The Case for Black Gentrification: Lessons from Brickton, Philadelphia

From: http://brooklynmovementcenter.org/post/case-black-gentrification-lessons-brickton-philadelphia/

Much of the discourse around gentrification centers on the displacement (or replacement) of low income people of color with white, middle to upper income gentrifiers. Rents increase, coffee shops and pet stores appear and long time residents are pushed out – either because we can no longer afford to live there or because we no longer see ourselves reflected and are too through with being imposed upon by white culture.

This article seeks to move past the usual positions of Black versus white, the conquered versus the conqueror and place Black people in a more active position within the discourse. The question facing many community organizers attempting to do anti-gentrification work is how to better their community without attracting gentrifiers that will eventually make it difficult for them to live there. Historically, governments in the US invest in neighborhoods deemed blighted only if they want to pursue urban renewal (aka negro removal) plans that will economically stimulate the city or once “pioneer” gentrifiers move in.

Revitalization in American cities, almost always leads to the displacement of Blacks by whites. This sends the message to communities of color interested in maintaining the cultural integrity of their neighborhoods that the only way to better the neighborhood is to attract white residents. Is it possible to revitalize a neighborhood of color in a way that is sustainable for the residents who live there? How can communities of color evolve without ultimately being replaced?

Black Gentrification

Based on field research done in Brickton, Philadelphia, Kesha Moore in, Gentrification in Black Face? The Return of the Black Middle Class to Urban Neighborhoods, marks the distinction between Black gentrification and white gentrification as motivation. Gentrification led by Black middle income residents has a social justice motivation based on the residents’ experiences of racial exclusion and an explicit desire for racial solidarity. Unlike traditional gentrification, the out-come of neighborhood change is not the creation of a wealthy neighborhood to replace a lower-income community (Moore, 2009).

The 2000 census revealed Brickton to be 92% Black, well above the city average of 44% (Moore, 2009). With hardly any white people, Brickton is unique in that it’s an intentionally racially homogenous yet economically integrated (Moore, 2009). This was not accidental. Activists and organizers in Brickton refer to pre civil rights era, forced segregation as their model for neighborhood development. Integrationist narratives as well as historical patterns of governmental investment in gentrifying neighborhoods, dictate that the presence of whiteness is what makes for a “good” neighborhood – by investing in their community and living alongside low income residents rather than trying to price them out, residents actively subvert this narrative.

Strategies from Brickton:

1. Middle class, Black residents actively recruit other middle class, Black residents to move into the neighborhood drawing on shared experiences of racial discrimination in residential neighborhoods and the “ethos of racial uplift” (Moore, 2009). Residents move in because they want to “give back” and invest in a Black community.
2. Middle to upper income residents who can afford a more expensive neighborhood, make the choice to remain in the community.
3. Add middle and upper income Black residents to the neighborhood without promoting the displacement of current low income residents. Encouraging asset accumulation (e.g., homeownership, entrepreneurship) amongst low-income residents is considered critical component of community development and a crucial step towards creating an “economically and politically powerful Black neighborhood” (Moore, 2009).

What does this mean for Brooklyn?

It may be time to shift the conversation and redirect our focus. The gentrification discussion has become stale, we’ve become bitter, and meanwhile more and more Black people are being forced out of Brooklyn. Brickton is what happens when Black people come together and actively address the needs of our community. The work doesn’t have to be anti-change, anti-development, or even anti-white. But it can and should be pro-neighborhood improvement, pro-strategizing and organizing, and absolutely pro-Black. Rather than seeing ourselves as victims, let’s change the narrative and see ourselves as organizers, capable of intentionally strengthening our neighborhood for ourselves and future generations. And for those of us in the middle class, let’s drop the guilt and start using our class privilege to figure out ways to invest energy and resources into our community.

JCP Closing 33 Stores

According to the WSJ, JCP is closing 33 Stores. I'll update this entry with CMBS exposures if/when I get a chance.

State	City	Shopping Center
AL	Selma	Selma Mall
CA	Rancho Cucamonga	Arrow Plaza
CO	Colorado Springs	Chapel Hills Mall
CT	Meriden	Meriden Square
FL	Leesburg	Lake Square Mall
FL	Port Richey	Gulf View Square
IA	Muscatine	Muscatine Mall
IL	Bloomingdale	Stratford Square Mall
IL	Forsyth	Hickory Point Mall
IN	Marion	Five Points Mall
IN	Warsaw	Marketplace Shopping Center
MD	Salisbury	The Centre at Salisbury
MI	Marquette	Westwood Plaza
MN	Worthington	Northland Mall
MS	Gautier	Singing River Mall
MS	Natchez	Natchez Mall
MT	Butte	Butte Plaza Shopping Center
MT	Cut Bank	(N/A)
NC	Kinston	Vernon Park Mall
NJ	Burlington	Burlington Center
NJ	Phillipsburg	Phillipsburg Mall
OH	Wooster	Wayne Towne Plaza
PA	Exton	Exton Square Mall
PA	Hazleton	Laurel Mall
PA	Washington	Washington Mall
TN	Chattanooga	Northgate Mall
VA	Bristol	Bristol Mall
VA	Norfolk	Military Circle Mall
WI	Fond Du Lac	Forest Mall
WI	Janesville	Janesville Mall
WI	Rhinelander	Lincoln Plaza Center
WI	Rice Lake	Cedar Mall
WI	Wausau	Wausau Mall

*UPDATE*
Deal Exposures:

Shopping Center	Deal	Loan PCT Deal
Military Circle Mall	GMACC 2004-C2	9.80%
The Centre at Salisbury	JPMCC 2006-LDP7	3.70%
Hickory Point Mall	BSCMS 2006-PW11	1.90%
Laurel Mall	BSCMS 2007-PW17	1.70%
Wausau Mall	WFRBS 2011-C4	1.30%
Marketplace Shopping Center	CGCMT 2004-C2	0.90%
Bristol Mall	BACM 2006-5	0.90%
Wayne Towne Plaza	MSC 2007-IQ15	0.60%
Natchez Mall	CGCMT 2006-C4	0.50%
Lincoln Plaza Center	GSMS 2006-GG6	0.10%

Source: Credit Suisse.

