Northern Virginia YIMBYism

A homeowners group in a Northern Virginia suburb noticed that home prices in their area made their low density neighborhood obsolete. Now they're partnering with homebuilder Centex to capture the value of redeveloping the area:

Poplar Terrace, a Vienna area enclave of 70 houses with big yards and towering trees, looks like a pleasant place to live. But to Pete Young and most of his neighbors, there is much more to this subdivision they call home:

The potential for millions in profits.

In a reflection of Washington's surging home prices and the allure of cashing in, Young and nearly all his neighbors have banded together to form a real estate collective that proposes to raze their 40-acre community and realize above-market profits from its redevelopment as a cluster of more than 1,000 condominiums and townhouses.

Adam "Invisible Hand" Smith and Karl "Damn the Bourgeoisie" Marx could each find things to like in this communitarian-capitalist "real estate collective." Viva la revolucion!

To Don't Lists

Time Card
Originally uploaded by TheGoogly.

Appointments and to-do lists rule our lives. Management guru Tom Peters thinks a to-don't list is just as important. From his "60 Tom's TIB," (This I Believe) available for download as a PDF (Via BoingBoing and Brianstorms.) :

There's a crucial variation on this theme. I once watched a highly energetic chief ripped asunder by a senior member of his board. “Richard,” the determined board member almost shouted, “you are smart, energetic, creative to a fault, perhaps even a genius. But much of your 'genius' is dissipated because you apply it to ten different things at a time, albeit with great skill.

“Let me tell you what you need,” he concluded. “A 'to don't' list.”

I don't know about “Richard,” but for me that was a profound moment. Fact No. 1: We all have 50 genuine priorities. Fact No. 2: If we get even two Big Things Done in a six-year tenure on the current job, we will have had a...Great Ride. Axiom No. 1: Therefore, what we choose not to do (the sole subject of that “To Don't” list) is at least as important, or more important, as what we choose to do.

And, finally, effective “To Don't-ing” is far, far more difficult than effective “To Do-ing.”

I think the story about people only using 10% of your brain is incorrect. More likely it's that 90% of your brain is distracted 99% of the time. Geniuses of the world, FOCUS!

Las Vegas is on Fire

As more high-rise hotel and condominium towers rise on the Strip, subdivisions and strip malls continue their march across the Southern Nevada desert. The city's population is expected to blow past 2 million on its way to 3 million. No wonder, Las Vegas was the hottest housing market in the country last quarter:

Las Vegas home values showed the biggest gains. The median price of an existing single-family home in and around Sin City shot up 52.4 percent.

"This is the biggest annual home-price increase in any metro area on record," said NAR chief economist David Lereah, explaining that the supply of houses on the market has been extremely tight.

One reason for the lack of supply (data show only a 1.7 month inventory of homes in Vegas) is the fact that most of the land surrounding the city is owned by the federal government -- 87 percent to be exact:

Most of that land is controlled by the BLM [Bureau of Land Management], which possesses nearly 3 million of Clark County's 5 million acres, a throwback to a time when no right-minded investor, short of a miner or railroad man, was willing to buy land in a desert wasteland.

Once again, we see government standing in the way of housing affordability:

BLM critics say more land would be available for construction if the agency would just open the spigot; then, the law of supply and demand would ease the recent explosion in land and housing prices. For proof they look to Phoenix, another booming city, which in the mid-1990s had higher median home prices than the Las Vegas Valley. Not today. The median price of a new Phoenix-area home was $182,000 in June. Here it was $241,750.

...

The average acre of land in the Las Vegas Valley costs about $290,000. In the Phoenix area that figure ranges from $30,000 to $50,000, or what it cost here a decade ago.

So where to go from here? Government authorities should draft a conservation plan to protect sensitive desert habitat like they're doing in Riverside County, CA and then get out of the way.

The pricing increases may be driven in part by a constrained land market, but a red hot Las Vegas economy that continues to outpace the country in construction activity and job growth can share the credit:

Nevada created 8,200 jobs in May, the Department of Employment, Training and Rehabilitation said June 19. In the past year, 47,600 new jobs have been added to the state's work force, which is growing at a 4.4 percent annual rate, compared with 1 percent nationally.

...

The 2003 [construction] index, released in May, shows Las Vegas had a list-topping 48.11 rating, nearly 10 points ahead of second-ranked Riverside-San Bernardino, Calif. (38.81). Las Vegas' score was 17.6 percent higher than a year ago (40.9), and 17.5 percent higher than two years ago (40.11).

High barriers to entry for acquiring prime land and blistering employment growth bode well for apartment investors in the area. We're extending The Walsh Team presence to Las Vegas through our associate, Mike Gallegos. Please contact us if you want a piece of the action.

