Shifting Paradigms: Millennials and wage stagnation raising multifamily investments to new heights.

October 9th, 2016

Last year, 43 million American households rented their residences, according to Harvard University’s Joint Center for Housing Studies. According to Harvard’s Joint Center, this “decade-long surge in rental demand [was] unprecedented.” Whether as a result of wage growth topping out at around 3.3 percent since the Great Recession, the changing priorities among a new generation of households or some combination therein, there are opportunities for investors in the multifamily market.

The two big factors affecting the market in the second half of 2016 are an uptick in overall household formation and increased demand for multifamily housing. Household formation dropped nearly 2 percent  from 2006 to 2008, according to the U.S. Department of Commerce. However, recent incremental growth, in particular household formation outpacing home ownership in early 2015, has reversed what could have been an extended downturn.

This increase in households has generated a mini-boom. From 2009 through 2012, the increase in households has exceeded the housing supply growth. As a result, the multifamily market has been playing catch-up. The implications for this mini-boom, as well as a cooling off period that has begun in certain regions, may vary, but overall the multifamily market as a whole offers opportunities for investors. The following are several points to consider as you evaluate multifamily housing investment opportunities.

Looking at Ripple Markets

In New York City and Washington, D.C., a significant amount of Class A multifamily housing has come online, stabilizing vacancy rates as the supply begins to outpace demand and investors find it harder to gain return on investment. In November 2015, Manhattan apartment vacancies hit their highest in nearly a decade, according to a Bloomberg report. In general, investors should anticipate leveling to decreasing rents as more mature markets become increasingly competitive.

While some of the major real estate markets begin to slow down, however, ripple markets present a growing area of opportunity. With regard to the New York City area, Queens and Jersey City are good examples of this phenomenon.

Evaluating Returns

Many owners and management companies are already planning for a new normal of stagnating rents to become the norm, insisting that projects in progress or planned for the future be priced according to today’s rents and without the assumption of a ceiling-less marketplace for renters. By planning an investment in multifamily properties accounting for little to no rent growth, investors can avoid surprises down the road when market dynamics shift in favor of renters.

The good news is that for properties that have seen a leveling of rents, the low rate environment offers significant refinancing opportunities.

Protecting Investments

With the possibility of a rate increase on the horizon, disciplined  investors set themselves up for long-term success, by increasing the equity they hold in projects. In this way, owners and managers are better prepared to absorb the impact of rate changes and fluctuations in vacancy rates.

An added benefit of holding greater equity in individual projects can be greater control over the decision making process. Investors want to look at the depth of each market and the total supply coming in. A question for investors to ask:

  • Should the project be delivered at the same time as everyone else in any given market? Probably not. By keeping an eye on development trends locally, investors can maximize their return on investment on a project-by-project basis.

Searching for Market Demand

While many developers have focused on the luxury market, which according to RedFin rebounded in the fourth quarter of 2015, investors will find abundant opportunities in affordable and workforce housing. Particularly as gentrification has affected local communities and displaced some residents, the need for low and middle income developments is rising. As the future for luxury housing becomes less certain and some regional markets appear to have overbuilt, affordable housing constitutes a bright spot for real estate investors.

In general, looking for geographies that have or are anticipating population or job growth are where investors will want to focus their efforts. In the Southeast, cities such as Charlotte, N.C., and Charleston, S.C., combine good economic policies at the state level with a relatively affordable cost of living. These areas are attractive for both companies and their prospective employees, and contribute to the need for affordable and middle income multifamily development.

Attracting Millennial Renters

Lastly, investors should consider gauging the long-term potential of certain cities based on their walkability. A 2015 report from the National Association of Realtors, found that millennials, more than earlier generations, place a premium on their ability to walk rather than drive to work, to shop, and to entertainment. Investing in developments in communities near transportation hubs offers a good opportunity to tap into early-stage growth markets.

Kappa Scholarship Endowment Fund, Inc. (KSEF) will hold its 33rd Annual Celebrity Auction and Soul Food Feast

October 9th, 2016

On Sunday, October 30, 2016, the Kappa Scholarship Endowment Fund, Inc. (KSEF) will hold its 33rd Annual Celebrity Auction and Soul Food Feast at the Armour J. Blackburn University Center on the campus of Howard University.  This event sells out every year and serves as KSEF’s premiere fundraising activity that attracts over 700 guests.

