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Gulfstream Gardens
likofh fv f � t . „..,,,„„,,... .., . .. , . Gulfstrcam arra , .,_ ,. i,,,:::,,,',4i.,•,.;7--,, - 2-'-'1-1,,,i‘..,„,...-,4:--it,....".':--;!:-:-E-.---i..„:.:;.-... ,--'-"::':::,,j7.---A-,,,,;:,..'''-t � L ,,,,p it . _. o� o1..., 2--,.!.tf.'it,,,,ii.,40. .„,„-,,:,,,,,,,...4„,,,,,,::,,,,::::;,::,,,,::..„;‘,,,,„::: r�ton eac t Meeting i : ossion November 1 7, 2009 S , . w�, -,''.',.'„.-'';'14 f 0 .dates, p.A. r Table of Contents 1. Gulfstream Gardens Permit Status 2. Development Agreement Requests 3. Boynton Beach Budget 4. Boynton Beach: For Federal Highway, plans frozen in time by economy 5. U.S. House Market Conditions 6. Apartment demand remains weak in Palm Beach County 7. Apartment Research Market Update 8. Multifamily Financial Distress Doubles :: - I— > y Y m °O v c n a� d d m > p p `� f0 E E E E E a E C in 0 . co• 2 °co c c • 3 O O O O yCO= � m E o COtv A c0 N p m p N p Q) O p M N C .. �.- w 0 O.N d N a a) a �, a N 0 O) >. 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' E k C) 8) 2 f a § 3 C) co U) U S . i o 0 0 ` 2 ■ ■a) e e f re ce § $ i i in k a. ) D 2 c c § § 2 » 0 E E E m u) m § § & 'V. . . 2 2 s i 8 @ @ @ \ C � o k 2 0 2 2 I © © co co co k § 0 0 k m. e m m a .9 Q 3 a Requests Cost to City 1. All remaining permit gees to be calculated on 1-9-06 in NONE which the original application fees were paid. 2. Project will have private water and sewer system and NONE shall be designed in accordance with FDER, AVWVA, NFPA and the 10 State Standards. 3. Project will have a private paving and drainage system NONE based on similar standards. 4. City to return Dixie Letter of Credit in amount of NONE $440,089.65. 5. Off site improvement bond in the amount of $15,000.00 NONE for driveway connections and sidewalk improvements. 6. Art in Park Fee does not apply to our project since the project was commenced prior to the October 5, 2005 Art NONE in the Park Ordinance # 05-060. 7. The Capacity Reservation Fees shall not apply to our project. 8. The Parks and Req fees shall be calculated based on NONE the original Site Plan Approval dated October 7, 2005 per Ordinance 06-025 at $656 per unit no $924 per the COA. NONE O O C O U ` co C O CU 4- :00 0 .0 E L U z a) c° w > c � o � 0O LOC/ � � t Q 0 r N o O F— 0 0 0 0 +-. c,;) cB a) 2 'i O X a) cn ON uj Y 0 0 0 0 0 .2Fa CO p ., Q p_ 0 L _ C c a) o - OJ a) a� E _'' ' c co �' �' —' Q) 0 •C 0 as O Q4-; N C 0 N C .0 N LL a3 0 0 > -- 0 Cu N -01E > -p = .0 0 1 0 QE 0 "t .Z Vj ..CO -C as N Q NCV O.m Q) CD 0 CD N Co Co •Z 0 II U Q3 N e— C 0 L. 0 0 0 '- 0. 0 L. 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Q 0 00 N > CD m m 0 cu U) o 0 E O CtIU a) 0 o N }' oo0 � 17 O to CO 0 •._ aj 0 0 _ vim .- Ona) . p 4.4.(-) CC a) 70 > 0 — a) -0 N 00000 `� • i 0 '0 0 0 N 0 •--, ,� O N ca 2 = — , NNNNN 0 E • � O 0 6 0 v) 0 .V � ,C . • U 0 Boynton Beach: For Federal Highway, plans frozen in time by economy The Coastal Star By Thomas R.Collins August 1, 2009 As you enter Boynton Beach from the north,the alluring Peninsula development greets you—a shiny new collection of townhomes and condos. It's just about to open its doors to happy new residents. tY- Peninsula Waterbrook Peninsula LLC 30 townhomes,40 condos Project status:Abandoned,in foreclosure Or it was,anyway. Getting its timing all wrong,the project got whacked by the market and is in foreclosure. It's 90 percent built,but its prospects are uncertain. It's"stale and dead,"city Planning Director Mike Rumpf said. "We hope it gets purchased and resurrected by someone,"he said,a map of the city's zoning plan on a wall next to him. With hardly any other choice,he looks on the bright side. "That's the only one of its kind that got caught,trapped,so far along,"he said."In most cases,they didn't get off the ground to begin with." But there are plenty that never got off the ground. Vacant lots sit up and down road—perhaps the very spine of the city. The economy,as it has throughout the city and elsewhere,has frozen the landscape in time. Land that was cleared,with high hopes of dazzling new condos and shops,just sits there. Hard-hit highway key to city's future The Federal Highway corridor in Boynton Beach might be one of the hardest-hit spots in the county,though.It is central to the city's redevelopment efforts. In 2001,the city approved a development plan for the road.It's a"wedding-cake shape"plan—as Rumpf puts it —with the tallest and most intense development near Boynton Beach Boulevard and Ocean Avenue,and lower tiers of development extending north,south and west from there. Pieces of that plan have come to pass. Marina Village Related Cervera Realty Services 349 condos/rentals 25,000 sq.ft.commercial space Project status:Completed,residential occupied. Marina Village,a condo project at Boynton Beach Boulevard and Federal,was finished before the market bust and sold out within a year,said Lorraine Freed,Palm Beach County manager for owner Related Cervera Realty Services. "It's still doing great,"Freed said.Boynton Beach Community Redevelopment Agency Director Lisa Bright said Marina Village's residential units are fully occupied. Lam°. ` . • , i. �. IstiM - -ri est. Promenade Panther Real Estate Partners 22,200 sq.ft.retail/restaurant 318 condos Hotel units(unspecified) Project status:Unknown Next-door,where Boynton Beach Boulevard meets Federal Highway,the towers of the Promenade development are nearing completion.The status of the"top of the wedding cake"project is unknown.According to Bright, (or developers had commitments for 40 percent of the space when construction started