Developer teams with L.A. nightclub owner on Hollywood complex

Camden Property Trust hopes its new apartment and retail complex will attract tenants seeking VIP access to clubs and restaurants operated by Sam Nazarian.

By Roger Vincent|LA TIMES

A $140-million apartment and retail complex in Hollywood will get a shot of glamour from Los Angeles nightclub impresario Sam Nazarian.

Nazarian, who also operates a string of trendy hotels and restaurants known for their playful, over-the-top decor, hopes to make the Camden seem like a cross between a resort and an upscale apartment community. Residents will share stylishly crafted common areas in the building and have special VIP access to other Nazarian-operated properties, such as the Colony nightclub and Katsuya restaurant.
"That's our captive tenant, the person who wants access," said Ben Brosseau of Camden Property Trust, which is building the 287-unit complex at the southeast corner of Vine Street and Selma Avenue. The site between Sunset and Hollywood boulevards is a former parking lot.

The neighborhood near the famed intersection of Hollywood and Vine has seen billions of dollars' worth of splashy real estate improvements over the last decade as apartments, condominiums, hotels and restaurants were built in the once-blighted area. More major developments including offices and residential skyscrapers are planned.

Camden Property Trust of Houston is one of the country's largest publicly traded apartment landlords and owns other complexes in Southern California, but the Camden is its first foray into the city of Los Angeles.
In an effort to attract young entertainment industry professionals as renters, the Camden trust joined forces with Nazarian's company, SBE, and its Los Angeles real estate development partner, the Souferian Group, to create a Hollywood-centric apartment complex.

In that vein, the Camden will house an outdoor "artists' annex" intended for the use of photographers, painters, writers and sculptors, as well as a soundproof musicians' studio and a movie screening room.
The amenities are part of Nazarian's plan to see that shared spaces aren't ignored by residents, he said.
"In many apartments, there is no energy in the common areas" such as theaters, pools and club rooms, he said. "Why spend money on amazing amenities if no one is going to use them? We want to really encourage people to get to know each other."

As designed by TCA Architects, the hub of the Camden will be a large indoor-outdoor recreational space with a fully equipped kitchen, a resort-style pool with cabanas and daybeds, and an outdoor spa.
Another area will house a dog park with a media setup that will allow residents to share their favorite pet photos and videos. There will be outdoor area set aside for yoga and other exercise, and a lushly landscaped garden with lounge areas and hammocks. Some units will be furnished.

"We're bringing a hospitality perspective," said Nazarian, who built an empire on over-the-top decor starting with a series of nightclubs more than a decade ago. His Hollywood haunts such as Hyde Lounge and Shelter lured young celebrities and became prime hunting grounds for the paparazzi.

He moved on to managing restaurants, including Gladstones in Pacific Palisades, and opened his first inn, the SLS Hotel at Beverly Hills, in 2008. His company now has an SLS hotel in the South Beach area of Miami Beach and others planned in New York, Seattle and China. An SLS hotel and casino is set to open in Las Vegas this year, and an SLS hotel and condominium complex is slated to open in Miami in 2015.
Nazarian's knack for pleasing the sensibilities of the Millennial generation with what he has called "a cross between playfulness and sophistication" will now be tested on apartments. Most complexes, according to his development partner Behzad Souferian, tend to follow formulaic conventions.

"They are too predictable. You know what you are going to get before you walk in," Souferian said. "Our mandate is to do this with more of a boutique feeling."

Nazarian, who put 177 styles of chairs in his hotel on La Cienega Boulevard, vowed to rein himself in a bit at the Camden. For the look of an apartment building, "timelessness is important," he said, "unlike in hospitality, which needs to be edgy."

Born in Tehran, the 38-year-old entrepreneur immigrated to the United States after the 1979 Iranian revolution. He founded a telecommunications business in 1998 and started investing in real estate in 1999. He controls more than 80 commercial properties that are open or in development.
The seven-story Camden will have neighborhood-serving retail outlets at the ground floor when it opens in 2016, said Brosseau of Camden Property Trust. It will have two super-graphic outdoor advertising signs, including one on the roof. Rents will range from $2,000 to $4,000 a month.
Camden is also building a large apartment complex in Glendale.

