Santa Monica Property Blog

FYI – NEW MULTIFAMILY LEGISLATION FROM SACRAMENTO

FYI – NEW MULTIFAMILY LEGISLATION FROM SACRAMENTO

By Jodi Summers

Legislators in Sacramento were more interested in finding was of shrinking the new $7.4 billion deficit for the 2010-11 budget than they were in thinking about the hit that apartment building owners have taken in the multiunit marketplace this downturn.

Fortunately, the more ominous legislation affecting multiunit properties has been shelved until next year, but, as a local multiunit property owner, we know you want to know what has passed and what is on the horizon.

Passed

* Assembly Bill 1020 (Emmerson, R-Redlands): Limits fees that may be imposed by local and state government and preempts local health departments from adopting any new or additional safety standards on top of federal guidelines regarding public swimming pools. Brings state regulations in line with federal law regarding anti-entrapment devices in pools.

* Senate Bill 120 (Lowenthal, D-Long Beach): Allows a tenant or occupant who has paid utilities in place of a landlord in order to prevent him or her from being shut off to deduct that amount from rental payments.

* Senate Bill 290 (Leno, D-San Francisco): Extends a Jan. 1, 2010, sunset period for a 60-day termination notice requirement for tenants who live in a property for longer than one year.

Be Aware of

* Assembly Bill 473, from Assemblymen Bob Blumenfield, D-Van Nuys, will require owners of properties with five or more units to arrange for mandatory recycling services.

* Assembly Bill 479, introduced by Assemblyman Wayne Chesbro, D-Arcata, will require local governments in large counties to adopt mandatory recycling laws for commercial properties.

**

http://www.carealestatejournal.com/newswire/index.cfm?sid=&tkn=&eid=905490&evid

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RESIDENTIAL REAL ESTATE TRENDS 4 U

By Jodi Summers

A recent study from the Urban Land Institute and PricewaterhouseCoopers LLP has concluded that homes near cities with thriving economies and mass transit will outperform outer-ring suburbs and “exurban areas,” it the near future.

The study calculated information supplied by more than 600 real estate experts, including investors, developers, lenders and real estate brokers. The report, Emerging Trends in Real Estate 2009, projects that the worst of the national housing downturn may be over, with the bottom of the market being confirmed by the end of this year.

The report included an overview of housing markets and how they may be affected by macroeconomic trends and changing regional conditions.

Some entertaining factoids:

· Changing preferences could increase demand for condos in urban areas, many of which now have a glut of such properties. One respondent said their company had 30,000 unsold units in south Florida — just as they did in 1975 and 1988.

· At some point, those high-end Miami condos overlooking the Atlantic will be good buys,” the report predicts, noting that ocean views “always find a market.”

· 24 hour cities” like New York, Boston, Chicago, San Francisco, and Washington, D.C., should also benefit from mass transit systems that can free residents from car dependence.

But, gains in the attractiveness of 24-hour cities could be “squandered” if cutbacks in police, fire and sanitation result in less safe and appealing environments. Falling property values and the economic slowdown are expected to cut into tax revenues, forcing cities to reduce services.

“Nothing would undermine 24-hour dynamics more quickly than rising crime rates,” the report warned.

· “Fast-growing Sunbelt cities had pooh-poohed mass transit in their rapid expansions, enabled by interstate highway building during the 1960s and 1970s,” the report observed. “Virtually no one contemplated the consequences of car dependence until populations began to overwhelm road capacities.”

· The Sunbelt is also plagued by water issues, as spotlighted by droughts that tested Atlanta’s reservoir system, which the report called “insufficient.”

· Water issues pose a challenge to further growth in areas dependant on the Colorado River and throughout the Southwest, the report said. Continued growth in areas like Las Vegas, Phoenix and Southern California will require increased conservation and new sources of water.

· The suburbs will continue to be desirable to families in search of better school districts and child-friendly environments. But the mortgage crisis, high car-related costs and increasing property taxes mean moving to the suburbs requires greater sacrifices.