two years ago,but she doesn't know where it stands now. "Their biggest thing is:Will their people sign on the dotted line for the contracts,"Bright said. She described the project as"for our downtown,absolutely critical." Las Ventanas Epoch Properties 43,361 sq.ft.of office/retail 20 townhomes&404 rental apartments Project status: 70 percent complete,now leasing At Las Ventanas,which is 70 percent built,leasing started in May. The occupancy rate is up to 15 percent,said Buck Anderson,who oversees Las Ventanas for Epoch Management.That's on target with what they'd hoped, although they had to bring their price points down 10 percent to 15 percent,putting rental rates at$1,050 to $1,700 per month."We don't have any buzzards flying over our heads. So we're OK for now,"Anderson said. Still,a drive along the road can be a dismal affair. * s matt+ r Gulfstream Mall Thirty-six Hundred Holdings 166 residential units 19,000 sq.ft.commercial space Project status: Residential plans abandoned.Now zoned commercial. At the south end of town,at Gulfstream Boulevard,Gulfstream Mall sits ringed by opaque fencing,with cracks in the asphalt parking lot,empty windows and crumbling facades.A plan for 166 residences and 1,900 square feet of commercial space is a lost dream. Owner Thirty-Six-Hundred Holdings asked for a return to a zoning of only commercial space,considering how hopeless new residential development seems these days. In January,city commissioners granted that right to the developer. , 500 Ocean/Arches Southcoast Partners 40,596 sq.ft.of retail 378 condo units Project status:Plans abandoned A little north of that,at the southwest corner of Ocean Avenue and Federal,another gigantic piece of land sits surrounded by construction fencing.The mixed-use project that was planned for the old downtown area is no longer planned. Looking toward a change in the market Federal Highway in Boynton Beach is still considered positioned for success once the market turns around. Bright said there's already been a jump in requests for more money from the CRA,but the agency's ability to chip in has been hampered.The budget,which gets its money from new development,has been cut 10 percent and 23 percent the last two years.Other than that,the CRA has been trying to find tenants. "Like any good sales person,we run down every lead and try to do everything we can,"Bright said. Anderson.of Las Ventanas,offered:"I think this is going to be a big growth area." But for now,director Rumpf has to settle for small victories.There's the application that came in recently for a marina project at the north end of town—but when that would get built is anyone's guess.There is the apparent success of the Gulfstream Gardens townhouse project north of Gulfstream Boulevard,which is"getting over the edge,"he said. "Even now,given the economy,we have people coming in asking questions,trying to package things,trying to explore opportunities,"he said."People have land—and they don't want to sit on it." to 111111.111111111 . • 11 J1' v I ii., •...i 0 .4 i , Fti •i ii 2nd t)aa1 to 2009 CY , t. ,..„- ti. August 2009 SUM MARY • During the second quarter of 2009, builders took Housing market conditions showed some signs of sta- out permits for new housing at a pace of 529,000 bilizing during the second quarter of 2009, after a fairly (SAAR)of units,0virtually the nt lower as in the first steady decline since peaking during 2005. In the pro- quarter 2009 but 50 percent than in the duction sector, the numbers of starts and completions second quarterr 406,000o (SAAR)Single-family u permits were increased, but the number of building permits issued issued forquarterof09, anhousing units in percenthe remained steady.In the marketing sector, sales and second of 2009, increase of 12 prices of new and existing homes all rose.Excessive from the secondfrst qquayrter erof 2009 but For35 the first lower inventories of available homes receded to an average than the utiquarter quarters,of 2 the um the glee rate of a 9.9 months'supply for new homes and remained in family5 consecutive issuedhsnotnumber of single steady at a 9.8 months'supply for existing homes at permits has declined. the current sales rates. The percentage of foreclosure • Builders started construction on 541,000(SAAR) starts for all mortgage loans in the first quarter of 2009 I new housing units in the second quarter of 2009, (the data are reported with a lag)set a new record high I up 3 percent from the first quarter of 2009 but down after remaining steady since the second quarter of 2008. 47 percent from the second quarter of 2008. Single- In the subprime segment of the mortgage market, family housing starts totaled 423,000(SAAR) where the crisis began, the foreclosure start rate was housing units, up 18 percent from the first quarter up again for both subprime mortgage loans and sub- of 2009 but down 37 percent from the second prime adjustable-rate mortgage loans. The multifamily quarter of 2008.For the first time in 13 consecutive sector was mixed in the second quarter of 2009. The quarters, single-family starts have not declined. numbers of permits and starts fell,but the number of completions increased. Conditions in the rental housing_ .. • Builders completed 828,000(SAAR)new housing —market softened.During the second quarter of 2009, the units in the second quarter of 2009,up 2 percent rate of apartment absorptions rose,but the vacancy rate from the first quarter of 2009 but down 25 percent increased sharply.According to the Bureau of Economic_ from the second quarter of 2008. Single-family ' "'"Analysis, the advance estimate of overall growth in completions totaled 524,000(SAAR)in the second the national economy was a decline of 1.0 percent at a quarter of 2009, down 4 percent from the first quarter seasonally adjusted annual rate(SAAR)in the second of 2009 and down 38 percent from the second quarter of 2009,a much slower pace of contraction than quarter of 2008. The increase in completions the 6.4-percent decline recorded in the first quarter of 2009. The housing component of Gross Domestic " •. J,� Product(GDP)fell 29.3 percent in the second quarter * aux s. of 2009, compared with a decline of 38.2 percent in the • "" ' '?._>.. .r'- '- .',',',',.....