With an improving economy, "the Los Angeles region is one of the best in the country for rental housing going forward for the next three to five years," Chief Executive Richard Campo said. "We think it's one of the best places to put the Camden flag down."

roger.vincent@latimes.com
Twitter: @rogervincent

Copyright © 2014, Los Angeles Times

http://www.latimes.com/business/la-fi-property-report-20140102,0,7534416.story#ixzz2pjmMocsd

Toyota shows off fuel cell car that can also power a home

By Jerry Hirsch| LA TIMES

 

Toyota Motor Corp. released new details on its fuel cell car Monday at the Consumer Electronics Show in Las Vegas - including plans for an adapter allowing the car to power your home.

The automaker chose the big tech gathering to display the four-seater, which looks like a futuristic Prius, to highlight its advanced engineering. A fully-fueled vehicle will be able to supply enough energy to power a house for a week in an emergency, Toyota said. Its engineers are working on an adapter that will connect the car into a home’s electrical grid.

After debuting the concept car at the Tokyo Motor Show in November, Toyota plans to start selling the car in the United States next year. While it has yet to disclose pricing, the company said it has slashed the cost of bringing the car to market by tapping an electric powertrain it already uses on one of its hybrid vehicles and other common parts.

“Fuel cell electric vehicles will be in our future sooner than many people believe, and in much greater numbers than anyone expected,” said Bob Carter, senior vice president of automotive operations for Toyota’s U.S. sales arm.

Toyota is one of three companies pushing forward with fuel cell vehicle cars. Hyundai will start offering one later this year and Honda plans one next year.
L.A. Auto Show: The future of fuel cell cars

Fuel cells use hydrogen to create the electricity that powers the car. Most global automakers believe they represent the best path to building the zero-emission vehicles now demanded by regulators in California and many other states.

But not every automaker is convinced.

At the Los Angeles Auto Show late last year, former Volkswagen of America Chief Executive Jonathon Browning said the company chose to produce a battery-powered Golf hatchback that it displayed at the show rather than a fuel-cell car for one simple reason: "Most people know where to find a socket," he said. "Not too many people know where to find a hydrogen fueling station."

“Hydrogen is still a long way off from mainstream commercial vehicles,” Browning said.

However, California's stringent environmental regulations require that 15% of the new cars sold in the state by 2025 be zero-emission vehicles, which at this point are either electric or hydrogen-powered autos. Nine more states have adopted the same sales goals, with a target of having 3.3 million zero-emission vehicles on the road by 2025.

That rapid adoption target is behind the automakers' efforts to bring hydrogen autos to the U.S. market now.

Using hydrogen to create electricity, fuel cells combine the best of electric and gasoline cars without the downsides, the automakers say. They drive like electric cars -- quietly, with tons of off-the-line power -- but can be refueled just like gasoline-powered cars.

“We are real excited about this technology,” said Ed LaRocque, Toyota’s national brand manager for fuel cell vehicles. "We think it is game-changing."

The Toyota model will produce 100 kilowatts of power, which is roughly equal to 134 horsepower, the same as a Prius. It will have a zero-to-60 miles per hour time at about 10 seconds, and possibly less, and a range of 300 miles.

LaRocque said that 300-mile range will be key to the success of fuel cell vehicles.  It is about four times what’s offered in all the electric cars on the market now, with the exception of Tesla’s Model S.

Hyundai's offering will be a hydrogen version of its Tucson sport utility vehicle and will be built on the same South Korean assembly line as the gasoline model of the small SUV. It will be offered starting next month on a special lease deal that includes all the hydrogen a driver can use as well as maintenance.

Honda’s will be a still-to-be-named advanced version of the Clarity fuel cell vehicle it has been testing in California for several years now.  Like the Toyota model, it is expected to hit showrooms next year.

For now, there are few places to fuel the cars, although three stations are spaced along the busy 405 Freeway in Torrance, Fountain Valley and Irvine, and there are some similar clusters on the East Coast.

“The number of fueling stations is a big challenge for the entire industry,” LaRocque said.

But California has approved more than $200 million in funding to build about 20 new stations by 2015, a total of 40 by 2016, and as many as 100 by 2024. The state plans to build them in clusters in metropolitan areas with some satellite stations on interstates to connect the clusters.

Toyota actually displayed two fuel cell cars at the big electronics show.  Besides the prototype, it showed a camouflage-taped engineering prototype that its engineers called “the mule.”  It was used for extensive testing in North America for more than a year.

Copyright © 2014, Los Angeles Times

http://www.latimes.com/business/autos/la-fi-hy-toyota-fcv-fuel-cell-ces-20140106,0,884109.story#ixzz2pjhobtSi

Housing tear-downs on the rise as real estate rebounds

With little vacant land left, developers and wealthy buyers are razing small, older houses in sought-after Southern California neighborhoods to build modern mansions.