· As home prices continue to fall, “McMansion subdivisions in the sticks (will) take a double whammy,” the report predicts. Rising heating and cooling bills could work against sellers already facing resistance to long commutes. “People realize they don’t need 3,000 square feet and four cars anymore,” one respondent noted in the report.

· California’s large suburban satellite markets, Riverside and Orange County, are expected to “tank in mortgage and housing misery.”

http://www.inman.com/news/2008/10/21/housing-healthier-near-thriving-metros

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http://www.alwaysonvacation.com/photos/United-States_California_Squaw-Valley_414901.html?spid=415021

EXPENSIVE RENT V.S. CHEAP RENT IN THE U.S.

EXPENSIVE RENT V.S. CHEAP RENT IN THE U.S.

California cities have among the highest rents in the country, claiming four of the top rental prices for the nation’s 40 largest metropolitan statistical areas according to the U.S. Census Bureau’s 2008 American Community survey.

San Jose has the most expensive lease rates in the country with renters paying an average of $1,314 a month; the area just north of San Francisco is second at $1,210; and our beloved Los Angeles, it’s a relative bargain at $1,101. So says

California rents even beat out those in New York, which has the seventh-highest rent of any major metropolitan area. But Thomas Davidoff, assistant professor at the Haas Real Estate Group at the University of California, Berkeley, says the differential between high and low rents in California is much less dramatic than in New York.

“Nothing in California matches rents in Manhattan, but in New York if you factor in Brooklyn, rents get lower,” says Davidoff.

Signing a lease in Miami and Orlando fetched monthly rents of $1,031 and $981 respectively.

“Miami and Orlando were two pretty hot areas when the housing market was raging for conversion of apartment stock into condominiums,” he says of the mid-decade housing boom. “So that reduced supply.”

The survey looked at renter-occupied units paying cash rent, and defined gross rent as the contract rent plus utilities, if utilities were paid by the renter.

On the affordable end, cities such as in Cleveland and Pittsburgh, where the slumping job market has lead to rent rates of $678 and $608. Pittsburgh has struggled to rebuild its economic base after the loss of its steel industry, and residents are leaving the city.

“The bottom line is that Pittsburgh is undergoing a sea shift in its economic base,” says observes Davidoff.

Susan Wachter, a real estate professor at the University of Pennsylvania’s Wharton School. “Rents are relatively low because it’s in a state which is losing population, and it is simply not doing well.”

Rust belt cities like Cleveland, Cincinnati and Columbus, Ohio, still have low rents compared with the rest of the country. Even though, according to the U.S. Office of Policy Development and Research, apartment vacancies are limited because of a lack of new construction, a rental home in Cincinnati will still cost only around $652 per month.

THE SENIOR HOUSING MARKET IS CHANGING

THE SENIOR HOUSING MARKET IS CHANGING

By Jodi Summers

The first of the Baby Boomers will soon be entering the senior housing market, and that is impacting the single and multifamily housing market.

The National Association of Home Builders and MetLife Mature Market Institute recently examined the 55-plus population and its preferences in homes and communities. Dubbed “Housing for the 55+ Market: Trends and Insights on Boomers and Beyond,” the report is based on data from the most recent American Housing Survey from the US Census Bureau and focused on trends that emerged between 2001 and 2007.

Some interesting conclusions, the age 55-plus population in the country has risen from 52.2 million–about 21% of the population–in 1990 to 59.3 million–again about 21%–in 2000 to 70.6 million, comprising 23% of the overall population, in 2007. By 2010, this group will grow to 76.6 million, or a quarter of the population, and to 85.3 million–26%–in 2014.

Most older households don’t currently live in age-restricted or–qualified housing, but that number is rising. In 2001, 2% of them lived in active adult age-restricted communities; in 2007, 3% did. What’s more, residents in this type of community had the highest satisfaction rates, although most 55-plus respondents related they were happy with their current homes.

Regarding property, design and looks were most important factors to older buyers of single-family homes. In age-restricted 55-plus rental or multifamily properties, proximity to family and friends topped residents’ priority lists.