+' .,. previous quarter,and contributed a 0.88-percentage- ' ''" z ,.. : point reduction in the growth of real GDP, compared ' ^y+ x r p :, ��'- * s -- , .i^1 '{`5 4{ *a hi°xfi.`, k ' �. ; .. with a decline of 1.33 percentage points in the first quarter of 2009. Housing Production . '1P',-.Y ,�}; > A .. , , Many housing production indicators improved in the -` t� y , second quarter of 2009.The numbers of single-family + ' F. - . , . -0 v housing permits issued and total starts and completions - . ,, . R all rose in the secondquarter of 2009. Manufactured c qtr , , .? � '� ,r "Nr. fix.,. housing continued a downward trend that began after b gg^d the hurricane-induced orders of late 2005. IIII ifOR IJ.'. I)i'hattnuntofH ,u in;andllrbaaI).•v, I,,�-in,at ',t ill* OHIO.:i i .1)011‘.> I)cvcl,ahment and RcscatIh sty i 111 411N DEVE`- Rt LI 101'' fr: Contents Housing Market Profiles 45 Table 34 Boston-Cambridge-Quincy, Mortgage Interest Rates,Average Massachosetts-New Hampshire 45 Commitment Rates,and Points: Summary 1 Colorado Springs,Colorado 46 1973-Present 70 Housing Production 1 Indianapolis.Comd,Indiana 47 Table IS minim". Motitering 3 A-f-ki ,rWsifity,Homeownership,and Las Vegas-Paradise,Nevada 48 Mortgage Interest Rates,Fees, Memphis,Tennessee-Mississippi- Effective Rates,and Average Term Foreclosures 4 Arkansas 50 to Muhifamily Housing 4 Maturity On Conventional Loans New Orleans-Metairie-Kenner, Closed:1988-Present 71 New Tables Document the Rise in FHA's Louisiana 51 Table 16 Share of the 1-to 4-1Pandly Mortgage Pittabutsh,Pennsylvania 52 Market 5 Italeilrit,North Carolina 53 FHA Market Share of 1-to 4-Family FHA's Market Share Fluctuates With Mortgages:2001-Present 72 Units Authorized by Building Permits, Economic Conditions 5 Table 17 Year to Date:HUD Regions Measures of PHA Market Share 6 and States --.... ..............55 FHA,VA,and PMI 1-to 4-Family Notes 10 Units Authatizedby.luildinii7ermits, Mortgage Insurance Activity: 1971-Present 73 National Data 11 Yeats)Dine:50 Most Active Core Table 18 Housing Production 11 Based Studs' tical Areas(Listed try Total Building Permits) 56 FHA Unasizisted Multfamily Permits. 11 Mortgage Insurance Activity: Starts 12 Historical Data 57 1980-Present 74 Under Construction 12 Completions 13 Table 1 Table 19 Alamdactured(Mobile)Hume New Privately Owned Housing Mortgage Delinquencies and Foreclosures Started:1986-Present 75 Shipments 13 Units Authorized:1967-Present 57 Ilible 20 Housing Marketing 14 Table 2 Value of New Construction Put in Home Sales. 14 New Privately Owned Housing Place,Private Retricketial Buildings: Home Prices 15 Units Started:1967-Present 58 1974-pt 76 Housing Affordability 16 Table 3 Table 21 Apartment Absorptions 17 New Privately Owned Housing Units Gross Domestic Product and Manufactured(Mobile)Home Under Construction:1970-Present.....59 Residential Fixed Investment: Placements 17 Table 4 1960-Present 77 Builders'Views of New Privately Owned Housing Table 22 Housing Market Activity 18 Units Completed:1970-Present 60 Net Change in Number of House- Housing Finance 19 Table 5 holds by Age of Householder: Mortgage Intr.:est Rates 19 Manufactured(Mobile)Home 1971-Present 78 FliA Market Share of 1-to 4-Family Shipments,Residential Place.ments, Table 23 Mortgages 20 Average Prices,and Units for Sale: Islet Mange in Number of House- FFIA 1-to 4-Family Mortgage 1977-Present 61 holds by Type of Household: Insurance 21 Table 6 1911-Present 79 PMI and VA Activity 21 New Single-Family Home Sales: Table 24 Delinquencies and Foreclosures 22 1970-Present 62 Net Change in Number of House- Housing Investment 23 Table 7 holds by ltece and stbuieitr of Reader:trial Pixed investment and Existing Home Sales:1969-Present..-63 hionatAolder:' 1971-Present 80 Gross Domestic Product 23 Table 8 Table 25 Housing Inventery 24 New Single-Family Horne Prices: Tata US.Housing Stock: Housing Stock. 24 1964-Pre8ent......._._.......................-....64 19ye_present 81 V oozy Bates 25 Table 9 Table 96 Homemmeratip Rates 25 Existing Home Prices:1969-Present...65 Banta Vacancy Rates: Tattle 113 IVO-Present .82 Regional Activity 26 Rwat Sales House Price Index: Table 27 141400.11113,19 -.-----.........-.... 27 MI-Present , 66 New'Wind,BM a'40432/1•"--------27 Table 11 Householder 982- resent of bY 1982-Present 83 New York/New ,HIP Region R-29 Housing Affordability bider .. ,,,, Table OS :0106014=ROAM Ill---- 30 Jamey 1973-Present ..t" ' Rates Region and a/teeth , Region IV..32 ==ttus bY Table 12 :1983-Present 84 Midwest,HMI RegicalAT..,...„............_.34 - Market AUm-Opti of New Rental TthIVS9 Wits, and'Itan mkt%Rent: Ifien-dmvitates by Race and ategilt rilsiati, `1 ,t on Vi .37 V 1970:Present 68 Rock7 , _•,, - - ReSiriu V01-----39 Ethagity:M3-P-- .t„ .85 Pilellie,HUD...,.,.,.IX..........