KSEF, the scholarship arm of the Washington (DC) Alumni Chapter of Kappa Alpha Psi Fraternity, Inc, was established in 1984 as a registered tax-exempt 501(c)(3) nonprofit corporation with the purpose of raising funds for awarding scholarships to graduates from District of Columbia Public and Public Charter High Schools.

During this past 2015-2016 school year, KSEF awarded $112,000 in scholarships to fourteen high school seniors.  Since its establishment in 1984, KSEF has awarded over $1.9 million to more than 650 deserving students.  Visit our website at http://www.ksef-inc.com/

Thanks to donors like you, the KSEF endowment has grown to exceed $2 million as we now pursue a goal of a $5 million endowment.

The Celebrity Auction and Soul Food Feast itself is held in two parts.  The first part consists of a Silent Auction and Cash Bar that begins promptly at 1:00 p.m. and the second part consists of a Soul Food Buffet and a Live Auction beginning promptly at 2:30 p.m.

Celebrity Auctioneers for this year’s event are: Guy Lambert, Elizabeth Davis, Aaron Gilchrist, and Sharon Ottey, MD

Items for the auction (e.g. Vacation at luxury resort, weekend accommodations at selected hotels, dinner or brunch at selected restaurants, gourmet hams and turkeys, electronic appliances, assorted premium liquor, books for all age groups, tickets to Redskins/Mystics/Wizards/Orioles games, works of art, week in luxury condos in the islands, vacation at a luxury resort) are donated by individuals and small/large businesses.

The menu for the event consists of chitterlings, honey fried chicken, barbecued spareribs, baked filet of sole, candied yams, collard greens, macaroni and cheese, potato salad, hopping john, corn bread, rolls, sweet potato pie, country bread pudding, chocolate cake, coffee, and tea.

If you are interested in attending this affair, contact me on 240-772-1023 or Anthony@Anthonybolling.com. The ticket price is $100.00.  Donations and checks made payable to KSEF can be mailed to me at the following address:

Anthony R. Bolling, JD
2833 Alabama Avenue SE, Ste #30494

Washington, DC 20020

This is one affair you don’t want to miss!  If your schedule will not allow you to attend, donations to the scholarship fund are welcome.  Your donation and ticket payment checks should be made payable to KSEF and mailed to me at the address listed above.

Deuteronomy 16:17

‘All must give as they are able, according to the blessings given to them by the Lord your God.’

Thanks for your continued support and care.

Anthony R. Bolling, JD

Chairman
Kappa Scholarship Endowment Fund – Corporate Donations Committee
Phone: 240-772-1023
Email: Anthony@anthonybolling.com

KWPP Annual Cookout

September 2nd, 2016

Welcome Family and Friends to Keller Williams Preferred Properties Annual Cookout.

KWPP SEPT EVENT - COOKOUT

House For Rent – 4513 Meade NE

September 2nd, 2016

4 BR House Sharing Opportunity

  • Electric and gas NOT included
  • Security deposit REQUIRED (1 month’s rent)
  • ALL applications MUST be ONLINE

For interested tenants, click here and you will be directed to the ONLINE APPLICATION page.

Walk one block to Deanwood Metro Station, Deanwood Recreation Center, Indoor Pool, Library, two blocks to New Ron Brown All-Boys Collegiate High School • Drive 2 minutes to 295/ New York Ave/ Route 50/BWI, Drive 5 minutes to New Costco/Lowes/ at Fort Lincoln, Enjoy Large “care free” yard, Seat on your own front porch, ALL NEW APPLIANCES: Washer/Dryer, Refrigerator, Range, Dish Washer • Enjoy LARGE 1st floor entertainment room, Ideal for 3 roommates!