By Andrew Khouri

The front-end loader swung to the right and took a bite out of the shingled roof of the quaint cottage. The roar of the engine and crackle of buckling lumber carried down Elm Avenue in Manhattan Beach.

Within 40 minutes, a demolition crew reduced the 1950s one-story to rubble. The 782-square-foot house would be replaced by a 3,300-square-foot Cape Cod.

"It feels exactly like the good old days," said the property's developer, Mike Leonard.

Those days of booming demolition and construction came during last decade's housing bubble. Now, tear-downs are again on the rise in Southern California's affluent communities, as a rebounding housing market triggers a residential reconstruction boom.

With little vacant land left, developers and wealthier buyers are snapping up small, older houses in sought-after locales, then leveling them to build modern mansions.

The wave of demolition has revived criticism that the new homes tower over those next door and clash with neighborhood character. Residents complain that their once-quiet streets have become perpetual construction zones.

The upscale South Bay town of Manhattan Beach exemplifies the trend. Builders in the city pulled permits to demolish 84 residential units from July 2012 to June 2013, the latest available data. That's nearly double the number pulled for the same period a year earlier. In August, one Manhattan Beach City Council member described the ongoing construction as a "tsunami."

That force has rattled Manhattan Beach homeowner Jane Guthrie. This summer, she said, workers hammered large metal beams into the ground a few houses away from her one-bedroom house, shaking the walls. Workers, she said, were installing a deep basement for a 3,500-square-foot, three-level house that replaced a small 784-square-foot cottage near the beach.

"It was like having an earthquake in your living room — for six hours a day," said Guthrie, a retired art director for ad agencies.

The rebounding housing market has sparked the demolitions. In November, the median price for a home in Southern California was $385,000, up nearly 20% compared with the same month a year earlier, according to research firm DataQuick. Builders such as Leonard are constructing houses "on spec," confident that they'll find buyers.

In other cases, wealthy homeowners are buying cottages, then hiring builders to knock them down and erect dream homes.

"You've got an amazing increase in new construction coming on the market" in Santa Monica, Brentwood and Pacific Palisades, said F. Ron Smith, a founding partner at high-end real estate brokerage Partners Trust.

In the city of Los Angeles last year, builders received approval to raze 1,227 houses and duplexes from January through mid-December, according to Department of Building and Safety records. That's 29% higher than in all of 2012, though still well off the pace of more than 3,000 in 2006, during the housing bubble.

Developer Igal Azran recently built a five-bedroom house near the Beverly Center in Los Angeles. The 5,000-square-foot mansion replaced a modest, one-story Spanish-style home. With glass walls and vaulted ceilings, the modern two-story towers over the adjacent 1920s homes with red-tile roofs. Public records show Azran bought the property — then a 2,180-square-foot duplex — for $856,500 in 2011. The house he built sold in October for $3.5 million.

Construction of new, high-end homes raises property values for neighborhoods, Azran said. Those building their homes shouldn't be confined to the sizes and styles favored by their neighbors, he said.
"People like different things — people like Spanish, modern, French-style," he said.

But many longtime residents resent the scrapping of quaint, older homes, including Clark Carlton, 57, who lives near Azran's project. He says he's growing his hedges higher to regain privacy lost to another newly constructed mansion.

"I am at the point now I have to make sure I am decently clothed to cross my backyard," he said.
Carlton and his neighbors want the city to take action. They are pushing Los Angeles to tighten the so-called anti-mansionization ordinance passed in 2008. Critics say it has failed to stop the construction of outsized homes that rob views, block sunlight and alter the character of established neighborhoods.
In October, the Los Angeles City Council imposed additional size limits on new houses in the Beverly Grove neighborhood. But the changes don't mandate a particular style.

"The new restrictions will support long-term property values," said neighborhood activist Shelley Wagers, who pushed for the measure. "Mansionization has been a matter of profiteering, and has made quick money for a few people at the expense of their neighbors."

Tear-downs have long stirred controversy, especially in beach communities — once-funky towns that have seen property values skyrocket over the years amid an influx of wealthy residents, chic boutiques and cafes. Many who grew up in the area have moved out, unable to afford a house with an ocean breeze. Many who did own homes couldn't resist cashing in.

Death often precedes a tear-down. For example, when an elderly homeowner passes away and children choose to sell rather than live in the property. The competition for what developers call lots — because the land is more valuable than the house — is fierce.