„.............41 Table 13 TAUS° Novth**, "Basion X 43 Builders'Views of Housing Market HOMeawintratip Metes by Household Activity:1979-Present.........._............69 lype:1983-Present 86 (111, Summary 2 represents the first time in 13 consecutive quarters I from the first quarter of 2009 but down 14 percent that this indicator has not declined. from the second quarter of 2008. • Manufactured housing shipments reached a new ■ During the second quarter of 2009, the average record low of 49,000(SAAR)units in the second inventory of new homes for sale was 292,000 units, quarter of 2009, the lowest level since the series down 11 percent from the first quarter of 2009 and began in 1959.Manufacturers'shipments in the down 35 percent from the second quarter of 2008. second quarter of 2009 were down 7 percent from This inventory would support 9.9 months of sales the first quarter of 2008. at the current sales pace, down 1.7 months from the first quarter of 2009 and down 0.7 month from the second quarter of 2008. The average inventory of Housing Marketing existing homes for sale was 3.87 million units,up 5 percent from the first quarter of 2009 but down The housing marketing sector also showed signs of 14 percent from the second quarter of 2008.This improvement in the second quarter of 2009. The inventory would support 9.8 months of sales at the numbers of new and existing homes sold and the current sales pace, up 0.1 month from the first median and average sales prices for these homes all quarter of 2009 but down 1.3 months from the rose in the second quarter of 2009. Sales of new homes second quarter of 2008. increased for the first time in 15 quarters.The inventory + • The Federal Housing Administration(FHA)continues of new homes available for sale declined,but the supply of existing homes for sale increased. The number of to account for a large share of the mortgage market. Bd months'supply of homes for sale dropped substantially on loan origination data,the FHA's dollar volume for new homes but remained virtually the same for share of the mortgage market was 17.5 percent in existing homes.The rise in new home sales and prices own 27j the first quarter of 2009(the data are reported with and the receding supply of new homes for sale caused i a lag),08 d2up 108m ercenttrofrmthehe first quarter of f builders'confidence,as measured by the National 2008.Based on the number of loans originated, the Association of Home Builders(NAHB)/Wells Fargo Housing Market Index,to increase in the second FHA's share of the mortgage market was 20.8 percent quarter of 2009. in the first quarter of 2009, down 26 percent from the fourth quarter of 2008 but up 81 percent from • During the first quarter of 2009,356,000(SAAR) the first quarter of last year.Although the FHA's new single-family homes were sold, up 5 percent share of home purchase loans in the first quarter of from the 338,000(SAAR)homes sold in the first 2009 was up from the fourth quarter of 2008, the quarter of 2009 but down 30 percent from the number of mortgage refinance loans was 46 percent second quarter of 2008. lower than in the previous quarter. This drop in the FHA's share of refinance originations reflects a rise • REALTORS sold 4,757,000(SAAR)existing single- in interest-rate-reducing refinances in the market, family homes in the second quarter of 2009, up reflecting the low mortgage rates available in early 4 percent from the first quarter of 2009 and down 2009.The FHA typically does not capture a high only 3 percent from the second quarter of 2008. share of interest-rate-induced refinances because • The median price of new homes sold in the second borrowers seeking rate reductions often have sufficient equity to avoid paying mortgage insurance.In previous quarter of 2009 was$216,600,up 4 percent from the first quarter of 2009 but down 8 percent from the quarters, the FHA's share of refinance originations second quarter of 2008.The average price of new homes was higher due to a higher proportion of refinances sold in the second quarter of 2009 was$273,800,up I by borrowers seeking to change product type.For example,borrowers with conventional adjustable- 7 percent from the first quarter of 2009 but down 10percent from the second quarter of 2008.A rate loans who faced potentially large rate resets constant-quality house would have sold for$284,200 were refinancing into FHA loan products. in the second quarter of 2009,up 3 percent from the • Home builders were more optimistic in the second first quarter of 2009 but down 6 percent from the I quarter of 2009. The NAHB/Wells Fargo composite second quarter of 2008. Housing Market Index was 15 in the second quarter • The NATIONAL ASSOCIATION OF REALTORS® of 2009,up 6 points from the first quarter of 2009 (NAR")reported that the median price of existing but down 4 points from the second quarter of 2008. The index is based on three components---current homes sold was$174,400 in the second quarter of 2009,up 4 percent from the first quarter of 2009 sales expectations,future sales expectations, and but down 17 percent from the second quarter of prospective buyer traffic-and ranges from 0 to 100. 2008.The average price of existing homes sold in All three components increased in the second the second quarter of 2009 was$218,100,up 4 percent I quarter of 2009. 3 Summary ciy oe- ,if: LiL w Affordability, Homeownership, The second quarter 2009 homeownership rate was 67.4 percent,up 10 basis points from 67.3 percent in and Foreclosures the first quarter of 2009 but down 70 basis points from the second quarter 2008 rate. The increase in home- Housing affordability decreased in the second quarter ownership reflects the recent upturn in home purchases of 2009,according to the NAR'Housing Affordability and a decreasing percentage of completed foreclosures Index. The composite index for the second quarter due to moratoria in effect on foreclosures and increasing suggests that a family earning the median income had use of loan modification plans. 