August 12, 2010 Adaptive-Reuse/Transportaion/TOD/Architecture Trends and Issues

This is our last night of class. It went pretty fast because of all the interesting subjects we talked about. Tonight was no exception. We started of talking a transportation and rail lines. Rail is very important to the state of Texas. Rail infrastructure i s very expensive to put in, but it doesn't take a lot of upkeep after in use. San Fransisco has started construction on the first high speed rail system in the United States. It is going to cost 4.2 billion dollars and create 48000 jobs. An interesting conversation in class was about GM and how they gave deep discounts to small towns on buses so they wouldn't utilize the rail system. It was a plan by GM to keep more cars on the road. Population is growth is going to be crazy from reading many articles in the next fifty years. Its expected to grow mostly in the south and west. Transportation infrastructure will have to change to keep up with the growth in population. California has passed a bill that wants cars to drive lower mileage each day to keep carbon emissions lower. This has caused many to think about developing TODs somewhere.
Adaptive reuse is still a niche market, but will change wen everyone shifts back to core urbanization. It is becoming popular for retail and office buildings to move into these kinds of buildings. Owners are getting higher rental rates and also have a lower vacancy.
Some developers don't want to do these projects if they can not get a substantial tax reduction. It's just not affordable if those initiatives are not there.
We had many articles looking at different adaptive reuse projects all over the country.
At the very end of class we talked about what we thought were the major things going on in commercial Real Estate. These were the top 5
-Mix use/ urbanization
-Technology
-Gov. sponsor projects
-sustainability/LEED
-Asset Repositioning

August 5, 2010 Residential / SFR / MFR / Appraisal/Valuation / Development / Construction Trends and Issues

We started the night talking about how DFW has been growing a great deal, but since the recession has begun, it has slowed down. It's probably going to be a year before the market picks back up. Though there is still a lot of construction going on in the area. In our class we discussed why this could be possible and concluded that it's because material costs have decreased and therefore developers want to take advantage while it's cheap to build. Multi-family residents will be more popular in these bad times because some can't secure financing for a home mortgage or their house has already been foreclosed on. Slowing single family resident construction has been caused by many things, but one reason is that banks aren't lending as much for housing developers to start housing developments. The bank is doing this because they are wondering where the demand is going to be coming from. Home building construction is a big section of the economy. When it drags, it slows many other things down with it. On the public side, construction has increased because the stimulus money is finally hitting the land and letting public construction start. We read an article about the ipad and how it is being used a lot on construction sites. The contractors are using them to look at all the specs. for the building and the process is becoming more efficient. It is also helping to save on printing costs; the company mentioned in Tennessee saved $179,000 just on printing costs. D. R. Horton, a major home builder, had a 50.5 million dollar profit in June, 2010. This is good considering the major loss they had this time last year. D. R. Horton believes they did well this June because of the tax credits. They believe the months to come will be very slow because the tax credits have stopped. Even more bad news is that construction contracts in Dallas have fallen 51% from last year. An interesting article talked about how a decommissioned fire station and a decommissioned police station both sold for $1; one was valued at 1.4 million and the other was worth $250,000. We had a conversation in class wondering what we as students thought about MFR being furnished. The question was asked whether more people would live there and like it. An interesting fact that Dr. Forgey told us is that right before the housing collapsed, builders were furnishing houses and adding the furniture to the mortgage.

Switching subjects to appraisal, an interesting article talked about how the governor of Florida wants properties to be reappraised to see what losses the oil spill brought and making BP pay for the losses. Valuation for tax purposes is now hitting properties all across the country. It will take a while for the local governments to get better.

The Obama administration and HUD are pushing money at the sustainability materials for Multi Family and Single Family Residents. Sustainability is a big thing coming up into the market. The niche has tremendous opportunity to grow in the future. Lenders need to get serious about sustainability and realize that upfront costs may be beneficial in the future.

If people are employed they move out of their parents house and if they are unemployed they find people to stay with to be able to save money. The economy is so messed up and experts keep changing their opinions and predictions about what is going to happen in the future. There is currently a shrinking demand for housing because of unemployment and lending being tight.

There is a new reform bill that will result in more accurate appraisal but will make valuations costs more. Appraisal regulations are changing for the first time in 20 years. The bill is trying to increase personal protection and transparency.

