Real Data: Triad Vacancy Rate Up Slightly

The latest update from Real Data shows that the vacancy rate for apartments in the Piedmont Triad region are up to 8.7% from 8.3% the same time last year:

The average vacancy rate for apartments in the Triad rose to 8.7 percent in September, up from 8.3 percent during that month a year ago, according to the latest report from Charlotte-based Real Data.

Despite the slight rise, average vacancies remain historically low in the Triad when compared with a high of 13.9 percent in 2009.

 

Enclave at North Point Sells for $25,000 per Unit

From the news release:

Resource Real Estate sold the 370-unit Enclave at North Point at 4260 Brownsboro Rd. in Winston Salem, NC to Threshold Capital for $9.3 million, or approximately $25,000 per unit. 

The 352,100-square-foot apartment community consists of one-, two- and three-bedroom units in 49 buildings. It was built in 1978 and renovated in 2011 in the NW Forsyth County submarket, and was 95 percent occupied at the time of sale.

High Point Development Ordinance Revision Making Waves in Real Estate Community

Greensboro and Guilford county recently updated their development ordinances and it wasn’t an easy, or quick, process. High Point has retained a consultant to help them revise theirs, and despite having the opportunity to learn from their neighbors’ experiences the city’s staff appears to want to go their own way. From the Rhino Times:

In an Oct. 10 letter to its members, HPRAR (High Point Regional Association of Realtors) President Cindy Martin and immediate past president Amy Hedgecock said that applying for the grant and rewriting the zoning ordinance makes sense, because developers shouldn’t have to deal with divergent zoning ordinances in High Point, Greensboro and Guilford County. But they said they weren’t happy with the way the rewrite is going under Clarion Associates.

“Now we are seeing what seems to be plans-in-the-making for a different permitting process, a longer process, and a far more restrictive process, with fewer alternatives for cost effective development,” Martin and Hedgecock wrote. “When so much work has been done to create a good plan for our region, why has High Point chosen to spend more money to start over, and create a system that is likely to be more restrictive and more costly for our community?”

The idea, when the City Council hired Clarion Associates, was that the zoning rewrite would be guided by an Update Advisory Committee of developers, redevelopers, High Point Planning and Zoning Commission members, architects, city planners and members of the High Point City Project, which the City Council created in an effort to redevelop High Point‘s traditional neighborhoods.

The advisory committee appears to be more development friendly than Clarion Associates, or at least less willing to try to achieve grand changes in High Point through restrictive zoning. The advisory committee is also less favorable to giving more authority to city planners and inspectors – something Clarion Associates recommends, because they claim it will speed development by allowing minor variances to be handled by the High PointPlanning and Development Department, rather than having to go to the City Council.

City planners on the committee, of course, agree with Clarion and think giving them more power is a great idea…

“High Point City Council should empower the Update Advisory Committee (UAC) to have equal voice with city staff on developing the updated UDO [Unified Development Ordinance],” Martin and Hedgecock wrote. “A great Update Advisory Committee (UAC) has been established and includes representatives from the City’s Planning and Zoning Commission, the City Project, the real estate and building industry and neighborhood leaders.

“However, input from the UAC carries no weight. In a recent meeting with staff and consultants, only abbreviated discussions on selected topics were allowed. UAC members were directed to submit all other comments in writing. Those comments were compiled, but were never discussed with the UAC and may not be incorporated in the plan.”

According to the HPRAR, the advisory committee is scheduled to meet only four times in the two- to two-and-a-half years Clarion Associates plans to take to rewrite the zoning ordinance.

Revising a development ordinance is a massive, detailed and time consuming undertaking. If the city staff and their consultants only plan on meeting with the advisory committee four times it’s hard to imagine them getting the feedback necessary to make the ordinance as effective as it needs to be for all parties.

Home of the 160 square feet apartment

An article in the 10/17/12 Wall Street Journal about the burgeoning, low end apartment market in China has some amazing numbers/quotes:

Some 50 million of China’s 230 million urban households live in substandard quarters often lacking their own toilet and kitchen, research firm Dragonomics estimates. The firm figures China will need to build 10 million apartments a year until 2030…

At the research center of China’s largest property developer, China Vanke,000002.SZ -0.61% is an apartment that measures 160 square feet, about the size of a parking space. The bed folds to make seating. The shower is a vertical tube by the front door.

At a price of about 835 yuan ($133) a square foot, an apartment that size is relatively affordable at the yuan equivalent of $21,500, which is around six times per-capita disposable income for China’s urban residents. By contrast, the larger apartments that have been the traditional focus of China’s developers could cost as much as 40 years’ income.

A recent book co-written by Chairman Wang Shi quotes him as saying: “Urban residents in China have no right to live in large houses”—citing low incomes and scarce land among the reasons.

Can you imagine the backlash in the US if anyone said that urban residents “have no right to live in large houses?”

Cascades Grandview on the auction block

The Cascades Grandview apartment building in Greensboro is set to be foreclosed and sold at auction on November 13:

Mortgage lender Spartan Heights Apartments claimed Cascades Grandview LLC was in default on its loan for 830 W. Market Street. The apartment building has been under scrutiny this year from Duke Energy and the city of Greensboro for unpaid utility bills.

At a foreclosure hearing Guilford County Superior Court this afternoon, only the receiver overseeing the property was present. Judicial Hearing Officer Amanda Sheek granted the sale of the building, to take place at the court house noon, Nov. 13.

