KeatFoong
The apartment sector had been holding out relatively well compared to other industries, but it too will succumb to the massive loss of jobs that is expected to accelerate as we go into 2009.

Through the third quarter, the national apartment vacancy rate according to the Census Bureau was 10.7 percent, only 0.3 percent higher compared to the same period a year ago and still below the level in 2003-04, reported the National Multi Housing Council (NMHC). And rents continued to rise through September, albeit at a slower rate and less than the rate of inflation.

The apartment fundamentals however, are expected to have deteriorated substantially since October and into November—which are yet to be reported on.

Some third quarter measures had already showed signs of that. NMHC’s third quarter Market Tightness Index, which measures changes in occupancy rates and rents, fell from 40 in the second quarter to 24. The survey showed that only less than one-third of respondents reported unchanged market conditions—compared to about half in the previous quarter who said conditions were unchanged.

And things are eviscerated on the financing end, portending deep trouble on future new projects spending. NMHC’s Equity Financing Index dropped to 4—out of 100—and the debt financing index fell to a record low of 4.

“We’re guarded about the outlook for 2009. We think it’s going to be tough. It looks like we’re in a recession and it could be a tough one,” Mark Obrinky, chief economist at NMHC, told MHN.

President-elect Barack Obama’s calls for an economic stimulus program to create jobs and his introduction of his economic team this week, as well as the government’s announcement of a $800 billion to aid the consumer credit industries, all appear reassuring. Down the line, we will address the question, ‘how bad can it get for apartment fundamentals?’ Meanwhile, have a Happy Thanksgiving.

Jack Kern
In a stunning announcement, Timothy Geithner was named as President Elect Obama's pick for Treasury Secretary, replacing Henry Paulson. To give you some idea, "Timothy F. Geithner became the ninth president and chief executive officer of the Federal Reserve Bank of New York on November 17, 2003. In that capacity, he serves as the vice chairman and a permanent member of the Federal Open Market Committee, the group responsible for formulating the nation's monetary policy.
 


Mr. Geithner joined the Department of Treasury in 1988 and worked in three administrations for five Secretaries of the Treasury in a variety of positions. He served as Under Secretary of the Treasury for International Affairs from 1999 to 2001 under Secretaries Robert Rubin and Lawrence Summers." (Information from the Fed website.)



I've been openly critical of Henry Paulson, the bait and switch tactics employed by the Treasury monkeys and the complete lack of planning and transparency on the TARP initiative. I am, however, pleased to see that Geithner was given the nod for this very important position. There are a couple of reasons for this.
 


First, and most importantly, the position of Treasury secretary has all too often been given to Wall Street barons, and as part of the political patronage system that needs reforming, Wall Street experience isn't usually aligned with the needs of the rest of the country. Next, The U.S. banking system has the ability to throw the rest of the world into a deep recession or depression if confidence isn't restored with any level of speed. Having Geithner working closely with Ben Bernanke will offer two advantages that will make the process easier – they've already worked together for many years on economic policy, and they're not from Wall Street and share a disdain for the kinds of financial pioneering that created the current mess.
 


Because Geithner has international experience under Rubin and Summers, he is more likely to be able to bring central bankers to the table and formulate some global strategies that will ultimately help to rebuild credit markets.


Lastly, the appointment firmly puts that control of monetary policy back in the hands of the Fed, where it was wrestled away by the Bush Administration. So going forward, good riddence to Henry Paulson, who was duped by the banks and only succeeded in helping them build their reserves and welcome back Ben. Now maybe we'll see some policies that actually work.

Jack Kern
Oh, those happy go lucky guys at AIG are at it again. Having been the fortunate beneficiaries of millions in taxpayer funds, they've now held another retreat and are claiming it was for educational purposes for the investment broker network. Isn't the investment broker network responsible for how we got into this mess in the first place?

According to AIG, the meeting was at minimal cost, compared to the value these events supposedly create and get this – if AIG can't get the brokers to sell their products to the right customers for the right purposes, then the brokers will sell someone else's policies. The right products to the right customers for the right purposes? Are they dreaming?

And Congress thought bailing out AIG was a good idea, while the major car guys are staring at the very real possibility of doing a Bear Stearns into history?

Meanwhile back at the Bat Cave.

