El Ultimo Dia. The last day of class.
I have enjoyed this class just like I've enjoyed all the other real estate courses I've taken. It has been great learning from the class discussions with Dr. Forgey and my classmates.
Transportation
The TxDOT Rail Division is urging the public to provide input regarding the Texas State Rail Plan that will be updated this fall. According to the article, The Rail Plan is required by the Texas Legislature and is also an important document that the Federal Railroad Administration (FRA) will examine to determine future funding for rail projects.
Adaptive Reuse Projects
Several articles regarding adaptive reuse were discussed. One article for example discussed a developer buying an old office building in downtown Pittsburgh and having plans to convert it to a residential building. This is a trend in larger cities. There are historical tax incentives for reusing old buildings and developers are capturing that niche market. However, when working with an adaptive reuse project there are many unknowns. When performing your due diligence, a developer should seek help from qualified experts in construction to help identify possible huge issues that may negatively impact a project. After reviewing all visible issues a cost estimate model can be built. After this is provided, it will help a developer identify whether a project is financially feasible or not.
Thursday, August 12, 2010
August 5, 2010 - Development / Construction / Adaptive Re-use / Redevelopment Trends and Issues
Dia Nueve.
It may be 2011 before population growth and job creation push existing construction projects and distressed assets through the system. Only then will apartment owners, investors, and developers be able to reap the benefits.
iPads are being used in the construction industry. My employer has purchased iPads for all field staff. A major benefit is the ipad’s ability to link to virtual plan rooms through the web and access all project drawings, contracts, specifications, project schedules, RFIs, submittals, purchase orders, correspondence, contacts, photos, etc. The iPad improves productivity for supervisors and craftsmen. The iPad on project sites, dramatically reduces the need to carry 50lb contract drawings and specification manuals around the jobsite. Cost savings is another benefit of using the ipad due to reduction of job printing required for a project. In addition,a green initiative may be launched based on the paper savings, providing better customer service.
The National Association of Home Builders (NAHB) has urged policymakers to address the lack of financing for housing production that is impeding the housing and economic recovery.
Homebuilders are in for a rough few years now that the home buying tax credit era has ended.
The Chief Executive from D.R. Horton Homes believes 2011 and 2012 are going to be tough years. He quotes "I just don't see any sustainability of growth or profitability until we get some jobs created in this country and until consumer confidence improve. D.R. Horton is by far the most aggressive in cutting prices from all homebuilders.
June 2010 contracts for future commercial construction in the Dallas-Fort Worth-Arlington Metropolitan statistical fell 51 percent when compared to June 2009, according to McGraw-Hill Construction.
Not all projects, though, are moving forward because the numbers still aren’t working. Developers looking for financing are running up against lenders that are still underwriting to very conservative metrics.
According to Milam, lenders are underwriting deals for garden-style apartments at a $2.40 to $2.60 per square foot range. High rises may go for as much as $3 per square foot. He advises these numbers are doable, but only if the land hasn’t traded in a while--specifically since 2006. "Anyone who purchased land after 2006 paid too much for it," he says.
"The price was likely based on condo outsales and the numbers just won’t work. Banks won’t underwrite a deal with rents penciled in at $4.50 per square foot, which is what land at those prices will require." Developers holding onto land from that time will have to wait at least five years before the underwriting and project costs meet at an acceptable point.
Due to the Gulf Coast oil spill, the governor of Florida wants commercial and residential real estate values to be re-appraised to calculate the loss in property values. The governor wants BP to pay for the decline in real estate values.
It may be 2011 before population growth and job creation push existing construction projects and distressed assets through the system. Only then will apartment owners, investors, and developers be able to reap the benefits.
iPads are being used in the construction industry. My employer has purchased iPads for all field staff. A major benefit is the ipad’s ability to link to virtual plan rooms through the web and access all project drawings, contracts, specifications, project schedules, RFIs, submittals, purchase orders, correspondence, contacts, photos, etc. The iPad improves productivity for supervisors and craftsmen. The iPad on project sites, dramatically reduces the need to carry 50lb contract drawings and specification manuals around the jobsite. Cost savings is another benefit of using the ipad due to reduction of job printing required for a project. In addition,a green initiative may be launched based on the paper savings, providing better customer service.
