Housing starts jump in January

By ANDREW KEATTS, The Daily Transcript

Thursday, February 24, 2011

If January was any indication, housing construction might be on a modest upswing in 2011.

San Diego County jurisdictions granted permits for the construction of 466 housing units in the first month of the year, more than were granted in any of the last three Januarys, and more than in all but one month of 2010, according to numbers released by the Construction Industry Research Board (CIRB).

Of the 466 permits pulled by developers last month, 309 were for the construction of multifamily units, with the remainder reserved for single-family homes.

County developers received 87 and 285 housing permits in the first months of 2009 and 2010, respectively. The yearly totals of 2,990 in 2009 and 3,342 in 2010 are the two lowest on record. In 2008, when 5,154 total permits were issued, 317 of those came in January.

“It’s still anemic,” said Mark Riedy, executive director of the Burnham-Moores Center for Real Estate at the University of San Diego, of the 466 permits issued in January. “I just can’t get excited about that. It might be more than the last three years, but the last three years have been anything but good.”

Compared to the monthly totals in 2010, last month would have trailed only June’s 559, and would have finished just ahead of the 440 pulled in May. There were 292 permits pulled in the last month of the year, after three successive months below the 200 mark.

“If we were to analyze this number, 2011 would far exceed what we saw in ’08, ’09 or 2010,” said Borre Winckel, chief executive officer of the Building Industry Association of San Diego (SD-BIA). “This is an affirmative statement about the intent of new construction.”

Though the numbers are expressed as a countywide total, Winckel says a select few jurisdictions, namely Chula Vista, are responsible for the bulk of new construction, and have been for a number of months. The entire coastal area is effectively bleak, he said.

The imbalance between multifamily and singly-family units comes as housing experts have repeatedly said that the future of development in the county is in urban infill and redevelopment. However, this is the first month since August in which builders pulled more multifamily than single-family units.

Because condominium financing is difficult to secure and county vacancy rates are low, new apartment construction is suddenly viable again, said Russ Valone, chief executive officer of MarketPointe Realty Advisors.

“We’re finally seeing new apartments come into the marketplace,” he said.

Citing SD-BIA research that an average of 140 different companies are involved in the construction of a single new house, Valone called housing construction a powerful job generator, and said increased building activity would strengthen the economic recovery.

Winckel said the last two months represent a positive trend line.

“I haven’t spoken to a single builder who thinks 2011 isn’t going to be a big improvement from the last three years, but it still (won’t) make a dent in the county’s latent housing demand,” he said.

Source: SanDiegoDailyTranscript

County to hold property auction

By ELIZABETH MALLOY, The Daily Transcript

Friday, February 25, 2011

The San Diego County Treasurer-Tax Collector’s office is scheduled to auction off hundreds of tax defaulted properties next month

Treasurer-Tax Collector Dan McAllister announced Friday that 469 tax defaulted properties are scheduled to be sold at the 2011 Property Tax Sale Auction scheduled for Friday, March 18, at the San Diego Convention Center. The auction is being held in an effort to collect $2,432,354.26 in unpaid property taxes including penalties and fees.

“We currently have 76 improved properties, 278 timeshares and 115 unimproved parcels ready for auction,” McAllister said. “The numbers may change if owners step up and pay the defaulted taxes with penalties right before the deadline. Owners of delinquent properties have until 5 pm on Thursday, March 17, the day before the tax sale to bring their taxes and delinquent charges up to date, or their property will be sold.”

Interested bidders may purchase registration packets for $60 at any of the Treasurer-Tax Collector’s offices, located in downtown San Diego, Kearny Mesa, Chula Vista, El Cajon or San Marcos. A $1,000 refundable deposit is also required at the time of registration.

“This should give serious bidders ample time to do their research and due diligence,” McAllister said. “I expect to see more participants this year due to the economy.”

Minimum bids are set based on the total amount of back taxes, penalties and sales costs. The successful bidder may take possession of a property after making a payment in full and after the Tax Deed to Purchaser has been recorded.