Housing Recovery Entering 2014, Local Market Performances Expected to Vary

Overview

Zillow’s fourth quarter Real Estate Market Reports show home values increased 1.4% from the third quarter of 2013 to the fourth quarter of 2014 to $169,100 (Figure 1). 2013 closed on a strong note with the Zillow Home Value Index (ZHVI) up 6.4% from December 2012 levels (Figure 2). On a monthly basis, home values are up 0.6% nationally. Overall, we are seeing a widening slow-down in home value appreciation with some markets showing more of a slow-down than other markets. In fact, of all metros 83% reported lower monthly appreciation in December than in November (seasonally adjusted), and of the top 35 metros, seven showed monthly home value depreciation. This slowdown was expected, and shouldn’t come as a surprise, as home values have been growing at an unsustainable pace in 2013, especially in many markets in California and the Southwest. Affordability had been decreasing in light of higher home values and rising mortgage rates and is now starting to put the brakes on these extremely high rates of appreciation.

 
 

According to the Zillow Home Value Forecast (ZHVF), we expect national home values to increase 4.8% over the next year (December 2013 to December 2014). Of the 291 markets covered by the Zillow Home Value Forecast, 265 markets are expected to see increases in home values over the next year, with the largest increases expected in the Riverside metro (16.1%) and the Sacramento metro (11.6%). Many California markets follow closely at the top of the list of markets expected to see the highest home value appreciation over the next year. According to the ZHVF, 265 markets (91%) have already hit a bottom in home values, another 25 are expected to hit a bottom by December 2014. 2014 will bring more for-sale supply to the market, as homeowners are freed from being underwater and demand will be a bit more muted as investors are decelerating their buying activity and rising mortgage rates are putting a damper on consumer demand.

 

Home Values

The Zillow Real Estate Market Reports cover 473 metropolitan and micropolitan areas (metros) of which 316 showed quarterly home value appreciation. Eight metros remained flat, while 149 metros show home values losses. Approximately 82% of the metros covered by the Real Estate Market Reports posted annual increases in home values. Among the largest metros, Las Vegas showed the largest annual increase with home values rising 28.1% from the fourth quarter of 2012 to the fourth quarter of 2013. Las Vegas was one of the metros hardest hit during the housing recession and home values are still down 45.3% from their May 2006 peak, despite the recent extreme increases in home values. Overall, national home values are back to November 2004 levels, down 13.9% since their peak in April 2007.  Also notable is that home values in two of the top 35 metros, Denver and Pittsburgh ended 2013 above their pre-recession peaks. This is in addition to many cities (versus the larger metropolitan regions), like San Francisco, Washington and Boston that have also surpassed their 2006 peaks.

Rents 

The Zillow Rent Index (ZRI) covers 521 metro areas, and 73% of those metros reported annual increases in rents in December. As a point of comparison, approximately 82% of the metro areas covered by the ZHVI experienced annual home value increases. Nationally, rents increased 2.4% in December from year-ago levels. We expect rents to continue with this growth trend as many households are still unraveling from being doubled up and many of those new households will choose to rent instead of buy. Markets that continue to see extremely strong year-over-year rent increases include Cincinnati (9.2%), Denver (8.4%), Pittsburgh (8.3%) and Seattle (8.1%).

Foreclosures

The rate of homes foreclosed continued to decline in December with 4.84 out of every 10,000 homes in the country being liquidated through foreclosure. With home values having appreciated for almost two years, foreclosures are naturally becoming less and less common. Nationally, foreclosure re-sales ticked up slightly, making up 9.3% of all sales in December, down 0.5 percentage points from the fourth quarter of 2012. The absolute number of foreclosure re-sales continues to drop, but this measure is a percentage of REO sales to all sales and given that during the winter months the number of sales decline, foreclosure re-sales are taking up a larger portion on those sales – increasing this seasonal measure. For-sale inventory levels remain tight in many markets; although constraints have been easing as negative equity rates decrease. The national negative equity rate stood at 21% in the third quarter of 2013 with only 8% (down from 9.7% a year ago) of underwater homeowners being delinquent.

Outlook

Nationally home values have started to slow since the breakneck pace of this summer. We expect this slowdown to carry into 2014, although some volatility in home values will accompany this slowdown. Nationwide, home values are expected to rise another 4.8% through December 2014, according to the Zillow Home Value Forecast. But local market conditions will not necessarily follow national conditions, a trend that may cause confusion and uncertainty among homebuyers and sellers. And while Zillow expects all but one of the nation’s 35 largest metro areas (St. Louis, -3.1%) to show appreciation this year, the expected annual appreciation (depreciation) rates vary from -3.1% in St. Louis to 16.1% in Riverside among the top 30 metros. None will approach the often breakneck pace set in 2013. 2014 will also see rising mortgage rates. However, there is a silver lining to this development, as rising mortgage rates will hopefully also encourage banks to make more credit available.

Data Resources

Forecast Graphic: Zillow Home Value Forecast
Figure 1: Zillow Home Value Index
Figure 2: Zillow Home Value Index Summary
Figure 3: Zillow Home Value Index, Zillow Rent Index
Figure 4: Homes Foreclosed (out of 10,000)

Wells Fargo Sells Servicing Rights on $39 Billion in Mortgages

In another sign of the banking industry’s retreat from the mortgage market, Wells Fargo is selling servicing rights on $39 billion of home loans to a nonbanking firm.

Wells Fargo said on Wednesday that it sold the rights to service 184,000 mortgages to the Ocwen Financial Corporation, a rapidly expanding company known for its expertise in dealing with subprime borrowers.

The deal represents about 2 percent of all the mortgages that Wells Fargo services, and comes as other banks have been selling this business to specialty servicers like Ocwen, which is based in Atlanta.

Last week, Citigroup announced that it had transferring servicing rights for 64,000 mortgages to Fannie Mae, which, in turn, plans to pay an outside firm to service the loans.

The deals represent a significant shift for homeowners, whose mortgages are increasingly being serviced by firms outside the traditional banking system.

Industry officials estimate as much as $1 trillion of mortgages could be transferred to specialty servicers over the next two to three years.