Distance from work location was the driver behind choosing a community for 17% of older buyers of single-family detached homes in 2007, up from 11% in 2001 to 17% in 2007.

The buyers of units in active-adult communities are getting younger–no older than 60–and in multifamily and rental units, many of the heads of households are females. The share of college-educated buyers in age-restricted homes has also taken a leap, from 50% in 2001 to 72% in 2007.

“NAHB has tracked the 55-plus population and its share of the housing market for decades,” concludes David Crowe, NAHB’s chief economist. “But this new data gives us our first look at specific consumer behaviors and preferences–what they look for in a home, the reasons why they move, and the characteristics of the communities they choose–over an extended period of time. By examining emerging trends, we have a clearer picture of what the mature market wants in homes and communities, which gives builders the tools to build housing that will meet those needs.”

http://www.metlife.com/assets/cao/mmi/publications/studies/housing-for-the-55-plus-market.pdf

http://www.globest.com/news/1406_1406/insider/178616-1.html

http://www.docuticker.com/?p=25847

http://www.marketwatch.com/story/when-baby-boomers-move-family-often-is-reason

IS THE LOCAL MULTIUNIT MARKET STILL A SAFE INVESTMENT?

IS THE LOCAL MULTIUNIT MARKET STILL A SAFE INVESTMENT?

 by Jodi Summers

The Los Angeles apartment building market has always been considered to be a safe area of investment because of the constantly growing segment of Los Angelinos just cannot afford to buy a house. And…studies are showing that it is still a good place to shelter money in a scary economy.

The official dictum from the most recent Marcus & Millichap study notes “Apartment market fundamentals in Los Angeles are expected to soften mildly through year-end 2008, though vacancy will still be one of the lowest rates in the nation.”

“It’s true, my vacancies are up,” confirms Mike, a Santa Monica multiunit property owner.

The study reports on rental trends and investment activity in the third quarter of this year. The study does reveal that a weakening job base has produced “a notable uptick in vacancy over the past year” in 26 of the Los Angeles Metropolitan area’s 37 class A submarkets. Despite these vacancy upticks, “Healthy demand and solid rent growth will fuel investor interest in the quarters ahead,” Marcus & Millichap forecasts, although it expects that “deal flow will remain measured as tightened lending criteria continue to shrink the pool of active buyers.”

The latest U.S. Labor Market Report from the Bureau of Labor Statistics noted that in the U.S., total nonfarm employment fell by -159,000 jobs in September.  This was worse than the August drop-off of -73,000 jobs and the biggest monthly decline since March 2003.

The report says sales have slowed by 37% on a year-over-year basis, attributed to a drop-off in 1031-exchange activity and “a more diminished role from leverage-dependent investors,”. Apartment properties have traded at cap rates averaging in the mid- to high-5% spectrum over the past year and are expected to stay in that range through the remainder of 2008.

If the Democrats get into office, and the capital gains tax rises to the proposed 28% - multiunit demand should again increase.

Another trend is that apartment owners are asking for smaller rent increases, with asking rents expected to rise 4.4% to $1,489 by year-end 2008, while effective rents will gain 4.3% to $1,440. To the contrary, RealFacts research notes that Los Angeles area rents average of $1,661, but RealFacts focuses more on institutional-grade assets.

The RealFacts figures rank Los Angeles as the fifth-highest rental market in the country. Its $1,661 average rent compares with an average of $2,272 in the Greater New York area, the highest in the nation, followed by Bridgeport-Stamford at $2,179, Greater Boston at 1,905 and San Jose, CA at $1,708.

“I live in Santa Monica, it would be great if the City would, just once, allow us to raise rents to a price equal to the cost of living increase,” concludes Mike. “In 2008 they let us raise rent a whopping 3.7% while my expenses on the unit went up more like 5.8%.”

That’s the Mark Obrinsky, vice president of research and chief economist for the National Multi Housing Council is of the feeling that, “The excess supply of for-sale single-family and condominium residences continues to weigh heavily on the multifamily sector, and a correction isn’t expected until at least 2010.”