Trinity River Vision Authority-July 29

We went up the street for class this evening to meet with the Trinity River Vision Authority to talk to them about the way they are going to develop around the Trinity River. It was very nice to meet with them and it was a great presentation. Shanna Cate gave the presentation. To make this project possible there were many different partners tied into the project. There are two major parts to the project. The Trinity Uptown project and also the Central City project. The Trinity Uptown project will be a private component of the project that will consist of 800 to 1000 acres that will be classified as mix use land. 2/3 of the land will be required to be residential so it won't take away from down town business The city gave a survey to many residents and it asked what they wanted from the Trinity River. The results came in a the majority wanted a water front they could go to. At the present citizens don't have this because of the flood that came through during 1949. After that disaster a levee system was put into place and since then Fort Worth has been disconnected to the river that runs right through the city. The levee system was designed for the 1960 population and because of all the growth around the city in recent years the runoff has become greater. This has caused many drainage problems. All together there are 5 different river vision projects. The other major project Central City is a public infrastructure project for flood protection. It will have 12 miles of water improvements and all the projects will add 16000 jobs.
To get this great idea Fort Worth went around looking for the best model and they found it in Grandville Island, Canada. To look at how the currents run down the river and how to position new developments. The city constructed a trinity river model the size of a football field. It also helps them do flood studies. They have figured out the best thing to do is to have the east side be a bypass channel and have new development and the west side be for recreation.
This project is huge it will cost around 1 billion dollars and have a 12 yera construction time frame. It will have 3 bridges, a bypass channel, Isolation gates, dam, and channel lock. The first bridge will start construction next year. With this Trinity River Vision it brings 2400 acres out of the flood zone. To make the the project look even better 80000 trees will be planted and a 6500 person amphitheater will be built. Also mountain bike trails will be made and a ferry taxi will be on the river to get you from the stockyards all the way down to down town. What is really different about this project form the Dallas one is that the Fort Worth project has all of its financing in place. 60% of the project is federal and the rest comes from the water district and the city. The project is on schedule and I can't wait to see it completed. It looks like a great place for tourism and also a great place for residents to go wind down and have some fun. All together it was a great presentation.

July 22, 2010- Trinity Trust Visit

This weeks class was a little different. Instead of meeting in the class room we all went to Urban Land Institute meeting at the Trinity Trust in Dallas. Is was very interesting seeing so many different people from all different parts of the real estate field. We had talked before about ULI and how it was a great institute to join because of all the great contacts you could make. The social gathering started out with some food and beverages. I met one guy who is going to join the masters program this winter. After a little mingling the presentation started. The whole reason for this meeting was to inform people about the Trinity River Project going on in Dallas. Don Raines was the one who spoke to us about the project. He is an urban planner and plays a big role in the project. He started off by talking about the history of the Trinity River going through Dallas. The bottom of the Trinity used to by limestone but was later taken out because of flooding problems. Another interesting thing was that the Trinity had been moved by man to flow a different route. In the project there are many different things that are going to be done. Starting out they want to make the river meander more to give the river more oxygen which will create a better life in the water. The project consists of 10,000 acres. The project will consist of two bridges being built. One is already under construction and will be done next year. The saying Don mentioned was "If u can sell the water you can sell the land." The project wants everything to deal with water. There is going to be a white water course for people and their kayaks. Another cool piece is the amphitheater that will be constructed and have a floating stage on the river for the performers to stand on. It will have around 18 soccer fields for people to play on. Also it will have a trail to bike, jog, or walk on. The trail will be 20 ft wide and sloped so the water and sediment will run off if it floods. There has been talks of putting a sky tram over the river so it would be easier for people to get to the great parks and the river. The presentation was interesting but only 30% of the drawings were in place. The project was huge and will take many years to complete. It was nice to get out of the classroom and learn something in a different environment.