Large banks are looking to trim their servicing activities, particularly of subprime loans, because the costs and regulatory headaches are too high. New banking rules will require banks to set aside more capital against the loans they service, further weighing on profits. The value of the servicing rights can also fluctuate based on shifting interest rates, causing unwanted volatility for the banks’ balance sheets.

That’s where Ocwen and other large nonbank mortgage servicers come in. Banks and investors in mortgage-backed securities pay Ocwen fees for servicing the loans they own. In exchange, the firms communicate with borrowers who fall behind on their mortgage payments and try to get them back on track. Servicers are also typically paid extra for getting delinquent homeowners caught up on their payments. Specialty servicers usually don’t hold the loans.

Analysts say Ocwen has been able to keep its costs low by operating call centers in places like India. The company also boasts about using “artificial intelligence, designed and tested by Ph.D.’s in psychology and statistics to develop dialogues with the homeowner,’’ according to a recent investor presentation.

“They have two decades of experience and are second to none in efficiency,’’ said Daniel Furtado, an analyst at Jefferies.

In some cases, housing advocates say Ocwen has been more responsive to homeowners than the large banks, which had to pay billions to settle regulatory issues related to servicing problems. The company has earned plaudits for working with homeowners to make principal reductions for underwater loans, which are for more than the house is worth.

But Ocwen’s track record is far from perfect. Last month, Ocwen agreed in a consent order with the Consumer Financial Protection Bureau, various state attorneys general and other regulators to provide $2 billion in mortgage principal reductions to underwater borrowers and refund $125 million to borrowers who had already been foreclosed on. The federal agency said, “Ocwen took advantage of borrowers at every stage of the process.”

The company said in a statement at the time that that the agreement “is in alignment with the same ultimate goals that we share with the regulators — to prevent foreclosures and help struggling families keep their homes.”

A Wells Fargo spokesman declined to comment on how much Ocwen paid for the bank’s servicing rights.

In the Citigroup deal, the bank paid Fannie Mae to settle outstanding fees it owed to the government-sponsored enterprise. The sale included nearly 20 percent of the total loans serviced by Citigroup that are 60 days or more past due.

American Realty Capital Properties Wraps Up $1 Billion Recap

Deutsche Bank and Cantor Real Estate are marketing a new commercial mortgage backed securities (CMBS) offering that will complete the final leg of a $980 million recapitalization of American Realty Capital Properties’ (ARCP) recently acquired net lease properties.

DBCCRE 2014-ARCP is a CMBS single borrower transaction that is collateralized by a $620 million first mortgage, 10-year, fixed rate loan originated by Cantor Commercial Real Estate Lending and German American Capital Corp.

ARCP purchased all of the assets backing the new CMBS offering over the last 20 months using equity and existing unsecured credit facilities.

The loan is secured by the fee and leasehold interests in 82 single-tenant retail (37.3% of allocated loan amount), office (35.6%), and industrial (27.1%) properties comprising approximately 7.2 million square feet.

The properties in the collateral pool are in 30 states and Puerto Rico, with three states representing more than 10.0% of the pool: Illinois (15.7%), Florida (11.0%), and Massachusetts (10.2%).

Six properties totaling 44.4% of total portfolio value are either headquarters office locations or industrial properties located in the same market as the tenant’s headquarters. These six properties represent 69.3% of the total office and industrial portfolio value.

CVS Caremark represents 18.3% of the aggregate trust balance serving as a tenant for 31 of the retail properties within the portfolio. It has a weighted average remaining lease term of 23 years.

The second largest tenant, Aon Corp. represents 14.9% of the aggregate trust balance. The tenant occupies a suburban office building in Lincolnshire, IL, pursuant to lease that extends one year beyond the loan term.

The third largest tenant, Bi-Lo, LLC (Winn Dixie) represents 10.2% of the aggregate trust balance. Bi-Lo occupies a warehouse/distribution facility in Jacksonville, FL, pursuant to a lease that extends nine years beyond the loan term.

This past October, ARCP announced it would merge with Cole Real Estate Investments Inc.
in an $11.2 billion deal, creating the world’s largest net lease REIT. The combined company will be comprised of more than 3,700 properties with a market capitalization of approximately $21.5 billion.

Five Takeaways: Treasury Official Outlines Mortgage-Market Priorities

A top Treasury Department adviser on housing policy outlined a series of initiatives that the Obama administration could undertake in 2014 to overhaul the nation’s mortgage market, even if Congress doesn’t succeed in shepherding a bipartisan overhaul of Fannie Mae and Freddie Mac.

Michael Stegman, a senior Treasury adviser, offered greater detail in a speech Wednesday about what kind of mortgage infrastructure should be built to take the place of Fannie and Freddie, and he outlined transition steps that could become a priority for the Federal Housing Finance Agency, which has a new director in former Rep. Mel Watt.

Here are some of the highlights of the speech he delivered at an industry conference in Las Vegas:

REFINANCING, PART ONE: The Treasury Department doesn’t support changing the cut-off date for the Obama administration’s Home Affordable Refinance Program, or HARP, which allows homeowners with a mortgage backed by Fannie Mae or Freddie Mac to refinance even if they have no equity. HARP is only open to loans originated before June 2009, and some Democrats have pushed for extending that cut-off date to June 2010. Bond investors would lose money if more borrowers were allowed to refinance, which could lead them to demand slightly higher prices in the future given the potential for other policy changes:

Some have suggested that the eligibility date for HARP should be changed so that borrowers who took out mortgages after the May 31 2009 cutoff date could also obtain a HARP refinance. Treasury believes there should be no change in the HARP eligibility date. Very few homeowners whose loans were originated after the cut-off date are underwater and advancing the date would do more harm than good by prolonging market and investor uncertainties.

REFINANCING, PART TWO: Mr. Stegman endorsed creating a HARP-like program for loans that aren’t backed by Fannie and Freddie, which he said could reduce the urgency in a handful of hard-hit communities to seize those loans via eminent domain. Such a plan, for which he also voiced support last year, would require congressional action, which seems difficult in the current political environment:

We must not forget about the inability of performing underwater borrowers whose loans are held in private-label security trusts to access refinancing. This has motivated some communities whose housing markets have yet to recover to consider using eminent domain to help families refinance and “right size” their mortgage debt. While we understand their frustration, we think refinancing legislation is a better way to go.

