This Week’s Recommended Reading

6 Articles to Read this Weekend Designing a Better Office Space The office of the future may not be about trappings or technology as much as the exchange of ideas, with a focus on employee engagement–what some experts are calling the “new sustainability.”… Here’s How To Create A Workspace That Empowers Your People And […]

Value Add Deals Needed To Keep Up With Apartment Building Demand- Freddie Mac

Apartment building investors should be looking at renovation, value add and repurposing deals according Freddie Mac’s David Brickman, EVP for Multifamily Business. In an Executive Perspective note published last week Brickman covered these points:

  • Demographic forces alone could create as many as 4.7 million more renter households by 2023.
  • That even the 3.1 million new units expected over the next 10 years will not be enough to meet demand.
apartment kitchen remodel

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  • Compounding the issue, the existing rental housing stock is aging.  Nearly 60 percent of U.S. rental properties with 20 or more units were built before 1980.
  • Supply already could be 1.5 million

             apartments short, by some estimates.

  • Nearly 6 percent of all units are retired each year; almost double that number for lower-income units.
Apartment Exterion Renovation

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  • Modernizing existing units could help keep them viable.
  • Modifying units could help better meet evolving needs.  For example adding amenities that promote working from home or increasing storage space, especially for Baby Boomers who previously owned homes.
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  • Some enhancements could help preserve not only the units themselves, but also the subsidies – such as Low-income Housing Tax Credits (LIHTC).
  • Modernizing, rehabilitating, and preserving existing units typically costs less than building new ones and benefits tenants as well as the property developer/owners and the surrounding communities.
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  • Boosting overall multifamily rental-housing inventory – through more emphasis on rejuvenating existing units in addition to new construction – would help close the supply gap and offer more housing options.
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See the whole Executive Perspective here.

Ashworth Partners

Saving money with design-build

The de Blasio administration wants the state to give it permission to build major infrastructure projects faster and cheaper by bundling design and construction bids into a single contract.

A 2011…

To view the full story, click the title link.

News – Crain’s New York Business News Feed

#Multifamily REITs best performers in 1st half 2014 had a piece called REIT Returns Outpace Broader Market in Solid First Half Showing out late last week and the part that caught my eye was the section titled: Apartment REITs Lead the Pack in First Half:

  • Apartment REITs were the strongest performers during the first half.
  • Total returns as of July 7 in the sector stood at 23.8 percent.
Apartment Building Investment REITS perform best during 1H 2014

Click image to view article on

“There was increasing comfort in the market that fundamentals in the [apartment] sector were not decelerating as fast as many had feared,” said James Sullivan, managing director at Cowen & Co.

Apartment REIT managers are some of the best multifamily operators in the world and it pays to pay attention to what they’re doing. Unfortunately the returns on REIT shares are too often driven  by capital flows from the stock market rather than the pure performance these managers generate. Patient contrarian investors  can be rewarded however by waiting for apartment REITs  to fall out of favor with stock market investors and pick them up at bargain prices.

Click on the image above or use this link to see the article on REIT Returns Outpace Broader Market in Solid First Half Showing

Ashworth Partners

NYC Speaking Engagement

For those interested in coming out, I’ll be speaking in New York City on July 15.

Click Here for More Info

And don’t forget to check out the progress on our personal residence on!

1-2-3 Flip

Apartment Investment Loan Rates Remain in 4.6-4.7% Range As Spread To Treasury 10yr Holds

The apartment building loan rate we track came in today at 4.765% (see below for loan details), making it 22 straight weeks below the five percent mark. The spread to the 10 year Treasury (T10) also remained in the 2.1 and change range where it’s been since the beginning of March, indicating that the very competitive market for multifamily loans continues on.

For the gold plated ULI less than 60% LTV loan the spread dropped into the 1.2s from the 1.3 range where it had been holding since late February, taking the implied rate for these core institutional apartment loans down to 3.77%.

10 Year Treasury versus Apartment Building Investment Loan Rate

Speaking of the spread between the T10 and the apartment building rate we track, the green line on the chart represents the six months trailing average spread. We track changes in the trend for signs apartment lenders becoming more or less competitive. Note that since rates are only quoted on business days the chart averages the last 120 business days which equates to roughly six months.

