Developers Diversified works toward smart, steady growth
By Michelle Jarboe, The Plain Dealer, May 22, 2010
BEACHWOOD, Ohio -- As Developers Diversified Realty Corp. recovers from the recession, the shopping center owner is unlikely to forget the lessons of a brutal financial crisis.
This time last year, the company's stock price barely topped $4 -- down from more than $70 per share in 2007. Empty stores peppered the company's shopping centers, hurt by big-box retailer bankruptcies. Risk-leery investors were shying away. And some analysts doubted whether the company could cut debt and raise money quickly enough to ensure its survival.
Yet the internationally known real estate company, founded in Northeast Ohio and based in Beachwood, has emerged from intensive care. Chalk part of that up to improved financial markets and a heartier economy, in which retailers are once again considering new stores. But Developers Diversified has made aggressive moves of its own, tapping nontraditional sources of cash, curbing development and installing a new chief executive officer.
As the economy rebounds, the company that became a poster child for real-estate risk now hopes to set another sort of example -- one of smart, steady growth, based on a strategy of creating long-term value instead of short-term gains.
"It's true that the industry historically has a short memory, and that often is discussed," said Daniel Hurwitz, who became president and CEO on Jan. 1. "But we don't.
"We went through a very difficult period of time. We have no intention of doing that again, and we will operate this company with discipline and focus and a keen sense of the history."
Northeast Ohio's real estate community is looking toward Las Vegas this week, as the shopping center industry gathers for an annual leasing conference that starts today.
Real estate companies, developers, retailers and leasing agents are converging at the Las Vegas Convention Center for three days of negotiating, networking and deal-making. And those meetings will have a rosier tint, now that the economy appears steadier, more financing is available and retailers have resumed their search for new store space.
That's a marked contrast to last year, when troubled financial markets and a choppy economy grounded developers and prompted retailers to cancel their trips. Attendance at the annual deal-making conference fell by 40 percent, according to the International Council of Shopping Centers, the trade group behind the event.
This year, expected attendance remains low -- up just slightly from last year at more than 30,000 people. But property owners and retailers are approaching the event with greater enthusiasm, intent on filling empty spaces and planning future expansions.
A few local companies will pitch new construction, including Bob Stark's planned retail project on the former State Road Shopping Center property in Cuyahoga Falls. But money for development remains scarce, and most property owners and managers are focused on existing properties. That presents a challenge for retailers, who already are planning for their 2012 store openings and are expecting that few new shopping centers will be available.
"It will be an industrywide concern as to how we're going to meet those growth plans going forward," said Paul Freddo, senior executive vice president of leasing and development for Developers Diversified Realty Corp.
Developers Diversified Realty Corp.
-- A real estate investment trust based in Beachwood.
-- Founded by Bert Wolstein in 1965 as Developers Diversified Group.
-- Went public in 1993. Traded on the New York Stock Exchange under the symbol DDR.
-- As of March 31, owned and managed 643 retail properties in the United States, Puerto Rico and Brazil.
-- Major tenants include Walmart, Target, Lowe's, Home Depot, Kohl's, T.J. Maxx, Marshalls, Publix Super Markets, PetSmart and Bed, Bath & Beyond.
-- Focused on leasing retail space and exploring redevelopment opportunities in the United States and Puerto Rico. Selectively developing projects in Brazil.
-- Grew through acquisitions until the recent real estate crisis. Now growing by filling empty stores, negotiating new leases, cutting expenses and selling less desirable shopping centers.
The shopping center owner, based in Beachwood, sent about 80 people to Las Vegas. That team will be courting retailers to fill vacant stores and assessing opportunities to improve some shopping centers to meet retailers' expansion needs. The company, which leased a record amount of space during the first quarter, works with tenants including Walmart, Target and T.J. Maxx -- brands that maintained appeal as consumers became more value-conscious.
Last year, retailers called and canceled appointments because they had decided to stay home, said David LaRue, chief operating officer for Forest City Enterprises Inc. This year, however, retailers have been reaching out to set up appointments with the real estate company, which is based in Cleveland and has properties throughout the country.
"We are hearing that retailers are indeed looking to grow," he said. "They do have the opportunity to move up from that B mall to an A mall, and they are going to be looking to improve their real estate position into the better shopping centers."
As of Friday, 1,000-plus attendees from Ohio, more than 400 of them from Northeast Ohio, had registered for the conference. Most were affiliated with real estate companies, developers and retailers. A few cities, including Canton, Medina, Westlake and Willoughby, also planned to send representatives to hobnob with retailers, chat with developers and explore opportunities for partnerships and projects.
Developers Diversified was founded in 1965 to develop Kmart-anchored shopping centers and went public in 1993. At its biggest in mid-2007, the company owned and managed about 800 retail properties. From its Ohio roots, Developers Diversified reached across the country and dipped into Brazil and Puerto Rico. And executives announced joint ventures to develop shopping centers in Russia, Ukraine and Toronto, Canada.
Real estate investment trusts, which pay out most of their taxable income to shareholders in the form of dividends, were hot. In February 2007, Developers Diversified's stock, listed under the DDR symbol on the New York Stock Exchange, traded above $70 per share.
But as signs cropped up that credit was tightening, investors lost their appetite for real estate. When major financial institutions foundered and the stock market tumbled in fall 2008, real estate investment trust stocks plummeted. Between the economic collapse and concerns about the company's debt, Developers Diversified's stock price fell below $1.50 a share by March 2009 -- a 98 percent drop from its peak.
"DDR was left in the gutter to die, effectively," said David Wigginton, a research analyst with Macquarie Capital USA Inc. "I think nobody wanted to touch the stock."
Traditional sources of real estate financing had disappeared, and the company was scrambling for cash. Meanwhile, Circuit City, Goody's, Linens 'n Things, Mervyns and Steve & Barry's -- all tenants at Developers Diversified centers -- went bankrupt and left large stores empty.
