A great example of how quickly we’re moving to develop a green-building economy in the East Bay. -D.

Building the future brick by brick

From the San Francisco Business Times – by Emily Wilson

Date: Friday, June 17, 2011, 1:49pm PDT

Savvy building owners are quick to limit energy use with smart thermostats and good habits, but most buildings emit a significant amount of carbon dioxide before the first LED light is switched on.

“The manufacturing of building products is incredibly energy intensive,” said Tom Pounds, CEO of CalStar Products Inc. “The best example is cement. Five percent of man-made carbon dioxide is coming from cement.”

CalStar addressed this problem by reinventing a basic building material: the brick.

“Clay bricks have been made for centuries by taking clay out of the ground and forming shapes and firing them in kilns at 2,400 degrees Fahrenheit for several days,” Pounds said. “As a result, every single clay brick you see in the world generated about a pound of carbon dioxide.”

CalStar’s process to make bricks and pavers uses recycled fly ash, a waste material from coal-firing plants, instead of cement. The fly ash acts as a binding agent, so the bricks don’t require firing to harden, meaning they use dramatically less energy and CO2 to produce.

“We sort of feel like we hit the trifecta,” Pounds said. “Forty percent of the body of our product is recycled material, so for every brick we sell instead of a clay brick, we’re both avoiding landfill and preserving natural materials. The second piece is 85 percent reduction in embodied energy, and the third is 85 percent reduction in carbon emissions.”

CalStar opened its first production facility in January 2010 and launched its bricks and pavers into the marketplace a few months later. The plant has a production capacity of 40 million “brick equivalents.” The company also plans to introduce permeable pavers in the near future as a solution for stormwater management.

Mark Moxley, a partner at Lake Street Landscape Supplies in Chicago, has been selling CalStar’s bricks and pavers for about nine months. Moxley appreciates the bricks’ smooth surfaces and rich colors.

“I’m encouraged by companies like CalStar,” Moxley said. “They’re a very forward-thinking model that allows products to be sold at a competitive price. I wish other companies would follow their lead.”

via CalStar’s recycled bricks save energy | San Francisco Business Times.

Rudy’s Can’t Fail Cafe, a new Uptown restaurant, is celebrating its grand opening Friday evening with Oakland Mayor Jean Quan and Green Day bassist Mike Dirnt, who is a co-owner.

The eatery, at 1805 Telegraph Ave. in Oakland, joins several other hip spots that have opened in Oakland’s Uptown neighborhood, an area that has been revitalized in the last few years.

It is across the street from the Fox Theater, a historic venue that was re-opened after a major overhaul in 2009.

Jeffery Bischoff, a former music industry entreprenuer, came up with the concept for a kitchy cafe serving classic diner food whipped up with locally-sourced ingredients and partnered with Steve Mills and Dirnt. The first Rudy’s location opened in Emeryville in 2002.

According to the restaurant’s blog, “Named after a classic song by the Clash and partially owned by Green Day’s Mike Dirnt, it’s a rockin’ spot with a lot of whimsical detail.”

Its menu features creatively-named dishes including Combat Mac and Cheese, Mr. Roadies Fish and Chips, and Your Own Private Eyedaho, hash browns covered in melted cheddar served with a sunny side up egg.

via Rudy’s Can’t Fail Cafe opens in Oakland’s Uptown | San Francisco Business Times.