The building and land are worth $6.2 million, according to county tax records.

Fast Company Interview with RentHop Founder

Fast Company interviewed one of the founders of RentHop that contained an interesting take on understanding your market:

I just got a New York apartment with a broker and had to fork over an infuriating 15% of the annual rent.
In 2009 we thought maybe brokers are commodities–that they’re not adding value, and maybe the site could help replace them. One of the bigger pieces of advice Paul Graham gave us at Y Combinator was this. He said, “If you really think that’s the case, if you really think you can go automate these guys away, you need to go and be brokers for a while. Simulate the life of a broker, and if you think you can automate that away, great.” He told us to fly back to New York and be brokers for a couple of weeks. So that’s what I did. I flew back and took a bunch of tenants around, and that’s when I realized, “Wow, this is tough work.” It’s a lot harder than people think…But I realized the most important part of brokering is that there’s a huge human trust component in the whole thing. A really good broker makes the whole process a whole lot less painful for the renter. The big takeaway was that brokers are not commodities at all. I didn’t think they were adding value, but now I’m convinced that a great broker does add value.

Then there’s this nugget:

It took us a while to discover the current business model we have now–that this is really a big data problem. We have four years of data and profile building with landlords and brokers. Now we know which ones are the good ones, and which are the bad ones. That became our eventual pivot. A good broker is valuable, and a good landlord is also valuable. Anyone responsive and good we want the site’s visitors interacting with, and anyone nonresponsive and bad we don’t want the site’s visitors interacting with.

Being responsive and good sounds like pretty solid advice.

Davidson County Creating Centralized Permitting Office

The Lexington Dispatch is reporting that the Davidson County Commissioners have approved funds to create a centralized permitting office. From the article:

The Davidson County Board of Commissioners unanimously approved on Tuesday a new central permitting office, which will be a one-stop shop for the permitting needs for contractors, builders and other county residents.

County staff says it will take three to four months to renovate the former Davidson County Board of Elections office at 912 Greensboro St. in Lexington, for the new use of a central permitting office.

The office would create one location for citizens seeking service from the environmental health, planning and zoning, the building inspection and fire marshal departments. Citizens currently have to go to three separate offices to obtain the appropriate permits.

Potential $39 Million Chatham Mill Redevelopment in Winston-Salem to Include Apartments

A Durham-based developer is planning to redevelop Chatham Mill in Winston-Salem as a commercial/residential mix:

A development group is asking the city of Winston-Salem for a loan to help convert the former Chatham Manufacturing Co. and Western Electric Co. complex downtown into a $39 million project with apartments and commercial space.

The development group, Chatham Mill Ventures LLC, which is led by Ken Reiter, a Durham developer who helped create a master plan for parts of the Piedmont Triad Research Park, is asking for a $750,000 loan. The project would include 170 apartment units on about 6 acres.

Hawthorne at Bridford Construction Coming Along

From the Triad Business Journal:

Construction on a luxury apartment development by Hawthorne Residential Partners on Bridford Parkway in Greensboro is well under way, with plans to welcome the first tenants as early as next month.

Officials from Hawthorne Residential Partners could not be reached immediately about the group’s Hawthorne at Bridford apartment development. But Nicole Ward, plan review coordinator for the city of Greensboro, said preliminary plans for the project were first approved in May and called for 216 apartments, a club house and a pool. Based on the luxury amenities and comparable costs for other recent developments of similar size, it’s likely that the project will cost more than $15 million to develop.

When ROI Isn’t the Right Measure – Investing in the Future

Most managers are intimately familiar with the concept of return on investment (ROI) since most of them have been judged based on that most fundamental of measurements. Sometimes, however, a short term ROI is absolutely the wrong tool to measure success:

Many business schools teach executives and entrepreneurs that business is about profit maximization. I don’t believe that. I believe business is about making a profit that sustains the business and enriches the owners but is not maximized in any period (month, quarter, year). I believe the goal of a business is sustainability so that all the stakeholders (customers, employees, owners, suppliers, etc) can rely on the business for the long term.

Let’s use an example. You own a business that operates on the web. You are a leading supplier of ecommerce to a vertical market. You generate $50mm in annual revenues and make a profit of $5mm a year. You see the launch of the iPhone and Android and think that your customers are going to want to connect to your business via their mobile phones. You ask your VP Product to scope out what it would take to build a comprehensive set of mobile apps that will allow this. She tells you it will take an investment of $5mm over two years to complete this project. You gulp. That is going to reduce your profits by $2.5mm a year in each of the next two years. What do you do? You make the investment because you must invest in the long term success of the business even though that is not a profit maximizing event. It may simply get you back to the $5mm per year of profits you were making before. There may be no ROI on this investment in a positive sense. It may simply be a defensive investment. You still need to make it to ensure you will be around for the long run.

Clay Christensen talks about this kind of thing all the time. Big company executives are asked to calculate an return on investment (ROI) on the investments they want to make. If the ROI isn’t greater than some minimum hurdle, the company doesn’t make the investment. And so along comes a smaller competitor who makes the investment and they eat the big company’s lunch.

So how does this apply to managing an apartment community? When you’re considering upgraded technology or capital improvements are two instances that come immediately to mind, but any time you’re considering the impact of an expenditure on your ROI you also need to consider the long-term impact of not acting.  It might just be penny wise and pound foolish.