Under California State law, the Treasurer-Tax Collector may sell any or all portions of properties that have been in default for five years. In December 2009, the Board of Supervisors approved 379 properties for last year’s auction. In November 2010, the Board approved nearly 600 properties for auction at this year’s sale.

Source: SanDiegoDailyTranscript

ARG Capital Partners secures joint venture equity totaling $16M

NEWS | SAN DIEGO


By Daily Transcript staff report
Monday, January 31, 2011


The San Diego office of ARG Capital Partners announced that it has arranged joint venture equity totaling $16 million for its client Feldman Equities Inc.

ARG assisted Feldman Equities in securing an all equity closing on the acquisition of a distressed mortgage note secured by a Class A, 134,065-square-foot multi-story office building in Tampa, Fla.

Given the time sensitive nature of the transaction and the closing deadline imposed by the note seller, an all equity closing was required.

Bryan Clark, director of Capital Markets with ARG Capital Partners, arranged joint venture equity on behalf of the sponsor, Feldman Equities, securing a letter of intent for $16 million in joint venture equity, with terms acceptable to the note seller, sponsor, and joint venture partner, for an all cash closing within five days of notification that the previous partner had backed out-with the closing of the acquisition taking place 15 days later.

ARG Capital Partners arranged the joint venture equity through a market-leading real estate private equity firm whose principals each have more than 20 years of experience, including leadership positions at premier investment funds and operating companies, and collectively have been responsible for over $10 billion of real estate investments.


Source: SanDiegoDailyTranscript

Downtown San Diego law school now has student housing

BY LILY LEUNG

MONDAY, FEBRUARY 21, 2011 AT 10:53 A.M.

The Thomas Jefferson School of Law's new downtown campus now has official student housing.

Security Properties, a Seattle-based real estate investment company, has leased 172-unit Entrada Apartments to school officials in a 15-year agreement.

The building, at 13th Street and Island Avenue in East Village, is currently housing students, and a waitlist is in place for future vacancies.

The law school, formerly in Old Town, finished its relocation to downtown San Diego in January. School officials hope to increase enrollment from 950 to 1,000-plus in the coming year, explaining their need to provide student housing.

“The situation is ideal and substantially enhances both our ability to recruit the highest quality student body to Thomas Jefferson School of Law, and to provide a greater economic benefit to the East Village community which has been so welcoming to us," said Associate Dean for Student Affairs M. Elizabeth Kransberger, in a statement.

Law school officials plan to charge market-rate rent for the apartments. In some cases, they will offer need and merit-based housing grants to students. About 90 percent of Entrada's units are studios with rent ranging $900-$1,200.

Security Properties, the company that leased out the building, acquired Entrada in July 2010 for $22 million. The apartment complex is the company's sole San Diego property though it has owned properties in the county before.

The apartments were built in 2004 and includes a mix of studio, loft, one-bedroom, two-bedroom and three-bedroom apartments. The building also has a renovated rooftop common area, interior courtyard, fitness center and underground parking.

Security Properties’ focus is primarily West Coast properties, including Seattle, San Francisco and Portland.

Source: SignOnSanDiego

Freddie Mac: Mortgage rates fall this week

By Lily Leung

Thursday, January 6, 2011 at 11:45 a.m.

U.S. mortgage rates dropped this week after two months of steady increases, said Freddie Mac officials Thursday.

The average 30-year fixed rate was 4.77 percent compared to 4.86 percent last week -- a dip some San Diego real-estate experts say is just part of the normal market fluctuations.

The current 30-year lending rate is still historically low, compared with the average at 5.09 percent during the same time last year and 6 percent at the height of the housing market.

The average 15-year rate also fell, from 4.20 percent to 4.13 percent.

This week's decreases are likely due to erratic trading in mortgage-backed securities, which drive mortgage rates, said Dan Williams, president of San Diego Lending Solutions in Mission Valley.

"Those bonds have been so volatile day-to-day," Williams said.

Leonard Baron, a real-estate professor at San Diego State University, isn't concerned about this week's rate fall.

"The market is functioning properly," Baron said. "Such a small amount is just irrelevant."

He said consumers should instead focus on the steady increases in the past two months, which he chalks up to an increase in consumer confidence.