"There are lots of external factors that we could point to, that we could certainly say were out of our control," said David Oakes, a former Wall Street analyst and investment manager who joined the company in 2007 and became chief financial officer in February. "That said, I do think we have to own up to operating with a higher risk profile than we should have. . . . We went into an environment where the world got dramatically worse quite rapidly, and we weren't as well prepared for that as we could have been. And that falls on us."
The company slashed domestic development and tabled most of its international aspirations. When property sales proved challenging, executives pursued more unusual sources of capital. Last year, the Otto family of Germany acquired 30 million shares of the company's stock in a deal that made the billionaire real-estate family the largest individual shareholder.
In addition to bringing some much-needed cash, the Ottos demonstrated a major investor's confidence in the company's shopping centers -- just as investors were looking at the portfolio as "sort of a wounded duck," as Hurwitz puts it. The Otto family acquired additional shares in February, bringing its stake in the company to 23.3 percent as of Feb. 24, according to regulatory filings.
In November, Developers Diversified closed on a $400 million loan through a Federal Reserve program meant to revive the market for commercial real estate loans tied to multiple properties. Since then, as financial markets improved, the company has sold shares and issued notes, using the proceeds to reduce debt and address upcoming loan deadlines.
"We were pushed, and we were at the forefront of finding new sources of capital," Oakes said. "But we had to be creative to do it. At this point, the traditional sources are back, and you've seen us access those in some size over the past six months."
The company also has been leaving undesirable partnerships with other real estate investors and pruning its portfolio of lesser properties acquired during the real estate boom. As of March 31, the company owned and managed 643 retail properties.
Good team gets a new coach
Employees, analysts and investors weren't surprised last fall when Developers Diversified said that Scott Wolstein, the son of the company's founder, would be leaving the CEO's job.
A succession plan called for Hurwitz, the chief operating officer, to succeed Wolstein, and rumors about an impending change had been flying since the company's investor day in July. A change at the top was mandated, analysts said, in light of the drubbing the company took during the real estate crisis and some frayed relationships with investors.
"It's sort of like if you have a good team but you need a new coach," said Alexander Goldfarb, a senior real estate investment trust analyst at Sandler O'Neill + Partners in New York. "From a street perspective, it was necessary. . . . There needed to be some responsibility accepted and acknowledgment of that shift, and that's exactly what the company provided."
Wolstein became executive chairman of the company's board. And Hurwitz, a Connecticut native who joined the company in 1999, took the helm.
Analyst Rich Moore, who covers the company from Solon for RBC Capital Markets, described Hurwitz as one of the most talented executives in the real estate industry. Though Developers Diversified still faces significant challenges cutting debt and filling empty stores, Moore applauded the company's progress cleaning up its balance sheet, unloading lower-quality real estate and leasing spaces at its shopping centers.
"He's the right guy to run the company," Moore said of Hurwitz. "He's made a lot of changes, all for the good."
With the leadership transition, management of a real estate empire passed from a local family to a team of executives born and raised outside Greater Cleveland. In an interview, Hurwitz stressed his commitment to Cleveland and said that property sales and strategy changes will not diminish Developers Diversified's presence here. The company owns and manages 33 retail properties in Ohio and recently expanded its Beachwood headquarters, a project under way before the recession.
Developers Diversified employs 735 full-time workers, about 40 fewer employees than two years ago. During the recession, the company froze external hiring and eliminated some jobs. The cuts were much shallower than those at many large real estate companies, and managers tried to find new jobs for employees whose departments or positions were eliminated.
Moore, who has followed Developers Diversified for a decade, said changes in strategy and management helped craft a shift in the company's attitude, which he described as less aggressive and more collaborative.
"I think there's less bravado," Moore said. "I think there's more of a belief that it's important to get done what we say we're going to get done."
As of March 31, the company's total debt balance was $4.7 billion, down from $5.9 billion during the fourth quarter of 2008. The company hopes to reduce debt to $4.4 billion by the end of this year. As shopping-center mortgages approach refinancing deadlines, Developers Diversified is working out new terms, seeking extensions or selling some properties. And executives are focused on replacing short-term debt with longer-term loans.
Investors appear to be responding to this strategy and the team that is implementing it. On Friday, the company's stock closed trading at $11.11 per share, up 20 percent since the beginning of this year.
"Last year, everyone said, 'It's a very nice plan, but we don't even know if you can deliver on that plan,' " Hurwitz said, referencing investor surveys the company has conducted during the past 18 months. "This year, people said, 'That was a very nice plan, and really you've made tremendous progress. Keep going. Keep going.' "
Wednesday, May 26, 2010
Wednesday, May 19, 2010
Cleveland School District and Cleveland State University Launch Innovative K-12 School
May 13th, 2010
Internationally focused school to serve as a school of choice for Cleveland students and training ground for CSU education students
Today, the Cleveland Metropolitan School District and Cleveland State University announced a collaborative project to launch an on-campus kindergarten-through-12th grade school with a curriculum that is globally recognized for culture, innovation and high standards.
The school, Campus International School, is one of five ‘new and innovative schools’ outlined in the District’s Academic Transformation Plan. Campus International School will incorporate programs from the International Baccalaureate – a Swiss-based, education program renowned for its academic rigor and international curriculum, such as Chinese language classes.
Beginning this fall, the school will accept 120 students in kindergarten, first and second grades with plans to extend classes to the 12th grade by 2015. It will be housed in the First United Methodist Church at the corner of East 30th and Euclid Avenue.
Initially, there will be two classes in each grade consisting of 20 students. The school’s regional draw provides enrollment opportunities for CMSD students, the children of CSU employees and students and students throughout Cuyahoga County. A lottery will determine enrollment if demand exceeds availability.
Campus International School provides yet another educational choice and a university setting for its students. “This school will provide a unique educational experience that is currently unavailable throughout most of the region, and without the burden of tuition,” said Cleveland Schools CEO Dr. Eugene Sanders. “This will set a new urban standard in education, while allowing us to attract some of the best teachers available.”
