MHN Blog

'Capital Insights' with Jack Kern: New Rent Regulations Go Into Effect on Foreclosures

"Nothing is more damaging to a state than that cunning men pass for wise."
Francis Bacon (1561-1626)
 
There are an estimated 5 million homes in foreclosure, with the total potentially rising to 7 million. One of the facts coming to light is that as much as 40% of these are investor- or syndicate-owned and leased out to renters. As these houses are falling into default, many of the owners are pocketing the rent payments and letting the renters discover for themselves that they are being evicted, even though they've paid their rents on time and consistently. Recent legislation now makes it harder for the bankers and court appointed receivers to evict the renters. If the renter has a lease, they are given the term of the lease plus 90 days to move out. If the renter is on a month-to-month term, then they are given 90 days to move. If no lease is in place, then it's up to the discretion of the court to decide, based on hardship and other socio-economic factors.

We've made mention before about how the foreclosure process has been a negative factor for professionally managed units and now at least the new legislation brings some additional order to the process. While it would be best for the foreclosed inventory to be closed out finally, at least this step avoids the constant lobbying and meddling by local governments with rules in effect that differ by county. It would be smart for owners to monitor court proceedings and potential evictions as these residents are going to need a place to go and their choices, at least by foreclosure standards, are becoming more narrow.

(Jack Kern is the managing director of Kern Investment Research, Germantown Md. You can reach him at 301.601.1900 or JKern@KernIRC.com.)

‘The Essential Kitchen’ with Kevin M. Henry: Tao of the New Economy: Part I—Meet the ‘So-Con’

The near collapse of the global economic system has had a major impact on the lifestyle of the American consumer, who is buying fewer services and goods that were once considered staples of the affluent life.
 
American consumers have suffered a collective breakdown. They have begun to question their lives and their lifestyles...Do I need that big German car? Do I really need that second house at the beach? Do my kids need to go to that private school? Do I need a new phone or iPod or laptop because it now comes in a cooler color? 

Out of this period of self-denial and personal re-evaluation, a new consumer will be born, the Socially Conscience Consumer or SoCon. SoCons are aware of the world around them and what it means to be self-sufficient—they are consumers who understand that the purchases they make have a profound impact on the world around them, both economically as well as environmentally.

The SoCon will no longer be goaded and coerced by peer pressure or ego-based advertising. He has moved from a consumerism based on flaunting and bragging to one of self-reflection and social responsibility. The battle cry of the SoCon is simple and direct “Do I really need this?”

SoCons will emerge from this economic downturn not as victims, but as survivors. They will feel good about themselves and most of all they will feel good about the future. Like the economic collapse of the 1970s and 1990s, the SoCons will enter into an age of great opportunity and great possibilities.

They will feel empowered and they will have the confidence to take on the future. They will believe in a better tomorrow. And they will focus on what’s good about life, rather than what’s not.

So what is at the “heart” of the Social-Conscious Consumer? To the SoCon it is about lifestyle, it’s not about owning, it’s about living. If stress and anxiety were the bi-products of the post-economic collapse, then nothing will be more coveted by the SoCon than a safe haven to gather and commune with family and friends.

What Are They Looking For?

They look at labels and check out websites and align themselves with those companies that embody their beliefs and values. They are no longer brand loyal, but seek brands that exemplify the new social contract and will hold them accountable.

A word that was once associated with an older generation has become the watch word of the new economy. “Frugality.” Everyone is looking over their collective shoulders, waiting for the other shoe to drop. Will I have my job next year or even next month…my 401 is useless, my savings account is near empty and I have no way to cover tuition for the kids next semester. In other words…every penny counts.

The SoCon has begun to buy store brands at the market as well as cutting and using coupons for the first time. They no longer are looking at cars and phones as a disposable commodity…they are looking and purchasing refurbished phones and other personal electronics as well as pre-owned autos…and even considering public transportation.

The biggest change has been the use of credit cards or better yet the lack of use…the SoCon have lost their need for instant gratification…they are taking their time and pondering their purchase…they have moved from a purchasing reflex of “I want this” to a conscious thought pattern of “Do I really need this.” They are abandoning the credit card to using a debit card or cash or— in a throw back to the 50s—lay-a-way…paying for it over time.