July 15-Debt Markets/Financing/Foreclosures/Investing trends and Issues

There were many different topics to talk about tonight. We started off talking about Citi Group and how it had done many deep dark business things that were in a way secretive to the American people.
Cities are now penalizing banks who don't take care of properties they foreclose on. This is a good idea I believe more cities should do. This keeps properties going to the pits and making other properties around look bad. The banks must keep the landscape looking nice and keep the house from being stripe of all copper or such things.
The next discussion we had was about CMBS. People are really concerned about commercial real estate. Many companies who have loans are under water and are going to refinance in the near future and lose everything if they don't have substantial amount of capitol to pay part of the loan.Property values have gone down 40%, vacancy rates are up, and rental rates are down. This is a worse case scenario for any owner. The article talks about how the government is not getting ready for this fall out and we need a plan. Many small and medium size banks will go down because of this. More than 60% if mortgages maturing in 2012 and 2013 are underwater. This is a very scary situation to think about. The major problem is its only beginning and will unfold in the next couple of years. The stress test on banks done by the government to make sure they are sound was only don to 2010 and not 2011 when its going to start to fall apart.

On the other hand their are institutional investors looking at investing in commercial real estate and other alternative investments. Which is contrary to the last discussion.

Also in the investment arena non-traded REITs are becoming very popular thing to invest in. 100,000 investors can offer these kinds of trades but only a few are actual selling them. It is very interesting because the non-traded REITs have had a higher return then traded REITs. REITs are what got us out of our last recession in the 80's and early 90's.

Many lenders right now are "extending and pretending." They know many loans they have made are not good, but they pretend the loans are okay and extend the loan so that the borrower will keep paying the loan as much as they can. All this is doing is delaying the inevitable. The banks don't want to reveal their financial situation to anyone or even themselves. Countrywide was the worst at doing this in the residential part of real estate, all just to say that they don't have bad loans.

The next article we talked about was where an asset based company in Toronto, Canada is buying an Addison office building that was foreclosed on by Wachovia. This area is where one of the first urban villages was done. This property was brought, even below replacement cost. Buying it so cheap makes a domino effect occur because they can charge lower rates than other places. Then the other offices could become unable to pay their expenses. Also the city loses money because the tax money received is lowered. Dallas is one of the best markets to buy property because of its good economy. Many investment firms are saving billions to buy these kinds of properties because of their dirt cheap prices. Another fact about DFW is that foreclosures hit 1649 for the year and $880 million in debt will be foreclosed on next month.

Atlanta leads the nation in bad CMBS special servicing loans. They have 226 problem CMBS loans. It's because they and weak underwriting loans; many of the loans are going to mature this year. A really scary statistic is that 85% of all CMBS loans will not be eligible for refinancing.

We also talked about the G7 countries and how they have a growing GDP debt. New growing countries will become big players in the global markets. China's growth will soon slow down.

The last thing we touched on were workouts. Workouts are a negotiation between the borrower and the lender to keep the property from going under. Institutions don't want to hold properties; an example is lenders can make changes to the loan to help the borrower like allowing just interest payments.

July 8-Hospitality/Travel/Resort/International Trends

Tonight's discussion started off talking about the hospitality industry. It is hurting right now because of the recession we are in. Tourists are not traveling and businesses are not traveling nearly as much as in the past. Businesses are trying to find ways to save money. So they are having day conferences or using a lot of technology to do business across the world to be more efficient and lower their overhead. Individual companies are becoming more efficient with their money also. An example would be a builder located in Dallas, the architect located in New York, and the construction management company would be in California. All the companies would come together via the internet and talk using a web cam. They could also have web cams on the construction site for others to see the progress being made.

Even though the economy is bad. The hospitality industry's top management said two major things things to focus on in the future is growth and finding other streams of income. In the past, the major thing wanted was efficiency. Efficiency can be maxed out, and has by a lot of hotels because they have dissected their balance sheets. Then put them backed together with with least amount of costs.
Historically in the 70's and 80's hotels were wasteful and then pressure was put on them by capital markets for buyouts. This is what caused them to become more efficient.
Also hotels are trying to be more sustainable. Ex. Hotels are asking customers if they want their towels and sheets washed everyday or not. This helps their marketing and also save their bottom line.

Another way hotels are trying to make some extra money is by offering private residences at their hotels for extended periods of time.

For some hotels, those near the Gulf Coast, things have gotten worse because of the oil spill. Hotel vacancies are drastically down and this is their seasonal period when they usually make most of their money for the whole year. The truth is that many will not make it through this to next year because they have no emergency capital.

Travel trends were the next thing we talked about. Travel is changing because of the economy and because of prices to travel. Now days it is stressful going through the whole air travel process. Many people are doing a variety of different things. Some are traveling on trains to vacation spots. Others are just staying closer to home and vacationing. Trains altogether are an upcoming trend in transportation. President Obama has passed a large bill to bring high speed rail into different corridors in the United States. Most major builders of this kind of train system are not from the US though.