Catalyst for change: An updated Foothill Square will reenergize the whole area, John Jay says.  Developer Jay-Phares Corp. plans to begin construction this summer on a major overhaul of Foothill Square, a 50-year-old shopping center in East Oakland that will bring in new anchor tenants Foods Co. and Ross Dress for Less. The $30 million renovation will transform the outdated space into a 201,900-square-foot shopping center from its current size of about 155,000 square feet. The project involves tearing down existing buildings to make room for more parking and new structures. “The objective is to modernize the center and bring quality goods and services to the surrounding community,” said John Jay, a partner with Jay-Phares Corp., the developer working on the shopping center, which is owned by MacArthur Boulevard Associates. Foothill Square is perhaps one of the most underutilized sites in Oakland, Jay said.  It is close to the San Leandro border right off of Interstate 580 and MacArthur Boulevard, a major artery, and in heavily populated area.  There about 25,000 people within a one-mile radius and more than 160,000 in a three-mile radius. Oakland’s dearth of retail is felt throughout the city, but most acutely in areas such as East Oakland.  The addition of the 72,000-square-foot Foods Co. will be one way to address what Gregory Hunter, Oakland’s redevelopment director, calls a “food desert” because of a lack of grocery stores.The Foods Co. is expected to start construction in July and could be open by December, said Mark Salma, director of real estate for Foods Co., which is owned by Kroger Co., one of the nation’s largest grocery chains.“We’re happy it’s all coming together,” Salma said. “We obviously want our brand new store in a shopping center that looks brand new.”Besides a new layout, the developers will blanket the 13.5-acre property with modern landscaping, signage and facades.Alameda County has agreed to spend $300,000 to re-align an off-ramp from Interstate 580 to improve visibility and access from the freeway.Foothill Square currently houses a mix of tenants including a hair supplies store, a dialysis clinic, laundromat, restaurants, a bingo hall and a Head Start facility.Some of those tenants will stay, including the bingo hall and the Academy of Hawaiian Arts, two neighborhood favorites, while making room for the grocery store and 24,000-square-foot Ross.When it was first built in 1961, Foothill Square was considered ahead of its time because of its walkable promenade in the middle of the center and the first indoor food court west of the Mississippi, called the Court of the Seven Chefs.In its early decades, the center was home to tenants such as Thrifty Drug Stores, Bank of America, Zales Jewelers and S.S. Kresge, the predecessor to Kmart.With time, those tenants moved away or went out of business, leaving the center in decline. Jay-Phares came on board during the mid-90s when Foothill Square was about 70 percent vacant and began making attempts to lure a new anchor.Deals came close to sign new leases with retailers such as Long Drugs and Lucky Supermarkets, but ended up falling through for various reasons.Jay-Phares, which focuses on rehabilitating urban properties, was able to bring in tenants such as a Social Security office and county services offices, which have since moved out.“We have always envisioned a transformation back to the original retail community center it was,” Jay said. “We hope it’s a catalyst to improve the entire MacArthur Boulevard corridor.”

via Oakland’s Foothill Square overhaul attracts new anchors | San Francisco Business Times.

An excerpt from a light-hearted piece from the weekend Journal.  They do a good job of lining up the various factors that will come into play over the next five years. – Derek

So what might the next five years look like? Once the foreclosure mess begins to clear up, say housing economists, the traditional drivers of the housing market—demographics, affordability, loan availability, employment and psychology—should take over.

Here is a glimmer of what the future may hold: While overall home prices fell by 7.5% in April over the same period a year earlier, according to CoreLogic, a Santa Ana, Calif., provider of real-estate data and analytics, if you exclude distressed sales, prices were off just 0.5%. So if you are in a market that isn’t battered by foreclosures, you may be close to a bottom already.

“The regular marketplace is hanging tough,” says CoreLogic chief economist Mark Fleming.

Here is a look at five key factors that will govern local markets over the next several years:

Demographics

Household formation fell during the economic downturn as a weak economy led some people to stay in school, double up with roommates or move in with family members. According to Moody’s Analytics, the number of new households renting or owning a home dropped to 578,000 in 2008 from nearly 2 million in 2005, just before the peak of the housing boom.

But household formation increased to nearly 950,000 last year, says Moody’s, and should average 1.2 million over the next decade.

“Whatever the excess supply of housing is, it is shrinking pretty fast,” says Thomas Lawler, an independent housing economist.

Some of the uptick in household formation is likely to come from the leading edge of the echo baby boomers, who have been waiting for the economy to recover before striking out on their own, says William Frey, a demographer with the Brookings Institution. That is likely to fuel an increase in demand for both rental apartments and starter homes.

The portion of people moving across the country has fallen to the lowest level since World War II, he adds. That is a sign that many people have put their lives on hold because of the weak economy.

“When things do pick up, there will be this pent-up demand for everything involved with starting a household,” Mr. Frey says.