I am reminded of several scenes in the Batman franchise where Wayne Manor is the headquarters of an effort to save Gotham City from an organized crime syndicate. No matter how wildly entertaining some of these bad guys were, none of them seemed to have figured out how to take dough from the public dole and squander it like AIG. With the government now holding a substantial portion of AIG in trust in one way or another, the risk now starts to spread across credit markets doing the opposite of what it was supposed to – threatening public sentiment instead of building confidence.

Fannie and Freddie aren't in such great shape either and the last thing we need as the multifamily industy is the public deciding to color all funding programs with the same brush. We can only hope that Congress wakes up and puts new rules and restrictions on AIG and the banks so we can get credit markets back on track.

It's starting to look like hanging out at the Bat Cave might be a good idea after all.
 
(Jack Kern is the Managing Director of Kern Investment Research and also the lead singer of Elmo's Rant, which recently released the single, entitled, "You Were Ugly As A Baby So Don't Bark at Me Now." He can be reached at jkern80124@gmail.com.)

Green design has become more popular in recent years in large multifamily and commercial building planning.

Take, for example, the Conference Center at the newly re-opened TreePeople Center for Community Forestry in Los Angeles, which recently was awarded LEED Platinum certification.

TreePeople is an environmental non-profit. Its Conference Center provides a gathering place for local, national and international leaders to meet and create plans for sustainable cities.

Which brings us to another growing green practice: Building sustainable communities.

Using green design when planning new multifamily buildings can help maximize energy efficiency and decrease any negative impact a single high-rise structure may have on the environment.

But use green design to construct entire new communities, and you can have an even greater impact. It’s big-picture thinking–that can offer big results.

New Neighborhood Focus

This week, multi-housingnews.com covered South Bronx-based Melrose Commons’ efforts to redevelop itself into a green haven.

Because of its sustainable design and urban neighborhood development work, the project was selected to be a member of the Focus Group for the new LEED for Neighborhood Development pilot program.

Melrose Commons’ renovations have been designed to create healthy indoor and outdoor spaces—no small feat in an urban area struggling with pollution.

When the community is complete, its green design features will affect an impressive amount of people: With 1,379 units, planners forecast 4,000 to 6,000 residents will live in Melrose Commons.
Green Design Tricks

When building on a larger scale–such as a community redesign–developers can include design elements to encourage community residents to live a greener lifestyle, such as:

•    Reducing the need for cars by building walking and biking paths. Promoting walking and biking can help reduce air pollution. And, because it provides daily exercise, residents get a bonus health effect.

•    Encouraging use of public transportation by building developments close to trains and buses. According to the Chicago Tribune, several of the multifamily developments in the Chicago suburb of Palatine, Ill., revitalized a fairly vacant downtown area into a web of condo complexes and walkable entertainment options near the train station.

Residents can simply hop on the Metra and commute to work downtown in less than an hour.
•    Adopting use of recycled and sustainable materials on a greater scale. The company preparing to build the first multifamily, modular housing developments in Portland has proposed doing just that.
The homes’ decks will be made from recycled plastic and cellulose, according to Portland’s Daily Journal of Commerce.

•    And reducing a project’s overall carbon footprint and utility use. The under-construction Gatsby Hollywood single-family home complex in Los Angeles hopes become Los Angeles’ first completely solar-powered urban community. Gatsby’s developers say that solar roof panels will help lower homeowners’ monthly utility bills by as much as 60 percent.

But single-family communities aren’t the only ones getting in on the green action. Habitat for Humanity, for example, plans to outfit the Staghorn Villas townhomes in Pine Hills, Fla., with high-grade insulation to cut the community’s carbon footprint and energy use.

More Money To Go Green

There is evidence that companies may be buying into the effectiveness of green urban planning, too.
Just this week, ComEd announced its first Community Energy Challenge, in which a dozen Chicago suburbs will work to develop and implement cost-effective energy efficiency pilot projects to support municipal sustainability objectives.

Certain lenders are encouraging going green, too. Wells Fargo, for one, has doubled its financing for LEED-certified buildings since May 2007.

It looks like that TreePeople conference space–the one designed to allow leaders to gather and discuss how to make cities greener–may get busy.

Because whether you’re planning a community's rebirth or determining a mixed-use complex’s look and feel, factoring in green design can improve residents' lives– and reduce the development’s impact on the environment.