The last discussion we had was about international markets. China could be in a bubble or it just could be growing fast. Their overall debt is very low and their economy grew last year by 8.2%.
Another interesting real estate project going on in the international market is in Iraq. This is very interesting project. It is a multi-building project with 3,500 resident apartments, a 5 star hotel, and an upper class mall. This project is targeting the educated in the area.

June 24 Industrial/Low-income Housing/Taxes/Governmental

We started off the class period talking about low income housing. An article that caught the attention of the class was about a developer in Dallas that had been applying for HUD money and the money was taken away from them to build upscale properties. Dallas wants a lot of sustainability developments. The city is somehow keeping low income housing out of the city even though they have been taking a fair amount of money and saying they are doing as much as possible to make low income housing available. For example, in Dallas there was a building built with low income housing on the bottom floors and nice penthouses built on the top floors. When people think about this kind of housing they think of drugs and crime everywhere. That might have been what it was like 5 years ago, but it has changed. Now this affordable housing is for teachers, police officers, and secretaries that work around in that area. You don't want to bus all these people in everyday for work so you have this kind housing for them instead. With low income housing you deal with NIMBY because a lot of the wealthy don't want it close to them, but they are needed so janitorial services and other low paying jobs can be taken care of. A great example of low income housing is the New Hope project in Houston. It was a very nice place and all residents have background checks. This makes the place a great environment. Studies show that when people have housing that they can afford it helps the community as a whole and makes it a better place to live. A big discussion we also had, was should we as people be responsible for relocating others that are misplaced from buying the low income land and building it up to be a nice place? As a person we need to help them somehow. In a way we already do because of the taxes that we pay to the government, but we shouldn't just give them to the government. The developer should have a responsibility to relocate these people without them having a loss.

Taxes were the next topic discussed. The government is trying to find ways to make more money through taxes. They are looking at taxing investors that have smaller incomes and currently pay less taxes because most of their profits/income comes from trades and investments. They only have to pay 15% capital gain taxes on this part of their income. That is why the government is raising it back up to 30-35%. They don't want people working the system and they want more tax dollars. Also, the government wants to lower the estate tax minimum before taxation. By doing this, the amount of people that will invest in real estate will be thinned and financing for real estate will cost more. City governments are also trying to get more money, for example in San Francisco, CA, they are trying to put a tax on commercial rent in order to lower their deficit by as much as possible. Most states have large deficits so the government is raising property taxes even though house prices are going down. This is the opposite of what the taxes should be doing. Governments are giving tax deductions to commercial properties for becoming green and also having ADA guidelines.

The last thing we talked about tonight was industrial markets. One of the articles talked about the DFW area and said that rents are going down and construction of warehouses is also going down. Just 345,000 square feet have been constructed in the first six months of this year. Last year in the first half of the year over 1.6 million sq ft were constructed.

We talked a little about Canada and its economy. It is doing well. Housing prices are very high. They are doing much better than the United States and many European countries because they have been keeping their financial regulation tight.

The government plays a big part in commercial real estate. GHS has a big hand in owning real estate. The government buys buildings to house new employees, and new parts of the government that are being created such as for the new health care system. They also redo office spaces and sell them to the private sector.

June 24-Retail Markets / Technology / WWW / Social Networking / Software Trends and Issues

The third class period consisted mostly of topics on technology and what has changed. The first topic we talked about dealt with retail markets and how they are changing. The retail market is shrinking because consumers are not wanting to spend as much. Also retail is shrinking because consumers are going virtual with online shopping. Mostly the middle income market are the ones that are hurting because they can be reproduced unlike a lot of the high end stores which are destination places. During the bad economic times many luxury stores closed because of their expensive rent. Their rent was expensive because they were in great locations with a lot of traffic. They have started to open these places up again after learning that even though they are expensive places that's where they are getting a lot of their revenue. If they moved to lesser expensive locations they were not getting as much traffic and therefore having a lower stream of revenue. Statistics show that some parts of retail have grown dramatically over the past 10 to 15 years. This part of retail is the restaurant and bar market. It is an element of replacing malls to spend time with one another (Ex: West 7th St. in Fort Worth). In this area there are more restaurants/bars than there are shopping. It is what has been demanded by the consumers.