Of course, when prices in healthier regions begin to rise, many would-be sellers who have sat on the sidelines could begin putting homes on the market, muting the price gains at first, says Susan Wachter, a professor of real estate and finance at the University of Pennsylvania’s Wharton School. Even so, she expects home prices to stabilize and begin to strengthen over the next two or three years.

There also are some powerful demographic cross-currents worth considering. The first baby boomers turned 65 in January, an age when demand for new homes falls and many begin to think about downsizing. “The baby-boom generation pushed prices up as they got older,” says Dowell Myers, a professor of urban planning and demography at the University of Southern California. But in the coming years, “boomers will start flooding the market on the supply side” with larger homes, while fueling new demand for smaller properties with more services and amenities.

Affordability

Rising home prices made renting cheaper than buying in many parts of the country. But that dynamic has begun to change: Housing affordability, as measured by the ratio of median home prices to median household incomes, has fallen below pre-housing bubble levels in just over two-thirds of the country, according to an analysis of more than 380 metro areas by Moody’s Analytics.

Renting is still cheaper than buying in most markets, but rising rents and falling house prices mean that, in some areas, this won’t be the case for long. Buying a home is already cheaper than renting in Chicago, Cleveland, Detroit and Orlando, Fla., according to Moody’s Analytics. In other markets, including Dallas, Las Vegas and Sacramento, Cailf., the equation is likely to soon turn in favor of homeownership if current trends persist, the firm says.

In Ann Arbor, Mich., where home prices fell 11.2% between 2007 and 2010, according to Fiserv Case-Shiller, housing affordability has risen well above historical levels, according to Moody’s Analytics.

That is good news for home buyers such as Steven Upton, a 42-year-old photographer, who in June will close on four-bedroom brick house on 10 acres in an upscale community in Ann Arbor. Mr. Upton paid $400,000 for the home, which previously listed for $600,000. “It’s a tremendous deal,” he says.

Before buying a house, it is wise to compare rental prices for similar properties. To be ultraconservative, wait until the monthly outlays, including taxes and insurance, are equal. You also could factor in the tax savings of owning, which would make buying more attractive even if the gross monthly outlay is slightly higher.

Employment

The strength of the housing market depends largely on the economy. Rising incomes and increased employment tend to give more would-be buyers confidence and buying power. For now, job growth remains sluggish: On Friday the Labor Department reported that just 54,000 jobs were created in May, far below expectations.

But signs of how a stronger job market could fuel housing demand are evident in the Dallas metro area, which added 83,100 new jobs in the 12 months ending in April—the largest gain in the nation, according to the Bureau of Labor Statistics. Dallas never had a big housing boom or bust and has benefited from trade with Mexico, a strong telecommunications sector and a central location.

The opportunities for a job with more responsibility drew Duane and Linda Elmer to Dallas from Des Moines, Iowa, where Mr. Elmer was a banker for nine years. The couple has agreed to pay $415,000 for a four-bedroom, four-bath house with a Jacuzzi and pool. Their Des Moines home, purchased nine years ago for $410,000, is on the market for $390,000. “We are willing to take the loss for the opportunity to live in a more diverse community and to take a job with greater breadth of responsibilities,” Mr. Elmer says.

Borrowers like the Elmers who are relocating for job opportunities are a big driver of home sales in nearby Plano, Texas, says Harry Ridge, a real-estate agent. He says such sales accounted for 20% of his business last year.

A similar influx of job seekers is fueling housing demand in the Washington area, where 25,700 new jobs were added in the 12 months since April 2010. Washington was the only one of the 20 cities tracked by Standard & Poor’s and Case-Shiller that saw home prices rise both on a month-to-month and year-over-year basis.

Credit

Mortgage financing remains plentiful for borrowers with good credit scores and solid employment histories. But for borrowers who don’t fit traditional lending standards, getting a loan can still be nearly impossible. In the first quarter, about 10% of banks tightened standards for nontraditional loans, according to the Federal Reserve. Meanwhile, higher down-payment standards are locking some would-be buyers out of the market. Just 35% of renters have the minimum 3.5% down payment needed for an FHA loan on the median-priced home in their market, according to a recent survey by Zelman Associates.

