insulation and duct sealing. SBI Energy predicts that the U.S. home energy retrofit market will grow about 15 percent per year to $35 billion by 2013, up from $20.7 billion in 2007.

David Leathers, senior vice president of energy services for mechanical contractor Limbach, confides that U.S. commercial building in the U.S. five years or older can likely benefit from a retrofit with payback for most measures taken in less than five years.

3 - Smart Building Materials - Energy-efficient building materials are the frame of green building. Serious Materials recently raised a $60 million third round of venture for the manufacture of energy-saving windows and environmentally friendly substitutes for sheetrock. More good investments - high-efficiency insulation system companies, such as walls with micro-encapsulated phase change materials to stabilize the indoor temperatures in buildings. More…Electrochromic technologies can darken or lighten the tint of a window when in contact with an electrical current, thus managing the amount of sunlight that passes through…Ventilated double-skin facades (already being used in Europe), use inner and outer glass walls with a thin cavity to provide insulation in between for the exterior shell of a building.

4 - More Energy Efficient Energy Codes - The American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE ) and the International Energy Conservation Code (IECC) are both developing the latest round of “model codes”— ASHRAE 90.1 and IECC — will likely require a 30 percent increase in energy efficiency.

Congress may soon mandate that all states raise their standards to the newest codes. The American Clean Energy and Security Act passed by the House this year includes a provision that would effectively create a baseline national building energy code by mandating the adoption of a standard set by the Department of Energy, who may very well call on the standards set forth by ASHRAE or IECC.

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http://earth2tech.com/2009/12/23/4-green-building-trends-to-watch-in-2010/

http://www.motherearthnews.com/Green-Homes/Green-Modular-Homes.aspx

http://en.wikipedia.org/wiki/Warren_Buffet

http://www.socalgreenrealestateblog.com/?p=841

http://www.ashrae.org/

http://www.icis.com/blogs/green-chemicals/2009/01/green-building-is-still-recess.html

http://www.newenglandmetalroof.com/construction_directory/green-building.gif

http://www.charlesandhudson.com/archives/eco-friendly-building-materials.jpg

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

GLOBAL EDGE TOP 10 BUSINESS DESTINATIONS

GLOBAL EDGE TOP 10 BUSINESS DESTINATIONS

edited by Jodi Summers

Global Property Guide has put together a list of the most attractive

property investment destinations across the world. Their research team

has ranked 77 of the world’s largest cities according to the average

gross rental yields.

The top 10 destinations are dominated by Asian cities, with Jakarta,

Kuala Lumpur and Manila all making the list.

http://www.globaledge.co.uk/news/top-10-best-investment-destinations-35909

LOS ANGELES 2010 - MULTIUNIT REAL ESTATE PREDICTIONS

Edited by Jodi Summers

The sun is shining again in Los Angeles. After two years of job cuts, payrolls are predicted to expand payrolls minimally in Los Angeles County in 2010, according to the 2010 National Apartment Index Report by Marcus & Millichap.

Los Angeles moves up two places this year to No. 13, thanks to perceived strengths in our marketplace. The hot spot is our sister city, San Diego, which rose four spots to No. 2 on the index due to expectations for resumed employment and household growth. (Washington, D.C., retained the top spot in the NAI for the second consecutive year, as ongoing government spending will fuel metrowide hiring and apartment demand.) New York City, which is the tightest apartment market in the country, finished in the No 3 spot.

Following are some of the most significant aspects of the Los Angeles Apartment Research Report:

* The local employment market is expected to stabilize in the second half. Following a loss of 115,000 jobs in 2009, payrolls are forecast to expand by 0.3 percent this year, with the addition of 13,000 positions.

* Rental completions will slow to 1,550 units in 2010, a 0.2 percent addition to inventory. Approximately 800 apartments are expected to come online in the San Fernando Valley due to continued job losses in the retail and construction sectors.

* Vacancy is forecast to tick up 20 basis points this year to 6 percent in response to ongoing stock additions.

* Lingering high unemployment will continue to pressure owners to lower rents. Asking rents are expected to fall to $1,335 per month in 2010, while effective rents will slip to $1,263 per month, respective declines of 2.8 percent and 3.6 percent annually.

Investors realize the current value of the Los Angeles, and there is a trend of cash-rich buyers shifting money out of the stock market and buying multiunit property with the intent of holding it for future generations.

“After watching the Los Angeles apartment market for years I have decided to move monies out of my stock portfolio and buy apartment buildings for my children,” noted one savvy investor.

A bolster for the multiunit market place is that Government-Sponsored Enterprise financing will remain available due to the GSE’s ongoing commitment to the asset class. (GSEs hold or pool approximately $5 trillion worth of mortgages.)

