Special Feature

Market swings old news for Appraisal Research founder

Eugen Stunard

Eugene Stunard, LAI Member

IGene Stunard comments on Chicago Residential Market.  Former International
President, Eugene Stunard was quoted in the November 7, 2008 Crain's Chicago
Business article, "Market swings old news for Appraisal Research founder
Eugene Stunard"
  
"In the 40 years since he started his residential real estate appraisal and
consulting firm in the basement of his Oak Park home, Eugene Stunard has
seen plenty of ups and downs in the market.
 
But the current crash is the worst since 1987, when the stock market?s Black Monday triggered a prolonged slump in housing.
 
'In this case, builders got ahead of the market," says Mr. Stunard, 75, partner and founder of Chicago-based Appraisal Research Counselors. "What amazes me is that people let it happen.'
 
The downtown market for new condominiums is seeing an unprecedented building boom, with 9,300 units to be completed in 2008-09, according to the firm's "Downtown Chicago Residential Benchmark Report," a widely read quarterly report that typically runs more than 700 pages.
 
Just two-thirds of those units have been sold or are under contract, and the weak economy is making additional sales hard to come by.
 
Now, Mr. Stunard is predicting a long, difficult time for developers. Once the job market recovers, he says, the downtown market can absorb 2,000 to 3,000 units a year, well below the annual average of 5,475 sales since 2003.

Construction on another new condo tower isn't likely to start until 2011 at the earliest, he adds.
 
'There's a lot of fingers to point, and a lot of people to blame,' he says.' But now we have to figure a way to get out of this.'
 
Amid the current downturn, it is difficult to foresee a time when the downtown housing market could again become overheated.  But that day will come, too, Mr. Stunard says.
 
'You'll always see this roller coaster as long developers can find cheap money,' he says."

 

Chapter Corner

Aloha Chapter:

The chapter members  met for the  quarterly meeting November 14  at Honolulu's Pacific Club to hear David Thomas, the Rex Lee Professor of Law at Brigham Young University's Rueben Clark School of Law, discuss mortgages, their history, and their contribution to the bursting of the financial bubble. Professor Thomas is a legal historian and property law expert and general editor and principal author of the 17-volume treatise, Thomson on Real Property.  He lectures on real property at conferences throughout the United States.  A lively discussion followed his prepared remarks.

David Callies, Aloha Chapter Scribe/Historian

Ely Chapter:

INTRODUCING...a new book on environmentally based land use planning, PLANNING CONNECTIONS Human, Natural and Man Made by LAI Member, N.J. "Pete" Pointner FAICP, ALA, ITE
This is a practical book about how to achieve more sustainable, attractive, efficient and livable human communities.  It is about "green", environmentally based land use planning and context sensitive design.  It presents planning principles and illustrates their application with 19 case studies of aproved plans and implemented projects.  There are chapters on comprehensive planning, town centers, site planning, growth management tools, review and processing of development applications and transportation corridors. 
Pete is an architect and planner with 47 years of experience beyond his masters degree in City and Regional Planning.  Pete is now a consultant with Corporate Services Inc. in Wheaton, Illinois. He has been a member of the Ely Chapter of Lambda Alpha since 1976.

For more information, or to order a copy, go to www.petepointner.com

The Ely Chapter enjoyed two enlightening programs this fall. At the Chautauqua, Richard Longworth, the author of Caught in the Middle: America’s Heartland in the Age of Globalization, spoke about how shrinking cities are declining for several reasons, including the impact of globalization. Many cities in the Midwest have experienced economic decline and are challenged to find ways to return to prosperity. After dinner he joined a panel discussion with Les Pollock, Founding Principal of Camiros, Ltd, and Rita Athas, Executive Director of World Business Chicago, which was moderated by Carol Coletta, President and CEO of CEO’s for Cities.  Among the solutions advanced by the panel and audience were:

•  high speed rail linking cities less than three hours apart as an alternative to air travel,
•  investment in infrastructure such as rail freight,
•  the role of universities in developing innovative technology,
•  the need to provide students with the ability to adapt for future jobs,
•  training so current workers can fill the new green jobs,
•  retention of residents with housing alternatives, recreation, culture and quality of life,
•  recognition that city-states will be key instead of states and cities,
•  collaboration among political, civic and business leaders who act as a unified region.