Credit is likely to remain tight for at least the next six months, says Clifford Rossi, a formerCitigroup Inc. consumer-lending executive who teaches at the University of Maryland.

But conditions should improve over time, he says: “There’s no question that it will gradually get easier.”

That will be welcome news to borrowers like Greg Silver. The 50-year-old real-estate developer would like to buy a second home, but hasn’t been able to secure a jumbo mortgage because his income consists of capital gains from sales of the properties he develops. Mr. Silver closed three sales in the past 12 months, netting him a total of more than $25 million, but didn’t record any capital gains in 2008 and 2009. Sure, he could use some of that cash to buy a home outright, but he would prefer to mortgage it, get the tax deduction and keep his cash free for business purposes.

“It’s a little devastating,” says Mr. Silver, who is living in Greenwich, Conn.

Psychology

The long-term case for buying over renting remains in force. Yet nowadays, “People are simply scared,” says Aaron Galvin, chief executive of Luxury Living Chicago, which finds rental apartments for wealthy clients.

Mr. Galvin says he has seen a 30% increase in business in the last year, driven by would-be home buyers who can afford to purchase a property but are choosing not to do so.

The portion of Americans who believe homeownership is a safe investment dropped to 66% in the first quarter from 83% in 2006, according to Fannie Mae, the government-controlled mortgage company.

But it isn’t clear whether the fear will result in a prolonged change in attitudes, as during the Great Depression, or have little long-term impact, as was the case for the housing bust that shook California and the Northeast in the late 1980s and early 1990s. Eighty-seven percent of people surveyed by Fannie Mae said they preferred owning to renting, though access to schools, control over one’s environment and other quality-of-life issues now are seen as the key benefits of homeownership, with building wealth and other financial factors viewed as less important. In addition, 67% of renters surveyed by Zelman Associates said they planned to buy a home in the next five years.

Jeffrey Connor may be a bellwether for the future of the housing market. The 40-year-old finance director at a corporate law firm says he thought briefly about buying a house when he moved to Chicago from Washington in October. But he opted instead to rent a luxury two-story apartment in downtown Chicago for $3,559 a month. Mr. Connor says it will take substantial job growth and a sharp drop in foreclosures to convince him to buy.

“The market is clearly soft,” he says, “especially when we consider it good news that the unemployment rate is hovering around 9% instead of 10%.” Mr. Connor says he isn’t worried about missing out on today’s low interest rates and will consider buying once unemployment falls to 6%.

Other buyers are showing less willingness to wait for the absolute perfect time to buy. Doug Yearly, chief executive of luxury builder Toll Brothers Inc., told investors in May that “some of our clients, after waiting so long, are starting to move off the fence and into the market, motivated by attractive pricing, low interest rates and, most important, the desire to take the next step in their lives. The family with elementary-school kids and a puppy when the housing debacle began five years ago now has middle-school kids and the dog weighs 80 pounds.”

Another indication that the rental market is poised to make a strong comeback.  Note the 2% vacanacy rates across his portfolio and the 7% increase in price per unit in SF. – Derek