Prominent Manhattan Beach builder Matt Morris recalled a lot he purchased in the spring.
"I overpaid, in my mind, by $250,000," he said.

The day after he went into escrow, Morris said, another developer offered to pay $150,000 more for the property. He declined the offer. There are simply too few lots available. And Morris believes he stands to make more upon selling the newly built house.

Manhattan Beach, which long ago morphed from a quaint beach town to ritzy burb, has recently been debating tightening its anti-mansionization ordinance, which aims to reduce the visual bulk of new homes and preserve older ones.

Leonard, the developer who demolished the Manhattan Beach cottage in October, said he is "ambivalent" about the new restrictions under consideration.

"As long as it satisfies the residents," said Leonard, who has constructed many Cape Cod-style houses throughout the city. "If the city and residents want small, I build small. If they want bigger, I build bigger."
Other local developers, however, have criticized the proposed changes. After the push-back, the City Council voted in November to send the proposals to the Planning Commission for further study.
Richard MacKenzie worries about what will come next on the empty dirt lots across from his 1955 house. He said he believes construction of a planned deep basement on the land will shift the ground and damage his house, as well as those of neighbors.

The project's developer declined to comment. But plans filed with the city describe a 9,000-square-foot, three-story mansion with an elevator, wine cellar, bar and game room. The master bedroom will have an expansive outdoor deck with a spa tub.

MacKenzie said such giant luxury homes, and the Kardashian lifestyle they represent, threaten the community's beach vibe along with the landscape. To him, Manhattan Beach is starting to feel more like Beverly Hills.

"Why move to the beach?" MacKenzie asked. "You used to walk on the beach and say hi to people. Now people have their own worlds they live in."


andrew.khouri@latimes.com

Copyright © 2014, Los Angeles Times

http://www.latimes.com/business/realestate/la-fi-housing-tear-downs-20140104,0,5252206.story#ixzz2pjo7J5Oj

14 Predictions We Like for 2014

By Mark Heschmeyer |COSTAR
Real Estate Prognosticators See CRE Recovery Continuing To Accelerate in 2014

Real Estate Prognosticators See CRE Recovery Continuing To Accelerate in 2014

Commercial real estate firms are moving into the New Year with a renewed sense of optimism - a positive outlook not seen for the past seven or eight years.

While many in the industry predicted a recovery in 2013, they did so with a sense of nagging worry over slower than expected job growth and concerns that the political brinkmanship in Washington could threaten the nation's credit rating and pitch the economy into stagnation or, even worse, recession.

Much of those concerns have ebbed as the two parties came to terms in December over next year’s budget. In addition, the Federal Reserve has established a clear path for rolling back the so-called quantitative easing steps taken in years past to bolster the economy. By spelling out its path for reducing debt purchases, the Fed has taken out much of the guesswork for when those financial supports will end.

Given the overhanging sense of dread seems to have disappeared from most forecasts, experts are predicting a better year in 2014.

CoStar News has encapsulated Following 14 outlooks for 2014 from forecasts offered by respected industry participants and observers. We’ve sorted them alphabetically by the firm making the forecast.

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Cassidy Turley: Impact from Rising Rates

If the big economic story of 2013 was policy vs. housing, this year doesn’t promise much in the way of variety. Policy vs. Housing, Part II will see the same threats to economic growth as we continue to struggle with dysfunction in Washington and, most likely, more political brinksmanship that may undermine confidence in the economy. But, while the challenges will be the same, the underlying fundamentals will be slightly stronger. Perhaps the biggest difference is that by the middle of 2014, economic growth should be strong enough for inflation to start to be a possibility once again. This is actually a good thing. The timetable could vary, but we anticipate the Fed raising interest rates by the end of the second quarter-likely in May or June. So long as interest rates don’t move too far too fast, the impact on the overall economy will be minimal. But there will be one. This could slow the housing recovery and it will certainly have an impact on commercial real estate pricing as the price of borrowing becomes more expensive. But that is assuming the underlying economic fundamentals have heated up to the point of warranting such a move-which is ultimately a good thing. A stronger economy may bring higher interest rates, but it will also bring higher earnings, lower unemployment, greater consumer spending and-for landlords-better rental rate growth and NOI. In the meantime, look for the first big political squabble (over the debt ceiling once again) to start up again in late January.