Laurie Marston, Ely Chapter Scribe

Golden Gate Chapter:

In May members enjoyed the Chapter’s  Spring Tour and were treated to a pre-opening, behind-the-scenes prowl though the new California Academy of Science in Golden Gate Park click here.  The tour was lead by Don Young, the project manager for the $400 million development.  The Academy houses some of the City’s most beloved visitor attractions, including the Steinhart Aquarium, the Morrison Planetarium, and the African Natural History Hall.  The Academy is a five-story structural concrete research/collections/ administration building with floor-to-ceiling glass walls; a three-story structural steel/concrete African Hall exhibit; a three-story structural concrete retail/restaurant/auditorium space; a glass enclosed rainforest dome; a planetarium dome; 53,000 sq ft of radiant floor exhibition hall; a split-level basement housing aquarium life support systems; and a 2.5 acre concrete-topped structural steel frame topographical living green roof that features  60,000 photovoltaic cells and 1.7 million native California plants.  Chapter members and guests explored the sustainable features which made the Academy the first museum to achieve a LEED platinum rating.  This unique development showcases sustainable development techniques and expresses the Academy's mission to explore, explain and protect the natural world.

In November, 60 members and guests of the chapter heard a presentation from member Lawrence Pelosi, Executive Director of Morgan Stanley, on current capital market conditions and their impact on real estate investment.  Pelosi, speaking from materials updated just that morning, described the unprecedented synchronization of global capital market turmoil click here.  Searching for bright spots in a sea of bad news, Pelosi noted that the rapidly falling oil prices were a form of economic stimulus, and that historically US recessions have only lasted an average of nine months.   According to Pelosi, assuming that the economy entered a recession in second quarter of 08, recovery can be projected to start in fourth quarter of ’09.

Denise Conley, Golden Gate Chapter Scribe

George Washington Chapter:
 
The Chapter held its October 22, 2008 Investiture Banquet in the Rotunda of the Ronald Reagan Building & International Trade Center with a panoramic view of the Mall.  The Chapter inducted 26 new members and presented its distinguished service award to Professor Steven S. Fuller, chapter president from 1998 to 2000, in recognition of his long term service to and achievements in the field of land economics in and for the District of Columbia and the greater Washington metropolitan area, his research and teaching in the area of metropolitan area economies, his development of indicators to track and predict current and near term performance and as President of the George Washington Chapter of Lambda Alpha international.  Dr. Fuller is Dwight Schar Faculty Chair and University Professor as well as Director of the Center for Regional Analysis, School of Public Policy, George Mason University, Fairfax, VA. 

London Chapter:

“Where do the property markets go from here?"
By Ed Stansfield, head of property research at Capital Economics.

If it hadn't been for the good company and excellent food, our Lunch on 20th November would have been a depressing affair. Our President had chosen for our speaker one of the more bearish commentators, and Ed did not disappoint!

His answer to the question set was simple: down—considerably down. Our commercial property market has fallen an average of 30% and he could see this extending to 40/45% in fairly short order, where it would remain for 2 years or more. Residential will be no better; he pointed out that the earnings/house price ratio still remains high by historical standards and he argued for a further fall of 20% before a floor might be found. Unfortunately, as well as bringing such a depressing message, Ed was able to convey his views with demonstrable skill and logical support; few would have left unconvinced.

The core of Ed's rationale lay in his, now universally held, belief that the world, and particularly the UK and US are faced with a deep and extended recession. In response to a question, he suggested that the Euro-zone problems may be less, but he was sceptical of their ability to agree on and organize effective and timely counter-measures, thus making a manageable crisis worse than it need be. In a bid to limit the degree of recession, central bank interest rates could well be brought down close to zero, but Ed argued that this may have only a limited effect. Whilst the banking crisis may have been contained for the present, he thinks that further failures remain more likely than not. Whilst that is the case, the appetite for lending by banks will be very constrained and low central bank lending rates will not transfer to the real world. Further, the prudential barriers to lending will remain high. On the other side of the equation, the appetite of businesses to borrow will be pretty weak. Tumbling profit margins will threaten business viability and discourage new investment. There are bound to be extensive worker lay-offs (perhaps 3.3m unemployed in the UK). Ed therefore painted a gloomy downward economic spiral as a virtual certainty.

