Renting Energy Efficient Apartments: 2012 Concept Community Part 1

Here is a good article shared by a colleague this morning that points out an opportunity of interest to multifamily housing owners and builders. It was written by John K. McIlwain who is the Senior Resident Fellow and J. Ronald Terwilliger Chair for Housing at the Urban Land Institute.

If you saw the video from an earlier post you might recall that there are mixed views on whether anyone is willing to pay for energy efficiency these days. My bet is that the tide is already turning and one of the big selling points for Gen Y will be energy efficiency. The article is called "How Home Builders Are Selling Green"

Here is the key takeaway from the full article:

This is a trend that the apartment industry in particular needs to watch. Its market is far younger than the homebuying market, a differentiation that will continue to grow as the young members of generation Y defer homebuying into their early and middle 30s. This, the largest generation ever, is also the one most committed and sensitive to the cost and use of energy. They are, by and large, an increasingly values-driven group, and climate considerations, sustainability, and reducing the use of energy are at the heart of their values. In short, the prime market for apartments is the greenest market in U.S. history.


We are about to formally announce a new project that will dig deeper into this debate called the 2012 Concept Community. More to come...soon! Rendering courtesy of KTGY Architects.  

990 Polk

Affordable Housing Finance's Donna Kimura and Tom Borsellino attended the ‘first look’ of 990 Polk, a newly constructed energy-sustainable apartment complex for low-income and formerly homeless seniors, located in the Tenderloin neighborhood. The event incorporated an awards presentation to TNDC and Citizens Housing for their green building efforts in San Francisco and a tour of the new property. Bank of America joins the celebration by announcing a three-year national grant to Enterprise for its work in community development and green building, nationwide.

Featured speakers included Gavin Newsom, Mayor, city of San Francisco, Doris Koo, President and CEO, Enterprise Community Partners, Janet Lamkin, California State President, Bank of America, James Buckley, President, Citizens Housing Corporation and Don Falk, Executive Director, Tenderloin Neighborhood Development Corporation.

Obviously it was cool to see important and much needed projects getting completed, but the fact that the project was "affordable", "seniors", "environmentally (and economically) sustainable" made it particularly noteworthy.

And this project needed appliances, products and services no different from any other. Here is a shot of the laundry facility.

(SAN FRANCISCO, December 2, 2008) – Leading nonprofit affordable housing organization Enterprise Community Partners honored Citizens Housing Corporation and the Tenderloin Neighborhood Development Corporation (TNDC) today to celebrate the developers' work in building environmentally sustainable housing for low-income communities in San Francisco. Joined by Mayor Gavin Newsom and Bank of America, the awards ceremony took place at 990 Polk Street, a newly constructed low-income senior housing property in the Tenderloin neighborhood.

Click here for the Affordable Housing Finance Story.

Green Practices Supplement

The Special Supplement to Multifamily Executive has published and is also available on the NMHC Website.

Please view the brief presentation for an overview or click here to view the complete pdf of the Green Practices Supplement.

Green Practices

View SlideShare presentation (tags: apartments practices green multifamily)

Multifamily News & Notes, July 2008

Most are familiar with both ends of the Fannie/Freddie news spectrum these days but the negativity is still far outweighing the bright spots. Here is some perspective on lending activity in multifamily housing right now. Pretty solid YOY growth:

HALF MOON BAY, CA. -- Fannie Mae (FNM/NYSE) today announced that its DUS lenders delivered $18.2 billion of the company's total investment in multifamily rental housing, representing the strongest first-half ever for DUS lenders and an increase of 30 percent over mid-year 2007 production. Fannie Mae's investment in multifamily housing totaled $20 billion in the first half of 2008. Primary multifamily financing solutions include debt financing through lender partners and multifamily bond purchases (from the Fannie Mae Website).

Here is an excerpt from the WSJ. Last year I posted on this topic using some statistics provided by Red Capital. The "20.4 MM by 2016" referenced below is pretty staggering.

Campus Living, and Even a Theater - Specialized Developers Helping More Colleges To Meet Housing Needs
By DAWN WOTAPKA - July 23, 2008; Page C12As the population swells and the majority of high-school graduates seek degrees, enrollment is projected to climb to 20.4 million in 2016, up nearly 42% in 25 years. By 2020, Arizona State expects its student count to jump nearly 60% to 100,000 competing for just 22,500 beds on campus. "The market is huge," said Jim Arbury, senior vice president of government affairs for the National Multi Housing Council.

There are also strong growth opportunities for companies interested in expanding through acquisitions. Plenty of student housing remains in the hands of mom-and-pop operators; the top eight players in the industry own less than 5% of total off-campus demand.