Click for more information

4513 Meade St NE.20019 Flyer

 

Anthony Bolling Leases Space to 7-Eleven

September 2nd, 2016

Anthony Bolling, JD – Managing Director Associate Broker with Keller Williams Commercial & Global Property Specialist has leased space to 7-Eleven on the 8th NE and “H” Street NE in one of the hottest commercial retail corners in DC.

HSCDC Starts New Affordable Housing Initiative

September 2nd, 2016

H Street Community Development Corporation has started a new affordable housing initiative for Washington, DC.

 

Perched on a Plateau

September 2nd, 2016

CCIM LogoJPG

Economists remain positive despite slower growth ahead.

Issue
Commercial real estate investment sales faltered coming out of the gate in 2016. Investment sales dipped noticeably in the first quarter compared to the prior year. Yet a gentle tap on the brakes in what has been a stable recovery is not cause for alarm. Economists continue to forecast a favorable outlook for transaction volume, absorption, and rent growth through 2016.

Investors pulled back early in the year as concerns flared due to volatility in the stock market, slowing growth in China, slumping oil prices, and widening spreads in commercial mortgage-backed securities. “There is nothing that stalls the market more than a plummeting stock market,” says Barbara Byrne Denham, an economist at Reis Inc. in New York City. The 1Q16 stock market gyrations created a ripple effect that showed up across the board in transaction activity and lending volume, she says.

Posted in: CCIM – read more

HIGH VOLUME OF DC OFFICE CONVERSIONS

September 2nd, 2016

THE LAST DECADE HAS SEEN A HIGH VOLUME OF DC OFFICE CONVERSIONS

Washington DC Office | Sep 01, 2016

By: Jon Banister

With millions of square feet of vacant office space and tenants vying for new and amenitized Class-A space, developers are being forced to find new uses for the DC area’s old office buildings.  Over the last 10 years, 5.7M SF of office space has been converted to other uses, research from JLL shows.  Of these projects, roughly 74% have been converted to residential buildings. JLL managing director and head of multifamily capital markets Christine Espenshade says residential is the easiest conversion to make from a development perspective, and it is also the most sought after asset class in today’s market.  “It’s the ability to get financing,” Christine says. “Of all the product types, it’s still easiest to get financing for multifamily. There’s so much demand for it.”   In the District, 13 conversion projects have totaled 1.1M SF. Northern Virginia has seen eight projects totaling 1.3M SF, while suburban Maryland has had five projects totaling 518k SF. Baltimore has been the most active submarket, with conversion 17 projects totaling 2.8M SF.  Courtesy: Christine Espenshade The reliance on the federal government as DC’s biggest office tenant has caused high vacancies as the government raises its standards for suitable office space, Christine says.  “That has left DC, more so than many markets, with unusable office space,” Christine, above vacationing with her family in Maine, says. “So developers have gotten creative, saying, ‘What can I do with this office building?'” This need for creativity has led to innovative new concepts, Christine says, citing WeWork’s new residential concept WeLive in Crystal City and Novus Residences’ office-residential hybrid concept, e-lofts, in Alexandria.  “In my mind that stands out as something that’s very interesting as people change the way they work and live,” Christine says of e-lofts.

Posted in: Bisnow – read more

Unizo Real Estate acquired 820 First St NE

September 2nd, 2016

CNN-ANCHORED NOMA BUILDING TRADES FOR $140M

Washington DC

Capital Markets | Aug 30, 2016

Jon Banister

NoMa BID Wolf Blitzer and Jake Tapper will still film their popular CNN programs in NoMa, but the property where they shoot just changed hands in a major deal.  Tokyo-based Unizo Real Estate acquired the 11-story 820 First St NE building for $140.5M, the Washington Business Journal reports. IN 35 DAYS! DON’T MISS THE NEW DEVELOPMENT FRONTIERS — Washington DC 10.06.2016 The previous owner, a JV of Harbor Group International, Capstone Equities and Image Capital, bought the building for $107M in 2012. Unizo has made a big splash into the US market recently. After making a $250 M purchase in New York last year, the Japanese firm bought 1201 Connecticut Ave NW in March for $163M.

Posted in: Bisnow – read more

Why Did Developer WC Smith Buy Up Most of Congress Heights?