This basic scenario had inevitable financial investment consequences. Equity dividends would be extensively threatened, making a mockery of backward-measured dividend yields. In a similar manner, effective economic demand for commercial property will evaporate across the board, if it has not already done so. He argued for falls of around 25% in rental values. Such a view of rents would undermine any view that property yields looked cheap compared to Government bonds of 3%, or perhaps less. Ed argued that this depressing property picture would extend across sectors and geography; there will be no safe niches!
On BBC TV there is a brilliant, but gloomy, current dramatization of Little Dorritt. Ed would have fitted in well, save that he offered no Amie to make things right. However, he did just manage to squeeze out three positive thoughts. He had kind economic words for Finland and Greece. He doubted if the UK Government?s likely borrowing and spending spree would be inflationary even in the long term; any borrowing would be a tiny proportion of the wealth destroyed. And, when asked how we would repay those debts, he reminded us that, although the reputation of many parts of the City was in tatters, the UK offered wider and still valuable financial skill.

Michael Mallinson
London Chapter Scribe

Phoenix Chapter:

“Emerging Trends in Real Estate 2009” report.
On November 21 the chapter membership met to discuss the “Emerging Trends in Real Estate 2009” report. Presenting the national and international outlook as written in the report was Steve LaPosa. Not surprisingly, participants painted a gloomy outlook for real estate nationally and internationally for 2009, characterizing the current real estate economy as being the worst period since 1991-92. One participant summed it up well, saying “People had been so focused on the credit crisis, no one noticed the economy sneaking up to knock their legs out from under them.”. Values are predicted to drop an average of 15-20% off peak, with total real estate returns turning negative. Loan delinquencies are headed higher. Cap rates are predicted to rise by 42 – 73 basis points, depending on property type, with industrial warehouses sustaining the lowest cap rate increase, and limited service hotels expecting the highest cap rate change. Investors are flocking to quality – in location (24 hour cities favored), real estate (core, institutional quality preferred), and for lenders, sponsor (strong borrowers with deep pockets sought). Top markets geographically are generally on either coast, with only Denver and Houston being non-coastal cities favored for new investment. Phoenix and Miami garnered least favored status, which may provide opportunity to local investors to make opportunistic acquisitions without significant competition from national players.

Chris Toci of Cushman and Wakefield presented a local market forecast for Metro Phoenix real estate in 2009. His presentation, characterized as “granular”, provided a multitude of statistics and charts mapping changes in population, employment, construction, absorption, vacancy and rents, over the past 33 years, and past 3 recessions. The chart below outlines past trends in employment. During 2008, metro Phoenix has sustained the largest drop in absolute employment ever.

However, in each prior recession, drops or declines in employment growth in Phoenix have been followed by years of strong employment growth, as is forecasted by economist, and shown in the chart below:

Metro Phoenix continues to experience population growth, and the housing recession has created an added benefit - homes are once again affordable, with a median price of $175,000, equivalent to the level last seen in 2004. Housing prices have declined 36.3% from their peak, and are now at a level consistent with the expected median price based upon average annual appreciation from 1989 to 2003 (see chart below)

Values in all commercial real estate sectors and land are declining. Opportunities to acquire quality real estate at very reasonable prices are expected in the next two years.

More information at www.lai-phx.org

Sheila Hamilton
Phoenix Chapter Administrator

Simcoe Chapter:

The LAI Simcoe membership partner with the Downtown Yonge Business Improvement Association (BIA)  and met to  discuss the progress in ending homelessness in Toronto. In a discussion entitled: "Keeping Yonge Street Retailers Competitive in Tough Economic Times", speakers Phil Brown, General Manager, Shelter, Support and Housing Administration, City of Toronto and James Robinson, Executive Director, Downtown Yonge BIA The City of Toronto reviewed the status of the program. Toronto has won many admirers for its commitment to ending homelessness by helping people to find and keep permanent housing.