OVERHAULING FANNIE AND FREDDIE: Mr. Stegman said that the status quo in which Fannie and Freddie remain in some form of government-controlled limbo shouldn’t be allowed to continue, even as the crisis becomes a distant memory now that companies are hauling in huge profits. For one, many of those profits are either one-time gains or they’re being generated by the firms’ large investment portfolios that are being wound down, he said:

It is good news that [Fannie and Freddie] have generated record earnings over the past several quarters…. But we believe that their recent financial results may significantly overstate the true financial condition of the enterprises, especially on a go-forward basis…. Recent financial results at the enterprises have also benefited significantly from strong home-price appreciation and low interest rates, both of which may moderate in future periods.

Part of an overhaul, he added, should address price differences between the securities issued by Fannie Mae and Freddie Mac, which have resulted in higher costs for Freddie.

A good first step … that could be taken during the transition is to reduce the price gap at which Freddie Mac securities trade relative to Fannie Mae’s securities by linking the two securities. This would reduce the cost to taxpayers and improve liquidity in the [mortgage bond] market. We think it is worth pursuing and are looking to find a workable solution that would not disrupt markets.

BROADENING ACCESS TO MORTGAGE CREDIT: The Obama administration continues to argue that mortgage standards are too inflexible—potentially locking creditworthy borrowers out of the mortgage market. Overhauling Fannie and Freddie, Mr. Stegman said, would be an important way to address some of these rigid credit standards:

We believe that keeping [Fannie and Freddie] in a conservatorship whose contours and restrictions were defined by emergency legislation is not the best framework for broadening the availability of mortgage credit over the longer term. The [companies] in conservatorship have done an exceptional job of maintaining a deep and liquid secondary market in and following the recent crisis. However, we believe that continued uncertainty about their political future will continue to be a headwind impeding access to credit especially for average families with less than pristine credit. For all these reasons, comprehensive housing finance reform remains a top administration priority.

RESTARTING PRIVATE MORTGAGE SECURITIZATION: Mr. Stegman has suggested in the past that the lower cost of government-backed lending isn't the only reason privately-issued securitizations have been slow to restart. Other technical barriers remain unaddressed:

In the absence of an apparent leader, Treasury plans to coordinate a series ofconversations with relevant regulators, market participants, and other stakeholders to help accelerate necessary reforms in the non-agency space.

Living with Gen Y: Trends in Multifamily Development

All eyes are on the Millennials as a new generation of consumers whose unique mindset is impacting all industries, from housing to environment, infrastructure, media and retailing.

Anton Menlo in Menlo Park, CA. Designed by KTGY, this $120 million sustainable mixed-use community serves Gen Y professionals in the walkable, transit-oriented neighborhood of Menlo Park.

Key characteristics of Gen Y

Also known as Generation Y, Millennials are fundamentally different from their Baby Boomer fathers and mothers. For one thing, Millennials (those in their 20s and early 30s) have been forged in the Great Recession, they know the risks of adventurous investments and financial escapades, they are burdened with student loans but highly educated and place a great deal of importance on sustainability. Unlike their parents, they delay some of the rites of passage into adulthood such as purchasing a house or getting married, precisely because they want to do things right. Young people move back with their parents or dive into renting not because they abandoned the American dream, but because they appreciate flexibility and seek financial stability before pursuing homeownership.

As of 2013, it is estimated that there are approximately 86 million Millennials residing in the United States. Over the next twenty years, this demographic group is expected to grow exponentially as immigrant counterparts continue to make America their home.

Impact on multi-family design

Partly due to the Millennials’ surge, apartment demand in most markets has climbed as well. Acknowledging Gen Y’s preference for urban living, mixed-use developments and walkable environments, multifamily operators have embraced innovation and new residential design trends have emerged. Car and bike sharing services, electric vehicle charging stations, community kitchens and farms are now an integral part of apartment communities.

“Multifamily developers and designers have been inspired by high-end amenities found at resort hotels and expensive membership health clubs as well as those amenities that single-family home owners would want,” said Rohit Anand, AIA, NCARB and managing principal in the Tyson, Va. office of the award-winning national firm, KTGY Group, Inc., Architecture + Planning, in a written statement.

“These amenities include resort-inspired pools, large spaces for vegetable and fruit gardens, additional storage closets off the patio/balcony and/or in the parking garage, bicycle storage and repair, jamming/recording studio, a large fitness center with lots of windows, a Pilates/Yoga studio, and big screen TVs or even individual screens on each tread mill or stair climber. Some developers are including a training facility with personal training in their membership-quality gyms.”

One other thing that multifamily operators should not disregard when devising retention strategies is technology and Millennials’ preference for digitalized environments. The members of this cohort grew up texting and socializing on Twitter and Facebook, they acquire everything online, from groceries to insurance policies and services, and don’t mind sharing when it comes to transportation and housing. Consumer-generated media, online reviews, rankings and opinion polling are a part of their daily existence. They like to make themselves heard and expect feedback, whether at work, within their communities or in their group of friends. Understanding the Millennial mindset and what the members of this demographic expect from their place of residence will allow property managers to better position their assets and cash out on their investments.

“Understanding the wants and needs of your primary target market is critical to success. Going the extra mile to provide amenities that are unique to the marketplace will give you a real marketing advantage in the process,” observed Anand.

“Today, amenities and technology, both low tech and high tech, are being leveraged to provide apartment residents with a convenient lifestyle free from the burdens and responsibilities of home ownership,” he added. “One of the advantages of apartment living near transit in urban, walkable communities is that residents can more easily do without owning a car. Car sharing businesses like Zipcar and Buzzcar have increased in popularity. Bike sharing, first made popular on college campuses, has moved off campus as well.”

In addition to tech offerings, Gen Y-ers expect their apartments to accommodate their lifestyle needs, such as socializing, shopping and entertainment. During the selection process, chances are that prospects will place as much emphasis on location as on rental rates and unit size.