169.3 percent of the income needed to purchase the median-priced,existing single-family home using standard E lending guidelines.This value is down 5.1 percentage Multifamily Housing points from the first quarter of 2009 and down 40.1 per- I centage points from the second quarter of 2008.The Performance in the multifamily(five or more units) decrease in affordability is attributed to a 4-percent housing sector was mixed in the second quarter of 2009. increase in the median price of existing single-family In the production sector,the numbers of building permits homes sold and a 2.3-percent decline in median family and starts decreased,but the number of completions income, which more than offset the positive impact of increased.The absorption rate of new rental units rose a 14-basis-point decrease in mortgage interest rates. during the second quarter of 2009,but the rental f vacancy rate also increased fairly sharply. ' The delinquency rate on all mortgage loans in the first quarter of 2009(the data are reported with a lag)was at • In the second quarter of 2009, builders took out its highest level since the series began in 1972,according permits for 103,000(SAAR)new multifamily units, F to the Mortgage Bankers Association. The foreclosure down 31 percent from the first quarter of 2009 and start rate on all mortgages also set a record high after down 73 percent from the second quarter of 2008. ` remaining steady since the second quarter of 2008. The I f� delinquency rate for all mortgage loans was 9.12 percent ■ Construction was started on 108,000(SAAR)new in the first quarter of 2009, up from 7.88 percent in the multifamily units in the second quarter of 2009, fourth quarter of 2008 and up from 6.35 percent in the down 28 percent from the first quarter of 2009 and first quarter of 2008. The delinquency rate for subprime down 67 percent from the second quarter of 2008. mortgage loans was 24.95 percent in the first quarter j ■ Builders completed 293,000(SAAR)multifamily of 2009,up from 21.88 percent in the fourth quarter of units in the second quarter of 2009, up 16 percent j 2008 and up from 18.79 percent in the first quarter of i from the first quarter of 2009 and up 24 percent 2008.Foreclosures started on all mortgage loans were from the second quarter of 2008. at 1.37 percent in the first quarter of 2009,up 29 basis points from 1.08 percent recorded in the fourth quarter • Market absorption of new rental apartments of 2008 and up 36 basis points from 1.01 percent recorded i incr in the second quarter of 2009. Of the total in the first quarter of 2008.Foreclosures started on number of new apartments completed in the first subprime loans increased to 4.65 percent in the first quarter of 2009, 52 percent were leased in the first quarter of 2009, up 69 basis points from 3.96 percent i 3 months following completion. This absorption in the fourth quarter of 2008 and up 57 basis points rate is up 7 percentage points from the first quarter from 4.08 percent in the first quarter of 2008. Not all of 2009 but down 1 percentage point from the I foreclosure starts end in foreclosure. The lag between second quarter of 2008. I a foreclosure start and a completed foreclosure ranges ■ The rental vacancyrate in the second ) between 2 and 15 months and the average lag is quarter of approximately 6 months. 2009 was 10.6 percent,up 50 basis points from the previous quarter and-up 60 basis points from the second quarter of 2008. Summary 4 o y vr ►-3 �] cn 0 0 > � Cm �• CT) n �.:. 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E. g r�-r CD I-'• CD 0 4 CD N a �' a o 0 Fr i.ti a 0 Vo (10, cb 2 b 0 g c ApartmentResearch MARK E TU P D A TE I1d1vll .&l\iilli IlddJ) Palm Beach County Fourth Quarter 2009 INVESTORS HAMPERED BY Low VELOCITY IN PALM BEACH COUNTY Apartment property fundamentals will remain weak in Palm Beach County as a soft economy reduces housing de- mand.Some positive economic trends have emerged,however,including an increase in sales of existing single-family homes and an easing in job reductions.Nonetheless,even a possible stabilization of the economy in the fourth quarter may not spark an immediate recovery in rental housing.This year,apartment vacancy has risen to more than 8 percent as a result of slumping demand related to a weak job market.The unemployment rate in the county climbed to about 11 percent by the end of the third quarter,up from the low-7 percent range one year earlier. Not only has the number of unemployed residents swelled 50 percent to more than 69,000 over the past 12 months, but the labor force has con- tracted by approximately 2,800 workers,the only year-over-year decline this decade. Only a resumption in hiring will bring workers back to the market and stimulate new demand for rental housing. In the meantime,vacancy will creep up to nearly 9 percent this year,while rent concessions will rise. Low deal flow in the first three quarters of the year has not provided prospective investors much transparency on values or cap rates, although it is estimated that cap rates start at about 8 percent for stabilized, cash-flowing assets. During periods of heavier activity three and four years ago,the median price was more than$100,000 per unit,as buy- ers were purchasing either for conversion value or under the assumption that substantial rent growth would ensue.As the conversion market has dried up and rents have started to recede,property prices have declined and may not reach bottom for a few more months. Marketwide,the average revenue has declined about 4 percent year to date and is pro- jected to fall 6.7 percent this year based on current vacancy and rent forecasts.Small,well-maintained,stabilized assets with long-tenured residents may be able to withstand the further erosion of fundamentals better than other properties. 