The National Association of Home Builders (NAHB) has urged policymakers to address the lack of financing for housing production that is impeding the housing and economic recovery.
Homebuilders are in for a rough few years now that the home buying tax credit era has ended.
The Chief Executive from D.R. Horton Homes believes 2011 and 2012 are going to be tough years. He quotes "I just don't see any sustainability of growth or profitability until we get some jobs created in this country and until consumer confidence improve. D.R. Horton is by far the most aggressive in cutting prices from all homebuilders.
June 2010 contracts for future commercial construction in the Dallas-Fort Worth-Arlington Metropolitan statistical fell 51 percent when compared to June 2009, according to McGraw-Hill Construction.
Not all projects, though, are moving forward because the numbers still aren’t working. Developers looking for financing are running up against lenders that are still underwriting to very conservative metrics.
According to Milam, lenders are underwriting deals for garden-style apartments at a $2.40 to $2.60 per square foot range. High rises may go for as much as $3 per square foot. He advises these numbers are doable, but only if the land hasn’t traded in a while--specifically since 2006. "Anyone who purchased land after 2006 paid too much for it," he says.
"The price was likely based on condo outsales and the numbers just won’t work. Banks won’t underwrite a deal with rents penciled in at $4.50 per square foot, which is what land at those prices will require." Developers holding onto land from that time will have to wait at least five years before the underwriting and project costs meet at an acceptable point.
Due to the Gulf Coast oil spill, the governor of Florida wants commercial and residential real estate values to be re-appraised to calculate the loss in property values. The governor wants BP to pay for the decline in real estate values.
July 29, 2010 - Fort Worth Trinity River Vision Project
Dia Ocho.
Our class walked a few blocks from our college campus to the Trinity River Vision headquarters in downtown Fort Worth. We were greeted by Shanna Cate when we arrived, and we were provided with an informational session about the Trinity River Vision Project.
The "Master Plan" for the Trinity River is a concept literally decades in the making. Encouraged by community volunteers in the 1980's, developed by urban designers and specialty consultants in the 1990's, and adopted by City Council in 2003, the Trinity River Vision Master Plan encompasses 88 miles of the Trinity River and its greenbelts and tributaries throughout the Fort Worth area. The "vision" has always been to advocate for this natural resource, keeping the river beautiful, accessible, enjoyable, and productive. Making sure it remains a valuable asset for the entire community.
The plan focuses on eight segments of the Trinity River and its tributaries: Clear Fork North, Clear Fork South, Marine Creek, Mary's Creek, Sycamore Creek, West Fork East, West Fork West, and the Central City area now called Trinity Uptown. It considers environmental quality, conservation, recreation facilities, trail developments, reforestation, beautification, and linkage to neighborhoods, downtown, and other special districts. The plan also addresses adjoining land uses, transportation and how other facilities best complement and benefit from the greenways.
The project has a 12 year construction schedule for the bridges, bypass channel, storm water management, isolation gates, dam and channel lock, interior water feature and Trinity uptown. Construction started in 2009, so it is scheduled to be completed in 2021. Private development may begin with the mixed development projects and start building multifamily, office, retail and restaurants. I’m excited about this because I currently work on mixed development projects, so I recognize there is huge opportunity for business growth in Fort Worth, Texas.
When the project is completed it will provide an estimated 16,000 permanent jobs, and 10,000 mixed income residential units.
Our class walked a few blocks from our college campus to the Trinity River Vision headquarters in downtown Fort Worth. We were greeted by Shanna Cate when we arrived, and we were provided with an informational session about the Trinity River Vision Project.
The "Master Plan" for the Trinity River is a concept literally decades in the making. Encouraged by community volunteers in the 1980's, developed by urban designers and specialty consultants in the 1990's, and adopted by City Council in 2003, the Trinity River Vision Master Plan encompasses 88 miles of the Trinity River and its greenbelts and tributaries throughout the Fort Worth area. The "vision" has always been to advocate for this natural resource, keeping the river beautiful, accessible, enjoyable, and productive. Making sure it remains a valuable asset for the entire community.
