Melissa Savenko's Richmond Real Estate Review

Economic Indicators in Today's Business Section - Does This Mean Richmond's Housing Market Has Recovered?

The following headlines are in today's Richmond Times-Dispatch:

"Economic Indicators Up 0.7 Percent in Feb[ruary]"

"Unemployment Claims Fall to Four-Year Low"

And this quote:

The average U.S. rate on a 30-year fixed mortgage jumped to 4.08 percent from 3.92 percent the previous week, mortgage buyer Freddie Mac said. The average on the 15-year fixed mortgage rose to 3.30 percent from 3.16 percent last week.

Richmond Times-Dispatch Business Section, Page D3.

What does that mean for Richmond's housing market? Personally, I think we have passed the bottom. Housing markets are hyper-local, and this isn't the case everywhere in the greater Richmond area, I know. I am basing my conclusion on activity in Areas 10 (urban City of Richmond from Church Hill and Fulton west through the Museum District) and 20 (City of Richmond from the other side of the Downtown Expressway west to the Henrico County line). In these areas I'm seeing even white-hot activity, especially:

• Fan houses $500,000 and up;
• Multifamily properties; and
• Windsor Farms.

I personally think the activity in these areas is the leading indicator of a broader housing recovery for the entire Richmond metropolitan area. At least I sure hope so. What do you think?

Richmond School Board Proposes Cutting IB Programs and Governors School Slots - Now THAT Ain't Smart!

More budget hoo-ha between the City of Richmond School Board and the Mayor's appointed Special Task Force. If you haven't been keeping up, the short version is this. The City School Board proposed a budget that has a $23.8M shortfall. In other words, they want to spend $23.8M more than they have been allocated. Mayor Jones is [understandably] irritated with the Board, since they are asking the City of Richmond to fund that $23.8M shortfall. He contends the School Board is responsible for finding a way to operate within their means, and coming up with cuts to make the budget work.

The School Board refuses. Mayor Jones appoints a Special Task force of independent educational and business leaders to look for ways to cut the budget. Yvonne Brandon, the Superintendent of City of Richmond schools, proposes certain ways to cut costs, including:

• Eliminating school sports
• Eliminating the International Baccalaureate ("IB") program
• Cutting the City's available slots at the Maggie Walker and Appomatox Governors Schools in half
• Furloughs
• Pay cuts for staff
• Layoffs

Of the proposals, the second and third items, eliminating IB and cutting Governors School slots, is just plain stupid. These are programs that raised the level of educational offering to the children we tax payers are paying to educate. The IB program is academically rigorous and requires application and acceptance. The Maggie Walker Governor's School is considered one of the best, if not THE BEST, high schools in the Greater Richmond area, even when put up against the private school powerhouses.

Personally, I think these "options" for budget savings are on the table in an attempt by the Superintendent and the School Board to create a huge public outcry, and to force the Mayor and his task force to give in to their demands for another $24M. Maybe I'm too cynical, and that's not their goal. But suggesting the elimination or limitation of the most academically rigorous and respected options in the City system - how does that make ANY SENSE?

The beneficiaries of the school system are supposed to be the students, not the teachers and staff. If the only options to balance the budget are furloughs, pay cuts, and/or layoffs, or more preferably eliminating staff and teachers by attrition, that's what the School Board should do. Don't eliminate outstanding programs, creating fewer academic opportunities for all Richmond kids. That's just plain dumb.

A Rant About Agents with "Expertise" in Expensive Neighborhoods - A Pitfall of Real Estate + Internet

I am going to be venting a bit in this blog, so just bear with me. But consumers, particularly first time buyers, please think about these points. This was triggered by a few recent incidents that have really, really irked me.