The 7 Characteristics of the SoCon
1.    The SoCons feel that they have too much “stuff.” And that they were prisoners of their possessions and had fallen victim to easy credit and the siren song of mass-consumption. Today they will no longer cave-in to their old buying habits.
2.    The SoCon wants to experience life and not just fill space around them with things. Now every purchase must be weighed and evaluated.
3.    The SoCon is embarrassed by past indiscretions…such as the Hummer or that 10- bedroom summer house for a family of three or the latest…the need to have an iPhone.
4.    To the SoCon, wealth is no longer about things or logos or a brand name…true wealth is about giving back to the community, to the country…to the planet. The things they will purchase today will reflect the social good.
5.    From the clothes they wear, to the coffee they drink, to the car they drive, to the kitchen that defines their home…each purchase must reflect a Social Return on Investment by the company or manufacturer.
6.    The SoCon will use limited resources as a currency of consciousness to leverage a greener and more sustainable tomorrow.
7.    The SoCon believes that the actions of the individual can make a difference.
In Part II, next week, we’ll take a look at marketing to the SoCon.

(Kevin Henry is the executive VP of Bazzèo Kitchen + Bath, as well as writer, speaker and industry activist. He can be reached at kevin@nyloft.net)

Foong on Finance: Initial Look at Financial Regulatory Reform

Last week, President Obama put forward his proposals to make changes to the regulatory oversight of the financial system.

Among the proposals, the “ Financial Regulatory Reform Plan” would give the Federal Reserve and the Federal Deposit Insurance Corp. additional controls over financial institutions. It would require hedge funds and private equity funds to be registered with the Securities and Exchange Commission. And it would consolidate the agencies that oversee consumer debt banking into a regulator called the Consumer Financial Protection Agency.

Where our industry is concerned, the plan would more tightly control banks that issue mortgage-backed securities. And it would require companies that issue mortgages to keep some of mortgages on their books, so that they are more careful about the lending that they do. 

From more of a citizen’s point of view, the reform plan has been criticized as not being real reform, just as advocates at this point are worried that healthcare reform is in danger of becoming.

But so far, from industries’ viewpoint, the Mortgage Bankers Association (MBA) says that it welcomes the coming debate over the regulation of the financial services industry.

“As the past several years have shown, oversight of financial firms can and should be improved in order to better protect consumers and make sure the troubles in the financial sector are not repeated,” says John A. Courson, MBA’s president and CEO.

"[W]e will continue to argue for one preemptive set of mortgage regulations throughout the country to replace the current patchwork of state and local laws."

MBA Chairman David G. Kittle, says that MBA supports the creation of a new regulator for non-depository independent mortgage banks and mortgage brokers, funded by the mortgage industry.

And that MBA will work with policymakers “on the idea that all participants in the mortgage origination process should have a financial interest in making sure a borrower has a sustainable mortgage payment, without putting certain business models at a competitive at disadvantage.”

At press time, MHN is still working to obtain from multi-housing groups their thoughts on the financial regulatory reform proposals. Stay tuned.

(Keat Foong is the executive editor of Multi-Housing News. She can be reached at keat.foong@nielsen.com)

Guest Blog: The Power of Your Website

We are all familiar with the web and have heard all the stories about young entrepreneurs becoming fabulously rich by building amazing sites and selling products through them. Some examples include Amazon, Zappos, and today’s social media darling Facebook.

Every property is a business and just like any other business you need to promote it. The best and most efficient source to advertise your business is through the Internet. Unlike traditional print advertising, your website need not cost a lot to advertise through. Essentially, your website is a tool to take and use as your advertising vehicle in various sources like Google AdWords, banner ads on popular websites, and through email marketing such as Constant Contact. But if you do not want to spend money to promote your website (which I do not recommend) you have another option. 

You may have heard of the term search engine optimization (SEO). It is the fancy term used by every out of work graphic designer and webpage specialist to try and hook you into paying them big bucks to “optimize” your site. I can tell you from experience that 95% of the people looking to “optimize” your site are not aware of what they are doing.

Your goal should be to build a site that can stand alone by itself and optimize itself. So if you are currently using a template-based system on which your properties site was built upon you’re in trouble.

Three things have to happen for you to have a good site that will be searchable by Google and the other search engines. 1) Domain name 2) Strong keywords inside the pages of your site 3) Receiving backlinks

Let’s look at each of the three points. Let’s assume that your property called Windmill Terrace and it is located in Encino, CA. Let’s also assume that the website to your property is www.wtencino.com . The name of this site is terrible for your property. The reason is because when a potential renter is looking for an apartment on Google they are very committed to a geographic location. What query might a renter queue into Google? How about ‘Encino Apartments’. This search term is highly searched for renters looking to live in Encino, CA. My suggestion for the owners of Windmill Terrace would be to change the domain name of their property to be www.EncinoApartments.com or www.apartmentsencino.com. By doing this the #1 key of importance is satisfied from an SEO perspective: having a searchable domain.

