BLOGS: Multifamily Focus

2008-09-29, 14:41

The Greening of the Multifamily Industry – Cost-Effective Practices

By: Multifamily Real Estate Industry Team
Virtually every time I speak with a multifamily owner, developer or manager about how the topic of “green” is impacting their communities, I am told, in general, that the incorporation of sustainability features into their apartment buildings or green practices into their management approaches is too costly and “makes no economic” sense.

As a “green” devotee, I find this response quite troubling. While it is true that green building features do result in increased costs, how is it possible that the energy savings associated with implementing these measures, together with increasingly available governmental and other incentives, do not offer off-setting benefits that make sustainability practices economically sensible?

It is against this backdrop, that I read with great interest (and relief) a recent Multi-Housing News article entitled “Green Design Makes Sense.”

The article underscores that, contrary to the generally-held view of many multifamily developers, owners and managers, “green developments do not have to cost that much more” and “in the development of green multi-housing, certain measures are relatively cost-efficient but still go a long way toward achieving environmental sustainability.”

Some of the sustainability features that can be cost-effectively incorporated into the design or rehabilitation of a multifamily community include using Low-VOC paints, finishes and adhesives, installing dual-flush toilets, orienting the direction of a green building in relation to the sun’s exposure, using increasing amounts of post-consumer recycled materials, regionally sourcing of materials, installing mechanical systems such as high-efficiency motors and local control of equipment, and using green roofs to reduce water runoff and heat emission.

AvalonBay Communities, Inc., an apartment REIT that is leading multifamily green development, is piloting several green projects, including a 500+ unit community under development in New York. “The measures taken by AvalonBay include the use of high-efficiency condensing boilers, low-rate ventilation fans, high-efficiency elevators and lighting and Energy Star appliances.” It is noteworthy that the costs of these sustainability features are being offset by reimbursements to be paid to AvalonBay from the New York State Energy Research and Development Authority program. This is good news since, as the pace of the sustainability trend continues to accelerate, increasing number of state and local jurisdictions will also begin to offer similar incentives.

Another California-based affordable housing developer has gone so far as to install photovoltaic cell solar panels for generating solar energy for one of its communities. The incremental costs associated with the use of this solar system were offset by a rebate from the State of California, increased equity from the sale of tax credits and increased debt borrowing capacity, both of which were tied directly to the developer’s incorporation of the solar sustainability features into the community, as well as the annual savings in electricity charges realized by the developer through its use of solar power.

I am not only comforted by these examples of the greening of the multifamily industry, but also convinced that apartment owners, developers and managers will increasingly focus on and incorporate sustainability features into their communities. Further, I believe that this trend will accelerate, as new technologies emerge that make these practices even more feasible and cost-effective, governmental incentives for “being green” become more pervasively available, and other associated off-setting economic benefits (such as greater equity investments and loan amounts and energy cost savings) begin to accrue to owners, developers and managers in connection with their adoption of sustainability features and practices.

(This entry posted by Pamela V. Rothenberg, a member of the Real Estate Development Group)

2008-09-23, 12:45

House Energy Bill Seeks Improved Energy Efficiency and Green Development for the Built Environment

By: Chris Iavarone
On Tuesday of last week, the U.S. House of Representatives passed the much talked about energy bill, H.R. 6899, by a vote of 236 to 189. Politicians and the press have spent a great deal of energy focusing on this year's hot button issue, offshore drilling, but the bill also includes a number of provisions that could have an impact on sustainable development and construction. For example, Title VI of the bill is a reformulation of a bill originally proposed by Rep. Ed Perlmutter (D-Co) last spring, the Green Act of 2008.

Among other things, Title VI seeks to cause a 20% reduction in energy consumption for single and multifamily structures built or rehabilitated with HUD assistance; creates an energy efficiency demonstration program that applies to multifamily properties in certain enumerated federally assisted program (e.g. Section 8); establishes incentives for increasing the energy efficiency of multifamily housing, including discounts on premiums for mortgage insurance and allowing mortgages to exceed certain dollar amount limits prescribed by law; and authorizes HUD to make grants to states, cities, and counties to carry out energy efficiency programs for new and existing multifamily housing.

Rep. Perlmutter stated in a recent press release, "The Green Act measures will help revitalize our economy by making energy efficiency practices more affordable, accessible and achievable by consumers, businesses and government entities. By prioritizing energy efficiency practices, we can ease the woes of homeowners, lenders, financial markets, builders and our environment."

Earlier this summer, Karen Carey summarized the testimony of representatives of the National Multi-Family Housing Counsel (NMHC) and the National Apartment Association (NAA) who offered a number of recommendations to improve the original Green Act of 2008. Some, but not all, of these recommendations were incorporated into Title VI, such as including the new National Green Building Standard as one of the applicable green building standards. See Karen's entry for a summary of the other recommendations and a link to the full testimony.

Sen. Saxby Chambliss (R-Ga) predicted that the House energy bill would go nowhere in the Senate. The Senate intends to unveil its own energy bill before it recesses next week, but does not intend to address it until after the November elections.

Sources: HR 6899, Atlanta Journal Constitution

2008-09-15, 09:22

Have We Hit Bottom Yet?