September 1st, 2016

 Why Did Developer WC Smith Buy Up Most of Congress Heights?

AUG. 20, 2014 6:31 P.M.
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A walk along the District’s far southeastern edge reveals much that wasn’t there 20 years ago. Heading eastward from the Congress Heights Metro station on Alabama Avenue SE, the first stop is the Shops at Park Village, anchored by a Giant that became Ward 8’s first full-service supermarket since the last century when it opened in late 2007. Turn right on Stanton Road, and there’s the sprawling Villages of Parklands, with more than 1,000 apartments, plus townhomes and a splash park (renovated in the 1990s and 2000s). Off to the right are the Park Vista apartments (completed 2011) and the 75 single-family houses of Asheford Court (2009); to the left is the 257-unit Orchard Park apartment complex (2008) and the Town Hall Education Arts and Recreation Campus, a performance, education, and office development better known as THEARC (2005).

What do these properties have in common, other than having transformed a once-decrepit (if still-poor) section of Congress Heights and Shipley? They were all built or rebuilt by the developer WC Smith.

It’s not uncommon for a developer to go all-in for a neighborhood. The JBG Companies control much of the U Street corridor between 7th and 14th streets NW. Douglas Development bought up much of F Street NW downtown. Nearly all of EastBanc’s properties are within a block of M Street NW in Georgetown. After all, there are advantages to controlling a neighborhood: The developer gets to choose what goes around its properties, theoretically creating a kind of value-building symbiosis.

But there are three things that set WC Smith’s domination of the Congress Heights area apart. First, unlike U Street or downtown or Georgetown, it’s one of the city’s poorest neighborhoods; the average median household income of the census tracts within a half mile of the Congress Heights Metro station is less than $32,000, the lowest of any Metro-station area in the District. Second, the extent of WC Smith’s dominion over Congress Heights is unparalleled: In some sections of the neighborhood, there’s hardly a square foot it doesn’t control.

And finally, in a town where developer-bashing ranks among the favorite pastimes, you’d be hard pressed to find a Congress Heights resident with a bad word to say about WC Smith.

“Let me tell you something,” says Mary Cuthbert, the self-proclaimed “queen of Congress Heights” and a 50-year neighborhood resident who chairs the local Advisory Neighborhood Commission. “When the other developers wouldn’t come near Ward 8, when they were slumlords and their buildings were falling down, William C. Smith fixed those buildings for people like me.”

WC Smith is best known in the District for building and rebuilding affordable housing, particularly in Southeast. It’s been a part of projects like the Sheridan Station redevelopment of public housing in Anacostia and the planned mixed-use development known as the Skyland Town Center. In the process, the company has received much praise from city officials—as well as subsidies, including a $40 million TIF break for Skyland. Smith has also done its part to return the favor: Along with its affiliates, according to a WAMU report last year, the company made 111 political contributions between 2003 and 2012 for a total of $103,450. It was the third-biggest donor to Adrian Fenty between 2003 and 2008 and the second-biggest donor to Vince Gray between 2004 and 2010.

William C. Smith—the name of both the company’s founder and the company itself until the latter was shortened to the initials—made his entree into Ward 8 half a century ago when he purchased the Richman Apartments in Congress Heights around 1955, but it wasn’t until his son Chris Smith succeeded him as CEO in 1986 that the true takeover began.

“We concentrated all our energies right here in the ‘90s,” says the younger Smith. (His father died in 2009.) It wasn’t an obvious choice. The neighborhood, a sought-after, mixed-race, middle-class community in the 1950s, experienced the same flight to the suburbs that plagued much of the city, but was worse east of the Anacostia River. The result was a predominantly black and poor population and an unsightly streetscape. The only major industry nearby was the St. Elizabeths mental hospital.

“When you used to drive through 20 to 25 years ago, the larger properties were half vacant, all boarded up,” says Smith. “That’s because people were leaving wards 7 and 8 for greener pastures.”

Smith’s big move was the 1991 purchase of the collection of buildings that now make up the Villages of Parklands. The company tore down vacant buildings to erect townhouses, built the splash park for residents, and, rather than create a tiny community center just for the relatively small Parklands population, collaborated with the National Park Service to open THEARC in 2005. The education and arts center has taken on enough of a profile as an east-of-the-river hub that President Barack Obama has chosen it as the venue for speeches on economic mobility and fatherhood.