2009 ANNUAL APARTMENT FORECAST 30% Employment:Job losses are expected to moderate over the remainder of the year.In 2009, decrease in employers are forecast to cut 16,000 positions for a 3 percent reduction in total employ- total ment.Last year,23,400 workers were let go. employment No Construction: After delivering 207 units in 2008, developers will not complete a single ISI units property this year. The planning pipeline contains 1,200 units, or 2.2 percent of existing win be rental stock. completed Ell100 basis Vacancy:The most significant factor affecting vacancy this year will be a reduction in de- point mand related to the weak economy.The vacancy rate is forecast to rise 100 basis points in Wit"cy 2009 to 8.9 percent. mi, 4.0% Rents: Slackened demand will hinder owners' ability to raise rents. As a result, asking decrease in rents are expected to fall 4 percent this year to$1,065 per month,while effective rents are askintt projected to slide 5.7 percent to$982 per month.Asking rents declined 0.4 percent in 2008, (40 and effective rents receded 0.7 percent. ECONOMY • Total employment was on track to decline 3.7 percent,or by 19,800 workers, Employment Trends in the 12-month span ending in the third quarter. So far this year, 14,000 —Metro Area positions have been cut in the county. --United States v 3% • With 37,400 jobs lost to date, the recession has been severe. Some sectors, however, added workers in the third quarter, signaling that the worst 05> phase of job reductions is easing. The professional and business services a. and leisure and hospitality sectors hired about 3,500 workers in the first two -35d months of the quarter,helping to offset losses in other sectors. 6% • The unemployment rate in the county approached 11 percent in the third os 06 07 08 o9• quarter,compared with 7.2 percent one year earlier. Sou'ces.W rn Ci h`.".-.ha,,kysc..i<h Services f,_S, flinty�:c • Outlook: Job losses are expected to moderate over the remainder of the year. In 2009,employers are forecast to cut 16,000 positions for a 3 percent reduction in total employment.Last year,23,400 workers were let go. HOUSING AND DEMOGRAPHICS • Housing supply is expanding at a slower rate.Approximately 2,100 units of single-and multi-family housing were completed in the county over the 12 Home Price Trends months ending in the third quarter,a 41 percent drop from one year earlier. K 40x -Metro Area During the same period,however,the number of households in the county --United States declined by about 1,800,creating a supply/demand imbalance. C ? 2C;. • Permits for 1,500 units of single- and multi-family housing have been is- tod sued in the past 12 months, down 40 percent from one year ago. Further declines in issuance are expected,which will reduce future supply growth. .205:. -_- w • The median price of an existing single-family residence in the county de- 40% e- 40 creased an estimated 38 percent year over year to$302,100 in the third guar- - 0sry 06nf'I07 08 09• ter. The drop has spurred a 40 percent increase in velocity. A credit for Sc,ur,e, &h,r<us Meitcha p Pec-arch Ser,q< a: torp<J ,t4,-.k Id fust-time homebuyers also has stimulated demand. • Outlook:A decline in permit issuance will help to enable the eventual re- alignment of housing supply and demand in the county. Demand,howev- er,will not recover until household creation resumes,which will not occur to a significant degree until employers start to hire again. CONSTRUCTION Construction Trends • Supply growth is minimal.Only 207 units have been completed in the past 8 —Apartment Completions 12 months,none of which have come online this year. — Multi-Family Permits .13 • Economic conditions will discourage future building, while financing for 8 6 projects is limited.In the 12 months ending in the third quarter,permits for 532 units of multi-family housing were issued,a decline of 42 percent from 4 the preceding year. 0 2 1 • Significant rental projects under way consist of Las Ventanas in Boynton E = 0 1 a Beach, with 494 units, and 217 units at Worthing Place in Delray Beach. 05 06 07 08 09• Both projects are slated for completion next year. Sources:Nit sun b MAUeha;)5€search S rric_,.U S Census eu!ecu • Outlook:After adding 207 units in 2008,developers will not deliver a sin- gle property this year. The planning pipeline contains 1,200 units, or 2.2 percent of existing rental stock. page 2 Marcus&Millichap • Apartment Research Report VACANCY • The projected vacancy rate of 8.5 percent in the third quarter was the high- est in five years.Vacancy climbed 30 basis points in the quarter,as demand Vacancy Rate Trends was weak.So far this year,the vacancy rate in the county has increased 60 i o% —/retro Area basis points. —United States Ef • Class A vacancy rose an estimated 30 basis points during the third quar- ter to 8.2 percent as tenant demand slackened. This year,vacancy in high- e. bo end complexes has jumped 90 basis points on a 1 percent drop in occupied units,or demand. 4?1 • Vacancy in the Class B/C segment was projected to hit 8.8 percent in the third quarter, an increase of 30 basis points from the preceding quarter. a 05 06 07 08 09• Year to date,lower-tier vacancy has inched up 40 basis points. 