The plan focuses on eight segments of the Trinity River and its tributaries: Clear Fork North, Clear Fork South, Marine Creek, Mary's Creek, Sycamore Creek, West Fork East, West Fork West, and the Central City area now called Trinity Uptown. It considers environmental quality, conservation, recreation facilities, trail developments, reforestation, beautification, and linkage to neighborhoods, downtown, and other special districts. The plan also addresses adjoining land uses, transportation and how other facilities best complement and benefit from the greenways.
The project has a 12 year construction schedule for the bridges, bypass channel, storm water management, isolation gates, dam and channel lock, interior water feature and Trinity uptown. Construction started in 2009, so it is scheduled to be completed in 2021. Private development may begin with the mixed development projects and start building multifamily, office, retail and restaurants. I’m excited about this because I currently work on mixed development projects, so I recognize there is huge opportunity for business growth in Fort Worth, Texas.
When the project is completed it will provide an estimated 16,000 permanent jobs, and 10,000 mixed income residential units.
July 22, 2010 - Dallas Trinity River Project
Dia Siete.
The project covers 20 miles of the Trinity River,approx. 10,000 acres.
This project addresses a number of regional concerns, though flood protection remains the essential cornerstone of this multifaceted effort.
The interrelated components of the project are:
– Flood Protection
– Environmental Restoration
– Recreation
– Transportation
– Community/economic development
Resolution of Levee issues
• More frequent mowing cycles
• Rip rap/drainage relocation for erosion
• Soil borings will determine needs for diaphragm walls
• Work with other agencies to determine needs
• The Trinity River Corridor Project will provide many of
the “fixes” for the unacceptable conditions of the levee
system
– Diaphragm walls
– Chain of wetlands
– Removal of ATSF Railroad Bridge
– Raising/fattening the levees
The design concept for a 10,000acre portion of the Trinity River Corridor from Royal Lane down to IH635/IH20past the Trinity River Audubon Center.
The promenade will accommodate 19,000 people during peak events and activities
• 80% of the promenade will be shaded throughout the course of the day.
Shade structures take the place of tree vegetation in this plaza preserving views of the downtown skyline and promenade, while Seating walls are integrated with the topography and provide illumination at night.
• Interactive fountains and darkcolored, exposed aggregate concrete paving slopes into the lake as a beach.
The project covers 20 miles of the Trinity River,approx. 10,000 acres.
This project addresses a number of regional concerns, though flood protection remains the essential cornerstone of this multifaceted effort.
The interrelated components of the project are:
– Flood Protection
– Environmental Restoration
– Recreation
– Transportation
– Community/economic development
Resolution of Levee issues
• More frequent mowing cycles
• Rip rap/drainage relocation for erosion
• Soil borings will determine needs for diaphragm walls
• Work with other agencies to determine needs
• The Trinity River Corridor Project will provide many of
the “fixes” for the unacceptable conditions of the levee
system
– Diaphragm walls
– Chain of wetlands
– Removal of ATSF Railroad Bridge
– Raising/fattening the levees
The design concept for a 10,000acre portion of the Trinity River Corridor from Royal Lane down to IH635/IH20past the Trinity River Audubon Center.
The promenade will accommodate 19,000 people during peak events and activities
• 80% of the promenade will be shaded throughout the course of the day.
Shade structures take the place of tree vegetation in this plaza preserving views of the downtown skyline and promenade, while Seating walls are integrated with the topography and provide illumination at night.
• Interactive fountains and darkcolored, exposed aggregate concrete paving slopes into the lake as a beach.
Thursday, July 15, 2010
July 15, 2010 - Debt Markets / Lending / Financing / Foreclosures / Workouts Trends and Issues
Dia Sies.
More interesting topics were discussed in class today.
There are non-judicial foreclosures in Texas.
A hearing by a judge is not necessary to proceed with the foreclosure process in Texas.
Deed of Trust- effectively officiates in case a tenant stops making payments.
Workouts- the Lender decides to work out a deal with a troubled tenant’s ability to service debt.
The lender may lower payments and push back the principal payments.
The lender may also get shared appreciation for a property if it is sold.
New foreclosure notices need to drop, not just stay at around at their near-record highs. Banks do not want to be homeowners, and they do not want spend cash for repair and maintenance services. Banks hold on to foreclosure inventory, but in a few cities, they're getting a big incentive to let it go. According to an article discussed in class, L.A. last week passed a new city ordinance that fines banks, servicers, whoever owns the foreclosed property, up to $100,000 for letting the property fall into disrepair. There are many run-down, stripped homes with overgrown lawns that are examples of what is not recovering in the housing market. .