CBRE: Office Market Recovery Poised To Accelerate

The office market recovery is poised to accelerate in 2014, as an improving economy should result in increased office-using employment according to CBRE, the world’s largest commercial real estate services and investment firm. The growth in office-using occupations, particularly in high-tech industries, is expected to increase demand foroffice space. The U.S. office market vacancy rate will continue to decline next year, falling by 80 basis points (bps) to 14.3% by the end of 2014, Steady improvement in the office market is expected to continue in 2015, with the vacancy rate forecasted to dip another 80 bps to 13.5%. CBRE forecasts that office rents will increase by 3%, on average, in 2014, and rise another 4.4% in 2015, as vacancy levels fall steadily toward the “equilibrium” level over the next two years.

Cornell Univ. and Hodes Weill: Big Money Will Continue To Rule

Institutions are significantly under-invested in real estate and are poised to allocate significant capital to new real estate investments. The weight of this capital can be expected to have broad implications for the industry, including transaction volumes, fund raising, lending activity and property valuations. The supply of capital may sustain current valuation and financing metrics (including capitalization rates and the cost of debt capital), according to Cornell University’s Baker Program in Real Estate and Hodes Weill & Associates, which co-sponsor the Institutional Real Estate Capital Allocations Monitor.

Deloitte: Steady Growth but Not Enough To Spur Much New Development

CRE fundamentals continue to improve across all property types, including vacancy, rent, and absorption levels, according to Deloitte's real estate forecast. However, demand is yet to increase enough to drive development activity, except for multifamily and hotel construction, which continues to be robust. These same sectors, which were the first to grow and recover after the recession, may see some tapering off in fundamentals as new supply comes to the market. Overall, it appears that fundamentals will continue to improve at a moderate pace, in line with the macroeconomic situation.

DTZ: Business Tenants Keep Bargaining Clout

The U.S. economy will continue to expand at a moderate rate, which will lead to more job growth and a related increase in demand for occupational space, reports global property services firm DTZ. However, with the expected moderate job growth, vacancy will only trend down slowly. Occupiers will remain in good bargaining positions over the next two years and occupancy costs will increase in line with inflation. They will continue to receive concessions as landlords compete to increase their properties' net operating income. Occupiers will gravitate to the most affordable markets and continue to reduce their costs through more efficient internal space build-outs.

EY: Private Equity Funds Getting Hands Dirty

Having emerged from the global recession and its aftermath, the real estate private equity sector is finally positioned for growth in 2014, according to a global market trends outlook in real estate private equity published by EY (Ernst & Young). Strategies being deployed by different PE firms and even funds to take advantage of this growth opportunity differ, as fund managers seek to differentiate themselves in a hotly competitive fundraising environment. But EY sees fewer opportunities in the future for fund managers to capitalize purely from the financial structuring side of their investments. The funds that come out ahead of the competition in this next phase of growth will have one thing in common: an 'old school' asset management approach that realizes maximum investment value by working closely with service providers to fill buildings and manage real estate.

Freddie Mac: The Emerging Purchase Market

Led by a resurgent housing sector, 2014 should shape up to be better than 2013 with a quickening recovery pace leading to more job creation. Freddie Mac expects single-family home sales and housing starts to be at their highest levels since 2007, and expect multifamily transactions and construction to post gains as well. The big shift ahead will occur as the single-family mortgage market begins transitioning from a rate-and-term refinance-dominated market, to a first purchase-dominated market. The emerging home-buyer purchase market should gather momentum in the coming year.

Grant Thornton: Huge Boost Ahead for Industrial Markets

U.S. companies will bring production, customer service and IT infrastructure back home, reports tax-advisory firm Grant Thornton. The reshoring trend is real and about to dramatically reshape the U.S. economy. More than one-third of U.S. businesses will move goods and services work back to the U.S in the next 12 months, which means that as much as 5% overall U.S. procurement may return home. The Grant Thornton LLP "Realities of Reshoring" survey found that even IT services, one of the first business functions to move offshore, are likely to return within a year. The trend could provide an enormous boost to domestic manufacturers, retailers, wholesalers/distributors and service providers.

Jones Lang LaSalle: Pent Up Retail Demand Will Drive Investment

Total retail investment is expected to increase upwards of 20% in 2014, according to Jones Lang LaSalle, as pent up demand that was not satisfied in 2013 fuels investments and investors look to balance their portfolios. The retail market will continue to turn around despite store closings and consolidation. Vacancy rates are projected to inch downward driven by power center popularity, while rents are expected to increase albeit slightly for the fourth consecutive quarter. JLL also expects the number of retail property portfolios coming to market, which combine a broad spectrum of B and C retail assets, will increase as REITs look to sell assets and recycle capital in the year ahead.