By: Multifamily Real Estate Industry Team
My last blog entry was entitled "Looking for Bad News" and my commentary centered around the notion that the more bad news we receive, the less bad news there would be left to disclose.

I am now rethinking that theme, as I opened the newspaper this morning to find that in the last twenty-four hours, Lehman Brothers had declared that it will file for Chapter 11 bankruptcy protection, Merrill Lynch disclosed that it will sell out to Bank of America for $50 billion (i.e., a price amounting to $25-$30 per Merrill Lynch share) and American International Group (AIG) indicated that is seeking a billion dollar rescue from the Federal Reserve.

This all follows last week's announcement that the federal government had taken over the two mortgage giants, Fannie Mae and Freddie Mac, who now live in the uncertain land of conservatorship.

Perhaps my new theme should be that bad financial news propagates more really bad financial news. Whichever concept may ultimately be correct (and I am now clearer that we will only ascertain the truth by looking backwards in hindsight), there is little doubt that the topography of American finance is now being dramatically redefined.

It is hard to conceive of a financial world without Lehman Brothers and Merrill Lynch. It is difficult to envision the ramifications of the consolidation into Bank of America of such extensive brokerage and consumer banking power. The implications of the Fannie Mae and Freddie Mac conservatorship remain unclear, although reports from leaders in the multifamily industry continue to underscore that for the apartment industry, it is business as usual with Fannie Mae and Freddie Mac continuing to issue loan commitments, lock interest rates and close financings.

The current question for me (and I am sure everyone else) is what is next? Should we brace for the failure of Washington Mutual, the nation's largest savings and loan bank? How many other banks will also go down? (This weekend I was told by a banking industry expert that we should expect to see in the nature of 250 banks fail.) How will all of this impact the apartment industry? Most importantly, have we hit bottom yet? (I don't think so.)

(This entry posted by Pamela V. Rothenberg, a member of the Real Estate Development Group.)

2008-09-11, 09:16

California bill seeks to prevent urban sprawl

By: Multifamily Real Estate Industry Team
The Wall Street Journal recently reported that a revolutionary bill has just passed both houses of the California legislature and is on its way to Governor Schwarzenegger's desk for his signature or veto. The Bill, Senate Bill 375, intends to cut carbon-dioxide emissions by rewarding cities and counties that prevent sprawl and improve public transportation.

The bill requires California's regional planning authorities to develop plans to meet a set of emission reduction goals in order to receive transportation funding. Builders who construct projects closer to public transportation will be graced with a lighter regulatory hand (e.g. reduced requirements for environmental studies).

There were a number of concerns, including an increase in the cost of housing, the loss of a city's right to determine the use of its land, and a fear that the law would impede California's growth, but the bill was ultimately supported by environmentalists, local governments, and builders.

Proponents hope that this bill will be a model used by other states to reduce the spread of sprawl, increase transportation-minded development, and lower carbon-dioxide emissions.

No word yet on whether the Governor will sign the bill into law.

(This entry posted by Chris Iavarone, a member of the Real Estate Development Group)

2008-09-10, 14:51

Switching to Digital TV --- Avoid a Public Relations Fiasco

By: Multifamily Real Estate Industry Team
I was just reading a piece by Betsy Feigin Befus of the National Multi-Family Housing Council about the upcoming (February 17, 2009) nation-wide switch from analog to digital television. According to varous groups who have been studying the state of consumer preparedness, nearly half of the consumers who will not be able to use their TV sets after February 17 are unaware of the impending switch.

Apartment owners have no legal obligation with respect to the conversion itself. Nonetheless, in cases where residents receive television programming via over-the-air rooftop antennae, the apartment owner would be prudent to determine whether the equipment can be modified to receive the digital signal, or whether it needs to be replaced ---- which will likely take some time. It's probably safe to say that residents consider ready access to television programs a condition of habitability, and not an amenity. Unless apartment owners address this situation very soon, they are likely to have a very ugly public relations situation on their hands come February 17.

On the other hand, apartment owners can do a lot (in addition to addressing the situation described above) to help their residents be ready for the switch. Ms. Befus' piece contains much helpful advice, and is available at

(This post submitted by Karen Estelle Carey, a member of the multi-family housing team.)

2008-09-03, 15:53

Real Estate Investment Opening Up to Chinese Investors

By: Multifamily Real Estate Industry Team
The WSJ reports that Chinese regulators have authored a law that would give Chinese insurers greater freedom to invest in commercial real estate. This change in investment rules is included in a revision to the insurance law making its way through Chine's legislature and could go into effect as early as the end of this year. Although real estate investment by insurance companies is not new to the US market, the WSJ reports that Chinese insurers are relatively restricted on what assets they may invest in and have been lobbying for years for greater flexibility.

This change in investment laws could produce an influx of capital into the U.S. commercial real property market at a time when new sources of capital are badly needed. However, the WSJ suggests that the availability of this capital, and the extent to which Chinese insurers invest is the U.S. commercial real property market, will depend on the administrative rules that result from this legislation. For that reason, we should not expect an immediate influx in capital.

(This entry posted by Chris Iavarone, a member of the Real Estate Development group)
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