Generally, local experts expect mortgage rates to remain steady throughout the year as the housing and job markets remain sluggish.

Although dips in lending rates could signal weaknesses in the economy, they are a good thing for potential homebuyers if they qualify for the loans.

"For every basis point that mortgage rates go up, that crowds out a small percentage of buyers," Baron said.

Source: SignOnSanDiego.com

U.S. apartment vacancies dip as rents rise

By Lily Leung  

Friday, January 7, 2011 at 12:19 p.m.

Average rents in San Diego County

Apartment type	Fall 2010	Spring 2010	Fall 2009
Studio	$1,040	$967	$996
1 bedroom	$1,175	$1,161	$1,127
2 bedroom	$1,440	$1,444	$1,422
3 bedroom	$1,771	$1,735	$1,754

Source: San Diego County Apartment Association

More Americans are renting, a sign of continuing economic distress that's also seen in San Diego County.

Nationwide, the rate of apartment vacancies dipped to 6.6 percent in the fourth quarter from 8 percent during the same time one year ago, marking a two-year low, said Bloomberg News this week. The data is from Reis Inc., a property-research company. 

Numbers from the San Diego County Apartment Association show the same downward trend in the region. The vacancy rate fell to 4.6 percent in the fall from 5.0 percent the previous year. The association surveys 25 major apartment owners and managers twice a year, in the fall and spring.

As more rentals filled up, rents rose across the U.S. and San Diego County. In the U.S., the average monthly rent rose to $986 from $964 year-over-year, a 2.2 percent increase. In the county, rent increase ranged 1 percent to 4.4 percent in the fall.

Some local experts believe demand and prices for rentals will likely continue through 2011 and even beyond because of an already limited housing supply, the lack of new building and an upcoming wave of foreclosures. 

Bob Pinnegar, executive director of the apartment association, called this an "abnormal period" for San Diego County's rental market. He said more people are flocking to the outskirts such as El Cajon and Alpine instead of San Diego city because of cheaper rates and the willingness to commute farther.

"People are moving around based on their perception of value," Pinnegar said.

Pinnegar said the performance of the local rental market also depends on the U.S. unemployment rate, which remains high. Employment is a key indicator for rental housing, with a direct link between the unemployment rate and apartment vacancy. It dropped to 9.4 percent in December from 9.9 percent a year ago. 

That's likely a seasonal uptick, said Kraig Kast, managing trustee for Atherton Trust, which has an office in La Jolla.

"It's not necessarily a trend because the hirings are likely related to the holiday season," Kast said. "We have to wait for the numbers for January and February."

Pinnegar said the job outlook for Californians looks grim because of the state's dire budget deficit. He expects a wave of government layoffs to occur during the first part of the year.

"State dollars will be cut, and that will a challenge," he said.

Source: SignOnSanDiego.com

Will Tax Bill Eventually Deliver for CRE?

By Erika Morphy

WASHINGTON, DC-The House of Representatives has sent legislation that extends the Bush-era tax cuts as well as several other business-friendly initiatives to President Barack Obama for his signature. 

For the most part it is a mirror image of the $858-billion deal that passed the Senate earlier this week. The crux of the package extends the tax cut as well as unemployment insurance--along with a new 2% payroll tax reduction for all workers. Energy and other tax breaks that were expiring this year have also been folded into the package. Some House Democrats balked at the last minute, protesting a revision to the estate tax, which exempts families inheriting up to $10 million. Democrats did win some measures of their own, in the form of government spending on certain projects. 

In the end, neither side was completely disgusted or totally enthralled by the bill, which has largely been pushed by the president and the Republican party. The Democrats see it as adding to the nation’s ever-growing national debt, but Republicans wanted the tax cuts to be made permanent instead of extended for two years. 

For the real estate community as well as the debt and equity market, and particularly the residential market, the bill’s passage is a net positive, says Dennis Yeskey, senior advisor and leader of the commercial real estate practice at AlixPartners.

The bill cuts Social Security payroll taxes and extends jobless benefits, key tax credits and mortgage insurance deduction--basically, all of this means people have a little more money in pockets, he tells GlobeSt.com. “The theory is that consumers will spend that extra money which will help the residential real estate market, which has been really hurt by the downturn.” Also, in terms of commercial real estate, increased consumer spending will benefit retailers, which will help the retail real estate market and eventually industrial real estate. 