KeatFoong
The apartment investment sales market since the financial market crisis
occurred in mid-September has “freezed up” as apartment buyers and
sellers face deep uncertainty over the future of the nation’s—indeed,
the global—economic condition.

According to the results of one study, reported here in the
previous issue, apartment sales volume has plunged a whopping 69
percent. Indeed, one broker, Kitty Wallace, senior vice president at
Sperry Van Ness, says that in her experience in California,
multi-housing transactions have dropped 70 to 80 percent.

The severe drop in apartment investment sales volume generally is
attributed to a combination of negative sentiment and uncertainty; lack
of bank financing; the death of conduit financing; tougher LTV and DSC
requirements from Fannie Mae and Freddie Mac; and a continuing gap
between buyer and seller expectations.

Anecdotally, many institutional and high-leverage players have
dropped out of the sales market. Among the ones remaining are long-term
holders and players who can put down a lot of cash. For these players,
many of them no doubt family-owned concerns, this is the opportunity to
get into previously difficult-to-enter markets.

One can only hope the investment sales market inactivity is
temporary as the government works to unfreeze the credit markets with a
bailout package and implement a yet-to-be-legislated fiscal policy to
stimulate the economy. Hopefully, the fiscal stimulus, which
President-elect Barack Obama says he is set on, will not be “too little
too late.” So far, initial signs of the effects of the bailout package
seem to be encouraging, and experts say a financial meltdown seems to
have been averted—for now.

No one knows when the apartment sales market will come back but
some players are optimistic it could be next year, when the economic
picture becomes clearer—and assuming the financial markets do not
unravel further.

Meanwhile, keep in mind that the multi-housing investment sales
market is still the top-performing commercial property sector. Other
commercial real estate sectors do not have Fannie Mae and Freddie Mac
to keep their transactions volumes alive.

Despite the optimism that greeted Barak Obama’s election to the Oval Office, the economy continues to struggle in a variety of areas. While experts continue to disagree as to whether or not an official recession is in the offing (or already taking place), it is clear that the President-Elect will inherit an economy with more than its share of problems.

Early this week, the nation’s No. 2 electronics retailer, Circuit City, filed for Chapter 11 bankruptcy. The move came a week after the firm announced it would close 155 stores in the wake of a drop in consumer
spending. Circuit City’s remaining stores will remain open throughout the bankruptcy proceedings.

Meanwhile, global delivery company DHL announced that it would cut 9,500 jobs and discontinue deliveries within the United States, though it will continue deliveries between the U.S. and other nations. The cuts come after the firm reduced its workforce by 5,400 earlier this year. 

And speaking of job cuts, nationwide, employers continued to slash positions in September, according to a Labor Department report last week. September saw a net loss of 159,000 jobs—the biggest one month drop in five years and the ninth straight month of losses. Year to date losses reached 760,000. The unemployment rate, meanwhile, remained at 6.1 percent. Perhaps most troubling about the report was the fact that losses were widespread across sectors, and not contained in a few industries.

The housing market also continued to struggle in September, with the National Association of Realtors’ pending home sales index dropping 4.6 percent during the month, after climbing 7.4 percent in August. The decline could have been more severe, if not for a sharp decline in home prices, which were down 9 percent over the previous September, due largely to foreclosures and tighter lending standards for
mortgages.

Those seeking a silver lining to the economic turmoil can look to the pump, where gasoline prices continued their decline, dropping to a national average of under $2.25 a gallon as of early this week–the lowest level since early 2007. Prices have plummeted some 45 percent from their mid July high, according to Triple A, as the faltering economy has decreased demand for oil.

The government, for its part, has kept up efforts to prop up the economy on several fronts.
In a plan to aid homeowners struggling to pay their mortgages, the Bush administration unveiled a plan to modify the terms of those home loans in hopes of stabilizing the single-family home market. The plan is especially significant in that it will apply to many loans held by beleaguered mortgage agencies Fannie Mae and Freddie Mac, which were taken over by the government in September due to massive losses on non-performing mortgages. Together, Fannie and Freddie hold a large percentage of the nation’s mortgage loans, and thus the plan could have a similarly wide-reaching effect.