Keywords laced throughout the pages of your site are important. Keywords that are focused on amenities and conditions of the property are important because this is what renters will be queuing into search engines. I recommend that you have a heavily key worded article at the bottom of your home page. When someone types in a phrase in the search bar of Google and your website has several of the words in that phrase or matches it exactly, Google should recognize this and put you more towards the top of the sites they display in your search results. Keywords in the title tags of each of your web pages are essential. The headlines of sites that you read on Google, well those headlines come from the title tags.

Backlinks are a vital component of a good SEO campaign. Essentially heavily laced key worded articles are written (200 to 600 words) and submitted to at least 20 of the top article directory services. Other services then pick up on your article and create what are known as backlinks pointing to your site.
You can do the writing yourself or pay to have it done.
When a term is keyed into Google, it searches all the sites with that term in it. It then categorizes the sites that you see in the results on several factors but one main one happens to be backlinks. If my property’s site has 10,000 backlinks for the term ‘pet friendly’ and my competition has 1,000 for the same term, then my site gets ranked higher.

There is no silver bullet with SEO. I’ve given you some important snapshots. Getting your site ranked high is incredibly important when renters are looking for somewhere to live. You should want your site to be number 1. For fun go to Google and queue in ‘apartment energy consultants’ and see what you get. If you would like assistance with your site and SEO please let us know.

(Scott Yahraus is the president of Apartment Energy Consultants. Apartment Energy Consultants is the governing body that certifies multifamily properties as being “National Green Apartment Certified” visit them at http://www.GreenRetrofitter.com, 818-854-6850, or email Scott directly at Scott@GreenRetrofitter.com)

‘Who’s Leading the Green Movement?’ Guest Blog with Matt Voorhees

Individual homeowners are going green in record numbers, but they are not the ones who will be the leaders in the green movement because they are going green slowly. As much as they might want for circumstances to be otherwise, most are not in a position to run out and buy, for instance, a high efficiency clothes washer when the old one is still running just fine. It’s a big expense, and while they will ultimately recoup all of the money from the savings on their water bill, the immediate savings does not justify the price of such a big-ticket item.

And even if they do go for the high efficiency washer, how likely are they to be able to replace all the other items that are wasting energy in their homes during the same time period?

Multi-housing owners and developers, on the other hand, are in a perfect position to realize profits in energy bills very quickly, depending on how many units they are overseeing. In their wildest dreams, many of them may never have thought of themselves as being on the forefront of a movement that, in the beginning at least, was associated with a political ideology. But the opportunity has been handed to them, and many are taking the reins.

One company deserving of recognition for its green leadership is The K & D Group, one of Ohio’s largest privately owned real estate development firms. They own and manage over 13,000 residential units in several apartment communities in the northeast portion of the state. The K & D Group is just about done with a project they began some six months ago to retrofit toilets in 7,500 of their units, mostly in buildings that were 20 to 30 years old. These same units also got new showerheads and aerators on their faucets.

The reason I know so much about The K & D Group project is because the company I work for, Niagara Conservation, supplied the toilets, aerators and showerheads. But that is beside the point (though I would like to mention that our Flapperless toilet is perfect for such retrofits not only because it is water efficient and maintenance free, but also because the base and tank are large enough to cover the old toilet’s footprint).

The point here is that K & D has chosen to overlook the difficulties inherent in such a big project (not the least of which is that residents don’t especially like the interruption of having installers working in their bathrooms) and focus on the bigger picture—and that picture is green, in two senses of the word.
Each one-bathroom household will be saving 9,200 gallons of water per year because of the toilet retrofit alone. K & D expects to save $1.5 million in water costs.

These are amazing numbers to consider. Think about it: There are 100 million toilets in the U.S. that flush at 3.5 gallons or higher, and if just half of these older models were replaced with high-efficiency toilets, 600 billion gallons of water would be saved each year. Thanks to companies like The K & D Group, that kind of savings no longer seems unfathomable.

(Matt Voorhees is the Business Development Representative for Niagara Conservation www.niagaraconservation.com and www.itseasybeinggreen.com)

'Gimme Shelter' with Daniel Gehman: Cars

“Here is my car, I feel safest of all;
I can lock all my doors, it’s the only way to live,
In cars.”