"We have not begun to corner the market," said Paul O. Bower, chief executive of Memphis, Tenn.-based Education Realty, which owns and manages 41,500 beds in 70 properties.

Here is some anecdotal evidence that there is some strategic thinking getting behind the green movement. It seems obvious but all of us get caught up in launching a new product because we are in love with the idea and fail to solicit input from the end-user.

Builder taps focus groups for green condominiums
Washington Business Journal - by Vandana Sinha Staff Reporter
Taurus Development Group plans to enlist a different type of consulting group to help shape its next green condominium building: everyday people.
The D.C. developer is turning to a concept called “crowd sourcing,” which creates communities of interested people, in Facebook fashion, to get their opinions, from initial designs to final sales, and help determine how a multimillion-dollar project should be developed. Call it Focus Group 2.0.

Construction Trends: For Sale Market

At our sales meeting this past week I had the pleasure of spending an hour with the President of London Bay Homes, Mark Wilson. They are a Luxury Homebuilder based in Naples, FL and offer some extremely high-end single family product.

In light of this fact two interesting topics came up in the discussion that I wasn't expecting: multifamily housing and density. London Bay is diversifying into multifamily and one of the primary drivers is the accessibility of land and how municipalities are designating the uses of this land (density requirements). Another key factor for his firm is price point diversity.

Mark's message to industry vendors focused on three key areas: price, service and on time delivery. He recognizes that we are in an inflationary environment but will reconsider vendor relationships more quickly where service and support is not superior.

Here were some other key points he highlighted that might be of interest to building product manufacturers in our space:

• Specification - he (builder exec) gets directly involved with many key building product decisions
  
• Developer influence - in certain projects there are arrangements where the developer requires certain products and brands (even on appliances and energy sources). An example is Lakewood Ranch which is a master planned community near Sarasota.
• Green - there has been limited consumer interest at the high end. The consumer defines "green" in a variety of ways and until you find that out you are just stabbing in the dark. Air quality and energy efficiency are the top 2 areas. There are also legal issues cropping up around Green Marketing that need to be considered.
  
• Information - magazines are still the most favored source of info. He prefers the portability and ability to read on weekends and during air travel. He uses the internet to do research.
  

Mark was also rather bullish on the short-term construction market in both single and multifamily housing. As a relatively small, niche player he certainly challenged these days but is not under the same type of pressure as some of the larger players. He reminded us that this country is a tremendous generator of wealth when you compare to Europe and other nations. That stimulous leverage should not be underestimated.

His growth goals center around buying distressed property and diversifying by price and geography.

Sustainable Community Development, Walkability Factor

The case for sustainable communities is being made daily which brightens my day. The editor's at HW have been talking about the practical application of sustainable development for the past couple of years in the pages of Developer.

"With gas prices sky-high, the pedestrian friendliness of your city or neighborhood becomes a pocketbook issue. A new survey by Walk Score has ranked the largest U.S. cities by their walkability."
By Christopher Solomon, MSN Real Estate

Walkability is a legitimate and critical factor these days. The article above points out web resource that has bound to be killing it these days. Check it out here: walkscore.com

We vacationed in Lake Tahoe last week and our primary criteria for selecting a vacation rental was walkability. My in-laws recently purchased a home in Sonoma County because of its walkability features. In the Bay Area property values in walkable communities have definitely remained the most well-insulated from the recent economic rout.

My opinion: The combination of preference change and population boom will dramatically shift the built environment over the next 20 years. The green movement will evolve into common discussions of sustainability. Even the most closed-minded will be enthusiastic about participating because it will make sense economically.

Green Building Conversions

We are currently working on a project with the NMHC that addresses "Green Practices in Multifamily Housing." In light of that my attention has been drawn to Green Conversions and Retrofits. We talk about Green Building often but the biggest opportunity is in Green Conversions.

Here is an article of interest even though it relates to office buildings:

Existing buildings get new lease on life with green conversions- Houston Business Journal

"Never doubt that existing buildings can become more green -- even without substantial renovations," Taylor says. "With the right tools and the right attitude, any office can be transformed into a more comfortable, healthful, and sustainable space."

The NMHC Supplement will cover both new construction and retrofits as relates specifically to multifamily housing. Here is a brief summary on the contents:

* How the apartment industry can use the green movement to its advantage

* NMHC research identifying ways to maximize energy efficiency

* The multifamily elements of the new NGBS

* Best practices for new construction and existing properties

* What consumers want (and are willing to pay for)

Our resident Green Expert, Alison Rice is heading up this project for us and we expect to publish the product in the August Issue of MFE.