Campus International School will provide a unique learning environment not just for the school’s young students but also for CSU education students, who will have immediate access to a teaching environment. Similar to a teaching hospital, University students will use the campus school as a hands-on training facility to enhance their classroom experience.
“This is truly a distinctive project on many fronts,” said CSU President Ronald Berkman. “This will provide the city with a unique, high-end education at no additional cost to the parents. But it will also provide the University with a venue to produce new, best-in-class teachers of the future.”
For Cleveland Mayor Frank Jackson, the project is a step toward reversing the flow of urban sprawl and drawing new families back into the city.
“For the City of Cleveland, the school represents a viable new option for younger families who want to live downtown,” Jackson said. “The first step of redeveloping any urban core begins with education, and this project sends a clear message that we are committed to bettering the community with students who will compete globally.”
Parents interested in enrolling their children can contact the CMSD Student Assignments Office at 216.523.6347, or visit www.csuohio.edu/k-12 for more information.
The International Baccalaureate offers programs of international education to a worldwide community of schools that develop intellectual, personal, emotional and social skills for students to live, learn and work in a rapidly globalizing world. The program serves 800,000 students at 2,800 schools worldwide.
Internationally focused school to serve as a school of choice for Cleveland students and training ground for CSU education students
Today, the Cleveland Metropolitan School District and Cleveland State University announced a collaborative project to launch an on-campus kindergarten-through-12th grade school with a curriculum that is globally recognized for culture, innovation and high standards.
The school, Campus International School, is one of five ‘new and innovative schools’ outlined in the District’s Academic Transformation Plan. Campus International School will incorporate programs from the International Baccalaureate – a Swiss-based, education program renowned for its academic rigor and international curriculum, such as Chinese language classes.
Beginning this fall, the school will accept 120 students in kindergarten, first and second grades with plans to extend classes to the 12th grade by 2015. It will be housed in the First United Methodist Church at the corner of East 30th and Euclid Avenue.
Initially, there will be two classes in each grade consisting of 20 students. The school’s regional draw provides enrollment opportunities for CMSD students, the children of CSU employees and students and students throughout Cuyahoga County. A lottery will determine enrollment if demand exceeds availability.
Campus International School provides yet another educational choice and a university setting for its students. “This school will provide a unique educational experience that is currently unavailable throughout most of the region, and without the burden of tuition,” said Cleveland Schools CEO Dr. Eugene Sanders. “This will set a new urban standard in education, while allowing us to attract some of the best teachers available.”
Campus International School will provide a unique learning environment not just for the school’s young students but also for CSU education students, who will have immediate access to a teaching environment. Similar to a teaching hospital, University students will use the campus school as a hands-on training facility to enhance their classroom experience.
“This is truly a distinctive project on many fronts,” said CSU President Ronald Berkman. “This will provide the city with a unique, high-end education at no additional cost to the parents. But it will also provide the University with a venue to produce new, best-in-class teachers of the future.”
For Cleveland Mayor Frank Jackson, the project is a step toward reversing the flow of urban sprawl and drawing new families back into the city.
“For the City of Cleveland, the school represents a viable new option for younger families who want to live downtown,” Jackson said. “The first step of redeveloping any urban core begins with education, and this project sends a clear message that we are committed to bettering the community with students who will compete globally.”
Parents interested in enrolling their children can contact the CMSD Student Assignments Office at 216.523.6347, or visit www.csuohio.edu/k-12 for more information.
The International Baccalaureate offers programs of international education to a worldwide community of schools that develop intellectual, personal, emotional and social skills for students to live, learn and work in a rapidly globalizing world. The program serves 800,000 students at 2,800 schools worldwide.
Friday, May 14, 2010
Rates Drop Below 5%! Lowest Rates in 2010
Mortgage rates drop to lowest level this year
By Associated Press business staff
May 13, 2010
WASHINGTON -- Mortgage rates fell this week to the lowest level of the year, as rates fell on U.S. government securities. Fixed mortgage rates closely track interest rates paid on long-term Treasury bonds.
The average rate on a 30-year fixed rate mortgage dipped to 4.93 percent this week from 5 percent a week earlier, Freddie Mac said Thursday. It was the lowest level since mid-December, when rates averaged 4.81 percent.
The drop came as investors shifted money from risky European debt to safer U.S. securities. Bond yields fell as a result, and that lowered mortgage rates.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
The average fixed rate dropped to a record low of 4.71 percent late last year, pushed down by a campaign by the Federal Reserve to reduce borrowing costs for consumers. The program ended this spring, but rates have remained low, especially after fears that Greece's government would default shook world markets.
"In times of nervousness, everybody seeks the safe haven," said Greg McBride, senior financial analyst at Bankrate.com
The last time rates for 30-year fixed mortgages averaged less than 5 percent was the week of March 25, when they were 4.99 percent.
This week, the average rate on a 15-year fixed-rate mortgage was 4.3 percent, down from 4.36 percent last week.
Rates on five-year, adjustable-rate mortgages averaged 3.95 percent, down from 3.97 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.02 percent from 4.07 percent.
The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.
The nationwide fee for loans in Freddie Mac's survey averaged 0.7 of a point for 30-year loans 0.6 of a point for 15 year, 5-year and 1-year loans.
By Associated Press business staff
May 13, 2010
WASHINGTON -- Mortgage rates fell this week to the lowest level of the year, as rates fell on U.S. government securities. Fixed mortgage rates closely track interest rates paid on long-term Treasury bonds.
The average rate on a 30-year fixed rate mortgage dipped to 4.93 percent this week from 5 percent a week earlier, Freddie Mac said Thursday. It was the lowest level since mid-December, when rates averaged 4.81 percent.
The drop came as investors shifted money from risky European debt to safer U.S. securities. Bond yields fell as a result, and that lowered mortgage rates.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
The average fixed rate dropped to a record low of 4.71 percent late last year, pushed down by a campaign by the Federal Reserve to reduce borrowing costs for consumers. The program ended this spring, but rates have remained low, especially after fears that Greece's government would default shook world markets.