Contributing information  from:

 http://www.globest.com/news/1275_1275/losangeles/174779-1.html

http://laedc.org/eedge/archive/2008/ee081006.html#1

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http://flickr.com/photos/48600074651@N01/192579719

http://www.globest.com/news/1268_1268/insider/174611-1.html?sector=multifamily

http://www.you-are-here.com/sunset/sierra_tower.html

http://www.archstoneapartments.com/Apartments/California/Los_Angeles/Archstone_Santa_Monica_on_Main/

http://www.apartments.com/partner/avsummary.aspx?page=avsummary&property=102343.122&p=AptHL&prvpg=8&partner=AptHL&prvpg=8&ahlp=182863&prvpg=8&index=0&type=photo#photosmedia

Own a Seaside Slice of Santa Monica Canyon + a Piece of History -> 11-unit mixed use across the street from the beach!

Jodi Summers | Sotheby’s International Realty | 310.260.8269 107 + 117 W CHANNEL RD, Santa Monica, CA Own a Seaside Slice of Santa Monica Canyon + a Piece of History -> 11-unit mixed use across the street from the beach! 11 Units - Multi-Family or Mixed-Use offered at $3,695,000     Year Built 1915 Sq Footage 5,137 Floors 2 Parking Unspecified Lot Size Unspecified Maint $0 per month DESCRIPTION Put this jewel in your portfolio ~107 + 117 West Channel Rd., Santa Monica, 90402A Historic 11-unit mixed use suite of properties across the street from the beach.   Gross annual income = $268,644 107 West Channel offers:   PREMIER CORNER EXPOSURE on Pacific Coast Highway - gateway to Malibu, Pacific Palisades & Santa Monica Canyon. Commercial Storefront with outstanding visibility; large 2br 2ba house; separate detached 1br 1ba apartment & small office. Built by F. E. Bundy + family in 1915. Effective Gross Income: $67,000. This property can be purchased separately for $1,350,000. ~~~~~ 117 West Channel offers: AMAZING OCEAN VIEWS at entrance to Santa Monica Canyon & Pacific Palisades. 7 Units. Remodeled with the finest attention to detail - wood floors, travertine bathrooms, stainless steel kitchens, advanced communications, and lush landscaping. (2) 1br 1ba & (5) studios. Use as apartments, offices, or live/work (Zoned C2). Built by F. E. Bundy + family in 1915. Effective Gross Income: $171,000 This property can be purchased separately for $2,800,000. ~~~~~ Buy both for $3,695,000 – a great value!   see additional photos below PROPERTY FEATURES Location! Location! Location! Own a piece of historic Santa Monica Brilliantly maintained LOCATION FEATURES You are @ the beach EZ to freeway Be at the beach, but be in th heart of it all. OTHER SPECIAL FEATURES Built by the Bundy family A grade improvements Put this jewel in your portfolio ADDITIONAL PHOTOS Seller contact info: Jodi Summers Sotheby’s International Realty 310.260.8269 For sale by agent/broker   Equal Opportunity Housing Posted: Oct 3, 2008, 2:07pm PDT

 

 

 

SANTA MONICA’S MAJESTIC/MAYFAIR THEATRE MULTIUNIT PROJECT IS GREENLIGHTED

SANTA MONICA’S MAJESTIC/MAYFAIR THEATRE MULTIUNIT PROJECT IS GREENLIGHTED
http://www.santamonicalandmarks.com/landmk29.html

Since the 1994 Northridge Earthquake, Santa Monica’s landmark Mayfair Theatre has piqued the interested of many a real estate developer. All along, the building’s owner, Karl Schober and Santa Monica’s Architectural Review Board have been negotiating the future. 

“The place was trashed by the earthquake,” said Karl Schober, who owns the building. “The guts of the Theatre collapsed.”
 

