Game of Risk
Report highlights potential problems for multifamily.
In its fall 2006 Real Estate Capital Markets Industry report, Deloitte & Touche USA, a consulting firm based in New York, sees commercial real estate–including multifamily–as an attractive investment early in 2007. But the firm does see potential trouble spots.
“Risks clearly are greater than in recent years,” the report said. “Headlining the list: slower economic growth, compounding debt, rising interest rates, and an uncertain consumer spending outlook.”
“I worry about the job market,” says Dennis Yeskey, national director of real estate capital markets for Deloitte. “The job market is driven by business investment, which has been unusually mild during the recovery.” If business investment slows even further, Yeskey fears that job growth will stall. “If job growth slows, it would take into the second quarter of next year to see an impact on the apartment market,” he says. “If that continues into first part of 2007, we may change our outlook for apartments in the second half of 2007.”
Ron Witten, president of Witten Advisors, an apartment industry tracking firm in Dallas, forecasts moderate growth for the apartment industry in 2007. “The only downside would be some pretty dramatic deterioration in the housing market,” he says. “We do think there’s likely to be softness in home prices.” –Les Shaver
Too Close for Comfort
Section 8 voucher holders live in clusters in many cities.
In East Charlotte, N.C., a group of homeowners noticed something that troubled them: Too many people holding low-income housing vouchers were moving into their neighborhood. It sounds like typical NIMBYism, but The Charlotte Observer examined the problem–and discovered that about four of every five Section 8 residents lived in one of 10 ZIP codes with high crime and blight. Meanwhile, the more affluent ZIP codes in the city housed no Section 8 voucher holders.Unfortunately, affordable housing experts say such clustering is common, despite the fact that vouchers are intended to avoid that very result. “I think every city and housing authority is concerned about their ability to provide opportunities to enable families to live in places other than the lowest-cost parts of their jurisdiction,” says Gene Rizor, vice president at Quadel, a Washington, D.C.-based firm that provides direct management, consulting, and training services to the affordable housing industry.The main reason: The federal government’s lack of support for the Section 8 voucher program. “Unfortunately, as HUD reduces the local administrators’ ability to raise rent levels through funding constraints, the [housing choice voucher] beneficiaries are increasingly driven into lower rent areas, which often equates with clustering,” says Conrad Egan, president and CEO of The National Housing Conference, a public policy and affordable housing advocacy organization in Washington, D.C.–Les Shaver
Executive Feedback
How do you fire a fee-management client?
A: “Sometimes fee clients just aren’t a good fit for your organization, and ‘firing’ them can actually be a really positive move for your company. The best approach is to let them know that you appreciate their business, but that it is no longer a good fit for your organization and explain why. (They need to hear the truth). Then, offer to transition management as smoothly as possible, and whatever you do, don’t burn any bridges. It’s a small industry, and you never know who you’ll be working with down the road!” –Dave Woodward, managing partner and CEO, Laramar Group
A: “It is important to send proper written notice, per the terms of your contract, and to meet in person with the client to review the reasons for the change. It is extremely helpful to offer a replacement fee manager recommendation at the time of the meeting.” –Bill Donges, CEO, Lane Co.
A: “Many clients do not respect the job being performed by third-party apartment managers. As a result, when terminating these relationships, the corporate and site-level staff have [higher] levels of motivation, desire, and effectiveness. It is also a great method to communicate this matter to the client, who [often] then chooses to behave.” –Steve Heimler, founder and CEO, Stratus Real Estate Project of the Month: Mission Creek Senior Community
The Mission Creek Senior Community, located in San Francisco, Calif., is one of the most unexpected senior housing properties in the nation. Unlike most senior communities, Mission Creek offers a more contemporary, urban look with metal panels, textures, larger windows, and balconies. (It was designed by San Francisco-based architecture firm Hardison Komatsu Ivelich and Tucker.)The developer of Mission Creek–Mercy Housing California, a national nonprofit affordable housing organization headquartered in Denver–wanted to pursue a different design concept from more traditional senior housing projects so the property would blend better with its more contemporary neighbors. So Mission Creek now boasts a cool exterior as well as an assortment of services for seniors, including frail elders and very low-income seniors.
Amenities at the 139-unit property include a public library and an on-site Adult Day Health Center, which will include skilled nursing services, occupational and physical therapy, a meals program and nutritional and recreational services. The health center will not only serve Mission Creek residents, but also seniors in the community at-large.The rent? Just 30 percent of the senior resident’s income. Not surprisingly, the complex (which opened earlier this year) was completely occupied as of May, according to Sharon Christen, a housing developer at Mercy. And there’s more to come. Mission Creek is part of a mixed-used development that will feature retail, commercial and entertainment venues and more residential housing. –Abby Garcia Telleria