"In times of nervousness, everybody seeks the safe haven," said Greg McBride, senior financial analyst at Bankrate.com
The last time rates for 30-year fixed mortgages averaged less than 5 percent was the week of March 25, when they were 4.99 percent.
This week, the average rate on a 15-year fixed-rate mortgage was 4.3 percent, down from 4.36 percent last week.
Rates on five-year, adjustable-rate mortgages averaged 3.95 percent, down from 3.97 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.02 percent from 4.07 percent.
The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.
The nationwide fee for loans in Freddie Mac's survey averaged 0.7 of a point for 30-year loans 0.6 of a point for 15 year, 5-year and 1-year loans.
Friday, April 30, 2010
When Tax Credit Vanishes, Will Buyers Disappear Too?
Jury's out on what will happen after tax credit for homebuyers expires
By Aldo Svaldi
The Denver Post
First-time homebuyer Jeff Romero has bid on more than 100 foreclosed properties in the past year, desperate to pocket an $8,000 tax credit that expires April 30.
With the clock ticking, Romero doesn't expect to get the Northglenn home he and his girlfriend are pursuing under contract in time. But losing that credit won't stop the 25-year-old from buying his first home.
"I have been very tempted to back out of our current offer and submit other offers," Romero said. "After talking it over with my girlfriend, we have decided that having the house of our dreams is more important than the tax credit."
The first-time-homebuyer tax credit, part of the stimulus package passed early last year, was designed to lure buyers. It and a $6,500 tax break for move-up buyers have done that, leaving some analysts worried that the tax breaks may have done the job too well and cannibalized future sales.
But the most popular view seems to be that housing markets are finally strong enough to stand on their own, without government support.
"Our sense is, based on what has been done and what has been occurring, the market can become self-sustaining by the end of the year," said Walter Molony, a spokesman for the National Association of Realtors.
Last fall, the group pleaded with Congress to extend and expand the tax break, which was scheduled to expire at the end of November, arguing that the market was too weak to manage without it.
Now, the NAR expects home resales will rise about 7 percent this year from last year, even with the credits going away. Homes must be under contract by April 30 and sales completed by June 30 to qualify.
Buyers undeterred
March was a "rock 'n' roll" month in metro Denver for homebuying activity, which should remain strong through June, said Gary Bauer, an independent real-estate analyst who tracks Denver's housing market.
"I fully expect that the market will continue to move along," he said. "Is it going to be a fantastic market? No. Will it be a negative market? No, unless something happens."
The credit definitely motivated Jennifer and Ronnie Holliman, who moved into their Parker home Thursday, to buy sooner rather than later.
"Our lease on our apartment actually isn't up until next December, so we had to break our lease," Jennifer said. "But we only did it because we knew we'd get the tax credit. Had it not gone through, we would have just waited until next year."
The credit covered their $2,500 lease-termination fee, she said.
But the number of homes being put under contract isn't at levels seen last October, when the previous deadline loomed, leading some analysts to conclude the tax breaks are not as important as they once were.
"Everyone has known about it, buyers are glad to get it, but it is no longer a central reason to buy," said Lou Barnes, a mortgage banker with Premier Mortgage Group in Boulder.
Take Romero, who still plans to buy a home without the credit. The credit would have gone to repay his father, buy furniture and create emergency savings.
As for the Hollimans, they plan to use some of the money left over to take their daughter to Disneyland for her birthday.
An even more important, if less visible, support for housing came from a Federal Reserve program that purchased $1.25 trillion in mortgage debt.
That unprecedented intervention, which ended in March, is credited with pushing mortgage rates below 5 percent and reversing a decline in home prices nationally.
Mortgage rates did jump from 5.04 percent on a 30-year loan before the program ended to 5.31 percent April 2, according to the Mortgage Bankers Association.
That increase also caused an index of mortgage applications to drop by 11 percent, although fewer people refinancing was behind that decline.
Mortgage rates could rise if private buyers don't step up and buy mortgage debt. Interest rates around 6 percent could kill activity, Barnes said.
But it appears the mortgage- rate spike was more the result of a positive jobs report that lifted interest rates rather than the Fed move. In an encouraging move for homebuyers, mortgage rates dropped back to 5.13 percent last week, Barnes said.
While the Fed hasn't bought any new mortgage debt since March 31, it is unlikely to dump the holdings it has. Also, little net new mortgage debt is being created. That means any rate increases should be moderate, said Cameron Findlay, chief economist at online lender LendingTree.
And there is a self-correcting mechanism. If mortgage rates rise, home values, which have been moving higher the past several months, could start falling again to restore equilibrium, Findlay said.
Findlay predicts that the U.S. median home price, now at $165,000 — a level last seen in May 2002 — will fall another 4.4 percent.
Some see trouble ahead
Some market watchers think things could get worse before they get better.
"All in all, I think we are in for a pretty dismal summer home-sales and housing-starts market," said Steve Wood, an economist with Insight Economics in Danville, Calif.
Combine exhausted demand, higher mortgage rates and another surge in distressed properties coming onto the market, and sellers could find themselves high and dry this summer, Wood contends.
Homebuilders who marketed to first-time buyers could end up the most vulnerable, said Lydia Lin, a broker associate with One Realty in Denver.
"They have relied heavily on this credit and retooled most of their new-home product towards the first-time buyer," she said.
And all bets are off if the economy weakens because stimulus funding runs out, employers stop hiring or interest rates shoot up.
Robert Shiller, who created the country's most closely watched home-price index, recently told Bloomberg that he sees the chances of the overall economy and housing markets going into a "double dip" as 50-50.
To understand where housing is headed, don't just watch mortgage rates, foreclosures and home sales, but job creation.
"The real issue for housing and as well as the economy generally is consistent growth in personal income," said Kansas City Federal Reserve Bank president Thomas Hoenig on a recent visit to Denver. "We need to have people with jobs."
By Aldo Svaldi
The Denver Post
First-time homebuyer Jeff Romero has bid on more than 100 foreclosed properties in the past year, desperate to pocket an $8,000 tax credit that expires April 30.