"There is a commercial real estate crisis on the horizon, and there are no easy solutions to the risks commercial real estate may pose to the financial system and the public," says a report issued by the Congressional Oversight Panel.
But in a sign of the government's unpreparedness, Warren notes that last year's stress tests were overly limited. The largest loan losses are projected for 2011 and beyond, but the stress tests conducted on big Wall Street banks last year examined their stability only through 2010."
Some banks have a special technique for dealing with business borrowers who can't repay loans coming due. The banks give them more time, hoping things improve and they can repay later. Banks believe this is a wise strategy, but we have learned in class this is simply called "extend and pretend." Banks are simply prolonging the inevitable by doing this.
The following example was discussed. In Atlanta, Georgian Bank lent $13.5 million to a company in late 2007, some of it to buy land for a 53-story luxury Mandarin Oriental hotel and condo development. The loan came due in November 2008, but the bank extended its maturity date by a year. The bank extended it again to May 2010, with an option for a further extension to November 2010, according to court documents.
Atlanta has more loans in special servicing than any other city and it is yet another sign the region is a poster child for risky real estate deals. The No. 1 issue is that values have fallen as vacancy has risen. The average loan to value was up to 80 percent. When many owners didn’t put a lot of equity into their deals, there wasn’t much of a margin for error. Many borrowers will be unable to get refinancing without injecting a large amount of equity. And, many are going to be unwilling to infuse equity into a loan that is already under water.
More interesting topics were discussed in class today.
There are non-judicial foreclosures in Texas.
A hearing by a judge is not necessary to proceed with the foreclosure process in Texas.
Deed of Trust- effectively officiates in case a tenant stops making payments.
Workouts- the Lender decides to work out a deal with a troubled tenant’s ability to service debt.
The lender may lower payments and push back the principal payments.
The lender may also get shared appreciation for a property if it is sold.
New foreclosure notices need to drop, not just stay at around at their near-record highs. Banks do not want to be homeowners, and they do not want spend cash for repair and maintenance services. Banks hold on to foreclosure inventory, but in a few cities, they're getting a big incentive to let it go. According to an article discussed in class, L.A. last week passed a new city ordinance that fines banks, servicers, whoever owns the foreclosed property, up to $100,000 for letting the property fall into disrepair. There are many run-down, stripped homes with overgrown lawns that are examples of what is not recovering in the housing market. .
"There is a commercial real estate crisis on the horizon, and there are no easy solutions to the risks commercial real estate may pose to the financial system and the public," says a report issued by the Congressional Oversight Panel.
But in a sign of the government's unpreparedness, Warren notes that last year's stress tests were overly limited. The largest loan losses are projected for 2011 and beyond, but the stress tests conducted on big Wall Street banks last year examined their stability only through 2010."
Some banks have a special technique for dealing with business borrowers who can't repay loans coming due. The banks give them more time, hoping things improve and they can repay later. Banks believe this is a wise strategy, but we have learned in class this is simply called "extend and pretend." Banks are simply prolonging the inevitable by doing this.
The following example was discussed. In Atlanta, Georgian Bank lent $13.5 million to a company in late 2007, some of it to buy land for a 53-story luxury Mandarin Oriental hotel and condo development. The loan came due in November 2008, but the bank extended its maturity date by a year. The bank extended it again to May 2010, with an option for a further extension to November 2010, according to court documents.
Atlanta has more loans in special servicing than any other city and it is yet another sign the region is a poster child for risky real estate deals. The No. 1 issue is that values have fallen as vacancy has risen. The average loan to value was up to 80 percent. When many owners didn’t put a lot of equity into their deals, there wasn’t much of a margin for error. Many borrowers will be unable to get refinancing without injecting a large amount of equity. And, many are going to be unwilling to infuse equity into a loan that is already under water.
Thursday, July 8, 2010
July 8, 2010 - Hospitality Markets / Travel / Resorts / International Property Markets Trends and Issues
Dia Cinco.