 One area that has produced good results to date has been the City's partnership with Downtown Yonge, the local BIA. For most business improvement areas, finding ways to enhance retail performance is typically linked to monitoring issues like changes in property taxes and the costs of garbage pick-up, or working to enhance marketing and promotion. For Toronto's Yonge Street BIA, however, its location in the heart of the inner city brings additional challenges. These include working with the City of Toronto's Shelter, Support and Housing Administration to facilitate support to the city's homeless population. Taking a constructive and collaborative approach to these difficult issues, executive director James Robinson recently took the innovative step of alerting stakeholders to the impacts that could result from cancelling or reduction in federal funding of highly valued cost-shared outreach programs. This session will bring those attending up to date on the City's current programs and discuss the role of  the BIAs as they attempt to adjust to dramatic changes in the social and economic landscape.

Those attending the LAI Land Economics Weekend were able to see the innovative  accomplishments being made by the City and the housing, counseling and services that are being provided to the formerly homeless people.  Those attending the LAI Land Economics Weekend were able to see the innovative  accomplishments being made by the City and the housing, counseling and services that are being provided to the formerly homeless people.

The following photos give a flavor of  the LEW attendees’  diverse experiences. For more photos, go to: http://www.lai-simcoe.org

The Terrence Donnelley Centre for Cellular and Biomolecular Research
at the University of Toronto.

Presentation by Randy Peddigrew (Senior Vice President, Land Development)
at the Remington Group Display Centre, Markham.

The Distillery Historic District

BAPS Shri Swaninarayan Mandir, Etobicoke.

Mississauga Civic Centre (Jones and Kirkland, Architects)

The Living Arts Centre, Mississauga (Zeidler Partnership Architects).

Condominium developments on Toronto's lakeshore.

The Michael Lee-Chin Crystal at the Royal Ontario Museum (Daniel Libeskind, Architect)

Many thanks to Kevin Harper....for his photography.-Ed

Vancouver Chapter:

On November 5, Mr. Hank Dittmar, Chief Executive of the Prince's Foundation for the Built Environment, addressed LAI's Vancouver Chapter about how sustainable urbanism can yield more profitable development.  His Royal Highness, Prince Charles, has been known to express opinions regarding the shortcomings of modern architecture and town planning. Once dismissed as elitist nostalgia, many of the Prince's views about land development are now embraced as key tenets of sustainable urbanism. The Prince established a Foundation for the Built Environment to demonstrate the practical and commercial value of these ideas.
 
Mr. Dittmar described the Foundation's success in developing Poundbury, a town of 5,000 adjacent to Dorchester. Both traditional and modern housing styles had been incorporated in building a mixed-use, mixed-income community.  Residential real estate in Poundbury now commands an 18% premium compared to surrounding development. The Prince's Foundation will initiate development projects on all five continents by 2011, to demonstrate the relevance and value of drawing upon traditional knowledge about how to build more successful communities.  As Mr. Dittmar quoted the Prince, "Seeing is believing" and the Foundation's goal is to show how green urbanism can yield commercial success alongside environmental and social sustainability.

Anthony Perl
Vancouver Chapter Scribe

Announcements

Administration Matters!

Attention LAI Members! Forgot how to login? No Problem 
Please visit the LAI Website at www.LAI.org. On the left hand side click on the Members Only Tab. Here you will need to use your email and the password is lai.

• Prestige of being an invited member of  a national 75 year old recognized land economics organization
• Being a part of an international network of exceptional professionals in all aspects of land development ? with access to their knowledge
• Able to learn of and use the models developed by other chapters
• A staff to deal with tax issues, non profit  paperwork, billing and following up on invoices and a myriad of other organizational support
• Learning experiences from the Land Economic Weekends
• Land Economics Foundation (LEF) grants available to assist in special local projects
• Low cost organization that provides the needed networking and support in stressful times (times of overwork as well as economic slowdowns)

-hls. Ed

Save the Date ! ! !
 
Vancouver, Canada, Spring Land Economics Weekend
May 7- 9, 2009
Terminal City Tower Hotel
837 West Hastings Street
Vancouver , B. C.  Canada
www.tctowerhotel.com

Hotel Reservations
Rates: $210.00 CAN Net, + taxes Single/Double
Phone: +604 681 4121
Toll Free: 1-888-253-8777
Fax: +604 488 8617
Email:hotel@tcclub.com
Registration Form coming soon!
 