Early this week, insurer AIG got a reworked $152.5 billion deal from the federal government, as the Federal Reserve and Treasury Department made significant changes to the terms of the company's original bailout. The Fed announced that it will reduce AIG's original $85 billion bridge loan to $60 billion, cut the interest rate by 5.5 percentage points and extend the borrowing period from two years to five years. In addition, the Treasury will also purchase $40 billion in AIG preferred stock. AIG was having difficulty paying back its original bridge loan, which it intended to use to sell off many of its subsidiaries to restore the firm’s financial standing.

As Obama prepares to take office in just over two months, his actions until then—especially, perhaps, his selection of a new Treasury Secretary—will be closely watched, and they could go a long way towards determining his early success in dealing with the nation’s faltering economy.

"I don't think we're in Kansas anymore"
Dorothy in the Wizard of Oz
(c) MGM 1935

The election o31076-Kern_Jack
f Barack Obama to president of the United States is going to have a diverse impact on markets, real estate and ultimately the status of the recovery package authored by the U.S. Treasury department, under Henry Paulson. Not since the administration of Herbert Hoover (what a fun president he was) has a newly elected president faced the myriad of complexities we are now facing as a nation.

There are a lot of promises contained in the campaign messages that now ring hollow, it seems to me and while the reluctant euphoria of the Grant Park celebration is manifest in everyone's mind, I want to address a perspective that's important to consider.

The Treasury department, prior to the election, with the assent, under stress of Fed Chairman Bernanke began to flood the markets with some degree of liquidity. The essential purpose of this liquidity is to loosen credit markets and make the banks more willing to lend to one another (overnight LIBOR) and also to take a second look at their policies of tightening credit. Fundamentally it hasn't worked as planned but some sectors are beginning to show very modest gains. Within our real estate industries, there are some indications that the availability of credit for acquisitions is progressing towards a more responsive standard. Whether this is due to the obvious pressures faced by buyers and sellers isn't clear yet, but with Fannie Mae more than willing to underwrite deals, some transactions are being closed.

The great Federal bailout of the banks, to the tune initially of $750 billion is part of the Obama election mandate of not doing for Wall Street what is needed for Main Street and expect to see some real reticence from campaign advisors to make future funds available for this purpose. Even Bernanke has been noticably quiet about how well the bailout is working. Remember we believe that Bernanke is upset that the Treasury department under Paulson has co-opted the role of the Fed in managing the banks and the money supply. With House Speaker Pelosi still pushing for additional bail-out funds, the end result will be a show down between the new administration and a Congress firmly entrenched in the belief we can spend out way out of this mess.

In the Wizard of Oz, Dorothy's house was uprooted and blown from Kansas (if you've ever been to Kansas, you'll appreciate the humor in this scene in the movie) all the way to Oz. By my own calculations, the likely result of this, aside from being removed from Kansas, is that Dorothy's house is now in a much better neighborhood in Munchkinland and her principal concern would be front foot benefit charges and taxes. With a house sitting on the main street in the middle of town, overlooking the best shops and parks, Dorothy has a double problem now, higher taxes and questionable property values. Sounds kind of familiar doesn't it?

As the next few weeks progress, expect to see the beginnings of a new tax policy, and in the offing, a likely slow down in any probable relief for homeowners. Oz included, the markets will be slow to return to some level of stability until next October, and between now and then, the newly reconstituted Congress, according to a friend of mine that currently serves in the Congress, will view previous Bush administration policies as flawed and at risk. With all bets off, renters will stay longer in their apartments and we'll be seeing another irrational attempt by the National Association of Homebuilders and the National Association of Realtors to game legislation to their advantage.

An earlier print of the Wizard of Oz apparently had, according to legend, signs for new subdivisions all along the Yellow Brick Road, on the way to the Emerald City. It seems if Dorothy has been a real estate investor, this might have turned out differently after all.

It’s no secret that green building is becoming more popular. And, as a result, green building training and certification programs are becoming more fashionable, too.

With good reason: As green building gains popularity in the multifamily sector–and in the overall building industry–there is an increased need for information about what green building entails and how to actually do it.
The industry is responding by offering grants, training and more information.

•    New grants mean new training funding: Consider, for example, the upcoming green building program at the Technical College of the Lowcountry in South Carolina.

Funded by an $86,000 grant from the Wal-Mart Foundation that was awarded just last week, the college’s green training program will teach students about environmentally sustainable construction next year, according to the Beaufort Gazette.

The program also will certify alternative energy construction technicians.