“Location is everything. What’s in the neighborhood within walking distance is the most important amenity. Where services are missing from the neighborhood, developers might incorporate ground floor retail/services to include a ‘grab & go’ convenience store, dry cleaning, nail (and hair) salon, sports pub and/or cafe. Investors are snapping up these “retail condominiums” at premium prices in high traffic, urban infill areas,” Anand explained.

One simple step to improve chances of success in attracting and retaining residents is offering a wide amenity package, to cater to all renter types. Whereas proximity to parks and recreation spaces will act as leverage when it comes to attracting outdoorsy types, pet-friendliness in a community will serve as a retention driver for pet-owners and animal lovers. You just have to know your target well and align your offerings with the prospects’ needs.

“As Gen Y loves their pets, savvy apartment developers are including grooming stations, a bark park or doggie run, and even doggie day care with pet walking services,” Anand pointed out. “Veterinary care and training might also be included.”

As to where these Gen-Y-centered apartments should be located, news organization Vocativ has compiled a list of cities where young Americans would feel more at ease in terms of job opportunities, quality of life, green, and general atmosphere.

Vocativ based their ranking on traditional data like average salary, employment rates, and the cost of rent and utilities measured against everyday factors like bike lanes for commuting, low-cost broadband and the availability of good, cheap takeout. What’s more interesting though is that they also included some quirky yet “all-important” lifestyle metrics in the study like the price of a pint of beer and an ounce of high-quality weed, as well as the level of access to live music, coffee shops and vintage clothing stores.

As it turns out, if you’re in your twenties, eco-minded, struggling to make ends meet and looking to put down roots in a city that won’t suppress your dreams, Portland, Austin, San Francisco, Seattle and Minneapolis are your best bets. See the complete ranking here.

Flowtown – Social Media Marketing Application

This year looks positive for Atlanta real estate

“Prediction is very difficult, especially if it’s about the future.”

The quote above from Niels Bohr, Nobel-winning physicist, is as funny as it is true. Most economists would agree that forecasting a performance result with a high degree of reliability is extremely challenging, as the myriad of events that may affect future conditions are unknown. So how do we predict what metro Atlanta commercial real estate market fundamentals will look like in 2014? Recent history, current trends and some forward-looking analysis are helping build a consensus among prognosticators as 2014 begins.

History tells us the market performed well in 2013, generally reaching pre-recession levels of activity in both the office and industrial sectors. It was the first year after the recession that exhibited characteristics of a recovery, and forms the basis for future growth potential. A little investigation reveals fundamentals are recovering in core submarkets, and that the volume of tenants seeking space is elevated relative to 2011 and 2012. Space options are tight in select areas. This local market momentum is reflected in some of the forward looking statements below:

“Generally speaking, European markets are showing signs of plateauing, while those in the Americas are seeing rents accelerate...” - CBRE EA

“Overall, it appears that fundamentals will continue to improve at a moderate pace, in line with the macroeconomic situation.” -Deloitte

“Space market fundamentals have slowly improved to the point where, even with slow demand, real income growth is likely to occur over the next two years.” - Urban Land Institute

“...with the demand outlook improving and new construction still at bay in most markets, the 2014 occupancy gains in US office markets should be the best of the entire recovery and should tip the scales toward greater rent growth during 2014 than in the past few years.” - Costar

The table below additionally offers rent growth forecast data for Atlanta from several sources for office space in 2014.

Forecasters clearly believe the next 12 months should bring more positive activity to metro Atlanta. Today, Niels Bohr might maintain predictions always have the potential of falling flat, and we’ll certainly know whether this is the case 355 days from today; however, recent Atlanta office performance metrics and current activity levels support the prospect of new growth.

California commercial real estate bouncing back, expert says

While the commercial real estate markets appear to be improving, there is no shortage of distressed properties.

The status of commercial real estate markets in the nation, California and San Diego County was the topic of a California Commercial Alliance meeting Friday at the Manchester Grand Hyatt in San Diego.

Lou Lollio, commercial issues chairman for the California Association of Realtors, said he can gauge how well the economy is doing by the number of cranes he sees.

"We are even seeing this happen in the San Diego area," Lollio said.

Lollio, who said he has been through three recessions, cited a CoStar Group (Nasdaq: CSGP) report that said in a general sense, commercial markets should continue to strengthen for the next five to eight years.

Lollio said that while office properties tend to lag the other asset classes, they are becoming a very good buy.

"Institutional monies are significantly underinvested in these properties," Lollio said.

Oscar Wei, a California Association of Realtors economist, said that although office markets are improving, investors need to be aware of the shrinking amount of required space per employee.

Wei, who said the average amount of space per employee was 225 square feet in 2005, said this had dropped to 150 square feet by 2010 and will be about 100 square feet in 2015.

Although submarkets such as Otay Mesa are still experiencing a very slow recovery, Lollio said, he expects a major improvement in the industrial markets generally.

Wei agrees.

"Industrial space is what's up and coming," Wei said.

Wei said apartment sales have continued to boom -- climbing by about 14 percent year over year.

"There's a lot of pent-up demand in multifamily," he said, adding that the national apartment vacancy is about 4.1 percent, about the same as San Diego's, depending on the survey.

As for retail, Wei said leasing is strong in the high end and the low end of the spectrum, but those in between have continued to suffer.

"The middle has just been stagnant," Wei said.

Commercial real estate markets may have improved generally, and the number of lender-owned properties may be significantly less than a couple of years ago, but Ray Mclaine, CEO of the Commercial REO Brokers Association, warns that these numbers are going to climb again.

While it might sound troubling that REO sales will increase, Mclaine likened it to what has been happening on the residential side.

"Banks didn't follow the rules," he said, adding that he saw markets where there would be 500 lender-owned homes for sale one year and 125 bank-owned homes the next.

"They just pulled these homes off the market," Mclaine said.

He said despite all the concerns about Commercial Mortgage-Backed Securities, "commercial REOs never came to market as anticipated."

Mclaine said the commercial properties "will get caught up in 2015-2018. 2014 will be one of the largest REO sale years for a while."