Future Land Economics Weekends (Subject to Change)

2009
Spring: Vancouver, Canada, Vancouver Chapter
Fall: Chicago, Ely Chapter

2010
Spring: Minneapolis, Minnesota Chapter
Fall: New Mexico, Zia Chapter

2011
Spring: Scotland
Fall: ?

New Members

Baltimore
Melvin L. (Mel) Freeman, Freeman Architecture – Freeman Consulting Group, LLP
Robert J. Robidoux, William S. Wise Inc.

Golden Gate Chapter
Denny Abrams, Abrams/Milikan
Elaine Andersson, Boston Properties
Crystal Barriscale, HOK San Francisco
Fred Blackwell, San Francisco Redevelopment Agency
John Clawson, Equity Community Builders
Kim Diamond, Pulte Homes
Jodi Fedor, Ellman Burke Hoffman & Johnson
Robert Gamble, Public Financial Management, Inc.
Dennis Henmi, Kwan Henmi Architecture Planning Inc.
Rebecca V. Hlebasko, BRIDGE Housing Corp.
Kenneth J. Kay, KENKAY Associates
Leslie Little , City of Alameda
Tom Lockard, Stone & Youngberg LLC
Alan Mark, The MARK Company
John Rahaim, San Francisco Planning Department
Joel Roos, Pacific Union Development Company
Gene Schnair, Skidmore, Owings & Merrill LLP
Eric C. Starr, Starr Finley LLP
Charles Sullivan, San Francisco City Attorney’s Office
Phillip H. Tagami, California Commercial Investments & California Capital Group
Bill White, Shute, Mihaly & Weinberger LLP
Kate White, ULI San Francisco

London Chapter
Stanley Beckett, Magrath LLP
Mark Richard Charlton, Colliers CBE
Ken Steven, Hall Walker Steven Limited
Sue Wheldon, Douglas Wallace

Los Angeles Chapter
Frances Banerjee, Banerjee Associates (Traffic and Transportation)
Tevis Barnes, City of Culver City, Community Development Dept. Housing
Hal Bastian, Los Angeles Downtown Center Business Improvement District
Kenneth Bernstein, City of Los Angeles Dept. of City Planning
Joseph Chatham, Chatham Street Mortgage Services
Robert J. Fazio, Robert Fazio Consulting (Planning and Community Revitalization)
Douglas M. Ford, Unitex Management Corporation
Lambert M. Giessinger, AIA, Historic Preservation Architect
Scott Ginsburg, Combined Properties, Inc.
Craig Johnson, Culver City Building Safety Division
Iao M. Katagiri, The RAND Corporation
Carmela Ma, CJM Associates, Inc. (Real Estate Investment Brokerage)
Milton Swimmer, Swimmer Development LLC
Todd D. Weaver, Synergy Commercial Real Estate, Inc.

Phoenix Chapter
Rose Arck, ACS Realty Services, LLC
Paul Blue, Phoenix Sky Harbor International Airport
John Chan, City of Phoenix
Daniel Colton, Colton Commercial
Jill Kusy, DMB Associates
Julie Johnson, GPE Commercial Advisors
Roderick McKinnon, R.W. McKinnon & Company
Chet Pearson, Geotechnical and Environmental Consultants
Steve Prokopek, City of Peoria
John Randolph, Mohr, Hackett, Pederson, Blakley & Randolph, P.C.
Mark Satern, Commercial Real Estate Lending, Bank of the West
Chaz Smith, The LandSource Group
Debra Stark, City of Phoenix
Jay Tubbs, Ryan Companies

Simcoe Chapter
Lindsay Dale-Harris, M.Sc.(Pl.) MCIP, Bousfields Inc.
Bruce R. Fischer, Metrus Development
Mary L. Flynn-Guglietti, McMillan Binch Mendelsohn LLP
Bruce W. Krushelnicki, Planning Department, The Corporation of the City of Burlington
Antony P. Lorius, Hemson Consulting Limited
Susan D. Rogers, Townsend Rogers LLP
Anthony B. Yates, P Eng, BA Consulting Group