Perhaps you have the good fortune to remember this ‘top ten’ song from 1980 sung by Gary Numan. I suppose this piece could be the un-official theme number of the City of Angels, where I do most of my work.

Over the last two weeks, I have experienced both ends of the spectrum of love/hate for the projectile ICE (Internal combustion engine, for those of you new to the discussion) personal transport system. First, I had the sublime pleasure of visiting our nation’s capital to check out a property belonging to one of my clients, to conjecture how to re-position the said asset to be more timely and appeal to a select demographic. In Arlington, Va., a “suburb” of Washington, D.C., renters actually pay a premium to inhabit a building that is mere steps from a subway (metro) station, rather than, say, a ten-minute walk.

Bopping around D.C. for a couple of days, I could certainly understand why this is true. For those of you who didn’t already know, the D.C. metro system is really cool. You can jam from a suburb to the National Mall in less than half an hour. With the current and future proliferation of government jobs, this is no small benefit; working in the core may be hot, but living there . . . maybe not so much . . . just yet.

Jump cut to L.A.—car coveting country. I heard another one of my clients give a talk on the nature of residential construction in L.A., especially with our new found enthusiasm for “transit-oriented development”, whatever that may be. This fellow, whom I profoundly respect and admire, comfortably stated the obvious about life on the left coast--south. Even if you are clever enough to find a domicile that allows you to walk or take transit to work, the moment you wish to engage in the 12-month-per-year outside activity culture, you’re probably going to have to get in your car to do it. Forget the river or the mountains, you’re probably going to need to car to jam out to visit Mom in Chatsworth or Duarte, or even Costco. 

The nuisance of all of this is, while we may in fact make great strides toward reducing the number of daily trips generated (and, hence, fulfilling the furtive future of such pedagogical legislation as Cali’s SB 375, the vehicle miles traveled juggernaut), it is going to be a dang long time before we are a region where most folks can comfortably live without their (for now) gas-gulping, emissions-belching personal velocity drone.

So, as my friend and client somewhat surreptitiously suggested, for the short time at least, let’s get over it. Ease into the future. Build the monument one brick at a time.

Great, so I have to continue to shoehorn 1.8 parking spaces per dwelling into the infill projects I’m designing unless they sit squarely atop a subway station. Well, maybe so. Or, maybe we’re ready for an interim step. Granted, the number of developments that can be built atop transit are relatively few. For the rest of us, what solutions might there be that will slowly help us to transition from everyone needing a car for everything everyday, to more of an occasional use concept, or even from there to a shared-car program? I might note that while in Arlington, walking from the property I was analyzing, to the metro station, there were two “Zip Car” outlets on the way. This was an eleven-minute walk, mind you.

What about district parking? Maybe I can keep one car at my residence, but the second family car (God willing, the hybrid Ford Escape or similar ride) in a public/private facility a block or so away from my address. The same structure might also house public parking for the services/restaurants/entertainments within the holy quarter-mile walking distance.

It’s just a thought. I’m down with the zeal to get folks out of their cars, but, for heaven’s sake, let’s listen to what they need today and help ease them into a transition, even as we fund and construct the transportation systems of tomorrow.

“Here in my car, I know I’ve started to think;
About leaving tonight, although nothing seems right,
In cars.”

Mmmmm . . . we’ve still got a long way to go; but thanks, Gary, for the thought.

(Daniel Gehman is principal at Thomas Cox Architects. He can be reached at DanielG@tca-arch.com)

'The Green Picture' with Erika Schnitzer: Energy Management, Technology and You

At GreenBuildingsNY—held in conjunction with BuildingsNY at the Jacob Javits Convention Center June 16-17—yesterday, I attended U.S. Energy Group’ s presentation, “The Art of Managing Buildings for Energy Efficiency.” David Unger, chief operating officer, discussed how building owners and mangers can reduce fuel usage by 10 to 30 percent by implementing an energy management system.

As I’ve previously discussed, part of Mayor Bloomberg’s plaNYC initiative proposes a new energy code for existing buildings, as well as a mandate that would require these buildings to make energy improvements to pay for themselves within five years.

According to Unger, implementing an energy management system pays for itself in about two years—and depending on the price of fuel, the ROI could be even faster. While existing buildings undergoing energy retrofits will certainly need to look at replacing their windows, doors, insulation and appliances, among many other renovations, utilizing an energy management system to regulate your boiler system will most likely be the first—and perhaps easiest—step you take on your path to lowering your building’s energy consumption—and your bills. (Click here for additional tips on making your building more energy-efficient.)