We track the 10 year Treasury because that is the benchmark most lenders base their long term rates on. In order to lure investors away from Treasuries to buy mortgage bonds lenders have to offer a premium (AKA ‘spread’) over what can be earned on the Treasury. So when the T10 moves, rates on all kinds of longer term loans including on apartments tend to move also. As you can see in the chart, the spread also widens and narrows as market forces make an impact.

Notes about the apartment loan rates shown in the chart above: The rates shown here are from one West Coast regional lender for loans on existing apartment buildings between $ 2.5 – 5.0M. The rate quote they send every Monday that I track is a 30 year amortizing loan with a fixed rate for 10 years (They also have other fixed periods at different rates). The max LTV for this loan is 75% (they have an even lower rate on their max 60LTV loans) and the minimum Debt Cover Ratio (DCR, aka DSR or DSCR) is 120. Note too that these are ‘sticker’ rates, LTVs and DCRs and ‘your millage may vary’ depending on how their underwriting develops.  I usually figure that we’ll end up at a 70LTV which also helps the debt cover and provides a larger margin of safety, which is half the battle from a value investing standpoint.

The prepay fee is 5,4,3,2,1% for early repayment in the first five years and you do have the ability to get a 90 day rate lock. The minimum loan is $ 500k (at a slightly higher rate for less than $ 1M loans) and they’re pretty good to work with as long as you go in knowing that it takes up to 60 days to close their loan. If you are looking at acquiring an apartment building in California, Oregon or Washington I’d be happy to recommend you to my guy there for a quote. Send me a message through this link and I’ll make an introduction for you.

The other rate we track is the from the Trepp survey which the ULI (Urban Land Institute) reports on. According to the ULI the Trepp rate is what large institutional borrowers could expect to pay on a 10 year fixed rate, less than 60% LTV loan for a “crème de la crème” core property located in a gateway market. We track this rate as a barometer of what the largest lenders are offering their best customers on the most secure loans for any advanced warning about future rate and spread changes. Note that the spread we chart is between 10yr loan we track and the T10.

How the St. Louis Fed calculates the 10 year Treasury rate displayed above: “Treasury Yield Curve Rates. These rates are commonly referred to as “Constant Maturity Treasury” rates, or CMTs. Yields are interpolated by the Treasury from the daily yield curve. This curve, which relates the yield on a security to its time to maturity is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. These market yields are calculated from composites of quotations obtained by the Federal Reserve Bank of New York. The yield values are read from the yield curve at fixed maturities, currently 1, 3 and 6 months and 1, 2, 3, 5, 7, 10, 20, and 30 years. This method provides a yield for a 10 year maturity, for example, even if no outstanding security has exactly 10 years remaining to maturity. For even more detail see:

As a reminder, one basis point or 1bp is equal to one-one hundredth of one percent or .0001. When you hear ‘fifty basis points’ that’s one-half of one percent; ’125bp’ would be 1.25% or a percent and a quarter, sometimes referred to as ‘a point and a quarter’. A bp seems like a tiny number, too fine to make a difference but in the debt world if you can squeak out an extra 20bp on a 100 million dollar deal (like a pool of apartment building loans) that’s $ 2oo,000.00 in your pocket. To paraphrase Everett Dirksen: “20bp here, 20bp there and pretty soon you’re talking about real money.”


Ashworth Partners

Rare retail-space bargain seized in SoHo

SoHo – The women’s fast-fashion apparel maker Brandy Melville just proved that fate casts even the city’s best retail space into deep discounts from time to time.