With the clock ticking, Romero doesn't expect to get the Northglenn home he and his girlfriend are pursuing under contract in time. But losing that credit won't stop the 25-year-old from buying his first home.
"I have been very tempted to back out of our current offer and submit other offers," Romero said. "After talking it over with my girlfriend, we have decided that having the house of our dreams is more important than the tax credit."
The first-time-homebuyer tax credit, part of the stimulus package passed early last year, was designed to lure buyers. It and a $6,500 tax break for move-up buyers have done that, leaving some analysts worried that the tax breaks may have done the job too well and cannibalized future sales.
But the most popular view seems to be that housing markets are finally strong enough to stand on their own, without government support.
"Our sense is, based on what has been done and what has been occurring, the market can become self-sustaining by the end of the year," said Walter Molony, a spokesman for the National Association of Realtors.
Last fall, the group pleaded with Congress to extend and expand the tax break, which was scheduled to expire at the end of November, arguing that the market was too weak to manage without it.
Now, the NAR expects home resales will rise about 7 percent this year from last year, even with the credits going away. Homes must be under contract by April 30 and sales completed by June 30 to qualify.
Buyers undeterred
March was a "rock 'n' roll" month in metro Denver for homebuying activity, which should remain strong through June, said Gary Bauer, an independent real-estate analyst who tracks Denver's housing market.
"I fully expect that the market will continue to move along," he said. "Is it going to be a fantastic market? No. Will it be a negative market? No, unless something happens."
The credit definitely motivated Jennifer and Ronnie Holliman, who moved into their Parker home Thursday, to buy sooner rather than later.
"Our lease on our apartment actually isn't up until next December, so we had to break our lease," Jennifer said. "But we only did it because we knew we'd get the tax credit. Had it not gone through, we would have just waited until next year."
The credit covered their $2,500 lease-termination fee, she said.
But the number of homes being put under contract isn't at levels seen last October, when the previous deadline loomed, leading some analysts to conclude the tax breaks are not as important as they once were.
"Everyone has known about it, buyers are glad to get it, but it is no longer a central reason to buy," said Lou Barnes, a mortgage banker with Premier Mortgage Group in Boulder.
Take Romero, who still plans to buy a home without the credit. The credit would have gone to repay his father, buy furniture and create emergency savings.
As for the Hollimans, they plan to use some of the money left over to take their daughter to Disneyland for her birthday.
An even more important, if less visible, support for housing came from a Federal Reserve program that purchased $1.25 trillion in mortgage debt.
That unprecedented intervention, which ended in March, is credited with pushing mortgage rates below 5 percent and reversing a decline in home prices nationally.
Mortgage rates did jump from 5.04 percent on a 30-year loan before the program ended to 5.31 percent April 2, according to the Mortgage Bankers Association.
That increase also caused an index of mortgage applications to drop by 11 percent, although fewer people refinancing was behind that decline.
Mortgage rates could rise if private buyers don't step up and buy mortgage debt. Interest rates around 6 percent could kill activity, Barnes said.
But it appears the mortgage- rate spike was more the result of a positive jobs report that lifted interest rates rather than the Fed move. In an encouraging move for homebuyers, mortgage rates dropped back to 5.13 percent last week, Barnes said.
While the Fed hasn't bought any new mortgage debt since March 31, it is unlikely to dump the holdings it has. Also, little net new mortgage debt is being created. That means any rate increases should be moderate, said Cameron Findlay, chief economist at online lender LendingTree.
And there is a self-correcting mechanism. If mortgage rates rise, home values, which have been moving higher the past several months, could start falling again to restore equilibrium, Findlay said.
Findlay predicts that the U.S. median home price, now at $165,000 — a level last seen in May 2002 — will fall another 4.4 percent.
Some see trouble ahead
Some market watchers think things could get worse before they get better.
"All in all, I think we are in for a pretty dismal summer home-sales and housing-starts market," said Steve Wood, an economist with Insight Economics in Danville, Calif.
Combine exhausted demand, higher mortgage rates and another surge in distressed properties coming onto the market, and sellers could find themselves high and dry this summer, Wood contends.
Homebuilders who marketed to first-time buyers could end up the most vulnerable, said Lydia Lin, a broker associate with One Realty in Denver.
"They have relied heavily on this credit and retooled most of their new-home product towards the first-time buyer," she said.
And all bets are off if the economy weakens because stimulus funding runs out, employers stop hiring or interest rates shoot up.
Robert Shiller, who created the country's most closely watched home-price index, recently told Bloomberg that he sees the chances of the overall economy and housing markets going into a "double dip" as 50-50.
To understand where housing is headed, don't just watch mortgage rates, foreclosures and home sales, but job creation.
"The real issue for housing and as well as the economy generally is consistent growth in personal income," said Kansas City Federal Reserve Bank president Thomas Hoenig on a recent visit to Denver. "We need to have people with jobs."
Wednesday, April 21, 2010
Gimme Shelter: New Ultra-Modern Bus Shelters Pop Up in Detroit Shoreway
If you've been hanging around Gypsy Bean and Baking Company lately, then you've probably noticed the new, ultra-modern bus shelters that have recently been installed here. If not, have your eyes checked. There is nothing boring about these shelters, and we're impressed by the boldness of the designer and the developer.
We did wonder about functionality, however. For instance: How does the bus shelter provide, er, "shelter" when it is pocked by quarter-sized holes that add to the impact of the sleek, modern design? Also, aren't those seats kinda small?
***
Former PURE staffer Genna Petrolla recently won an award from Judson Smart Living. You can read all about it here. Congrats Genna!
Wednesday, April 14, 2010
Developer MRN Ltd. Secures Financing for First Phase of Uptown Project
Developer MRN Ltd. secures financing for first phase of Uptown neighborhood project at University Circle
By Michelle Jarboe, The Plain Dealer
CLEVELAND, Ohio -- A long-discussed project at the heart of University Circle could break ground this summer, creating a residential backbone for the emerging Uptown neighborhood.