Kroll Bond Ratings: Multifamily Resurgence in Conduit CMBS

The Federal Housing Finance Agency (FHFA) has begun to implement strategies to reduce the multifamily footprints of the two GSEs it oversees. As a result, Kroll Bond Rating Agency expects we will see a gradual decline in Fannie and Freddie’s securitized market share, which could revert to levels not seen since before the run-up to the CMBS market peak. At the peak of market in 2007, the conduit market’s share of the $36 billion securitized multifamily loan market was just over 78%. As the financial markets spiraled, that trend reversed and the GSEs became the primary source of loan production, dominating securitized new issues with more than a 95% market share.

Nomura: Muted CMBS Loan Maturity Risk

Based on the performance of loans maturing in 2012 and 2013, the investment bank Nomura estimates that 84% of loans maturing in 2014 will pay in full, a decline of just 3% from 2013 levels. Similar to 2013, Nomura expects the balance of loans rolling to delinquency to decline over the coming year, influenced by muted maturity risk and fewer term defaults resulting from improving CRE fundamentals. Most of the loans maturing in 2014 have 10-year terms and were underwritten prior to the sharp rise in property values that began in 2005. However, 15% of maturing loans have 7-year terms and were underwritten at the market peak. This set of loans has an increased risk of default at maturity.

PKF: U.S. Hotel Investors Poised To Do Well in 2014/2015

After a slight deceleration in growth during the last half of 2013, PKF Hospitality Research, LLC (PKF-HR) is forecasting very strong gains in revenues and profits for the U.S. lodging industry in 2014 and 2015. PKF projects national revenue per available room (RevPAR) to increase 6.6% in 2014, followed by another 7.5% boost in 2015. Concurrently, hotel profits should enjoy growth of 12.8% and 14.5% respectively over the next two years.

PwC US and ULI: Investor Activity Continues To Expand Beyond Core Markets

The U.S. real estate recovery is set to continue into 2014, with investors increasingly looking beyond some of the traditionally popular markets to secondary markets in search of higher yields, according to the latest Emerging Trends in Real Estate 2014, co-published by PwC US and the Urban Land Institute (ULI). The predicted growth in secondary markets will be driven by investors searching for returns as opportunities in core markets become harder to find and the most sought-after properties become more expensive. The move into secondary markets is underpinned by the anticipated increase in both debt and equity capital during 2014.

Transwestern: More Opportunities in Sale-Leasebacks and Net Lease

The cost of capital for owner occupants is on the rise, thanks to increasing interest rates. To cope with higher costs, owner-occupants are increasingly looking at selling their owned real estate as one strategy to generate funds for operating expenses, company expansion or retiring debt. This scenario presents an excellent sale-leaseback opportunity for investors looking to acquire real estate that comes with a long-term tenant in place. The lending environment is expected to bring more net-lease properties to market, as well. As interest rates increase, a larger number of office, industrial and retail buildings are projected to be marketed for sale.

That's 14 predictions for 2014. We look forward to covering these and many other major trends in commercial real estate in the year ahead. Here is a bonus prediction from CoStar's Property and Portfolio Research group: 

CoStar: 2014 Best Year of Office Occupancy Gains in Recovery Cycle

Heading into New Year, office employment has been growing at the fastest rate since the start of the recovery, with the sole exception of early 2012. But there are two key differences between today's market and that of the past few years. First, the office market now has far less under-utilized "shadow" supply space, which will drive a higher level of net absorption as more office-using tenants expand. Second, with the demand outlook improving and new construction still at bay in most markets, the 2014 occupancy gains in US office markets should be the best of the entire recovery and should tip the scales toward greater rent growth during 2014 than in the past few years. However, developers have already shown their willingness to break ground at the first sign of improvement. This has already happened in Boston, Houston, Silicon Valley and most recently, San Francisco. As developers ramp up new supply, the office occupancy gains are likely to slow in 2015 and certainly by 2016. Investors should enjoy the benefits of occupancy gains in 2014, which are expected to be the best in the current recovery cycle. 

http://www.costar.com/News/Article/14-Predictions-We-Like-for-2014/155801?ref=100&iid=368&cid=966E80DBB06FFD78B8A4600F95FE80B9

New Era of Office Towers Will Continue to Rise in 2014

New Era of Office Towers Will Continue to Rise in 2014 - CoStar Group.