One reason the hospitality industry has weakened is due to families scaling back on destination trips which would require hotel lodging. Families are cutting down on expenses during this weak economy. Hotels revenues have also weakened due to new technologies that allow business meetings over the internet in lieu of having face to face meetings at hotel conference rooms. This technology helps companies reduce traveling expenses which effectively allow savings on operating costs. Technology such as webinars and teleconferences are alternatives to face to face meetings and they reduce a company’s traveling expenses significantly. In addition, business team members that are located in different parts of the country may monitor real time progress of development projects via live web video feeds.
It is important for hotels to discover new ways for generating revenue. Some ideas shared in class were that hotels should provide the following: dry cleaning service, restaurants, selling toiletries, new release movies, late night eatery, etc. Providing these simple items may help attract clients. However, I believe Wi-Fi internet should be free at hotels. I stayed at the Marriot Renaissance hotel recently and I was disturbed to find out there was a $12 dollar internet access fee per day, so I used my cell phone to access the internet instead.
Hospitality businesses are suffering from the damage the Gulf Coast oil spill. Most of the people lodging at hotels are the environmental cleanup crews. The environmental crews are primarily in the Gulf Coast to work, so they are not spending money on entertainment attractions like tourists would.
Real estate property values in China are increasing and there is belief by some experts that it is headed toward a real estate bubble.
Latin America scores low in transparency according to John Lang LaSalle. This is essentially due to Latin American markets not having market performance data. However, this is changing since Brazil just two years ago enacted in indexes market.
One reason the hospitality industry has weakened is due to families scaling back on destination trips which would require hotel lodging. Families are cutting down on expenses during this weak economy. Hotels revenues have also weakened due to new technologies that allow business meetings over the internet in lieu of having face to face meetings at hotel conference rooms. This technology helps companies reduce traveling expenses which effectively allow savings on operating costs. Technology such as webinars and teleconferences are alternatives to face to face meetings and they reduce a company’s traveling expenses significantly. In addition, business team members that are located in different parts of the country may monitor real time progress of development projects via live web video feeds.
It is important for hotels to discover new ways for generating revenue. Some ideas shared in class were that hotels should provide the following: dry cleaning service, restaurants, selling toiletries, new release movies, late night eatery, etc. Providing these simple items may help attract clients. However, I believe Wi-Fi internet should be free at hotels. I stayed at the Marriot Renaissance hotel recently and I was disturbed to find out there was a $12 dollar internet access fee per day, so I used my cell phone to access the internet instead.
Hospitality businesses are suffering from the damage the Gulf Coast oil spill. Most of the people lodging at hotels are the environmental cleanup crews. The environmental crews are primarily in the Gulf Coast to work, so they are not spending money on entertainment attractions like tourists would.
Real estate property values in China are increasing and there is belief by some experts that it is headed toward a real estate bubble.
Latin America scores low in transparency according to John Lang LaSalle. This is essentially due to Latin American markets not having market performance data. However, this is changing since Brazil just two years ago enacted in indexes market.
Thursday, July 1, 2010
July 1, 2010 - Industrial Markets / Low-Income Housing / Taxes / Governmental Trends and Issues
Dia Cuatro...
In today's collaborated discussions we reviewed industrial markets, low income housing, taxes and governmental trends and issues.
An article discussed pertained to HUD community development block grants that are being awarded to the City of Dallas. Dallas is receiving millions in federal grant money for housing; however, Dallas is rejecting certain affordable housing development projects to limit the amount of affordable housing in downtown. Affordable housing developers are frustrated because they believe Dallas city hall is favoring a select number of developers which are building a mix of upscale developments with a minimum amount of affordable housing units. One developer in particular is very upset after losing millions of dollars due to their project not being awarded HUD funding which was required to make their project feasible. This developer believes Dallas officials are favoring upscale developments with minimum amount of affordable housing units for the downtown area. The article suggested that Dallas officials may want to portray an upscale scene for their downtown and this might be the reason why Dallas is rejecting development projects with a high count of affordable housing units in downtown.
Lack of diversity in communities was discussed and how it can affect its residents. A community needs diversity to provide a healthy environment to have a good level of interaction. Affordable housing is required for teachers, police men, fire fighters, nurses, cleaning and cooking personnel, etc.