New apartments designed by architect Stanley Saitowitz bode well for Uptown
Cleveland developer MRN Ltd. has secured financing commitments to build $44 million worth of apartments, stores and restaurants along Euclid Avenue, northeast of Mayfield Road and Ford Drive. After years of planning, University Circle is poised to make a huge stride in attracting residents to a district known for its educational, medical and cultural behemoths.
"It's the project that everybody's been talking about for decades," said Chris Ronayne, president of the University Circle Inc. community development group. "It's at the epicenter of what could be a turning-of-the-page toward a very vibrant University Circle that is truly mixed-use."
MRN's project is a key anchor for Uptown, a mixed-use redevelopment that stretches from Mayfield to East 117th Street and from Little Italy to the Case Western Reserve University campus. Early phases of Uptown represent an investment of more than $150 million. The Cleveland Institute of Art has started a $55 million renovation and expansion along Euclid. The Museum of Contemporary Art Cleveland is raising money for a $25 million building at Euclid and Mayfield. And various stakeholders are planning millions of dollars in additional development.
Several of these projects, including MRN's buildings, have struggled with fundraising and financing hurdles in a rocky economy. MRN, the Maron family's development company, initially unveiled plans for a multi-phase residential and retail project in mid-2008. At the time, homebuilder Nathan Zaremba planned to build condominiums and apartments with the Marons, who are best-known for creating an entertainment district on East Fourth Street in downtown Cleveland.
Barnes & Noble has remained an anchor retail tenant for Uptown, despite project delays and the challenging economy. The bookstore will sit on the north side of the site, in an apartment building steps away from the Case Western Reserve University campus.Nearly two years later, those plans -- to be revealed publicly at a Cleveland design review meeting today -- look markedly different: MRN is now the sole developer, pitching a smaller first phase. There are no condominiums, which are harder to finance than apartments and have pre-construction sales requirements. Downsizing has helped the Marons secure financing and set a schedule, even as other developments in Northeast Ohio and across the country remain stalled.
"It's a very complex project in terms of all the stakeholders that are involved, not only in the community but as potential financiers of this thing," MRN partner Ari Maron said. "It's taken us a little bit longer than we initially anticipated to put all that together, but we're excited to be close."
The $44 million first phase could be finished in late 2011. It will comprise 102 apartments and 56,000 square feet of stores and restaurants in two J-shaped buildings lining Euclid Avenue. Maron would not share rental rates, but he described the apartments as higher-end residences aimed at nurses, doctors, graduate students and professors. Barnes & Noble still plans to open a two-level store on the north side of Euclid.
An apartment building planned along the south side of Euclid Avenue will curve in front of the Cleveland Institute of Art and terminate in an oval-shaped space designed for a restaurant or other unique tenant.South of Euclid, the Marons hope to create University Circle's answer to East Fourth, lined with restaurants and bars. An entertainment-focused street will be tucked between the J-shaped building and one of CWRU's existing Triangle apartment towers, where the university is planning a ground-floor retail renovation.
Future phases of the MRN project could include additional retail, offices and condominiums.
"We feel very strongly that there is a for-sale market in University Circle, so I want to make that clear," Maron said, citing town houses being built on East 118th Street and in Little Italy. "In terms of moving this project forward, it's easier to point to buildings like Park Lane Villa and the existing Triangle buildings and see that there's clearly a market for residential rental buildings."
The Marons are buying land for the project from CWRU and University Circle Inc., the driving forces behind Uptown. Instead of buying the property all at once, the Marons will purchase only what they need for each phase of the project -- another way to make the development financially feasible.
The $44 million first phase of the Maron family's development in Uptown will include an entertainment street, tucked between a new apartment and retail building and one of Case Western Reserve University's existing Triangle apartment towers. The Maron family is best known for turning downtown Cleveland's East Fourth Street into an entertainment district, and this street in Uptown also will be lined with restaurants and bars.KeyBank and FirstMerit Bank have signed on as lenders, and the Cleveland and Gund foundations are providing loans and grants. Community Development Advisors, an affiliate of the Greater Cleveland Partnership, is using federal New Markets Tax Credits to help finance the project. So is Enterprise Community Investment, a national lender. And Village Capital Corp. of Cleveland has committed loan money to the project.
The city of Cleveland approved $5 million in loans for the project in 2008, through a program designed to help developers revive vacant or little-used properties. The city has made no financing announcements about the project, and a spokeswoman did not respond to a request for comment Wednesday.
"It's been kind of a monumental task, really, to obtain these multi-layered financing commitments in this credit environment," said Russell Berusch, vice president of real estate for CWRU. "For that reason alone, we're really fairly sanguine. There are lots of moving parts and a great sense of urgency to achieve a closing and get a shovel in the ground."
By Michelle Jarboe, The Plain Dealer
CLEVELAND, Ohio -- A long-discussed project at the heart of University Circle could break ground this summer, creating a residential backbone for the emerging Uptown neighborhood.
New apartments designed by architect Stanley Saitowitz bode well for Uptown
Cleveland developer MRN Ltd. has secured financing commitments to build $44 million worth of apartments, stores and restaurants along Euclid Avenue, northeast of Mayfield Road and Ford Drive. After years of planning, University Circle is poised to make a huge stride in attracting residents to a district known for its educational, medical and cultural behemoths.
"It's the project that everybody's been talking about for decades," said Chris Ronayne, president of the University Circle Inc. community development group. "It's at the epicenter of what could be a turning-of-the-page toward a very vibrant University Circle that is truly mixed-use."
MRN's project is a key anchor for Uptown, a mixed-use redevelopment that stretches from Mayfield to East 117th Street and from Little Italy to the Case Western Reserve University campus. Early phases of Uptown represent an investment of more than $150 million. The Cleveland Institute of Art has started a $55 million renovation and expansion along Euclid. The Museum of Contemporary Art Cleveland is raising money for a $25 million building at Euclid and Mayfield. And various stakeholders are planning millions of dollars in additional development.