After years of negotiation the ARB and Schober have finally agreed on a design -  what remains of the old structure will become the façade of a new 34-unit apartment building with retail on the ground floor, adjacent to the hugely popular Third Street Promenade.
  Of the apartments, 60 percent will be one-bedroom units and 40 percent will have two bedrooms. Of the two-bedroom apartments, three will be set aside for very low-income tenants, said architect David Forbes Hibbert.
 

HOUSING STARTS REBOUND

The Wall St. Journal  notes -

Housing starts made an unexpected rebound in April, reflecting gains in the volatile multifamily segment for apartments and townhomes. But starts for single-family homes fell, and analysts predict continued turmoil in the housing sector.

Get all the details on our economy @

http://online.wsj.com/article/SB121094058802498537.html?mod=CommercialRealEstateMain_1

THE MULTIUNIT REAL ESTATE MARKETPLACE: SOLID FUNDAMENTALS BUT SLOWING INVESTMENT ACTIVITY

COMMERICAL REAL ESTATE MARKETPLACE: SOLID FUNDAMENTALS BUT SLOWING INVESTMENT ACTIVITY

OVERVIEW
Investors seeking opportunities for properties with good longer-term income stream projections rather than short term price appreciation…
 

The National Association of Realtors Commercial division notes three trends in commercial real estate that dominated 4Q 2007:
 

1.      The credit crunch that is still impacting the residential sector began to influence the ability of many commercial property investors to get funding.
 

2.      While investment activity has fallen off noticeably since August of this year, the fundamentals have remained relatively healthy.
 

3.      Both the Commercial Leading indicator (CLI) and the SIOR Index clearly point to a
general slowing in the pace of commercial real estate activity.
 

While the pace of investment has fallen since August/September, first and second quarter activity was brisk. By  the end of October, a record $325 billion worth of commercial real estate
had traded hands nationwide, with over half involving office properties. As a comparison, $306.8 billion worth of commercial properties traded hands in all of 2006, and $267.6 billion was traded in 2005 – both yearly totals surpassing the $150 billion that traded hands in 2004.

 NAR Chief Economist Lawrence Yun said commercial fundamentals are essentially sound.  “Although vacancy rates remain relatively low for all sectors, they are expected to rise slightly in the office and industrial markets during the coming year because much of the space being absorbed is in high-quality buildings or is built-to-suit,” he said.  “As a result, there is a fair amount of older space on the market, particularly in the industrial sector where obsolescence is a factor, although industrial rents are showing healthy gains.  Vacancy rates in the retail and multifamily sectors are projected to tighten in 2008 with rents rising in all sectors.”

NAR FORECAST: Tighter credit conditions will most likely limit the number of investment transactions. Institutional and foreign investors can only take-up some of the slack and they tend to be primarily interested in properties valued in excess of $5.0 million. Cap rates will slowly begin to rise as prices fall. The era of rapid price escalation may be coming to an end.
 

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The Multi-Family Market:
Hurting  housing market helps the multifamily sector…
 

The apartment rental market – multifamily housing – is experiencing increased demand from the slowdown in home sales.  With a rising population and a growing number of households, vacancies are tightening and rents are rising.Multifamily vacancy rates are projected to average 5.4 percent in the current quarter, down from 5.9 percent in the fourth quarter of last year, and then continue to decline to 5.1 percent by the end of 2008.  Average rent is likely to rise 3.1 percent for 2007 and 3.8 percent next year, following a 4.1 percent increase in 2006.Multifamily net absorption is expected to total 234,400 units in 59 tracked metro areas in 2007, below the 229,500 last year, but should rise to 245,800 in 2008.

The COMMERCIAL REAL ESTATE OUTLOOK is published by the NAR Research Division for the Realtors® Commercial Alliance.  The RCA, formed by NAR in 1999, serves the needs of the commercial market and the commercial constituency within NAR, including commercial members; commercial committees, subcommittees and forums; commercial real estate boards and structures; and NAR affiliate organizations. 

The next Commercial Leading Indicator index will be February 20; the next commercial real estate market forecast is scheduled for March 12.