Notes from SFAA General membership meeting 1/23/12

2011 was very good year for the rental housing  industry and it will be hard to beat. Legislatively we got some good things done and  our candidates  fared well in lcoal elections. This year will bring a very important election cycle on all levels of govt;  local, state and fed. We will have supervisorial elections in the even districts this year so there is an  opportunity to further the successful assembly of a more pragmatic and cooperative board of supervisors.

The analytics for our industry continue to look positive…..

Average Rents should continue to escalate with a limited supply.

I checked Craigslist today for 1 bdrms in the following districts.

  • Nob hill, 6 units available and the avg rent is  $2427.
  • Mission 7 units available ………………………  $2136
  • sunset/Parkside  4 apts………………………..    $1247
  • Russian Hill………………………………………..  3 x   $2966
  • Inner sunset ………………………………            6 x  $2258

I think you will continue to see avg. rents driven upward by a shortage of supply and moderate to strong demand. I recently had 2 tenants rescind their 30 day notices to move after spending a weekend apartment  hunting and realizing that they 1. have a pretty good deal pricewise and 2. don’t   want the acrimony of dealing with a highly competitive rental environment.

I think we will are going to see more of this in the coming year. Shortage of rental inventory caused in part by a lack of apartment turnover.

ON THE SALES SIDE……

There are inventory constraints at work here too..

There are 22 multi unit buildings   currently for sale in SF regardless of price. 7 of    which are 5 or 6 unit buildings.

There are 11 multi unit (5+) buildings in contract and in various stages of the sale process as of today, January 23, 2012.

There were 66 sales through MLS in the last 6 months with an average price per square foot of $300 and avg days on the market of 92.

 Stats – Averages

Listing $

SqFt

Listing Pr/SqFt

DOM

Sale $

Selling Pr/SqFt

5+ Units (66)

$2,532,042

9582

$303

92

$2,479,877

$299

 

Class A buildings are valued at cap rate in the mid 4%‘s and class B buildings are priced caps in the mid 5%’s.  Riskier assets like those in deep  Tenderloin are being priced in the mid 6% but there is very little inventory right now and brokers are being pretty tight lipped about their pipelines.

Its a great time to sell as demand for apartments is high given the metrics of the rental market and the attractive financing rates available.

I am seeing 7-10 fixed rates at below 4.5% so check if you refi-ed back in 06-07 in the mid 6%’s thinking, this can’t get that much better!”  Well it has and it might be worth the litany of the paperwork.  In fact,  it might be well worth buying your way out of a loan through the PPP if you can save a full point in interest.

Selling you apartment building isn’t the hard part, finding a up leg property on a 1031 exchange is going to be.

Much of the sales volume over the last 2 years has been in larger portfolios and off market transactions. If you are planning on selling, first call me as a may have a buyer but also be aware that abundant choices for the up leg portion of the deal  do not currently exist.

– That’s the market update.

 

Fire at Pierce and Golden Gate:  1st 5 alarm fire in SF in 6 years

 

  •  occurred in shortly before Xmas,  2 properties damaged and 37 people were displaced from their homes.
  • Owner of the building is an SFAA member: had to deal with a number of displaced tenants, none of whom sustained any serious injury from the fire.
  • Personally came to thank industry leaders for initiating the Good Samaritan legislation passed last year;
  • Fillmore Towers, Park Merced and Mosser Properties avail their services as they always do and assisted in providing housing to  displaced tenants through the Good Samiritan program.  If you are interested  you can sign up online at SFAA.org site.  2 page enrollment app with no obligation to participate.
  • This is a great example of the fruition of that work and the industry coming together to help a member and those affected by the disaster.
  • My office is located relatively close to that address so I went by to see what happened.  In the 2 block radius restriction; I saw every city service dept: police, fire,  red cross , animal rescue, dbi,  dpw, and various disaster remediation companies. It was great to see everyone working in unison to deal with the aftermath of the fire. Pretty impressive actually, everyone involved with mitigating the challenges of that day, I take my hat off to them.

SFAA lease revisions for 2012 are complete.  Added 4 new clauses which I will

#16 defaults to NO subletting allowed under any circumstance.

#32  carbon monoxide detectors if provided in premises tenant responsible for maintaining.

#38  Renters insurance, tenants agree to have it and provide LL w proof within 30 days.  or if cancelled is grounds for just cause.

#53 No release from forfeiture:  tenant must pay back attorneys fee costs and damages as a condition of release from forfeiture: goes back to our Prop M victory