Such systems make energy retrofits seem relatively easy—with U.S. Energy Group’s management system, for example, you can manage all your properties from one remote computer and receive updates via email and text message—and cost-effective.

But not all energy-efficient improvements need to be technologically based.

HUD, DOT (U.S. Department of Transportation) and the EPA (Environmental Protect Agency) have announced an interagency Partnership for Sustainable Communities to help improve affordable housing, transportation options—and lower transit costs—all while protecting the environment in communities nationwide. (Click here for MHN’s coverage of this announcement).

Such government initiatives, however seemingly basic and broad they may be, are greatly applauded by many industry organizations.

What do you think? Should we focus more on technologically advanced systems that are easy to use and upgrade—but direct their attention on more specific building systems—or should we embrace a more general approach that takes into account entire neighborhoods? Is there a happy medium that we can all use?

Caption for group photo: The Superintendent of Banks for the State of New York, Richard Neiman, together with Jerome Belson, President of the Associated Builders and Owners of Greater New York (ABO), kicked off BuildingsNY 2009.

(Erika Schnitzer is associate editor at Multi-Housing News. She can be reached at  Erika.Schnitzer@nielsen.com)

'Guest Blog' with Scott Yahraus: Stimulus Package for your Complex

By and large it has been a bad year for all of us. High tides raise all ships and low tides bring them all down. We’re all riding the crest downward, including your residents. I probably don’t have to remind you of that.

In this month’s issue of Multi-Housing News, Christy Freeland, CEO of Riverstone Residential said, “We know that people like to be social, so we’re offering things like movie and game nights, or bringing in guest speakers on topics like physical fitness. We’re not having to spend a lot of money on those things, but it’s the idea of providing a sense of community that will keep residents around longer.” (MHN, June 2009, pg. 13)

I could not agree more with Freeland. Your residents are your customers, so it is wise that you treat them well. To me, this means going above and beyond giving them a clean and safe place to live. Goodwill goes a tremendously long way.

Recently a client of ours decided that he wanted to host a grand re-opening at his property to market his 43 vacancies. He decided that he wanted a local radio station to attend for two and a half hours and that he would have a raffle drawing. The raffle was for a flat screen TV to be given away as the radio station wrapped up their time on the property.

When asked for our input, we modified his original plan and enhanced the benefits at the margin.
The radio station was given four different pitches to announce how this complex is green, new, convenient, healthy to live in, and safe (the complex is “National Green Apartment Certified” platinum level.)

 The DJ would cycle through those four pitches in succession every time he spoke while announcing that there was an iPod giveaway every half hour. The DJ also mentioned the free burgers and hot dogs that were being served and how easy it was to see the new green property while you ate your free food. 

For the current residents of the property, the management firm announced a week and a half in advance that the ownership was throwing them a party. There would be free catered bar-be-que, as well as an iPod raffle.

For the drive by traffic who weren’t listing to the exact radio station that was broadcasting from the property, we decided to have BBQ smoke chips in a separate grill billowing white smoke up in the air a hundred feet high. We also chose to have very large balloons made up and strung together raising high into the sky. Think of the balloons that you are accustomed to seeing at car dealerships.   

The results of the promotion were nothing less than amazing. The week of the event resulted in 28 new leases! 10 of the leases came as a referral from current residents. The current residents were encouraged to bring their friends and family. Not only did the owner surpass his goal of 20 new leases, he was also able to build a stronger community at his complex. This strength binds the residents together more closely and will “…keep residents around longer,” something Freeland points out as being very important.

(Scott Yahraus is the president of Apartment Energy Consultants. Apartment Energy Consultants is the governing body that certifies multifamily properties as being “National Green Apartment Certified.” Visit them at http://www.GreenRetrofitter.com, or contact Yahraus directly at Scott@GreenRetrofitter.com or 818-854-6850)

'Gimme Shelter' with Daniel Gehman: Aggressive Passive

At least out here in California, “building carbon neutrality” is the new black. In this curious epoch, while we are all waiting to see who will build what next, I have heard it speculated that the “green” movement will fade to a mellow chartreuse until it is clear where the money will come from for new developments. Mmmmm . . . maybe not so much.