“People thought we were nuts that we were going to sell townhomes in Ward 8 for over $100,000,” says Smith. But they sold quickly, he says, mostly to Ward 8 families who had previously rented and didn’t think they could afford to buy. (Just prior to the 2008 recession, the Smith-built townhomes along Mississippi Avenue SE were routinely selling for more than $300,000, according to city property records; since then, sales mostly have been in the 200s.)

But while the vinyl-sided townhomes, each with a street-facing garage and a tidy front lawn—and the two-car-garage free-standing houses just to the west—might be beloved now by residents who recall a rougher past in Congress Heights, they do pose two potential future dilemmas as the neighborhood continues to evolve.

First is their distinctly suburban format. Without enough demand in the neighborhood currently to support a greater density of middle-class dwellings, these homes seem all right. But with the city’s population growing by about 1,000 residents a month, the time will soon come when the wisdom of building spaced-out, car-centric residences within walking distance of the Metro will seem more dubious.

Opponents of taller buildings in the city’s core invoke the mantra of building “out, not up,” allowing development to spread to the city’s poorer, outlying areas, like Congress Heights. But there’s little room to build out when the “out” areas are taken up by houses like these. Instead, we may end up building out to the suburbs, and the District will lose out on residents and tax dollars.

The Giant on Alabama Avenue—or rather, separated from Alabama by a sea of parking the size of two small city blocks—is an instructive example of the tricks time can play. Before it opened in 2007, a suburban format with extensive surface parking was necessary to lure Giant to the site because it was what the company was used to, says Smith. Now, rather than a design Greater Greater Washington called “straight from Atlanta,” the idea of a more pedestrian-focused store, just a short walk from the Metro, seems logical if not obvious. “If we were doing the grocery store today, would we do [a more urban design]?” Smith asks. “We’d definitely considered it. But we couldn’t do it then.”

The second problem is one of affordability. Where developers often breed resentment, WC Smith has built a tremendous store of goodwill—but you have to wonder how long it’ll last when all this development inevitably makes Congress Heights less affordable to longtime residents. For now, Smith has remained popular in part because residents are seeing the good of development without the bad, since the neighborhood remains much less well off than others with comparable recent development.

“Congress Heights was a working-class community,” says the Rev. Anthony Motley, who’s lived in the neighborhood for more than 60 years, “and it continues to be that. It’s transitioned from a predominantly white neighborhood to predominantly African American, but it’s still working class.”

That could begin to change when the biggest thing to happen to Congress Heights in decades finally arrives: the redevelopment of St. Elizabeths into a mixed-use campus of housing, offices, and retail. Large-scale, Metro-adjacent developments have already transformed formerly blighted neighborhoods like Columbia Heights and the Navy Yard area. It would be naive to think the same couldn’t happen in Congress Heights.

Of course, that will be great financial news for WC Smith, which will finally reap substantial profits from its patient and farsighted investment in the neighborhood. (Smith says the company made no profits in its early years of Congress Heights development. “There was no quick buck to be made here,” he says. “It was all with a long-term view.”) For neighborhood homeowners, too: Their ample houses could easily double in value. But as prices start to rise, longtime renters might begin to find themselves priced out of the neighborhood they’ve inhabited for decades. We’ll see just how beloved WC Smith remains then.

Correction: Due to a reporting error, this story initially stated that WC Smith was involved in the redevelopment of the Arthur Capper/Carrollsburg public housing complex. Although WC Smith owns land that was included in the Capper/Carrollsburg planned unit development and built Canal Park adjacent to the site, the company did not directly build any of the housing that comprised the project. Additionally, the story stated that WC Smith was a recipient of the $55 million PILOT subsidy for the project, citing a WAMU report last year that listed Smith as a recipient. In fact, Smith did not receive any of that subsidy.

Illustration by Jandos Rothstein

Note: This article was originally posted on http://www.washingtoncitypaper.com/news/housing-complex/blog