He said along with a pent-up supply of REO properties the activity will be boosted by the fact that at least $300 billion in troubled CMBS loans that are scheduled to mature the next three years.

"About 40 percent of these are underwater," McLaine added.

Jon Coupal, CEO of the Howard Jarvis Taxpayers Association, came to the session to blast any type of split roll tax. An example of such a tax is AB 59, by Democratic Oakland Assemblyman Rob Bonta, which would allow a school district to impose different parcel tax rates depending on whether a property is residential, commercial or industrial.

SCA 3 by state Sen. Mark Leno, D-San Francisco, would allow school districts, community college districts and county offices of education to impose, increase or extend parcel taxes with a 55 percent threshold rather than the two-thirds requirement under the current statute.

Coupal, who contends that California would be in worse shape if Proposition 13 weren't approved in 1978, argues that split-roll proposals such as these are the greatest threat to Howard Jarvis' tax measure since its inception.

"The public was asked whether the protections provided to residential properties should be extended to commercial, and the voters said ‘yes,’” Coupal said.

Coupal added that since Democrats have a supermajority in the California Legislature, it also would be easy for them to lower required threshold for a tax from the current two-thirds majority to 55 percent.

"This would be a real sock to commercial properties," Coupal said. "It would also be an administrative nightmare."

ABCs of CDO (CLO, CBO, CDO of ABS)

An excellent tutorial on CDOs in all its varieties.

RPT-Fitch: U.S. CMBS Credit Enhancement Poised for Increase

Jan 22 (Reuters) - (The following statement was released by the rating agency)

The lone improvement in U.S. CMBS underwriting last year stands to deteriorate in 2014, which could translate to a spike in credit enhancement on new deals, according to Fitch Ratings in a new report.

Fitch notes that every major CMBS underwriting metric declined in 2013 except for debt service coverage ratio (DSCR). However, with interest rates likely to rise over the next two years, DSCR will likely decline too. In turn, Fitch is likely to raise CMBS credit enhancement levels if higher interest rates push DCSRs down.

And, even if current levels of DSCR are maintained, Fitch will, as it has steadfastly maintained over the past two years, increase CMBS credit enhancement if other underwriting parameters continue their deterioration.

Debt on new CMBS deals will be increasingly comprised of first and second mortgages and mezzanine financing in order to refinance loans coming due over the next few years, said Managing Director Huxley Somerville. Subordinate debt in CMBS deals already rose in the second half of last year and stands to do the same in 2014 as the refinancing debt wall approaches. Particularly problematic may be CMBS deals containing loans underwritten with expected net operating income increases that do not come to fruition.

Another troubling trend taking place in 2013 was the increase in interest only loans (IO), with Fitch reporting over 50% of loans having some form of IO period. Fitch finds this counterintuitive given the current low interest rate environment. With the likelihood of interest rates being higher at refinance and the potential for lukewarm economic growth over the term of the loan, the logic of removing a strong mitigant to CMBS refinance risk in a higher rate world is questionable at best, said Somerville.

It should be noted that Fitch has already baked in higher interest rates into its CMBS ratings. Fitch's analysis provides benefit to the fixed rate of interest through the term but recognizes the potential stress at maturity when the loan may need to be refinanced with a higher interest rate.

‘Real estate is a slightly complex business’

Mumbai-based Lodha Group probably ranks as the most diversified real estate developer in the country, with homes at every price point.

It has delivered over 20 million sq ft and has over 35 million sq ft under development with a land bank of 5,300 acres.

In November, it bought the landmark MacDonald House in central London from the Canadian government for Rs 3,120 crore.

In a chat with Business Line, Abhinandan Lodha, Deputy MD of the group, spoke about the market and how the spread of his product range is an effective hedge against market fluctuations. 

Excerpts:

The markets are up, growth is down and banks are stretched. How do you see your prospects in these trying times?

We have been lucky in the sense we are Mumbai-based and 97 per cent of our value lies here. Mumbai, being an island city and the financial capital, has robust demand as long as you have a credible name to deliver. What we have been doing over the past 4-5 years is to build an organisation with a lot of credibility with both consumers and suppliers. And, we have an asset pool across the spectrum. We have an apartment for Rs 30 lakh and one for Rs 100 crore, and everything in between. We are selling something at every price point. The range enables us to hedge our whole portfolio.

How is the mix?

Forty per cent is in the affordable category, 15 per cent in aspirational and 35 per cent in the luxury segment. About 8-10 per cent is in retail, commercial and the rest.

Sales are poor in Mumbai realty…

The market has not shrunk. It has grown about 6 per cent over the past year in size.

It is just that the market share has got re-allocated and some sections of people have chosen to buy ready apartments rather than those under development due to the risk profile attached to some developers.

Reports indicate an inventory of 58 months in Mumbai. Even if discounted to 40 months, isn’t it quite high?

My only contention is that if this inventory is that high then there should be some negative movement on the price at some point of time or there would be offers given. There is generally a slowdown in sales, but the months of inventory may be a little off the mark.

We delivered 5.5 million sq ft last year and 4.5 million sq ft this year.

For example, in Lower Parel, everybody would say, if you have, on an average, 2,000 apartments to sell, it would work out to 70 months’ inventory as one cannot sell over 25 units a month there. We sold 1,200 apartments in 60 days.

In Mumbai, there is a population which wants to buy and has the money and desire to buy. So, if the market is shaken then the concept of inventory disappears.

In Palava (a 4,000-acre suburban township of the Lodhas), I was selling 40 apartments in a month when we launched it. Now, the sales are 800 units a month.

How much do sales accruals help fund your projects?

It depends on how you look at it. For someone like us it is the backbone. Our model is that we are not an asset owner but an inventory owner. We need to continuously sell like a factory where you produce and sell. We have an annual accrual of about Rs 9,000 crore.

The budget for the year?

It is around Rs 8,800 crore.

Any plans to move into other cities?

No. We have Mumbai, and Pune and London will be an important part of our business going forward. We intend only to complete the projects we had taken up in Hyderabad.

When are you going to start work in London?

By the middle of June. We will have the plans frozen by April.

There are reports of delays in some of your projects. Is it because of the economy or delays in approvals?