Finally, Yeskey says, leaving capital gains rate the same through 2012 is very important to commercial real estate “very, very important. One of the reasons is that the rate on dividends will remain the same as well--the REIT market is really a dividend play and this has the potential to help the REIT market.”

Also, the bill has extended bonus depreciation, says Harvey Berenson, managing director in the Business Tax Advisory group at FTI Schonbraun McCann Group in New York City. “The law also extends 15-year depreciation for qualified leasehold improvements. This will also encourage investment in rental property.”

The bill’s passage will also go far to improve the mood in the business community, which should help, observers say. In discussions with local real estate professionals, the primary benefit they see from the passage of this bill is the removal of a big near-term uncertainty, Edward F. Manzi Jr., chairman and CEO of Fidelity Bank, a Leominster, MA-based community bank, tells GlobeSt.com. “Generally speaking, for the decision-makers in the real estate investment community, less uncertainty is better because they can complete analysis and move forward with more clarity,” he says.

Based on the overall dollars saved by the bill, it won’t promote new development in the commercial real estate industry, agrees Scott Spector, a principal at Spector Group in New York. “However, the perception will be very attractive to developers and end-users and this will help to provoke more much-needed activity across the industry.”

Perhaps the most intriguing--but also the most amorphous--benefit of the bill is its promise to increase employment. The package has been forecast to create 3.1 million jobs, Peter Cohan of Peter S. Cohan & Associates tells GlobeSt.com. Whether that is worthwhile from a fiscal perspective--those jobs are coming at a cost of $276,774 per job, higher than the $254,857 per job cost of the $787-billion stimulus bill--is debatable, he says. But from a pure commercial real estate perspective, those jobs will all require new office, retail and industrial space. 

The bill just may push the economy towards the tipping point of businesses seeking to create jobs because demand is there for their products and services, Cohan adds. “We are not at that point yet,” he says. Even with a 9.8% unemployment rate, businesses are ringing up profits just fine.  

But businesses may have to step up hiring if they want to save face--even if they haven’t reached the point of responding to growing demand. The 20 executives that met with President Obama this week promised that if the bill goes through they will be on the road to hiring people again, says Howard Hammer, of Fiske & Co., a CPA and consulting firm in South Florida. “I don’t see how it can’t help…the  government is encouraging businesses to buy equipment, to grow, and that will require more employees and new hires,” he tells GlobeSt.com. 

Source: GlobeSt.com

Inflation, Interest Rates to Remain Tame in 2011

By Hessam Nadji

Primarily due to concerns over short-term economic weakness and potential deflation, the Fed recently implemented the controversial QE2, the second round of quantitative easing. Over the past year, prices for all goods rose a meager 1.1%, and core inflation, which excludes the volatile food and energy sectors, inched up 0.8%. Most of these increases occurred before July.

Since July, core inflation has increased by only 0.1%. While certain goods and services have indeed witnessed large increases, notably gasoline, which has increased 7.3% in the past 12 months, and medical care, which has jumped 3.2%, these gains have been offset by flat or negative growth for other goods and services.

For example, there has been no growth in the housing sector, -0.8% downturn for apparel, and -4% for computers. One of the biggest components of inflation is wage pressure and because of high unemployment, there is none and that is one of the major reasons the Fed acted. A drop in housing costs has also helped, as has aggressive pricing by retailers of consumer goods.

Yield curves for one-, two- and even three-year Treasury Bills remain exceptionally low, reflecting little concern over short-term inflation. Currently, yield curves are in the 0.3% to 1.08% range, whereas in 1990, one- to three-year T-Bills were in the 8% to 9% range; and in 2000 they were in the high 5% range. In the past two months, however, interest rates on 10-year T-Bills have spiked 94 basis points to 3.53%.