San Francisco real estate investor Russ Flynn continues to pick up the pieces of the crumbling Lembi family apartment portfolio, paying $55 million for the defaulted notes on two top-notch Nob Hill buildings in a deed in lieu of foreclosure transaction.Flynn acquired the 167-unit Gaylord Hotel, an upscale residential hotel building at 620 Jones that houses the restaurant Jones. He also picked up the Park Lane at 1100 Sacramento St., a New York-style doorman building which sits on the top of Nob Hill across from the Fairmont Hotel and the Pacific Union Club. The 1925 78,000-square-foot Park Lane, where a 2,300-square-foot unit is currently renting for $10,500 a month, has 33 units ranging in size from 2,300 square feet to 3,600 square feet. Lender UBS Real Estate Securities, which took back 51 buildings from the Lembis after the market crashed in 2008, was the seller of the notes.“The Park Lane is simply one of the best buildings in one of the best locations in one of the best cities in the world,” said Dan McGue of Paragon Real Estate Group, who represented Flynn in the note purchase.The buildings represent the 27th and 28th former Lembi apartment buildings that Flynn has bought since 2008, a flurry of activity that has added 931 units to the portfolio. Flynn owns about 3,500 units in San Francisco.Flynn has now invested more than $155 million in former Lembi properties. The vacancy rate in Flynn’s portfolio is 2 percent.The Lembi family shelled out more than $1.2 billion in San Francisco rental buildings between 2003 and 2007, using Wall Street money to borrow 95 percent of many buildings’ purchase prices. As loans started to become due in 2008 and 2009 the credit markets had frozen up and the family was unable to refinance the debt.Flynn said he tried to buy the pair of buildings in 2005, but was outbid by the Lembi family, which at the time was buying up nearly every apartment building that came on the market. Lembi paid $60 million for the two buildings, and then invested another $11.8 million in improvements.“I have always loved the Park Lane. I wanted to own it for a long time,” said Flynn. “It’s the best residential apartment building on the West Coast.”The median price per apartment unit in San Francisco is rising rapidly, jumping 7 percent in the past year to $182,800 per unit, according to Marcus & Millichap. The in city’s trendiest tech-centric neighborhoods South of Market, vacancy has dropped nearly 2 points to 4.9 percent.“We are in a unique situation out here,” Flynn said. “We are benefitting from the slow economy everywhere else and the need to keep interest rates low. Ordinarily when we have low interest rates we have declining rents. We have the opposite now here, we have low interest rates and rising rents.”Flynn estimates that high-end rents dropped between 30 and 40 percent during the recession, but that rents are back to where they were in 2008.“I’m starting to get a bit nervous about where the younger generation is going live if they don’t make a very high salary,” said Flynn. “People in the culinary industry are going to have a hard time because people in the tech industry are going to price them out.”

via Flynn snaps up Lembi’s Nob Hill buildings | San Francisco Business Times.

Where Is Housing Headed?

By Nick Timiraos

Home prices showed signs of stability in April after several months of declines, according to a report Wednesday from CoreLogic Inc.

CoreLogic’s home price index showed that home prices increased by 0.7% in April from March, even though they were down 7.5% from one year earlier, when sales were being boosted by tax credits. The report came one day after the S&P/Case-Shiller index showed that home prices declined in March to a new post-bubble low.

What’s going on here?

These and other home prices indexes, which track repeat sales, tend to be heavily influenced by the share of distressed sales, as we’ve noted before. That’s because banks tend to cut prices in order to quickly sell foreclosures. As the distressed share rises, price indexes are likely to report larger declines.

CoreLogic provides one index that excludes distressed sales, and it has shown little movement—up or down—in home prices recently. Excluding distress, prices were down 0.5% in April from one year earlier, and down by 1.6% in March. By comparison, prices were down 7.5% and 6.8%, respectively, when distressed sales are included. All but six states declined when including distressed sales, but 20 states showed increases if distressed sales are excluded.

The numbers could explain one of the big standoffs restraining the housing market in recent months: Buyers are demanding deeper discounts than sellers think they should have to offer.

A better gauge of what’s happening to prices in real time is to look at pending sales, which usually track future sales activity. The National Association of Realtors last week reported a surprisingly sharp 11.6% drop in pending home sales for April, which should show up in May and June sales.

Most analysts believe that home prices, which are down around 30% from the peak, are near bottom, absent any further deterioration in the economy. While banks will continue bringing hundreds of thousands of foreclosures to market in the coming years, affordability has fallen back to pre-bubble levels.

Home sales “are not obviously misaligned with fundamentals,” wrote Goldman Sachs economist Zach Pandl in a note Tuesday. He says that given mortgage rates, job market conditions, and household formation, home sales shouldn’t deviate too far from current forecasts in the coming months. Any significant decline in sales “would likely require a shift in fundamentals: higher mortgage rates, a further deterioration in perceptions about house prices, or a weaker job market.”

The prospect of a double-digit drop in prices in 2011 has grown remote, says Glenn Kelman, chief executive of Redfin Corp., largely because banks have been slow to list foreclosures and sellers haven’t stepped in to fill the gap.