Real estate is a slightly complex business and the supply chain management is not as efficient as it should be. There have been delays in some of our assets. A few of our projects have been delayed and we have informed our consumers, rescheduled and delivered them.

Abe Eyes Land-Price Reflation in Zones to Spur Building Boom

Japan wants to trigger a jump in inner-city property prices by loosening building restrictions in test zones under Abenomics, a government adviser said.

“Central-city property prices will likely rise when various plans are announced,” Tatsuo Hatta, 70, a member of a government council on special economic zones, said in an interview in Tokyo last week. The economic impact from the urban-planning changes will be “extremely big,” he said.

Prime Minister Shinzo Abe is trying to sustain an economic rebound that risks losing steam in April when a sales-tax increase will damp consumer spending. While Hatta’s comments offer some insight into the government’s plans for special economic zones, investors are still waiting for fuller details of Abe’s growth strategy in what Goldman Sachs Group Inc. calls a “critical year” for Abenomics.

Home prices in Tokyo are around 120,000 yen to 150,000 yen per square foot, Chicago-based Jones Lang LaSalle said last year. That compares with about 280,000 yen to 400,000 yen in Hong Kong and 200,000 yen to 250,000 yen in Singapore, it said.

According to Hatta, the changes will make it easier to construct residential buildings in business districts in designated zones, creating opportunities to improve urban planning and make cities more enticing for employees of foreign companies.

Stock Bust

The bursting of a bubble in the stock market, which peaked in 1989, and a real-estate market bust in the 1990s saddled banks with bad loans, plunging Japan into a deflationary slump that it’s still trying to shake.

While prices in some cities picked up after former Prime Minister Junichiro Koizumi cleaned up the banking system in the early 2000s, a sustained rebound has been elusive. Nationwide residential real-estate prices at the end of September were down 51 percent from a peak in 1991.

Introducing special economic zones is a cornerstone of Abe’s effort to create opportunities for Japanese companies, along with steps to boost industrial competitiveness and open up the country more to international trade.

The government may decide in March where it will locate the special zones, Abe said on Jan 7.

2020 Olympics

The council will decide on criteria for selecting these areas at its next meeting expected to be held at the end of January or early February, Hatta said. There will be a maximum of five zones, with one or two “virtual” areas and the rest in big cities, he said.

Tokyo’s real-estate market has started to perk up, helped by unprecedented monetary easing by the Bank of Japan and the city’s successful bid to host the 2020 Olympics. The monthly average vacancy rate in Tokyo business areas fell to 7.34 percent at the of December from 8.67 percent a year earlier and 9.01 percent at the end of 2011, according to data from Miki Shoji Co.

The real-estate subindex of Japan’s benchmark Topix of shares climbed about 62 percent over the past year, outpacing a 43 percent gain in the Topix index.

Japan’s commercial real-estate transaction volume jumped 41 percent in October-December from the previous quarter, led by Japan Real-Estate Investment Trust activity, according to DTZ Research. Sales of commercial property more than doubled last year to 3.54 trillion yen ($34 billion), the highest since 2007, it said in a research note this week. Commercial property includes office buildings, shopping malls and distribution centers.

Attracting Foreigners

Loosening rules on residential construction in business districts would create more demand for education, medical and other services in those areas, Hatta said.

“Labor and other issues are more important and will have an impact over the long term, but this will have a strong impact in the short run,” Hatta said of the building deregulation. “The focus, as far as attracting foreign nationals is concerned, is to make living in city centers comfortable,” Hatta said.

British Columbia, Canada real estate firm looks for luxury buyers in China

Sales of high-end properties are on the upswing in the Vancouver region, spurring one of British Columbia’s leading real estate firms to search for wealthy buyers by setting up shop in China.

Dan Scarrow, vice-president of corporate strategy at Macdonald Realty Ltd., said he has heard enough anecdotal evidence of well-heeled home buyers with roots in China to make it worthwhile to invest in a Shanghai office.

In February, Mr. Scarrow will start the first of two three-month assignments in 2014 in Shanghai. After his fact-finding mission, he plans to hire Mandarin-speaking staff in China to keep the overseas branch office going.

While real estate experts have estimated the proportion of foreign buyers in the Vancouver region’s housing market at only 1 to 3 per cent, Mr. Scarrow said if the statistics were to include recent immigrants with origins in China, the influence of rich Chinese buyers would be greater, especially on single-family detached homes in pockets of Vancouver’s West Side.

Most high-end transactions occur on Vancouver’s West Side and the Municipality of West Vancouver. In the luxury market, there were 644 properties that sold for $3-million or higher in the Vancouver area last year, up 47 per cent from 439 homes that traded hands in 2012, according to data compiled by Macdonald Realty. Of homes that sold last year, there were 148 that fetched at least $5-million, compared with 107 sales in that category in 2012.

Mr. Scarrow said it is hard to determine how many of those elite sales went to recent immigrants from China, noting that the ripple effect due to an influx of new money can easily be exaggerated. Still, he believes the proportion was significantly higher than 3 per cent last year.

“There isn’t this wave of offshore investors with no ties to Canada who are coming in to buy, but the genesis of their wealth is from mainland China,” said Mr. Scarrow, a Canadian who speaks Mandarin fluently. “Most of these people land in Canada first as investor-class immigrants.”

He dismisses tales circulating of wealthy offshore buyers snapping up Vancouver properties sight unseen as false, emphasizing that he will instead seek to nurture a market in which China-Canada family ties are crucial.

The 30-year-old Mr. Scarrow said that as a product of a mixed-race marriage, he is acutely aware that the issue of foreign shoppers is a sensitive one in British Columbia. “The perception among some sellers is that mainland Chinese money is driving the luxury real estate market here,” he said.

But Mr. Scarrow cautions homeowners against hiring real estate agents based only on ethnicity, stressing that the best representatives know Vancouver’s neighbourhoods well, no matter what their race.

Mr. Scarrow’s mother, Lynn Hsu, moved in 1979 from Taiwan to Vancouver. Ms. Hsu is the president and majority owner of Macdonald Realty, which has more than 1,000 real estate agents and staff across British Columbia. Her ex-husband, Peter Scarrow, is a lawyer who has worked in Asia for the past dozen years, including advising wealthy Chinese on Canadian immigration and tax rules.