The next topic we talked about was Internet Marketing. It is a big industry for businesses to get into, but they need to start controlling their digital footprint more on how negative or positive their business is being portrayed. Mobile marketing is a big part of marketing and is getting bigger every year. Such things as urban spoon or yelp help businesses thrive. Also dealing with mobile devices, we talked about the new iphone 4g which has video conferencing. This would be a big game changer for medical offices because they would be able to diagnose through video conferencing if both the office and patient have the phone. Video conferencing could also change the way retail is done by enhancing their services. They wouldn't have to have experts at every location. For example, a home improvement store would be able to see a part on the video conference and give help instead of having an expert in the store and the customer having to go to the store to fix their problem. In the future video conferencing will most likely continue to be used as a time saver and will add emotional value when making non face-to-face deals.

A big component of residential real estate sales are looked at on Realtor.com. At this website people can view almost all house in any given area and about 80-90% of all buyers look online first. This causes marketing prices for brokers and realtors to go down, but it also cuts into their earnings too.

There are a lot of real estate programs that are changing from having to be installed on each computer to being web based. This is called cloud computing. Many programs for home computers are starting to use the cloud as well. Even though this is happening, there are a few issues with the internet; it is not as perfect as it seems. You are still vulnerable on the internet and no online applications are fool proof.

One of the most interesting things I learned during this class period was that fiber optic lines are buried next to rail road tracks. There is a data center in Bryan, Texas because of this. A recent demand in the Real Estate Industry is the demand for data centers. These centers are very high tech pieces of property.

June 17, 2010-Office Markets/Sustainability/Green Development Trends and Issues

Our second class started off talking about sustainably. Sustainability can be defined as many things including renewable and flexible. The dictionary describes sustainability as when something remains diverse and productive over time. The main words to describe it though are the 3 E's, efficiency, effectiveness, and equitable. Sustainability can also come down to what impact it has on the environment. Sometimes suburbia just builds and doesn't look at how sustainable the projects are really going to be. They just now that everyone has a car and can drive to the place they need to go.

Dr. Forgey told us a few quotes from Peter Drucker. "Doing the right thing" and "doing things right." Each of these represent different things. The first one represents effectiveness and leadership. The second one represents efficiency and management. Both are needed to have sustainability. These were just some examples on how to describe the different words that make up sustainability.

Our next discussion of the night was about office buildings. The first part of the conversation talked about what helps worker satisfaction and productivity when laying out a building. Many things were brought up such as lots of windows, good building amenities, good ventilation, or even giving employees comfortable chairs to sit in while working. Next we talked about flexibility in office space. To me this is very important because you are looking toward the future and what can be used in that space. A way this is happening now is that buildings are having less 4 walled rooms and having a lot more cubicles. Also buildings are being formatted so the tiles on the ground can be lifted up and wiring can be changed or plug ins can be put in different spots. Another thing about flexible space that is not thought about as much is financing maybe easier to come by and you might get better lease rates.

A long and very interesting trend we talked about was what is happening with regional malls. A lot of them have been shutting down. The question was asked why? A trend that has been seen in this real estate market is eye catching. While regional malls are trying to stay afloat a new type of shopping experience has popped up. It is called the town center. It has all the same stores as a mall, but has a little different atmosphere. At the town center you walk outside to get to each store unlike the the regional mall which is all air conditioned. The town center in a way is taking shopping back to the beginning where all shopping was downtown and you had to walk to every store. There are many views on why things are changing but one good answer was that the demographics are changing and are making shopping centers keep up with what the customers want.

A big development in real estate in just the past few years is LEED certification. It is changing the way things are constructed and remodeled. The different articles talked about during class touched on how big corporations are wanting these LEED certified buildings. Corporations want these buildings for two main reasons. A big one is the marketing aspect. It shows that the company cares about the environment and wants to do something to change the way business has been done. The other big reason for the demand of these buildings is it saves a lot of energy costs for the companies. Many energy companies in Houston are at the fore front of wanting these buildings. Many other companies are coming together in groups to have buildings that are LEED certified.