A bit of background: I live and work in Richmond's Historic Fan District. It is a very specifically designated area, the entire neighborhood is listed on the National Register of Historic Places. It also happens to be adjacent to VCU's Monroe Park Campus. The Fan is one of the City's most expensive neighborhoods, for a number of reasons, including :

1. Beautiful Victorian architecture;

2. One of the best, if not THE best, public elementary schools in the City of Richmond in William Fox Elementary;

3. An established walkable urban neighborhood filled with shops, restaurants, art galleries and more;

4. The VCU connection, which creates high demand from both the students and faculty associated with the University.

Certainly since the 1990s, the Fan has traditionally attracted old home lovers, VCU students and faculty, young families with elementary school children, and the urban hipster and young professional population. Increasingly, it is attracting another demographic, the down-sizing Baby Boomers relocating from the suburbs. Some of these folks previously lived in the City, and moved out to one of the Counties for the public schools when their children were old enough. But more and more we are seeing people relocating into the City who have never lived in an old house. This creates issues in and of itself. These issues are further complicated when either of the agents involved in the transaction, buyer's agent or listing agent, is unfamiliar with the issues that can come up with old houses. To name some "biggies": asbestos, lead-based paint, oil tanks.

So, what is my problem? Working in the Fan - and for that matter the Museum District, Carytown, Bellevue, Ginter Park, Westover Hills, I could go on and on naming historic City neighborhoods - requires a certain level of expertise. I would think a buyer or a seller would want an agent who has listed and sold properties in the area. However, over and over again I see people using agents that have no or next to no experience with historic properties.

I really don't understand it. People will do more research to buy a TV or a computer than they will to find the agent that is going to help them buy or sell a home. And that home is for most people the biggest single investment they will make in their life.

Now, part of the problem is some agents represent themselves as expert in a particular area when they are no such thing. This is mainly on the Internet, through websites and Facebook pages. From what I've seen, the representation of "expertise" is typically passive, meaning the agent has sections on their website that discuss the Fan and buying and selling in the Fan. They are using search engine optimization ("SEO") to show up high in search results. But here's what I don't understand: Why don't you, Mr. or Ms. Buyer or Seller, ask the agent how many houses they have listed or sold in the [relevant historic neighborhood]? Or if they have some other nexxus for knowledge of the neighborhood?

I will certainly agree that part of this rant is self-serving, because I do almost all my work in historic City neighborhoods, I live in the Fan, my office is in the Fan, I grew up in Bellevue and Ginter Park, and almost all my business has been in City neighborhoods. It is frustrating when you have spent a lot of time to develop specific expertise, and other agents are using the Internet and SEO to capture leads without putting in the time and developing the expertise. It is especially frustrating when you have to do a deal with one of these agents and end up doing their work, because they don't even know what issues to spot. Or, worse yet, you have a deal fall apart because the inexperienced agent missed an issue that is typical with an old house, didn't advise their client, and their client flipped out over an inspection item that we see all. the. time.

Look, it is no surprise that agents and brokerages would like to get a toe-hold in these City neighborhoods, which are often some of the most expensive real estate in the Greater Richmond Metropolitan area. There have been a number of brokerages that have established offices in the Fan and Museum District over the last several years, in an attempt to capture market share. Many, if not most, of those offices eventually closed.

What is my "solution?" Well, besides having all those buyers and sellers calling me up to represent them? [:)]? I think agents have to earn their stripes the old fashioned way, by putting in the time. I tagged along behind my broker for two years, learning as much as I could about a real estate market that I already knew intimately, because I lived in it and had for 15+ years. But I needed to learn the ins and outs of representing buyers and sellers, how to manage a transaction, what the pitfalls are that can come up in inspection, how to solve those issues, and much, much more. I am a licensed attorney that had done major corporate transactions, so I knew my way around contracts and negotiation better than the typical new real estate agent. But I still had to learn how to buy and sell real estate. My real estate training was like law school, where the teach you how to "think like a lawyer," but nothing about how to actually practice law.

The situation of the buyer or seller calling on the inexperienced agent based on that agent's SEO skills is yet another example of the pitfalls of internet access to data in the real estate world. Information is not knowledge. Consumers, do your homework. Interview multiple agents. Find someone with expertise. Find someone that you feel comfortable with too. After all, this is a professional service relationship, so you need to like the person you are working with. Agents and consumers who want to flame me for this position, I'd love to get some comments back. Meanwhile, I'm off to host an Open House. In the Fan. [;)].

How Do People See Richmond - And What Does Real Estate Got To Do With It?

In the Sunday Commentary section of the Richmond Times-Dispatch, there are three - THREE! - pieces alone that really struck me.