The bottom line: Prices appear more likely to bounce along a bottom rather than plunge precipitously as they did in 2007 and 2008. Housing indexes may show ultimately show this, though foreclosures could cloud the picture for now.

via Where Is Housing Headed? – Developments – WSJ.

747 Richmond Street, El Cerrito

Beautiful gardens and decks adorn this delightfully spacious bungalow.  A two bedroom, one bath close to it all in El Cerrito.  Updated kitchen, hardwood floors, fireplace and a bonus room listed at $475k.

7319 Ganges Court, El Cerrito

Hardwood floors, open plan with light and views.  1/4 acre lot backs up onto open space.  Great starter home listed at $409k.

4642 Kaphan Avenue, Oakland

Three bedroom, two bath restoration in the Oakland Hills.  Bay Views, new kitchen with Cherrywood cabinetry, on-demand tankless water heater, new windows, furnace and more.  Listed at $489k

10740 Hellman Street, Oakland

With views overlooking the vast expanse of Knowland Park, this three bedroom, two and a half bath will lift you out of the urban life the moment you roll up your drive.  Marble floors, fireplace, bay views, master suite and a bonus room make this property incredibly tempting.  Listed at $399k

By ELIOT BROWN And NICK TIMIRAOS

Fannie Mae is planning to sell a stake in scores of apartment buildings to Related Cos., the New York private real-estate company controlled by Stephen Ross, according to people familiar with the matter.

Under terms of the deal, Fannie would sell to Related a 25% stake in the government-controlled company’s inventory, which is valued at about $300 million, according to people familiar with the matter. Terms of the deal couldn’t be determined.

Fannie also would sell Related stakes in future foreclosed multifamily properties, which are expected to be added to the portfolio as Fannie takes them over in the coming years, these people said. Related would be required to invest in maintenance and management of the properties.

The deal would represent the first major bulk sale of foreclosed property by Fannie Mae, which has seized a number of apartment buildings from landlords in recent years as the loans fell into default.

Although lending to landlords makes up a relatively small portion of Fannie’s overall mortgage portfolio, the amount of foreclosed apartment buildings, which tend to be middle- and lower-income rentals, is on the rise. Fannie reported $596 million in foreclosed multifamily properties at the end of 2010, more than double what the company reported a year earlier.

If completed, the transaction would mark a shift for the mortgage company. Until now, Fannie was selling off apartment buildings seized from landlords individually, often at distressed prices. But as its stock of foreclosed buildings increases, Fannie is seeking an investor to help boost values of the buildings while keeping a majority stake on its books, people familiar with the deal said.

Both companies, which were taken over by the federal government during the financial crisis of 2008 and required $134 billion in taxpayer bailouts, have largely resisted bulk sales of single-family properties or nonperforming loans. The firms believe they can make more money selling properties individually. They also want to avoid liquidating houses at fire-sale prices, which would erode the value of properties that they either own or are used to secure loans they guarantee.

The multifamily sector overall has recovered faster than other types of commercial real estate. But most apartment-building values still are well below 2007 levels, and delinquency rates on loans remain high. As a number of loans made during the peak years come due in the next five years, Fannie is expected to see its foreclosures on multifamily buildings rise.

“Weak economic conditions have caused new foreclosures to outpace dispositions,” the company said of multifamily properties in a February filing with the Securities and Exchange Commission.

via Related to Buy Stake in Fannie Apartment Portfolio – WSJ.com.

As more proof that the apartment investment market is hot, Leeward Ventures recently paid $3.075 million for the Fontana Lee East Apartments, a 22-unit property in Adams Point near Lake Merritt in Oakland.

The price breaks down to about $139,772 per unit and $146 per square foot.

The property was attractive because of its prime location for apartments in Oakland. It was built in 1968 by Santos Construction and is a four-story wood frame and stucco building with a concrete block exterior and a concrete slab foundation.

The building is comprised of 15 one-bedroom/one-bath units, six two-bedroom/two-bath units and one two-bedroom/two-bath penthouse with a wood-burning fireplace. Unit amenities include garbage disposals, dishwashers, electric ranges, electric fireplaces, abundant closet space, private balconies, wall china cabinets in select units and original light fixtures.

via Investor buys Lake Merritt apartment building | San Francisco Business Times.