Maximize NOI

Day 2 of the Apartment Finance Today Conference covered some interesting NOI Building ideas. Since deal velocity has slowed considerably it's time to get back to basics and maximize efficiencies. Lee Harris (Cohen-Esrey), Richard Kelly (LumaCorp), Dave Richitelli (ista North America) and Jeff Kelly (Tucson Realty & Trust) spent some time digging into the multitude of ideas out there that WILL increase NOI if we take the time to get educated.

Some of the topics:

• Credit Cards - reduce bad debt and attract renters
• Revenue Management - manage expirations and realize quick payback
• Green ideas that save money - Lighting, monitoring gas boilers, irrigation efficiencies and submetering
• Trash removal, Low Cost Physical Improvements and Surety Bonds

Focusing on customer service needs to be a core competency of apartment operators. Those with a sound strategy will whether any storm. Especially those caused by speculators who were in the business for a quick hit. This customer service theme was also emphasized in the Keynote by Dr. Tony Downs from the Brookings Institution.

The discussion that took place was lively and participants were enthusiastic about making investments in products and services that offered immediate ROI.

Multifamily is Green: Part 2

Rather than answer my own post I will provide a follow-up. Alameda County has a great website called stopwaste.org. Under this site is a wealth of information on Green Building and more specifically, a set of Multifamily Green Building Guidelines.

I wish I could say that this is breaking news but it was published back in 2004 and I managed to remain in the dark about it for awhile now.

There are interesting case studies that support the guidelines as well. My advice applies to myself first and foremost...we all need to dig deeper.

Multifamily Housing is Green

Each side of the housing market (single family vs. multifamily) has its own set of powerful propaganda that can really motivate change. I happen to be a renter because it is less expensive in the Bay Area (for the moment) and it allows for a lifestyle flexibility that I enjoy. Even though I have a vested interest in multifamily housing, I still think that making a generalization about one or the other is like pulling the party line lever in the voting booth...even though many of us do it, the practice is irresponsible.

One sales pitch that I haven't seen enough of in practice is the case for multifamily housing being Green...right now. By its nature rental housing encourages conservation. Location, higher density, smaller living spaces are just a few factors that make multifamily the green choice without even trying. This story has merit and can generate traction with customers if we position it properly. We don't need to be certified to state the facts to customers, the press and local governments.

Owners want to conserve energy for profit, renters feel the pinch of energy costs but as a whole neither takes the time to add up where their money goes and put together strategies to change. Let's talk more about how being green is fiscally responsible and give examples.

Here is an interesting program from our friends at Mark-Taylor.

Go Green, Save Cash on Gas Mark Taylor offers $1,000 rent savings to new residents who cut their commutes by moving to a Mark-Taylor property
Scottsdale, April 2, 2008—Phoenix apartment renters tired of paying $3-plus per gallon for gas and spending way too much time stuck in traffic can now save time, money and the environment with Mark-Taylor Residential.
This month, new residents who prove they will cut their commutes by moving to a Mark-Taylor property can receive a $1,000 savings on their rent.
www.mark-taylor.com/spring08.htm

Case Study: Lighting & Window Replacement

If you are a product manufacturer it might be useful to investigate the local incentive programs that are being offered to multifamily developers and owners. Oregon is certainly one of the more progressive-minded states when it comes to encouraging high performance building but the case studies offered here can be a lesson to any building product manufacturer looking to understand what drives product decisions in multifamily housing. Lighting, windows, doors, HVAC, insulation, washers and dryers seem to be the primary targets for practical "green" renovation and construction.

Let owners and developers know what your product can mean to their NOI and how to market the green benefits to residents.
"Energy Upgrades Give Properties a Marketing Edge"
"Energy Efficiency Makes Tenants Comfortable"

Click through the links above to see the programs offered by Energy Trust of Oregon, Inc. These are 2 small projects that realized a big financial upside for owners and tenants alike.

Trends: Modern Communities

While we are all trying to figure out what the housing market shakedown means for multifamily rentals there is some interesting consumer research out there that links social networking and online communities with real estate trends. It is proven that people want to be a part of a community but some argue that communities created by technology have actually alienated many of us in some ways.

Have a look at what a leading consumer research firm, Gfk Roper has observed about American values these days. The study is called "Modern Communities" and the link takes you to a Denver Post Article from earlier this year. Given the population growth this country is expecting over the next 20 years this study might lead you to some interesting conclusions about how the landscape will change.

The jury is still out on how the concept of New Urbanism will be embraced by municipalities in the near future, but we intend to follow it closely in the pages of Developer and at our upcoming Developer Conference in Washington, DC on September 11-12.

Judging from the turnout at last year's event, and the early success of the publication, we are betting that smart growth is going to be a force to be reckoned with in the coming months. The end-user certainly seems to be on board with the concept and we expect to see the convergence of production builders, leading multifamily players and retail developers try to figure out a successful go forward strategy.