Most of what I’ve been hearing suggests that the high performance/resource sensitive sensibilities (some folks still say “sustainable,” but I find the word inaccurate and highly charged, so try not to use it) are actually gaining momentum during this period of economic mayhem. Without offering a judgment on the value of that, there’s one thing of which I am certain: the first buildings out of the blocks when the pendulum swings in earnest will have a significantly different appearance in addition to their significantly different mechanics.

We will usher in a new awareness of our structures’ relationship to the sun, particularly here in the coastal desert environment. With business as usual, we could continue to design a moderately dense community with two or maybe three buildings as the key components, rotating them on site as necessary to optimize circulation and yield, but not really changing the “architecture” from face to face. This has gone on for years and years.

However, as we begin to pursue the new holy grail (I say that without cynicism) of “zero footprint”, it will be necessary again to embrace the low-hanging fruit of passive solar design. Why? Well, as the baseline for building energy consumption continues to drop, the first response has been to raise the efficiency of the HVAC and lighting equipment, incorporating higher SEER units, motion sensor light switches, and of course, the ubiquitous swirly fluorescent light bulbs. This, of course, is an awesome step in the right direction.

To catapult to the next step, however, will require much more sensitive building design and siting. The days of using the same look on all elevations is coming to a close. To be blunt, we will never achieve net zero energy consumption if we don’t return to the basics of our dwellings’ relationship to the sun, and how to optimize it for resident comfort and maximum resource stewardship.

You’ve all seen how this is accomplished in sophisticate museums, civic buildings, and perhaps even single-family houses—each of which is typically a simple, four-sided affair where the exposure of each wall to our major passive energy source (the sun) is relatively easy to consider and manipulate. When we place repetitive buildings consisting of multiple units on a site, however, the complexity factor expands logarithmically. Will it really be possible to design individual buildings on a large site in such a manner that each is generally responsive to the azimuth?

The answer is a resounding YES. We must, and we will. The reason is profoundly simple—we must use every trick we know to reduce the buildings’ heating and cooling loads PASSIVELY. Even the simplest building energy modeling programs illustrate that it doesn’t make sense to have the same extent of glazing on the north façade as on the east or west. Sure, we have employed window shading devices selectively where to not do so would roast our residents like so many ants under a magnifying glass. Simply stated, this is a case where if a little is good, a lot is even better.

Architects will need to work harder in the design phase so the gas-and-electric powered climate control systems won’t have to. More building design will be necessary, challenging the inherent efficiencies of the same treatment of each exposure, or the same building rolled out on a property with multiple exposures, all oblivious to the constant energy striking the envelope, which, while seasonal, NEVER CHANGES.

Are you ready for a new era of aggressively passive design?

(Daniel Gehman is principal at Thomas Cox Architects. He can be reached at DanielG@tca-arch.com)

Foong on Finance with Keat Foong: Worse Is Yet to Come

If you have been reassured by President Obama’s calm demeanor and are feeling more relaxed these days, there is an opinion article in a recent issue of The New York Times entitled “The Economy is Still at the Brink.” In case you miss the point, an illustration accompanying the article says, in big, black, artistic, letters, “The Storm Is Not Over, Not By A Long Shot.”

In the multifamily sector specifically, if the number of outfits being created that are specializing in turnarounds is any indication, players may be expecting the trickle of distressed assets and property owners to become more of a flood later on.

“There is about $18 billion worth of apartments under some stage of distress now,” says Michael Kelly, president and co-founder of Caldera Asset Management, which recently announced it is providing comprehensive services for turning around distressed multifamily assets. Kelly says the amount of such troubled assets could grow exponentially in the near future. “In the next two years, this number could be substantially higher as loans come due.”

Many of these properties were the ones that were purchased during the mid-2000s boom, at high prices and based on aggressive projections of future income. As the expected higher incomes did not materialize, these assets may be having difficulty paying their debt servicing costs and expenses. And if these assets are not already short of cash, when their loans mature they will have trouble refinancing the existing debt.

Even if they were not aggressive plays, many assets will face trouble refinancing loans in the next few years if the value of their properties and income fall. According to the Mortgage Bankers Association, large volumes of short-term multifamily loans—the ones that were made in the midst of high real estate prices—will be maturing after 2010, in 2011 and 2012.

According to Caldera Asset Management, $12.31 billion in equity will be needed to refinance properties that were acquired in 2007 alone. The company predicts the problem will not just get worse over the course of the recession, but “long after the recession ends"—"as the larger wave of overvalued assets and loan maturities sweep the market."

(Keat Foong is executive editor of Multi-Housing News. She can be reached at Keat.Foong@nielsen.com)