The brand just leased an…

To view the full story, click the title link.
Real Estate Deal Watch – Crain’s New York Business

70% of Americans think housing crises continues, 51% say renting is more appealing #Multifamily

A MacArthur Foundation survey conducted by Hart Research Associates shows that 70% of Americans polled think that the housing crises isn’t over and 19% think the worst is yet to come, good for apartment building investment I believe. As reported by the Wall St. Journal in an article titled: Allure of Homeownership Slumps Amid Worries of Continued Crisis  the worst is yet to come figure is unchanged from last year, which may reflect a segment of the population that has been deeply scarred by collapse of the lending and housing bubbles. The still in the crises figure is down from 77% a year ago but it is still a big number that’s having a positive effect on apartment demand:

51% say renting is more appealing; positive for apartment building investment

Referencing the chart above, the article stated that 51% of those polled said renting was more appealing than in past decades which is definitely positive for apartment building investors. Note that while urban apartment demand and development has been getting a lot of action, 35% of suburbanites think renting is more appealing. This lines up with moves large institutional multifamily investors are making recently with value add suburban deals. For more on the suburban apartment trends see: Blackstone Hunts for Apartments in Latest Rental Foray on Bloomberg.

The survey also asked about the deductibility of interest expenses on 2nd homes and homes worth more than $ 500,000. Overall a majority favor eliminating the tax break by a slim margin but when broken out into different geographical areas some surprising results show up; see the article for the chart and discussion on that as well as how appealing homeownership is among different groups.

Ashworth Partners

House #57: Demolition Videos

We knocked down Our House yesterday and we’re starting excavation of the new basement today…

As I mentioned last week, we’re tracking the project in gory detail over at This morning, I posted a couple time-lapse videos of the demo…check them out:


You can also check out the live streaming video of the project at any time…

1-2-3 Flip

North American Office Highlights – Q1 2014

ICEE, Sunbelt Office Markets Shine in Q1 2014 After a weak, weather-impacted start to the year, employment growth accelerated, supporting further modest office occupancy gains. Although the financial services industry was stagnant, the professional and business services sector added 77,000 jobs in April, the highest monthly total since November 2012 according to ADP. The tech […]

What can you do to add value to your home before you sell?

Every home owner has some vision for the property he/she has, but in most of the cases, they do not know exactly how to invest economically in them. Before selling any property, there have to be some renovations that add value to the house which you wish to sell. The spring season is the ideal time to begin the renovating ventures. It is the best weather to go ahead with the job. If you are looking to buy property e.g. buying houses for sale in Birmingham from expert estate agents then you may hope that the previous owners have completed the following steps;

You can make your choices for remodelling of your house which also suit your pocket. The fundamental goal of a prudent homeowner is to spend every bit of money wisely in the venture of remodelling the house. Whether the remodelling involves painting a room, adding another storey or renovating the kitchen or the washroom, you must ensure to make intelligent moves and there is a lot that can be done before selling the house in order to make it give you a better bargain.

You must make your own decisions. The first and foremost decision that you need to make is whether the job requires a contractor or not. This also depends on how much money you can shell out, how much time is there on your hands and what are the changes that you wish to incorporate in the house. If there is even a slight doubt that you, yourself will be unable to take on the task, then it is best to employ a contractor. It may involve money, but you will get something that is an attraction for the potential buyers.

Go for the process of renovation one by one. You must not attempt to do a big task at once. You must start with the smaller projects first. These will be the things that you may be able to do on your own like fixing new lights and painting. Then you can go to the projects that require more work like major systems or new windows etc. Finally, turn to the final touches and the cosmetic and beautification part.

It is best to make use of the standard materials and simple designs. Granite and wood are always the best to use and durable too. You must also try and use inexpensive fixtures for most part of the house. The other systems that require some proper renovations should be identified and then the budget for working on them could be decided.

Lastly, there is a need to cushion your budget. This is because, when you start with the process of renovation, there may be some surprises for you. You may start renovating a part and then realize that another part needs to be worked on. So, you must reserve 15% over and above your budget in case there is some extra work that is required to be undertaken. This is most necessary in case you hire a contractor. Don't forget the legal fees as I'm sure every estate agent in the UK will add.

The key lies in having a good knowledge of what you wish to do in your home and what it will cost you. You must investigate and determine what are the stages involved in the changes that you wish to make and how much is the total estimate of the expenditures. Utilize your knowledge to your benefit and ensure to make prudent choices for your home.