Urban Villages come to the OC

The reality sets in across urban Southern California: 6 million people by 2030. Where will they go?

Developers in Orange County want to solve the problem with vertical mixed-use developments that place apartments and condos over retail or workspaces. Large central county cities like Anaheim, Santa Ana, and Irvine all have projects in the works because planning departments are finally adding some flexibility to their books:

In the Platinum Triangle, an area of predominantly industrial buildings near Anaheim Stadium and the Arrowhead Pond, the city has loosened the zoning with the goal of encouraging private companies to bring their own proposals to the city. Instead of micromanaging what's going there, the city is throwing open the doors, believing that the market will turn this area into a vibrant downtown for the county. The city expects high-rise offices, new commercial centers, new housing and the emergence of a mixed-use neighborhood where underutilized buildings now stand.

Already developers have plans in the works:

CREA/Nexus Anaheim Corners LLC, an affiliate of the residential division of Nexus Properties Inc. of San Diego, plans a 390-unit apartment complex and 11,000 sf ground-floor retail space.

There's another innovative project in the pipeline for Santa Ana:

Urban+West+Strategies and the Lennar South Coast Division plan 108 units of for-sale, live-work lofts at the companies’ new Santiago Street Lofts, which the developers describe as a transit-oriented development across from the Santa Ana Train Depot...The 108 units will be three stories each and will range from about 1,540 sf to 2,300 sf, with the ground floors of the lofts designed especially to accommodate the work portion of the live-work spaces. “A key to the project is that the work spaces will be completely separate from the living spaces,” DiRienzo emphasizes.

Live-work strategies like these will become increasingly prevalent in future years. America's workers are trading in stodgy corporate jobs to become free agent marketing consultants and indie publishers. Trends like outsourcing and improved collaboration and conferencing technology will allow more people to telecommute and stay mobile. Office condos, wireless networking enabled Starbucks, and live-work spaces meld perfectly with these 21st Century workers.

Sure, single family tract homes will continue gobbling up the deserts of the Inland Empire but for those who prefer to live in vibrant urban environments these new projects are exciting developments.

A whole new meaning for "Home Printing"

What if building your own custom home was as simple as pressing "Print" on your computer? Science fiction fantasy? Not if Dr. Behrokh Khoshnevis from my alma mater, USC, has anything to say about it. He's pioneering a new construction method called Contour Crafting. Here's how the New Scientist article describes it:

It takes instructions directly from an architect's computerised drawings and then squirts successive layers of concrete on top of one other to build up vertical walls and domed roofs. The precision automaton...can work round the clock, in darkness and without tea breaks. It needs only power and a constant feed of semi-liquid construction material. The key to the technology is a computer-guided nozzle that deposits a line of wet concrete, like toothpaste being squeezed onto a table. Two trowels attached to the nozzle then move to shape the deposit. The robot repeats its journey many times to raise the height and builds hollow walls before returning to fill them.

"The goal is to be able to completely construct a one-story, 2000-square foot home on site, in one day and without using human hands," says Khoshnevis. The robot can install plumbing and wiring as it goes, but can't do windows -- yet.

Khoshnevis's prototype robot hangs from a movable overhead gantry, like the cranes at ship container depots. Khoshnevis speculates that they could also be ground-based, running along rails and able to build several houses at one time.

Not only will the homes go up faster, but more beautifully as well. According to Venice architect, Greg Lynn, ""I'm convinced this will allow you to make beautiful, innovative and as yet unimagined kinds of houses." Unconstrained by 2x4's, the technique will allow for complex curving walls and dramatic domed ceilings. I'm thinking about a funky mix of Taj Mahal, Walt Disney Concert Hall, and old school Mongolian yurt for my dream house.

The technology's speed and cost also makes it perfect for emergency housing in cases of earthquakes or war, low income housing, and even space colonies. Imagine future space colonists reading the directions: "Mix one part moon dust with one part water and stir..."

The construction industry has been a laggard in the productivity miracles that have already remade agriculture, manufacturing, and services. Looks like that won't last long.

Downtown Gentrification and Its Discontents

The flood of investment into the Downtown Los Angeles market is slowly producing a world class, 24 hour city. Already a sports and cultural powerhouse with the Staples Center and Walt Disney Concert Hall (above), the influx of new loft dwellers is finally drawing essentials like a Ralphs supermarket slated to open later this year.

