New Orleans – Investor interest in the multifamily market here is very strong despite a lack of good land.
Part of the land problem is exacerbated by neighborhoods where new construction simple won’t pencil out, noted multifamily broker Larry G. Schedler in a report to Real Estate Business Online. Schedler, president of Larry G. Schedler & Associates, said some moderate-income areas, such as East New Orleans, had rental rates of about 65 cents per square foot before Hurricane Katrina, which “will not be sufficient to justify the cost of new construction.” He said that without federal incentives, the multifamily component of New Orleans’ rebuilding will suffer. Nonetheless, investor interest in multifamily in his market was “overwhelming.”
Developers and investors looking for progress on the reconstruction can check out The Brookings Institution’s Metropolitan Policy Program, which is tracking the rebuilding effort (see www.brookings.edu/metro/katrina.htm). Brookings reported that New Orleans was home to more than 130,000 people, including many college students, in early February. But the city is still lacking basic services such as functional schools and utilities, “and the area continues to hemorrhage workers.”
Meanwhile, a conference on “Solutions and Development Opportunities in the Gulf Opportunity Zone” will take place April 11-12 in New Orleans. The event, sponsored by Novogradac & Co., will explore ways the housing industry can become involved in housing and community development efforts in Alabama, Louisiana, Mississippi and other Gulf States. For more information, go to www.novoco.com/Events/2006gozone_neworleans.shtml.
Lane development president steps down
Marc Pollack resigned as president of Lane Investment & Development, LLC, a subsidiary of the Lane Co. After 12 years in that position, he will remain a partner and become a consultant. At press time, a replacement had not yet been named.
During Pollack’s term, Lane Co. acquired and developed more than 80 investments, totaling 20,000 multifamily units.
In other news, the company promoted Sue Mitro from risk manager to director of risk management.
Prudential names principal
Prudential Mortgage Capital Co. chose Jeffrey Allshouse to lead its Federal Housing Administration (FHA) lending unit as a principal. He will oversee FHA commercial mortgage loan originations for Prudential Huntoon Paige’s southern region.
Before joining the firm, he was vice president of originations for Centennial Mortgage, Inc., in Atlanta. He has more than 20 years of experience in commercial real estate, including agency lending and bond and tax credit financing.
RentalHouses.com appoints Richardson
RentalHouses.com, Inc., a national online listing service for rental housing, hired David Richardson as president and CEO. Richardson was previously president and CEO of Keller Furniture, Inc.
Check tax appeals rules
Buyers and sellers work through many details when buying and selling an apartment property. Most parties agree to separating expenses based on the closing date so taxes and other expenses will be apportioned to the appropriate time period of ownership. However, parties should be sure to check the rules pertaining to tax appeals. In many jurisdictions recipients of tax dollars (school districts, etc.) may seek to raise assessments outside of the normal cycle. Therefore, a buyer subject to an appeal in a retrospective jurisdiction (2005 taxes paid in 2006) could pay the increased taxes for the seller’s ownership period. To avoid paying for the seller’s portion of the increased taxes, negotiate that the apportionment “survive the closing” and reapportion based on the value as finally determined. There’s the simple sentence that can make or save thousands of dollars.
– J. Kieran Jennings, partner at Siegel Siegel Johnson & Jennings, a Cleveland and Pittsburgh law firm; and the Ohio and Western Pennsylvania member of American Property Tax Counsel, the national affiliation of property tax attorneys.
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New York City housing investment announced
New York City — The AFL-CIO is pouring more money from its pension fund into housing in New York City.
On February 2, AFL-CIO President John Sweeney announced a commitment to invest $500 million. The investment is the second phase of the union’s New York City Community Investment Initiative.
The union’s new plan includes $250 million for commercial real estate investments, focusing on opportunities to invest equity in new market-rate housing or mixed-use developments through the union’s Building Investment Trust.
Another $250 million will go for the new construction or rehabilitation of apartments here, focused on preserving the affordability of existing projects, especially older buildings in the New York State Mitchell-Lama program, through the union’s Housing Investment Trust (HIT). The trust typically invests in these projects by purchasing bonds backed by their mortgages.
In addition, a collaboration with the Union Plus Mortgage program will provide $1 billion for home mortgages for members of AFL-CIO labor unions or municipal employees. Union Plus is a program of Union Privilege and Chase Home Finance.
The AFL-CIO just finished the first phase of its New York initiative: a commitment to invest $750 million in five years. The union has actually invested $840 million in New York housing in just four years, easily beating its targets. The AFL-CIO made that commitment in the weeks after the Sept. 11, 2001, terrorist attacks.
Back then, many experts were questioning whether investors would come to New York City, but the union would not turn away from the city. “We have more union members here than we have anywhere,” Sweeney said. “We wanted to put our pension funds to work … investing our fund to create economic opportunity.”
So far, in the initiative’s first phase, the AFL-CIO’s investments have not just helped to develop or preserve more than 13,000 units of housing — they have also earned very competitive returns for the union’s pension funds.
“We have an investment fund that outperforms the industry,” said Steve Coyle, CEO of the AFL-CIO’s HIT. Other large states where the union has been active include Illinois with more than $500 million invested and California with more than $150 million.
Apartment markets remain strong
A quarterly survey of National Multi Housing Council members released in January found that apartment market conditions continue to grow tighter across the country.
About 70% of respondents indicated that their local apartment market was tighter (meaning lower vacancies and higher rent increases) than three months earlier; only 4% said their markets were looser.
Solid majorities of respondents indicated that the availability of financing was largely unchanged from three months earlier.
Only 6% said “now is a worse time to borrow” mortgage financing than three months earlier.
For more information, see www.nmhc.org.