Dan Scarrow said there will be opportunities to tap into the Chinese market during his stay in Shanghai. Besides seeking contacts who are interested in single-family residential properties, he will be on the lookout for investors in Vancouver’s commercial real estate market and also new condo projects.

Benchmark index prices, which strip out the most expensive properties, have jumped 17.3 per cent to $2.1-million for single-family detached houses over the past three years on the city’s West Side, according to the Real Estate Board of Greater Vancouver. By contrast, West Side prices have risen only 4 per cent for townhouses and 3.5 per cent for condos over the same period.

Metro commercial real estate a mixed bag

The Albuquerque metro area’s economy continues to play out in the commercial real-estate market, reflecting in bricks and mortar the challenge of rebuilding the labor force while pink slips continue to be handed out.

The 323,541-square-foot Albuquerque Office Park, shown here, originally built for federal contractor BDM and most recently Presbyterian Healthcare Services headquarters, is now for sale at an asking price of $28.74 a square foot. (Courtesy of Joel White)

The vacancy rate for offices ended the year at 19.3 percent, up from 18.9 percent in the fourth quarter of 2012 but down from 19.6 percent in the preceding third quarter, according the latest market data from Colliers International.

The office market, which had an average vacancy rate of 12.3 percent in 2005-08, tends to thrive or dive with the job market.

The vacancy rate for industrial real estate such as warehouses and R&D buildings ended the year at 9.3 percent, down from both 10.3 percent in the fourth quarter of 2012 and 9.9 percent in the preceding third quarter, Colliers reported. The industrial market’s average vacancy rate was 7.8 percent in 2005-08.

The retail real-estate market appears to have fully recovered, sporting its lowest vacancy rate in six years at 7.6 percent in the fourth quarter.

According to the Chicago-based CCIM Institute’s Quarterly Market Trends report for the fourth quarter, the average vacancy rates nationwide were 15.6 percent for office, 9.2 percent for industrial and 10.4 percent for retail.

Compared to signs of a national economic recovery, the turnaround in Albuquerque’s economy appears hesitant, which is particularly evident in the office market. The local office vacancy rate approached 4 percentage points higher than the national average at year end.

“There are silver linings to everything and we can try to be optimistic, but the improvement we expect to see in 2014 is not going to be substantial,” said John Ransom, managing director of Colliers’ Albuquerque office.

“We’ve been fortunate but too reliant on the government for jobs,” he said. “The question is what’s going to be the next spark (in the local economy)?”

In addition, commercial real-estate brokers point to the fact that Albuquerque has a lot of old, obsolete office, industrial and retail properties that nobody wants to rent – at least not without an infusion of renovation money. Those properties prop up vacancy rates.

“It’s not that we’re overbuilt, but under-demolished,” Ransom said.

The month-over-month improvement in the office vacancy rate during the fourth quarter was based largely on one large deal, Blue Cross and Blue Shield of New Mexico’s expansion into 84,724 square feet at The 25 Way, said Ken Schaefer, director of brokerage services at Colliers’ Albuquerque office.

The 25 Way mixed-use business park is in the Albuquerque’s strongest and biggest office submarket, the North I-25 corridor which straddles Interstate 25 north of the Big I. The vacancy rate was 14.2 percent at year end, down from 18.5 percent in the fourth quarter of 2012, according to Colliers.

“The North I-25 (corridor) has the newer product – more energy efficient buildings, fiber (optics) and ample parking – with good access from both sides of the river,” said Terri Dettweiler of commercial real estate services firm CBRE.

The North I-25′s popularity reflects a continuing trend in the office market for companies to house more employees in less space, thus saving on the overhead costs of leasing, she said. As a result, contemporary buildings designed with open layouts, suitable for so-called “cube farms,” see more demand.

The Downtown office submarket is a different story. The year-end vacancy rate was 29 percent at year end, an improvement over 32.2 percent in the third quarter when Albuquerque had the distinction of having the highest office vacancy rate of any city’s central business district in the country.

“The problem is not Downtown being Downtown,” said Tom Jenkins of Real Estate Advisors. “The problem is the aging inventory.”

Improving the Downtown office market will take more than building more parking garages, he said. Many of the office buildings are basically tired and in need of upgrades to infrastructure like heating and cooling systems and elevators, he said.

Overall in the office market in the fourth quarter, Schaefer said leasing activity was “a mixed bag with positives outweighing the negatives. Growing deal activity is setting up the next two quarters for positive absorption (of vacant space).”

In the third quarter, however, the office market could take a big hit when Presbyterian Healthcare Services vacates most of its 323,541 square feet of leased space at the Albuquerque Office Complex near the airport. Presbyterian is moving to a corporate-owned headquarters near Balloon Fiesta Park.

That big of a vacancy hitting the market could push up the office vacancy rate by 2.3 percentage points, Colliers has said. While leased space is tracked as part of the office market inventory, owner-occupied buildings like Presbyterian’s new headquarters are not.

Originally built for a predecessor firm of Northrop Grumman in 1980-88, the four-building Albuquerque Office Complex is not currently being marketed for lease. A team of brokers at Sperry Van Ness/Walt Arnold Commercial Brokerage has listed it for sale at an asking price of $9.3 million.

Improvement in the industrial vacancy rate is based less on positive moves in the market, as in empty space filling up, and more on fewer negative moves from downsizings and closings, said Jim Smith of CBRE.

“Space vacated in 2013 – about 1 million square feet – was half the space vacated in 2009,” he said. “What that says, especially for a smaller market (like Albuquerque) with not a lot of business growth, is most businesses that decided to downsize have done so.”

An uptick in construction activity, most of it in multifamily and retail projects, has given the industrial market some buoyancy, Schaefer said. Construction-related businesses, including contractors and suppliers, have traditionally been a major user of warehouse space in the metro.

The metro’s construction sector gained back lost jobs for much of 2013, but the preliminary count of 19,900 jobs as of November is still well below the peak of 31,700 in mid 2007, according to state labor data.