The Walsh Team is at the forefront of the area's explosive growth with two new downtown listings: 1) Artist's Lofts at 900 E 1st St, an industrial adaptive reuse with wood floors, exposed brick, and killer views of the downtown skyline (currently under contract); and 2) The Oviatt SRO Apartments at 1315 S Flower in the heart of the exciting developments in downtown's South Park district. It's flanked by the Convention Center and a Blue Line Metro stop and contiguous with Legacy Partners beautiful new 100-unit luxury building City Lights on Fig. You'll see from the photographs that the owners have adopted a similar paint job to blend their 1911 brick building in with the 2003 wood frame and stucco. The Oviatt has been dramatically renovated with a new lobby and leasing office, fresh carpet, mailboxes, and new windows on the sides facing Pico and Flower, but still has lots upside with more improvements. There's also vacant retail spaces on the bottom floor, valuable assets for a retail-lean market that's adding so many new households.

Five years ago, it would have been unthinkable to renovate these older single room occupancy hotels with shared baths and tiny rooms, but the market forces are unstoppable. That doesn't mean everyone's happy about the trend. SRO buildings in other parts of downtown like Skid Row have always been the housing choice of last resort for the poor and homeless. According to a recent Los Angeles Business journal article, homeless advocates aren't too happy to see developments like this:

For decades, the Cecil, at 640 S. Main St., was among dozens of run-down single room occupancy hotels on Skid Row that rented rooms without kitchens or private bathrooms for between $150 and $200 per week.

But Street Wise Investments LLC, owner of the 634-room Cecil, has made nearly $4 million in improvements since it bought the hotel in 1999....Gone are the advertisements for $150 weekly room rates. In their place are efforts to lure budget domestic travelers and European and Asian backpackers.

Many of the SRO hotels are owned by non-profit groups like Skid Row Housing Trust, which buys small hotels to preserve as affordable housing, but that leaves 4,000 privately owned units near Skid Row, which worries the Trust's executive director Jim Bonar:

With limited affordable housing in the city, gentrification is threatening one of the few options [left for low-income tenants]. "I'm afraid the handwriting is on the wall," he said. "At this point it's only a matter of time."

Looks like he's right:

Gilmore & Associates LLC, a pioneer in downtown loft conversions, has purchased a condemned SRO called the El Dorado at 416 S. Spring St., where it plans another market-rate condo project.

Limiting development problem either, since the major cause of homelessness is the growing gap between wages and housing costs. And the major cause of skyrocketing housing prices (besides ultra-low interest rates from Greenspan) is lack of supply due to backward land use regulations and NIMBYism. A Heartland Institute Study found the implicit zoning tax on a buildable quarter acre plot of land is $303,178. No wonder it's so expensive to live in LA!

Downtown Los Angeles is one of the last available areas where significant new housing resources can be built. Along with efforts to provide education and health care to those on the margins of society, we need to let the market develop enough new housing that everyone can afford a place to live.

For more about the exciting story of downtown see the LA Downtown News, an excellent resource about downtown development and the Central City Association. For more about homelessness in LA, check out Beyond Shelter and the Los Angeles Homeless Services Authority.

Squeaky Clean Institutional Real Estate Companies

The barrage of corporate scandals over the last several years has sapped confidence in our proud securities markets. Driven to inflate results (and executives' fat stock option packages) large firms like Enron and WorldCom used dubious accounting methods, questionable foreign tax havens, and bogus underwriting from Wall Street's largest investment banks to bilk thousands of naive investors. But according to a new article from Knowledge @ Wharton, Real Estate Investment Trusts have been model corporate citizens:

Unlike the boom of the 1980s, whose aftermath revealed a host of shady deals between real estate developers and unscrupulous S&L executives, publicly traded REITs have largely been untouched by the most recent scandals.

So how did they do it? The article gives three reasons:

One is the necessity to create cleaner companies after the 1989-92 recession that played havoc with the real estate industry. "There is no question that real estate had a horrendous reputation in the public markets," [Sam Zell, Equity Group Investments of Chicago] said of the pre-1990s era. "But come 1992, the shoe was on the other foot. We were desperate. We had to raise money or our industry was gone."

Zell noted the second reason is that "the nature of our business doesn't lend itself to quite the same amount of Mickey Mouse" as in many other companies. It is hard for REITs to cook their books when they pay out 90% or more of their cash flow as dividends. (REITs are exempt from federal tax so long as they distribute at least 90% of taxable income to investors each year.) The third reason is the level of ownership by management. "No segment of the S&P 500 has a higher concentration of ownership by management than the REITs do," said Zell.

Looks like the rest of Corporate America could learn something from the big REITs. Though not practical for all firms higher dividend payouts keep companies honest by discouraging them from using the tax line as a profit center. Guess Bush and friends knew what they were doing with the dividend tax cuts -- better to have the owners watching the money than the managers.