First, there is John Bryan's piece, "So, What Do You Think About Richmond?" Mr. Bryan is the President of CultureWorks, a non-profit umbrella organization that supports arts and entertainment groups in Richmond. He details his informal interviews with marketing professionals at a conference in Louisville, Kentucky. The question was "Tell Me Everything You Know About Richmond." Apparently, what the thirty three (33) folks interviewedknew was basically nothing. So, Mr. Bryan followed up with each of the interviewees and sent a "pitch" about the City. The remainder of the piece details exactly what he highlighted, things about Richmond, Virginia that make it special and unique.

The second piece is by Mike Hughes, President of the Martin Agency, and Ella Kelley. It suggests turning the Huguenot Bridge into a public park/pedestrian and bike byway, a la the New York City High Line. What a super-cool idea!

The third piece is Tom Silvestri's editorial titled "Four Buddies Discuss How to Play Ball." I'm not too sharp, so it took me well into the first read to figure out Chester was Chesterfield County, Hans was Hanover County, Henry was Henrico County and Rich was, you guessed it!, the City of Richmond. Duh me. But the piece cleverly lays out the various jurisdictions' attitudes towards funding a new ball park for the Diamond. If you have read my blog for any length of time you know I am pro-baseball on the Boulevard, and all for a new ballpark for the Squirrels.

More on all of these topics later, but if you haven't read them, do. Great things are happening in Richmond.

New Apartments in the Richmond Market - Are We Looking at the Next Real Estate Bubble?

OK, I keep referring to how many new apartment units there are in Richmond, Virginia, particularly Downtown/Shockoe Bottom, and wondering if there are enough bodies to fill them. I've decided to tally up the various projects to see how many new units there are online and/or in development. Here's what I have:

SHOCKOE BOTTOM/SHOCKOE SLIP:

1. Bobber Flats, 2001 E. Franklin Street, 41 Units

2. Old Stone Row, 21st and Main Street, 96 Units

3. Engine Company Lofts, 2000 Block of East Main Street, 28 Units

4. Trolley Commons, 2001 East Main Street, 80 Units

5. Cedar Broad Apartments, what I call "The McDonald's Project," 1900 Block of East Broad Street, 204 Units

6. 2001 East, 2001 East Broad Street, 75 Units

10. Monument Construction Building, 1425 Cary Street, 38 Units

11. Harvester Project, Cold Storage Building #6, 36 Units

12. Canal Lofts IV, 18th and East Main next to Have a Nice Day Cafe, 124 Units

12. Genesis Townhouse Project, Union Hill, 150 Units

11. Marcellus Cox Building, 19th and East Marshall, 120-130 Units

TOTAL BOTTOM/SLIP/UNION HILL UNITS: 992-1,002

 

DOWNTOWN:

1. Berry Burke Building, 525 East Grace Street, _____ Units

2. Montaldo's Building, a/k/a Pasture, East Grace Street, 4 Units

4. Hotel John Marshall, Corner of N. 5th and East Franklin, 238 Units

5. First National Bank Building, 825 East Main Street, 154 Units

6. 8 1/2 Canal, 8 1/2 Canal Street, 160 Units

TOTAL DOWNTOWN UNITS: 556 + Berry Burke

 

JACKSON WARD/CARVER

1. To Be Named Gilbane Project, 1200 Block of West Marshall, 136 Units

2. Eggleston Property Project, 2nd Street, 31 Units

3. To Be Named, 1325 West Broad, 19 Units

4. Hippodrome, 2nd Street, 29 Units

TOTAL JACKSON WARD/CARVER UNITS: 215

 

MANCHESTER:

1. Former Mercer Property, 901 McDonough Street, 188 Units

2. Miller Manufacturing Project, 5th and Stockton, 210 Units

TOTAL MANCHESTER UNITS: 398

 

NORTHSIDE:

1. The Collegiate, Chamberlayne Avenue Just North of Interstate 95, 270 Units

2. To Be Named Virginia Union Project, 2300 Lombardy Avenue, 33 Units

TOTAL NORTHSIDE UNITS: 303

TOTAL UNITS: 2,464-2,474+

If I adjust for number of people in these units, since many are 2-4 bedrooms, it can be anywhere from 3,696 new residents required, using a multiplier of 1.5, to 7,392, using a multiplier of 3. Are there going to be enough new bodies to fill all these apartments? I sure hope so. No one wants to see any of these projects fail, that would be bad for the City of Richmond and the surrounding neighborhoods. But I do have some worries:

• I am sure I've forgotten or missed some new projects.
• This analysis does not take into account condominium projects that came on-line 2008-2009 and have significant rental components. Vistas on the James and Miller & Rhoads come to mind.
• What about the existing apartment inventory? Do new projects just cannibalize the older, not-as-fancy projects?
• This doesn't include two new projects in Scotts Addition, 3600 West Broad and 3200 West Clay (135 units). And I will be shocked if the Interbake Foods Building does not have a significant apartment component. These three projects alone should add over 500 new units in a very desirable location.
• Why are people paying $1,600/month and up for an apartment? That's a mortgage payment on a $300,000 house in the Fan/Museum District/Carytown/Munford/Bellevue/take your pick "hot" neighborhood.

I'd love to hear people's thoughts and comments on the apartment building craze. Do you think there is going to be an oversupply of apartments in the City? Why do people want to rent vs. buy?

Reynolds North Plant - More News Today

In a story in today's Bizsense, there are more details about the planned riverfront redevelopment at the former Reynolds North Plant.  There is more information about a possible major office building on a parcel at 10th and Byrd Street, adjacent to Riverfront Plaza and the Riverside on the James. 

I've heard on the street rumors for quite a while of any number of possible tenants for an-until-now-unannounced new riverfront building.  McGuire Woods is one of the many names I've heard.  Makes sense, maybe they are jealous of Troutman Sanders' riverfront location at Riverside on the James and Williams Mullen's shiny new highrise at 10th and Canal, straddling the Downtown Expressway.  [ASIDE:  Does it give anyone else the heeby-jeebies to drive under that thing?  I'm always worried it will come crashing down just as I pass through.]

If McWo were to move, that would put all the major local law firms on or adjacent to the river.  And then they and Hunton & Williams, right next door at Riverfront Plaza, can glare daggers out the windows at each other, and continue in their never-ending battle for the title of the "Best Law Firm in Richmond."

Reynolds North Plant Being Redeveloped - New Life to Richmond's Riverfront

In today's Richmond Times-Dispatch, a front page story announced the redevelopment of the former Reynolds Metal manufacturing facilities north of the river into apartments and ancillary retail.  That this has been coming is common knowledge in the real estate community, but perhaps not well-known outside of those circles.

This development is being described as "the linchpin" that Richmond has been waiting for for over 15 years.  I think it's an amazing opportunity, and I'm glad to see WVS and Fountainhead Properties, both experienced players, running this show.  WVS is a Northern Virginia developer responsible for The Village at Rocketts Landing, and Fountainhead is a local developer of Artworks, Manchester Flats, and numerous other projects in the Manchester and Downtown areas.

I am sure this is a state and federal tax credit renovation, meaning the developers can recover 45% of the value of "qualified renovation expenses" ("QREs"). The newspaper describes this as a $35M project.  Now, that number may include the acquisition cost ($7.3), and not all renovation expenses are QREs, but for the sake of making the math easy,because I suck at math, let's just assume they are.  So 45% of $27.7M = $12.46M.  WAY more than chump change.

Forget Justin French and his misuse of the tax credit programs.  I hope Richmond realizes just how lucky we are to have one of the most generous state tax credit programs in the country, allowing 25% recovery of QREs.  You put the state tax credits together with the federal tax credits (20%) and it makes these deals work.

So good luck to WVS and Fountainhead, congratulations on getting the North Plant deal closed, and we can't wait to see the finished product.  I know we have just won in a landslide the title of "The Next Austin," up-and-coming hipster city, but I'm hoping we end up looking like another Great State of Texas city, San Antonio, with their thriving canal walk.

P.S.  I just learned how to add pictures!  How exciting.  I know I have just outed myself as a tech-idjit, but I'm so proud I just have to give myself a virtual pat on the back nonetheless.