We discussed if developers should be responsible for relocating others that are displaced from buying the low income land and building it up to be a nice place? The class consensus was yes, developers should have a responsibility to relocate these people. Relocation assistance should be required to move residents when a new development needs to be built.
The US is broke, so removing the capital gains tax of 15% and changing it to a 30% + tax rate is being proposed in order to generate more tax dollars. Hedge fund guys are making their money on trading funds whether it is hedge funds, real estate, etc. If real estate is taxed higher than liquid investments, why would you invest in real estate? Pension funds and other retirement funds invest indirectly and chasing really cheap real estate deals. If you take players out of the real estate market, you raise the cost of real estate financing. Congress can make this retroactive or not. Congress can back date this date a year or two. Real estate has been skewed by policy by transferring risk from individuals and corporations and lenders to society.
Restoring Neighborhoods
Developers diversify and improve neighborhoods. Gentrification is a good thing. However, the number one issue is that it will raise property taxes.
In order to generate more tax revenue, San Francisco city officials are imposing a commercial rent tax on San Francisco tenants. This rent tax will hurt small businesses and it may cause many tenants to leave San Francisco.
The U.S. government is a big commercial real estate player.
The GSA is an owner of large real estate such as courthouses, agencies, etc. In terms of employment, they are progressively the better ones to work for. They are market oriented and have savvy employees.
The average discount according to an USA today article is that you can buy a foreclosure for a discount of 30% than a non foreclosure property.
Cloud computing
A growing number of government entities are improving citizen engagement by using social networking tools to communicate with each other. I think this is a great idea.
In today's collaborated discussions we reviewed industrial markets, low income housing, taxes and governmental trends and issues.
An article discussed pertained to HUD community development block grants that are being awarded to the City of Dallas. Dallas is receiving millions in federal grant money for housing; however, Dallas is rejecting certain affordable housing development projects to limit the amount of affordable housing in downtown. Affordable housing developers are frustrated because they believe Dallas city hall is favoring a select number of developers which are building a mix of upscale developments with a minimum amount of affordable housing units. One developer in particular is very upset after losing millions of dollars due to their project not being awarded HUD funding which was required to make their project feasible. This developer believes Dallas officials are favoring upscale developments with minimum amount of affordable housing units for the downtown area. The article suggested that Dallas officials may want to portray an upscale scene for their downtown and this might be the reason why Dallas is rejecting development projects with a high count of affordable housing units in downtown.
Lack of diversity in communities was discussed and how it can affect its residents. A community needs diversity to provide a healthy environment to have a good level of interaction. Affordable housing is required for teachers, police men, fire fighters, nurses, cleaning and cooking personnel, etc.
We discussed if developers should be responsible for relocating others that are displaced from buying the low income land and building it up to be a nice place? The class consensus was yes, developers should have a responsibility to relocate these people. Relocation assistance should be required to move residents when a new development needs to be built.
The US is broke, so removing the capital gains tax of 15% and changing it to a 30% + tax rate is being proposed in order to generate more tax dollars. Hedge fund guys are making their money on trading funds whether it is hedge funds, real estate, etc. If real estate is taxed higher than liquid investments, why would you invest in real estate? Pension funds and other retirement funds invest indirectly and chasing really cheap real estate deals. If you take players out of the real estate market, you raise the cost of real estate financing. Congress can make this retroactive or not. Congress can back date this date a year or two. Real estate has been skewed by policy by transferring risk from individuals and corporations and lenders to society.
Restoring Neighborhoods
Developers diversify and improve neighborhoods. Gentrification is a good thing. However, the number one issue is that it will raise property taxes.
In order to generate more tax revenue, San Francisco city officials are imposing a commercial rent tax on San Francisco tenants. This rent tax will hurt small businesses and it may cause many tenants to leave San Francisco.
The U.S. government is a big commercial real estate player.
The GSA is an owner of large real estate such as courthouses, agencies, etc. In terms of employment, they are progressively the better ones to work for. They are market oriented and have savvy employees.
The average discount according to an USA today article is that you can buy a foreclosure for a discount of 30% than a non foreclosure property.
Cloud computing
A growing number of government entities are improving citizen engagement by using social networking tools to communicate with each other. I think this is a great idea.
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