Several of these projects, including MRN's buildings, have struggled with fundraising and financing hurdles in a rocky economy. MRN, the Maron family's development company, initially unveiled plans for a multi-phase residential and retail project in mid-2008. At the time, homebuilder Nathan Zaremba planned to build condominiums and apartments with the Marons, who are best-known for creating an entertainment district on East Fourth Street in downtown Cleveland.
Barnes & Noble has remained an anchor retail tenant for Uptown, despite project delays and the challenging economy. The bookstore will sit on the north side of the site, in an apartment building steps away from the Case Western Reserve University campus.Nearly two years later, those plans -- to be revealed publicly at a Cleveland design review meeting today -- look markedly different: MRN is now the sole developer, pitching a smaller first phase. There are no condominiums, which are harder to finance than apartments and have pre-construction sales requirements. Downsizing has helped the Marons secure financing and set a schedule, even as other developments in Northeast Ohio and across the country remain stalled.
"It's a very complex project in terms of all the stakeholders that are involved, not only in the community but as potential financiers of this thing," MRN partner Ari Maron said. "It's taken us a little bit longer than we initially anticipated to put all that together, but we're excited to be close."
The $44 million first phase could be finished in late 2011. It will comprise 102 apartments and 56,000 square feet of stores and restaurants in two J-shaped buildings lining Euclid Avenue. Maron would not share rental rates, but he described the apartments as higher-end residences aimed at nurses, doctors, graduate students and professors. Barnes & Noble still plans to open a two-level store on the north side of Euclid.
An apartment building planned along the south side of Euclid Avenue will curve in front of the Cleveland Institute of Art and terminate in an oval-shaped space designed for a restaurant or other unique tenant.South of Euclid, the Marons hope to create University Circle's answer to East Fourth, lined with restaurants and bars. An entertainment-focused street will be tucked between the J-shaped building and one of CWRU's existing Triangle apartment towers, where the university is planning a ground-floor retail renovation.
Future phases of the MRN project could include additional retail, offices and condominiums.
"We feel very strongly that there is a for-sale market in University Circle, so I want to make that clear," Maron said, citing town houses being built on East 118th Street and in Little Italy. "In terms of moving this project forward, it's easier to point to buildings like Park Lane Villa and the existing Triangle buildings and see that there's clearly a market for residential rental buildings."
The Marons are buying land for the project from CWRU and University Circle Inc., the driving forces behind Uptown. Instead of buying the property all at once, the Marons will purchase only what they need for each phase of the project -- another way to make the development financially feasible.
The $44 million first phase of the Maron family's development in Uptown will include an entertainment street, tucked between a new apartment and retail building and one of Case Western Reserve University's existing Triangle apartment towers. The Maron family is best known for turning downtown Cleveland's East Fourth Street into an entertainment district, and this street in Uptown also will be lined with restaurants and bars.KeyBank and FirstMerit Bank have signed on as lenders, and the Cleveland and Gund foundations are providing loans and grants. Community Development Advisors, an affiliate of the Greater Cleveland Partnership, is using federal New Markets Tax Credits to help finance the project. So is Enterprise Community Investment, a national lender. And Village Capital Corp. of Cleveland has committed loan money to the project.
The city of Cleveland approved $5 million in loans for the project in 2008, through a program designed to help developers revive vacant or little-used properties. The city has made no financing announcements about the project, and a spokeswoman did not respond to a request for comment Wednesday.
"It's been kind of a monumental task, really, to obtain these multi-layered financing commitments in this credit environment," said Russell Berusch, vice president of real estate for CWRU. "For that reason alone, we're really fairly sanguine. There are lots of moving parts and a great sense of urgency to achieve a closing and get a shovel in the ground."
Wednesday, April 7, 2010
Obama Administration Offers Aid to 'Underwater' Homeowners
Government aims to help more 'underwater' homeowners
By Associated Press business staff
April 5th, 2010
WASHINGTON -- The government launched a new effort on Monday to speed up the time-consuming, often-frustrating process of selling your home if you owe more than it's worth.
The Obama administration will give $3,000 for moving expenses to homeowners who complete such a sale -- known as a short sale -- or agree to turn over the deed of the property to the lender. It's designed for homeowners who are in financial trouble but don't qualify for the administration's $75 billion mortgage modification program.
Owners will still lose their homes, but a short sale or deed in lieu of foreclosure doesn't hurt a borrower's credit score for as much time as a foreclosure. For lenders, a home usually fetches more money in a short sale than a foreclosure. And the bank avoids expensive legal bills, cleanup fees and maintenance costs that follow a foreclosure.
"It's very traumatic and embarrassing and frustrating to go through a foreclosure," said Laurie Maggiano, policy director of the Treasury Department's homeownership preservation office. With a short sale, she said, "your financial issues are your own problem and not neighborhood conversation."
Falling home prices and lost jobs have forced many sellers into this position. For example, in Orange County, Calif., short sales made up about 26 percent of the market in March, compared with 17 percent a year earlier, according to data complied by Altera Real Estate, a local brokerage. In the Minneapolis-St. Paul metro area, about 12 percent of all deals since October were short sales, up from about 8 percent a year earlier, according to the Minneapolis Area Association of Realtors.
The expanded incentives will help accelerate short sales, said Mark Zandi, chief economist at Moody's Analytics. He expects 350,000 homeowners nationwide to use the program through the end of 2012, more than double his earlier forecast.
A short sale appears to be the only way out for Brandee Chambers, 36, of Las Vegas. She got into trouble during the housing boom by taking out a risky loan against her home and using the money to buy two investment properties in Phoenix.
She later lost those two properties to foreclosure, and now she is trying to sell the home she lives in for $209,000, but the mortgage balance is $350,000.
Chambers, who owns two hair salons, says she would rather stay in her home, where she lives with her 14-year old son. But she had no luck getting help with her loan. She said she's resigned to scaling back her lifestyle and renting out an apartment.
"I've had to accept a lot in the last year," she says.