While New Office Supply Not Even Close to Mid-2000 Levels, Several Skyscraper Projects Will Change Urban Skylines In Coming Year

By Randyl Drummer |COSTAR GROUP

New data on construction starts and spending provided compelling evidence of a recovery in urban office development, prompting some planners to describe 2013 as "the year of the return of the downtown high-rise" as major skyline-altering projects broke ground in Seattle, New York, San Francisco, Houston, Dallas, Chicago and even in markets hit hard in the housing downturn such as Phoenix and South Florida.

The total value of office construction put in place was up 2.6% in November from the previous month and is 5.6% higher than the same time last year -- with private projects logging larger increases of 4.6% and 11.5%, respectively, according to U.S. Census Bureau data released today.

Office construction starts climbed 26% in November, maintaining a growing momentum seen during the second half of 2013, according to a report last week from McGraw Hill. However, much of the increase is contained in several massive new office projects that started in November, including the $336 million Transbay Tower in San Francisco, the $265 million State Farm office complex in Tempe, AZ, and $160 million for the office portion of the $700 million Korean Air Hotel project in Los Angeles.

Though still nowhere near the pre-recession construction levels of the mid-2000s, overall nonresidential development -- driven by private-sector spending -- is seeing somewhat of a comeback, posting the strongest numbers in at least four years. The office, industrial, hotel and even retail sectors are seeing across-the-board increases, according to outlooks and forecasts from major construction data providers compiled by CoStar News.

With much of the unused shadow supply having been absorbed and construction still at bay in most markets, the U.S. office market is positioned for a strong 2014, which is expected to be the fourth and strongest year of consecutive occupancy gains of the recovery, according to CoStar's Property and Portfolio Research group.

While overall office construction spending remained muted for much of 2013 as in previous years, the New Year will see an uptick, with Gilbane Construction predicting that total spending for office construction will rise 7% to $39 billion in 2014, the largest increase since 2007. Reed Construction forecasts an even larger increase of 8.6% in 2014, followed by almost 6% in 2015.


Leading indicators for stronger 2014 commercial construction activity remain positive. The Dodge Momentum Index, a monthly measure of initial reports for nonresidential building projects in planning, rose 2.8% in November from the previous month, according to McGraw Hill. Though still well below the peak readings back in 2007, the November increase in the momentum index, which leads hard construction spending by a full year, posted its highest reading since March 2009.

"Nonresidential building is gaining momentum, aided by improving activity for commercial building from low levels while the institutional building sector stabilizes after a lengthy decline," said Robert A. Murray, chief economist for McGraw Hill Construction. "The construction start statistics, when viewed in the context of 2013 as a whole, are still trending upward."

The upward trend for total construction starts is expected to continue in 2014, Murray said.

"One plus for construction and the economy going forward is the recent budget pact approved by the U.S. Congress, since it removes the uncertainty that would have come with the threat of another government shutdown in early 2014," Murray added.

Associated Builders and Contractors Chief Economist Anirban Basu agreed that construction activity bounced back in November in part due to the end of the federal government shutdown.

"The recent acceleration in economic activity sets the stage for a much better 2014, both for the broader economy and the nonresidential construction industry," Basu said. "We can expect nonresidential construction spending to expand during the first half of the year."

Large new office project that started in 2013 include the following:

• The first phase of Amazon's 3.3-million-square-foot campus at Seventh and Westlake avenues in downtown Seattle’s Denny Triangle area, consisting of two buildings valued at $244 million. The project, scheduled to open in late 2015, , adds to the millions of square feet already leased in the city by the Internet's dominant retailer.

• In October, TIAA-CREF and Transwestern broke ground on BHP Billiton Tower, a 600,000- square- foot office building on the Four Oaks Place in Houston's Galleria submarket. The 30-story is being built on a 2.72-acre tract at 1500 Post Oak Blvd. is 100% preleased to BHP Billiton, a global energy and resources firm.

• In July, KDC began the $550 million office portion of the State Farm regional headquarters complex in Richardson, TX. The three-building complex includes a 1.5 million-square-foot, 21-story tower, plus parking garages. The State Farm buildings are part of a 186-acre development by KDC that will include more office buildings, apartments, retail and a hotel.

• In July, Samsung broke ground on its 10-story, 1.1 million-square-foot headquarters in San Jose. The $300 million building for 2,000 employees is expected to be finished in 2015.