•    Training makes green building more possible: NeighborWorks America, an organization providing access to homeownership and affordable rental housing, just launched a new Web site–www.nw.org/green–to help the housing and community development industry create greener housing and communities.

The site features examples of green homebuilding efforts and community projects and include links to education and training courses for professionals, according to Thomas P. Deyo, NeighborWorks America’s Senior Advisor Green Strategies and GulfRebuilding.

NeighborWorks America offers a total of 16 green building and related courses, including courses in how to make multifamily housing greener.

•    More educational opportunities offer encouragement: Other entities–such as Mich.-based J.S. Vig Construction Company–are working to make green building a simpler choice for developers and builders.

Noting that LEED certification can be expensive (and to some, confusing and time-consuming), J.S. Vig recently announced that it has formed Project Green, a green building think tank.

The think tank will initially have a staff of five and be headquartered in Ann Arbor, Mich.—in a building that will also house a resource library devoted to sustainable construction as an additional green resource for builders.

Selling Green

Builders and developers aren’t the only ones trying to make going green easier. Real estate agents are also getting involved.

In October, a group of Exclusive Buyer Agents received certification for completing the Green Building for Real Estate Professionals Level One Course offered at the annual National Association of Exclusive Buyer Agents convention.

The Green Real Estate Education course was designed to help real estate professionals learn what green building is and what it means for consumers. The course included green facts, initiatives, green materials, financing tools, tax incentives and energy rating information.

That makes sense—if we’re going to take the extra effort to build green, having some qualified to sell something green should be part of the process.

Still, as lending becomes harder to obtain for large projects, the additional cost of building green is likely to prevent some builders from adding sustainability to their design plans.

And—while the extra education and training is all good—certification can be an issue.

The Burden of Certification Costs

Some regions have local green certification guidelines builders can use; yet many in the industry still feel
that the only certification or standards worth pursuing are the LEED guidelines because they’re the biggest and most widely recognized.

They are, however, also expensive. (LEED certification costs vary per area but can be more than $3,000 per project.)

Paying to get some general green education probably isn’t a bad idea. But in terms of certification, the extra cost to pursue LEED status makes the various smaller local certification programs seem like a decent idea. The New York Times ran an article suggesting as much on Halloween.

Would you consider getting your projects green certified if your area had a reasonably priced program? Or would you prefer to just use LEED guidelines and pay more for certification?

Tell us what you think.

Henry

Up until recently, the kitchen was designed as a functional laboratory for a single participant, the woman of the house, the little lady, mom.  It was laid out with assembly line efficiency with a window centered on the sink so she could watch the little ones in the back yard.

The evolution of the Modern Kitchen has grown far from its primary function of food preparation, to that of “the social center of the home”.  A place where the family, both nuclear as well as tribal, still gather to share, rejuvenate and commune together.

Today the Modern Kitchen is still the gathering place of the tribe, but the walls have come down and this once hidden and secluded space is now part of a larger social arena.  It serves as living room, dinning room, home-office, entertainment and media center.

The Modern Kitchen has become a place that defines the home and the individual that lives in it.  This once private domain of the feminine world has now given way to the new social order and reflects the world that we live in.   More democratic than “Moms” kitchen, everyone is welcomed in the Modern Kitchen.  Friends, family and guests are invited, if not encouraged to participate in the ritual of preparation.  

Simple and clean, open and inviting, the exclusion of all things extraneous are the words that describe the Male Centric Kitchen.  A kitchen without boundaries or barriers, a kitchen free from conventional thought and restrictions, a kitchen created to reflect the individual.

The Modern Kitchen is open to the rest of the home, and as such, the kitchen now must function on several levels, from food preparation to social interaction, from entertainment center to living-room.  More furniture, than cupboards, the Modern Kitchen blends seamlessly
into the living areas of the home, successfully achieving the delicate balance between form and function. 

The Modern Kitchen, in its new domestic role, finds itself reflecting a family style based on the sharing of traditional roles and function.  The living area embraces the kitchen as a multifunctional arena, were food is prepared, people talk, the last email is finished and guests are entertained. 

The core of the Modern kitchen is about entertaining, aesthetics outweighs functionality.  Where room for friends and guests are a prerequisite…”a space where the day begins and the party always ends”.

Kevin Henry is a writer, speaker and industry leader as well as the Executive VP of NYLOFT. He can be reached at kevin@nyloft.net

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