For buyers, though, short sales can be a great opportunity.
Marco Cappelli, 49, a winemaker from Northern California, is planning to buy a short sale this month in the Sierra Nevada foothills. He and his wife are paying $214,000 for a property that had been listed at $270,000. They pair plan to fix it up, install a hot tub and rent it out to vacationers.
Along with the financial incentives, the new government program makes another key change. Mortgage companies will have to set their minimum bid before the house is listed for sale. If the offer is above that, the lender must accept it.
That's a big change from current practice. Lenders generally don't calculate how much money they are willing to accept on a short sale until they have an offer in hand, causing long delays before the sale is approved.
The new program "will give us a degree of efficiency that we have not had in the past," said Matt Vernon, Bank of America's executive in charge of short sales and foreclosed properties.
Under the new process, buyers who submit an offer to purchase a home in a short sale should get a response within two weeks, as opposed to months. If that happens as planned, it would be a big improvement. Real estate agents across the country have complained that lenders are often difficult to reach, sometimes only communicating by e-mail and infrequently at that.
"You're one of 400 properties on a screen," said Dave Bauer, a real estate agent in Danville, Calif.
Some real estate agents who specialize in short sales are optimistic. "It could be the first government program that actually helps Las Vegas," said Steve Hawks, a real estate agent there who specializes in short sales. Most borrowers in Las Vegas, he said, owe so much more on their mortgages than their properties are worth they can't qualify for a loan modification.
The Treasury Department outlined the plan last November, but doubled the original $1,500 in relocation money after realizing that many homeowners need more cash to move out. That's because landlords usually want large deposits from people whose credit records have gone sour after missing mortgage payments.
However, there are plenty of restrictions. To qualify, the home needs to be a borrower's primary residence. Homeowners either have to be behind on their mortgages or on the verge of becoming delinquent.
Currently, the program is not available for mortgages owned or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac, though the two government-controlled companies will soon follow suit, said the Treasury's Maggiano.
By Associated Press business staff
April 5th, 2010
WASHINGTON -- The government launched a new effort on Monday to speed up the time-consuming, often-frustrating process of selling your home if you owe more than it's worth.
The Obama administration will give $3,000 for moving expenses to homeowners who complete such a sale -- known as a short sale -- or agree to turn over the deed of the property to the lender. It's designed for homeowners who are in financial trouble but don't qualify for the administration's $75 billion mortgage modification program.
Owners will still lose their homes, but a short sale or deed in lieu of foreclosure doesn't hurt a borrower's credit score for as much time as a foreclosure. For lenders, a home usually fetches more money in a short sale than a foreclosure. And the bank avoids expensive legal bills, cleanup fees and maintenance costs that follow a foreclosure.
"It's very traumatic and embarrassing and frustrating to go through a foreclosure," said Laurie Maggiano, policy director of the Treasury Department's homeownership preservation office. With a short sale, she said, "your financial issues are your own problem and not neighborhood conversation."
Falling home prices and lost jobs have forced many sellers into this position. For example, in Orange County, Calif., short sales made up about 26 percent of the market in March, compared with 17 percent a year earlier, according to data complied by Altera Real Estate, a local brokerage. In the Minneapolis-St. Paul metro area, about 12 percent of all deals since October were short sales, up from about 8 percent a year earlier, according to the Minneapolis Area Association of Realtors.
The expanded incentives will help accelerate short sales, said Mark Zandi, chief economist at Moody's Analytics. He expects 350,000 homeowners nationwide to use the program through the end of 2012, more than double his earlier forecast.
A short sale appears to be the only way out for Brandee Chambers, 36, of Las Vegas. She got into trouble during the housing boom by taking out a risky loan against her home and using the money to buy two investment properties in Phoenix.
She later lost those two properties to foreclosure, and now she is trying to sell the home she lives in for $209,000, but the mortgage balance is $350,000.
Chambers, who owns two hair salons, says she would rather stay in her home, where she lives with her 14-year old son. But she had no luck getting help with her loan. She said she's resigned to scaling back her lifestyle and renting out an apartment.
"I've had to accept a lot in the last year," she says.
For buyers, though, short sales can be a great opportunity.
Marco Cappelli, 49, a winemaker from Northern California, is planning to buy a short sale this month in the Sierra Nevada foothills. He and his wife are paying $214,000 for a property that had been listed at $270,000. They pair plan to fix it up, install a hot tub and rent it out to vacationers.
Along with the financial incentives, the new government program makes another key change. Mortgage companies will have to set their minimum bid before the house is listed for sale. If the offer is above that, the lender must accept it.
That's a big change from current practice. Lenders generally don't calculate how much money they are willing to accept on a short sale until they have an offer in hand, causing long delays before the sale is approved.
The new program "will give us a degree of efficiency that we have not had in the past," said Matt Vernon, Bank of America's executive in charge of short sales and foreclosed properties.
Under the new process, buyers who submit an offer to purchase a home in a short sale should get a response within two weeks, as opposed to months. If that happens as planned, it would be a big improvement. Real estate agents across the country have complained that lenders are often difficult to reach, sometimes only communicating by e-mail and infrequently at that.
"You're one of 400 properties on a screen," said Dave Bauer, a real estate agent in Danville, Calif.
Some real estate agents who specialize in short sales are optimistic. "It could be the first government program that actually helps Las Vegas," said Steve Hawks, a real estate agent there who specializes in short sales. Most borrowers in Las Vegas, he said, owe so much more on their mortgages than their properties are worth they can't qualify for a loan modification.
The Treasury Department outlined the plan last November, but doubled the original $1,500 in relocation money after realizing that many homeowners need more cash to move out. That's because landlords usually want large deposits from people whose credit records have gone sour after missing mortgage payments.
However, there are plenty of restrictions. To qualify, the home needs to be a borrower's primary residence. Homeowners either have to be behind on their mortgages or on the verge of becoming delinquent.
Currently, the program is not available for mortgages owned or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac, though the two government-controlled companies will soon follow suit, said the Treasury's Maggiano.
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