• In April, Skanska began the first phase of Prudential Financial’s $444 million, three-tower headquarters in Newark NJ, a 20-story high-rise office tower of about 732,000 square feet slated for completion in March 2015.

• Though not a high-rise project, construction began in earnest during 2013 on one of the largest U.S. office projects, Exxon Mobil Corp.’s massive, 385-acre corporate campus along the Hardy Toll Road in north Houston. About 10,000 Exxon employees will begin moving into the 20-building complex in 2014 as the company consolidates operations from Houston, Virginia and other locations.

•  In September, Facebook began work on its $435 million, Frank Gehry-designed West Campus office project on 22 acres in Menlo Park CA. The 433,555-square-foot building with a rooftop garden will hold about 2,800 Facebook employees.

New mortgage lending rules go into effect this month

Beginning in January, new mortgage rules from the federal Consumer Financial Protection Bureau (CFPB) will go into effect.  The rule changes are designed to prevent the kind of mortgage loan excesses that led to millions of homeowners facing foreclosure during the recent downturn.  In addition, the new rules set the FHA guarantee cap at $625,500.

The CFPB’s rules make stricter lending practices official; however, most lenders have already tightened home loan practices to reflect what a borrower is actually qualified to borrow, therefore, the rules may not change the day-to-day lending practices which are already common.

The rules, which come from CFPB, will go into effect Jan. 10 and include these provisions:

• Lenders must base their lending decisions on borrowers’ ability to repay their mortgages.
• Lenders can't write mortgages if the borrowers' monthly debt payments (including the mortgage, car loans and other debt) exceed 43% of their income.
• Mortgage fees cannot exceed 3% of the loan amount.  And loans can't include high risk characteristics such as payments that cover only the interest on a loan.
• Mortgage brokers can't receive higher fees for recommending loans that cost the consumer more.
• Mortgage servicers cannot begin the foreclosure process until a borrower is more than 120 days delinquent.  If the homeowner is working with the lender to modify a loan to make it more affordable, the foreclosure process can’t start.

In addition to these rules, the Federal Housing Administration will no longer guarantee loans for more than $625,500.  This is down from the previous $729,750.  This change has the highest impact on higher-cost areas.  Fannie Mae and Freddie Mac, the large mortgage finance companies, have already dropped their loan guarantee ceilings to $625,500.

The FHA change means that buyers of homes that cost more than $625,500 will not be able to get FHA loans, which provide for down payments as low as 3.5%.  Instead, borrowers have to apply for jumbo loans, which usually require down payments of at least 20%.  Since few buyers of expensive homes choose FHA loans, the new FHA guidelines may have less effect on the luxury home market than on average properties.  Nonetheless, you should be aware of the impact these changes may have on the luxury market segment.

Wells Fargo to pay $591 million to Fannie Mae in mortgage settlement

By Jim Puzzanghera| LA TIMES

WASHINGTON — Wells Fargo & Co. said Monday it has agreed to pay $591 million to Fannie Mae to settle disputes over soured mortgages the bank sold to the seized housing finance giant during the subprime housing boom.

The agreement covers loans originated by Wells Fargo before 2009 that Fannie Mae was trying to force the bank to buy back. The deal "resolves substantially" all repurchase issues related to those loans, the company said.

Wells Fargo will pay $541 million in cash to Fannie Mae, with the rest covered by credits from earlier repurchases.

Fannie Mae and its sibling firm, Freddie Mac, were seized by the federal government in 2008 as they teetered near bankruptcy because of bad loans they had purchased from banks. The firms bundled the mortgages into securities and could try to force banks to buy back loans that did not meet certain guidelines.

Fannie Mae and Freddie Mac have been aggressively pushing banks to repurchase so-called legacy loans the firms had bought before they were placed under government conservatorship.

“This agreement represents a fitting conclusion to our year of hard work to put legacy issues in the rear-view mirror and begin 2014 focused on improving the future of housing finance.” said Fannie Chief Executive Timothy J. Mayopoulos.

Banks have agreed to pay Fannie about $12.7 billion this year to resolve disputes over toxic mortgages. The largest deal was a $10.3-billion settlement with Bank of America Corp. in January.

In October, Wells Fargo agreed to an $869-million settlement with Freddie Mac on pre-2009 mortgages.

http://www.latimes.com/business/money/la-fi-mo-wells-fargo-fannie-mae-mortgage-repurchase-20131230,0,7854630.story#ixzz2pHjtoWJR