LEED certification is in such popular demand. LEED has come very far from where it started. A few years ago if you were LEED accredited, it was a luxury. These days to many people being LEED certified is a necessity. LEED increases its standards every year because the association looks at new technologies that come out. LEED is a big deal, even the Chinese have LEED and standards that they follow. That is just the tip of the iceberg of where LEED is going. The Chinese really had to do something because their air quality was so poor. Since they have realized that there are ways to be greener, they have been leaders in producing solar panels and windmills. A big road block for LEED certification is lenders. What needs to be done is that lenders need to be educated about why LEED is important.

The last conversation we talked about was about what extent should the United States government play in making the U.S. green. Much legislation has already been produced which are making people become greener. This is a very touchy subject because the government could get too big and not know where to stop. Many good things came out of our conversations that would be good for green such as having all business locations and their electric bills posted for people to see. Also, if you had something in your house that showed how much you were spending that minute, hour, day, etc. on electricity it would help people to probably conserve more.

June 10, 2010 Educational/ Employment Trends and Issues

This is the first time we have met for class. Throughout the next 10 weeks the class is looking at existing trends and issues and looking into the future to where they will be. We started off the class by watching a video about the Sub Tropolis located in the Kansas City area. It is an underground complex that was previously used for limestone mining in the 1940's. Since the space had previously been mined, it reduced the cost of putting tenants in the space. The Sub Tropolis is filled with build to suit facilities. The tenants there now range from a book store to a church and many in between. Sub Tropolis has many great benefits that no other place can offer. The lease rates are 30-50% less than locations above ground. The utilities here are 50-70% lower other places. Also the temperature under the ground is always around 70 degrees so workers that work with equipment or do manual labor are more productive. This project is a great example of adaptive reuse and what creativity can help to achieve.

We then watched another video over the Bank of America skyscraper in New York City and it is LEED Platinum. It's currently the only Platinum skyscraper. Many ideas were shown that reduce energy costs. Such as the dots on the bottom and top of the glass throughout the building which direct sunlight away. Rain water is also captured and reused in the building as chilled water which cools the building.



LEED is starting to change the way tenants look at leasing. Now they are looking towards LEED to market their company.

We then talked about educational trends after the videos. Today employers are looking for other skills in future employees that they don't have to teach or train to employees and they want more than just what students have learned during college. For example, they want graduates to understand certain computer programs and/or how the business works before we get into the business. Looking at time, it shows that education like a four year degree does not mean as much as it did in the past. Blogging can now show students ability to write and think critically as well as let employers know what students have been exposed to; a "living resume" does this as well. Throughout the next 10 weeks the class is looking at existing trends and issues and looking into the future to where they will be.

Another topic discussed was employment markets and the new branches associated with future demands. Loan modification, asset management, adaptive reuse were just a few mentioned in class. We talk about Dallas and how it is land locked. The future of it is going to be through adaptive reuse of buildings and more density ex. big 30 story apartment buildings. The United States is going to start to reuse and remodel buildings because space is becoming limited.

Office Hotelling was also another discussion point. For example, Ernst & Young going to not have cubicles for auditors or employees who are not in the office. For these individuals they have a corner office reserved to meet with clients or if they do need to do work they can reserve a cubicle. This can cause office space to become cheaper because companies won't need as much space. This could be the future of the way office space is managed

Senior housing is another big market up and coming because of baby boomers. This part of the market is very capital intensive when developing and running.

Dr. Forgey gave us some advice on how to find the best job for us and how to get businesses to offer us jobs.
1.To learn about what company or what type of business you like it is best to do an internship.

2.Job search front- go out and talk to those people and try to get internships.

3.Become a member of the urban land institute because it is a great opportunity to get networking and find a job.

The last discussion we had that night was Online education and the future of it and how it will effect the actual real estate on campuses. Generation changes have taken place and now kids and young adults are inside playing video games instead of outside playing sports like in the past. In this generation classes and degrees are changing to online classes and even online degrees. Is it changing the real estate of schools? Will the buildings be obsolete? It is not possible to have a real estate class online because participation is needed in class. There is not an answer right know but my opinion is the classroom cannot be substituted by anything. I believe taking a few classes online is okay, but for a masters degree or any major classes they need to be taught be a professor with experience in a classroom setting.

The first night was very informative and I enjoyed very much learning about the the Sub Tropolis and the Bank of America building. I also liked hearing all the opinions on the online education topic.