The rise in long-term rates is due to expectations for faster growth in 2011. Better-than-expected readings on multiple economic indicators, the proposal to extend Bush-era tax cuts and other proposals by the Obama Administration to stimulate the economy, such as the payroll tax reduction, have prompted this shift in sentiment. This shift also reflects the desired outcome by the Fed to encourage capital rotation out of safety and into asset investments. Nonetheless, interest-rate movements and recovery patterns seldom move in straight lines, especially in this recovery. Another round of European debt concerns, negative surprises on banking and foreclosures and disappointing hiring in the United States could easily spur a temporary reversal in interest rates. The longer-term implications of the Fed’s QE2 and tax extensions are serious, and could negatively impact confidence and interest rates down the line. 

Over the next nine months, the 10-year Treasury yield should settle in the 3.5% to 4% range, which is still low by historical standards. Interest rates are unlikely to rise much beyond this range, partly because of low inflation and the Fed’s commitment to purchase $600 billion in Treasuries next year. In a way, QE2 can be characterized as insurance to limit the rise in rates and support short-term economic momentum.

Longer term, once the economy and job creation pick up momentum, the Fed must move swiftly to remove excess liquidity from the system to fight off inflation early, without killing the recovery. This will be a delicate balance to strike since the markets are looking for “just-in-time” deficit reduction measures that do not cause a recession or stagnation.

Interest rates will rise again in late 2011 or early 2012, as the recovery turns into an economic expansion. Assuming an inflation run-up is avoided and deficit reduction plans are executed effectively, the rise in interest rates should be orderly, and within a reasonable range so as not to pose a significant valuation risk to commercial real estate. This is a big assumption that carries substantial risks, but the Fed has the benefit of past cycles – the 1994 and 2002 through 2004 cycles – both of which were extremes; with one nearly causing a recession, and the other creating a severe housing bubble. 

The underpinning of a favorable outcome for today’s investors is locking in still low interest rates ahead of above-average rent growth. This requires realistic asset-specific underwriting, achievable rent growth assumptions and a cap rate spread that accommodates for higher, but not hyper interest rates.

Source: GlobeSt.com

Commercial property mortgage delinquencies rise in 3Q 2010

By THOR KAMBAN BIBERMAN, The Daily Transcript

Friday, December 3, 2010

The Mortgage Bankers Association (MBA) reported there are indications of a strengthening economy, but that doesn't mean there aren't plenty of commercial property owners in San Diego County more than 90 days delinquent with their payments.

The MBA analysis looked at commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, Fannie Mae (OTC: FNMA) and Freddie Mac (NYSE: FMCC) in the third quarter.

Together these groups hold more than 80 percent of outstanding commercial/multifamily mortgage debt.

The report said that the 90-plus day delinquency rate on loans held by FDIC-insured banks and thrifts increased 0.15 percentage points to 4.41 percent.

In San Diego County, a number of assets have loans more than 90 days delinquent.

Topping the list is the 329-room Park Hyatt --formerly the Four Seasons -- Aviara in Carlsbad, which is more than three months behind on a $186.5 million loan, as noted by Bloomberg News.

A venture including Broadreach Capital Partners and Maritz Wolff & Co. owns a majority stake in the Aviara.

While high profile hotels receive much of the attention, other types of assets here are in a similar situation.

One of these is the 433,320-square-foot Pacific Center I & II office complex in Mission Valley, on which GE Asset Management has defaulted. A total of $121.2 million is owed on that property.

Other properties that are delinquent more than 90 days include the 90,000-square-foot Village Faire shopping center in Carlsbad ($16.9 million); the 75,000-square-foot Carlsbad Corporate Plaza office complex ($21.3 million); the 240,000-square-foot Gateway Chula Vista office complex (two loans totaling $50.5 million); and the 26,000-square-foot Prospect Plaza office building in La Jolla ($7.2 million).

There are about 20 other commercial properties with delinquent loan balances of $1 million or more in San Diego County.

The MBA report said delinquency rates for different commercial/multifamily mortgage investor groups were mixed in the third quarter.

The delinquency rate for loans held in CMBS is the highest since the series began in 1997.

Delinquency rates for other groups remain below levels seen in the early 1990s, some by large margins.

"Greater strength in the economy is bringing some stability to commercial mortgage delinquency rates," said Jamie Woodwell, MBA's vice president of commercial real estate research.