'Forccast 5,.-ces:M.11 us G Milk.',op Rese.rd,Semre Res • Outlook: The most significant factor affecting vacancy this year will be a reduction in demand related to the weak economy.The vacancy rate is fore- cast to rise 100 basis points in 2009 to 8.9 percent. RENTS • Countywide asking rents slipped 1.4 percent in the third quarter to$1,083 per month and are down 2.3 percent year to date. Effective rents decreased 1.9 Rent Trends percent in the third quarter to$1,004 per month,following a 1.7 percent dip in 6% c Asking Rent the preceding quarter.Year to date,effective rents have dropped 3.6 percent. —Effective Rent c, Z' 4X • Activity at Class A properties in the county primarily accounts for the de- cline in asking rents in the third quarter and thus far in 2009. Class A ask- ing rents fell 1.5 percent in the third quarter to$1,271 per month and have oa edged down 3.4 percent this year.In the Class B/C segment,asking rents of $937 per month were 1.3 percent lower in the third quarter and for the year. ,. as • Concessions rose 50 basis points in the third quarter to 7.3 percent of asking Er 05 06 07 08 09* rents as a result of the drop in effective rents.Revenue also fell 2.2 percent -11,c,.,- SOW CC Ma'cuc_:.c'hchrcp Resrirch Sen,cec.P in the third quarter and has decreased 4.5 percent year over year. • Outlook:Slackened demand will hinder owners'ability to raise rents.As a result,asking rents are forecast to fall 4 percent this year to$1,065 per month, while effective rents are projected to slide 5.7 percent to$982 per month. SALES TRENDS** • Transaction velocity decelerated by more than 50 percent over the most Sales Trends recent 12-month span, based on a limited number of deals. Activity was especially slow through the first three quarters of this year. • $120 c • The median price in deals completed during the past 12 months was$55,900 = $1 o0 11 II I per unit. • $80 • Though cap rate trends are difficult to discern due to a lack of activity,ini- o hal yields are estimated to average from about 8 percent for top-quality a 560 P-q h c II assets to approximately 10 percent. $40 05 06 07 08 09* • Outlook:Investors will continue to move cautiously due to the recession, •7racs„,,z.Msau,rerioa Sours., 9,.(U.6 M1((ichap Reseal oh Service:_CcS.a,Group he RCA but additional signs of economic stabilization may encourage buyers to identify potential acquisitions before the recovery starts. "Data reflect a full 12-month period,calculated on a trailing 12-month basis by quarter Marcus&Millichap • Apartment Research Report page 3 coy CAPITAL MARKETS BY WILLIAM E.HUGHES,SENIOR VICE PRESIDENT,MARCUS&MILLICHAP CAPITAL CORPORATION Marcus SMilliehap • Compared to other core property sectors,apartments have fared best due to the availability of financing through government-sponsored enterprises NATIONAL MULTI HOUSING GROUP (GSEs)Fannie Mae and Freddie Mac. Recent modifications to GSE guide- lines will impact lender decisions,however,as borrower requirements in- Visit www,NationalMultiHousingcroup.cou,or call: dude more substantial apartment ownership experience. Linwood C.Thompson Senior Vice President,Managing Director • Loan-to-value requirements range from 55 percent to 75 percent.Portfolio National Multi Housing Group q Tel:(678)808-2700 lenders are issuing loans at all-in rates of 6.00 percent to 6.75 percent for a lthompson@marcusmillichap.com five-year term and 6.9 percent to 8.0 percent for a 10-year term.Rates among agency lenders are roughly 100 basis points to 150 basis points lower.The government's creation of a conservatorship for Fannie Mae and Freddie Mac has most likely boosted confidence in the two GSEs, putting down- ward pressure on rates, but it also creates several near-term uncertainties, as the conservatorship is due to expire at the end of the year. • Delinquencies will rise further as a wave of maturities approaches;however, at-risk borrowers may find lenders amenable to loan extensions/modifica- tions.Furthermore,Freddie Mac is under way on its second securitization of multi-family debt this year,and the government's TALF program is expect- ed to at least provide a much-needed spark to the traditional CMBS market. SUBMARKET OVERVIEW • The Green Acres/Palm Springs/Lake Worth submarket is typically is one of the best performing in the county,although vacancy has climbed 50 ba- sis points during the recession. The submarket has a large proportion of Marcus ,Li jA ap one-bedroom units,which will likely realize an increase in demand as the economy improves. Real Estate Investment Services • In a recent transaction,the 94-unit Haverhill Gardens in West Palm Beach Prepared and edited by changed hands for$45,400 per unit.Vacancy in the West Palm Beach/Palm Art Gering Beach submarket rose 50 basispoints in the third quarter. Senior Market Analyst Research Services • With a 2.7 percent decline in effective rents year to date in the Century Vil- For information on national lage submarket,concessions have climbed from 9.8 percent of asking rents apartment trends,contact John Chang to 11.5 percent of asking rents. The vacancy rate has also spiked 70 basis National Research Manager points this year. Tel:(602)687-6700 ext.6803 john.chang@marcusmillichap.com Fort Lauderdale Office: Gregory Matus Regional Manager gmatus@marcusmillichap.com SUBMARKET VACANCY RANKING 5900 N.Andrews Avenue Suite 100 Vacancy Y-O-Y Basis Effective Y-O-Y Fort Lauderdale,Florida 33309 Rank Submarket Rate Point Change Rents %Change Tel:(954)245-3400 1 Green Acres/Palm Springs 7.3% 40 $963 -0.4% Fax:(954)245-3410 2 Boca Raton East 8.0% 190 $1,176 -4.7% --O' 3 Boynton Beach/Delray Beach 8.1% 20 $1033 -4.0% Price:$150 4 Boca Raton West 8.4% 150 $1,132 -2.0% 5 Century Village 9.5% 90 $834 -6.3% 6 North Palm Beach 9.8% -180 $915 -4.5% (NY ©Marcus&Millichap 2009 www.MarcusMillichap.com 7 West Palm Beach/Palm Beach 10.0% 220 $985 -7.7% The informatunt cannoned ut Pus report tom obtamedirom sources deemed fain reliable tory effort was mode to Momaquaeandcompleteitfn>matronhowever,norepresentation,warrantyorguamntee,expressorimplied,maybemadeastomeaccunay,rrdhabmy y'N e i finmation crodaineJ heron.Note:Metro-lece/employment growth a calculated using seasonally adjusted quarterly afrmgea.Sales data include transactions valued at$.500,000 and greater unless otherwise noted Sources'Manu&M lll the Renamo Services, Roman„Jlotm Stan,* ,CoStar Group,Ino.,Frowmy.com,National Association,fRealtors,Real Capital Analytics,Rely 7WR/Dodge Pipehne,U.S.Census Rureau. Do you have the bandwidth to attract and keep residents? veriLn '{1: tin '1 iv iMULTIFAMILY E EXECUTIVE From: MULTIFAMILY EXECUTIVE 2009 Posted on: July 16, 2009 12:39:00 PM Multifamily Financial Distress Doubles By:Les Shaver Distress is piling up in the multifamily market, but it's still not as bad the other real estate sectors, according to the most recent Troubled Assets Radar from Real Capital Analytics(RCA), a New York-based research firm that tracks commercial real estate. According to the report, which measures assets in default, foreclosure, or bankruptcy, to date in 2009, 588 apartment communities, totaling$8.1 billion, fell into distress. Overall, 1,133 apartment communities, totaling $17.7 billion, were in trouble across the country. Those numbers don't surprise Debbie Corson, a principal at Atlanta-based Apartment Realty Advisors. "We're getting a lot of calls and doing a lot of opinions of values for lenders, special servicers, and owners who are trying fn figure out where the market is and what the value of these assets are," she says. Apartments ranked third behind retail and development sites in total troubled assets. But other real estate classes are catching up afar this year,retail ($17.8 billion); hotel ($11.8 billion); office ($8.9 billion); and commercial development sites($8.6 billion) gained more distressed assets than the apartment market. Anyone who is following the industry knows there's one simple reason for this—the fmancial assistance from Fannie Mae, Freddie Mac, and the Federal Housing Administration."Multifamily hasn't had the same liquidity issues as the other asset types," says Dan Fasulo, managing director for RCA. "On a relative basis, I see a lot more trouble in other property sectors." This trouble was exacerbated by the April bankruptcy of General Growth Properties (GGP), which piled $13.5 billion onto the overall commercial distress numbers. Overall, troubled commercial properties have more than doubled this year with the value topping out at $108 billion. In April, $19.5 billion was added to the total, but much of that was fueled by GGP. "Without GGP, the growth of newly troubled properties moderated slightly in April and May with$5.5 billion of assets added in each month,"the report states. "June, however, is shaping up to be among the worst months of the year with over$10 billion of newly defaulted mortgages recorded so far." Patterns of Trouble RCA's report also sheds light on which apartment sectors and markets are facing trouble. Right now,a dozen markets around the country have more than $500 million in distressed assets. New York, the most expensive et in the country, leads that list with $2.2 billion in apartments in distress. Miami has $1.5 billion in distressed ents, followed by Houston ($982.4 million); Phoenix, Ariz. ($959.7 million); and Las Vegas($931.5 million). :see the complete list below.) In the overall commercial market, Las Vegas (fueled by GGP's problems), Manhattan, Arizona, and California all experienced problems. • This doesn't surprise John Cannon, executive vice president at Horsham, Penn.-based lender Capmark Financial Group. "The areas that are showing a lot of distress right now are the Florida, Texas, and California markets and Phoenix and Las Vegas,"he says. "Those markets are probably under the most stress." Garden units($11.6 billion)have the most distress in the sector, followed by high-rises($7.1 billion); low-income Illw fusing($418.3 million); student ($410.7 million); and senior($$310.6 million). "The size of the garden apartment market is much larger than the high-rise market," Fasulo notes. Unfortunately, one place that RCA doesn't aggregate distress is by asset class level. Right now, the consensus in the apartment industry is that the lower levels properties were underwritten with riskier mortgages, and, consequently,are facing more stress. "The lower class deals are the ones that we're seeing in more distress," Corson says. "Those are the ones we're getting to work on. I suspect the lenders will be faster to get rid of the ones they don't view as desirable." Fasulo doesn't necessarily agree. "I think it has more to do with the market you're in,"he says. "In a bad market, both your Class A and Class C assets are getting hit harder. Twelve Markets with the Most Troubled Apartments Market Dollars(in millions) Number of Properties 1 Manhattan $2,194 82 2 Miami $1,468.5 41 1 Houston $982.4 175 Phoenix 1$959.7 58 as Vegas 1$931.5 37 LOrlando — _--J$595.8 20 z Atlanta $589.3 I 59 Chicago $553.8 150 Los Angeles $555.2 45 7 Broward County '$543.1 27 3 Palm Beach I$532 ILI t s Tampa $522.4 122 .. 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