In conclusion, Marcus & Millichap expects, “Long-term rates to remain low this year, mortgage rates to stay relatively stable and lenders increasingly opting to work out extensions or modifications for loans rather than taking near-term losses. Seller financing, or assumable debt, will also become a big factor in transactions this year.”

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http://www.marcusmillichap.com/aboutus/News/Current/020510_los_mm.asp

http://www.globest.com/news/1580_1580/insider/183133-1.html

http://www.uli-la.org/node/382

http://en.wikipedia.org/wiki/Government-sponsored_enterprise#See_also

LOS ANGELES COUNTY MULTIUNIT PROPERTY SNAPSHOT – FEBRUARY 2010

DISPARITY BETWEEN BUYERS AND SELLERS

By Jodi Summers

Multiunit investors are not getting the value that they’re seeking in the Los Angeles West Side apartment building market, and are pulling unproductive sale properties from the market. Look at a two-year comparison, from January, 2008 vs. January 2010 - the number of for sale properties in Los Angeles County is down 46% and the number of sold properties is up 1%, according to Clarus Market Metrics.

The Federal Reserve bank’s recent survey of senior loan officers for 55 US banks and 23 foreign banks shows that credit–while not becoming looser–is not tightening. Creative lending has become a viable means of securing a multiunit transaction, which is why that comparing Jan-08 vs. Jan-10 the number of under contract properties is up 102%

If you’ve applied for a commercial mortgage in the past two years, you know that banks have tightened lending standards for this real estate sector. The relative few who are buying in this sector are finding tremendous satisfaction, as the median price of sold properties is down 63%.

FYI - Residential investment spending boosted overall economic growth by +0.1 percentage point. In 4Q 2009.

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We would like your real estate business. If we can provide you with more detailed information, please contact the SoCal Investment Group through Jodi Summers, Jodi@jodisummers.com. We look forward to working with you in your next real estate transaction.

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http://www.cirbdata.com/

https://www.terradatum.com/

http://www.globest.com/news/1590_1590/washington/183353-1.html

http://www.globest.com/news/1590_1590/washington/183353-1.html

http://www.socalgreenrealestate.com

http://www.laedc.org/eedge/index.html#1

GLOBAL USE OF GREEN BUILDING PRODUCTS SKYROCKETING

GLOBAL USE OF GREEN BUILDING PRODUCTS SKYROCKETING

By Jodi Summers

Keep studying those lists of top rated green building products, because global purchasing of green building products will grow to $571 billion by 2013. This growth is more than tenfold from the $455.3 billion spent on green materials in 2008, notes the study by Allied Business Intelligence Research.

“Innovation, particularly in wood and insulation, is a key driver behind the growth of green building products,” observes Larry Fisher, research director of ABI Research’s next generation practice.

“The most significant driver of growth in the green building materials sector is concern for the environment. While environmental preservation has been a topic of discussion for decades, only recently has the level of concern for the environment driven governments, manufacturers and consumers to respond.”

The study notes that businessmen and builders will look toward products with greater energy efficiency produced in an environmentally-friendly manner. Preferred lumber and wood products will come from well-managed forests.

Now if we can only figure out an efficient way to make drinkable ocean water.

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http://www.purchasing.com/article/439362-Buying_of_green_building_products_to_increase.php

http://www.mossgreenchildrensbooks.co.uk/wp-content/uploads/2009/10/iStock_000001111800Small-2.jpg

Energy to Sell - States with Renewable Portfolio Standards

States with Renewable Portfolio Standards

Edited by Jodi Summers

Here is a nifty map and chart from the U.S. Department of Energy showing states with renewable portfolio standards - a state policy that requires electricity providers to obtain a minimum percentage of their power from renewable energy resources by a certain date.

California is stellar with the objective of 33% renewable energy by 2030, but not nearly as aggressive as Maine, which is shooting for 40% renewable by 2017.

Currently there are 24 states plus the District of Columbia that have RPS policies in place. Together these states account for more than half of the electricity sales in the United States. Five other states, North Dakota, South Dakota, Utah, Virginia, and Vermont, have nonbinding goals for adoption of renewable energy instead of an RPS.

The chart below gives a rough summary of state renewable portfolio standards and links to organizations that are administering these standards or explain the details involved. Percentages refer to a portion of electricity sales and megawatts (MW) to absolute capacity requirements. Most of these standards phase in over years, and the date refers to when the full requirement takes effect.

http://apps1.eere.energy.gov/states/maps/renewable_portfolio_states.cfm?prin