"Commercial mortgage performance among most investor groups, including life insurance companies, Fannie Mae and Freddie Mac, and commercial banks and thrifts, continues to be better than during the last major downturn of the early-1990s."

"Although weak, the economic recovery is just beginning to be seen in commercial real estate fundamentals and the mortgages they support," the report added.

The MBA reported the 30-plus day delinquency rate on CMBS loans rose 0.36 percentage points in the third quarter to 8.58 percent.

Maturing CMBS loans may be a $1 trillion problem nationally but William Hoffman, president of the Trigild Inc. receivership firm, said he hasn't really seen the maturities yet.

However, Hoffman suggested hotel owners have plenty reason to worry -- particularly if they bought their properties within the past three years.

"It's going to be nasty for them," Hoffman said.

There have been encouraging signs, but mixed signals as well.

The 60-plus day delinquency rate on multifamily loans held or insured by Fannie Mae decreased 0.15 percentage points to 0.65 percent during the third quarter.

The 60-plus day delinquency rate on multifamily loans held or insured by Freddie Mac increased 0.07 percentage points to 0.35 percent during the same period.

Hoffman said that while his firm has no shortage of multifamily properties, it remains the strongest asset class -- even in tough markets such as Arizona.

"There are buyers for multifamily. That's the easiest property to move," Hoffman said.

Source:  San Diego Source The Daily Transcript

San Diego Multifamily Apartment Outlook

San Diego Multifamily Apartment Outlook


Click on the link above to see the most recent San Diego Apartment Market Report.

For more information, please contact Anastasia Duboshina at 619-222-9500 Ext. 4, aduboshina@arg1031.com  

Apartment Realty Group San Diego Sells Central San Diego Apartment Complex

Press Release

October 16, 2010

---

Apartment Realty Group San Diego Sells Central San Diego Apartment Complex

SAN DIEGO, CALIFORNIA –The two-story 5,292 sf, 8 unit apartment complex located at 4676 Cherokee Avenue SanDiego, CA 92116 in the Normal Heights neighborhood has been sold for $760,000. The property consists all 1 bedroom units less than 1 block south of the popular Adams Avenue area. James V. Carter, Managing Director and Sean Bascom, Investment Associate with Apartment Realty Group (ARG) represented the buyer, a San Diego-based private investment group.

For more information, please contact James V. Carter at (619) 222-9501, JCarter@ARG1031.com or Anastasia Duboshina at (619) 222-9500 Ext. 4, aduboshina@arg1031.com

---

Apartment Realty Group (ARG) is a multifamily investment sales and advisory services firm with a
proven track-record of value-added brokerage services. ARG has been able to provide sellers with
specialized strategies to maximize property values by creating competition for each marketing assignment as well as providing buyers and 1031 exchange clients with sound investment options which are not generally available in the marketplace. Visit us online at: www.ApartmentRealtyGroup.com

Apartment Realty Group San Diego Sells North County Lender-Owned Apartment Complex

Press Release

October 5, 2010

---

Apartment Realty Group San Diego Sells North County Lender-Owned Apartment Complex

SAN DIEGO, CALIFORNIA –The 3,934 sf, 6 unit apartment complex consisting of 4 separate buildings on a 19,602 sf lot located at 207 East Dougherty Street located in the North San Diego County area of Fallbrook has been sold for $660,000.  James V. Carter, Managing Director and Anthony Mendes, Senior Associate of Apartment Realty Group (ARG) represented the seller, a San Diego-based private lender.

For more information, please contact James V. Carter at (619) 222-9501, JCarter@ARG1031.com or Anastasia Duboshina at (619) 222-9500 Ext. 4, aduboshina@arg1031.com

---

Apartment Realty Group (ARG) is a multifamily investment sales and advisory services firm with a
proven track-record of value-added brokerage services. ARG has been able to provide sellers with
specialized strategies to maximize property values by creating competition for each marketing assignment as well as providing buyers and 1031 exchange clients with sound investment options which are not generally available in the marketplace. Visit us online at: www.ApartmentRealtyGroup.com