By Anuradha Kher, Online News Editor
Pete Berman is the CEO of The Ruby Group, a consulting, development and construction company, and an instructor for professional-certification classes sponsored by the NAHB and other industry organizations. Berman is also managing director of NewLife Properties, which has bought, renovated and sold dozens of foreclosed homes in New York’s Hudson Valley and on Long Island. The Ruby Group does most of its work in upstate New York (the area northwest of New York City.)
He talks to MHN about what multifamily developers can expect in 2010 and why flipping foreclosed properties will be one of the biggest trends this year.
MHN: What can multifamily builders and managers expect in 2010?
Berman: I would expect lower vacancy rates as jobs return and most importantly, fear subsides. Various things are happening: immigrants are supposedly returning to their home countries and a lot of people are doubling up. But they can only live with family for so long. New household formation exceeds new unit construction, so demand will fill supply.
MHN: How is the student housing sector performing?
Berman: Our company is close to securing final approvals for dorms at Sullivan County Community College in New York and in our experience the student housing sector is performing very well. Cap rates have decompressed along with the broader market but fundamentals are strong. Especially at Community colleges and local schools which are our primary focus.
MHN: Has the green trend taken a backseat due to the recession?
Berman: I believe the focus should be on value and less on the glitz. Green should be indistinguishable from good building practices such as tight envelope and efficient construction like lean manufacturing. But the implementation of new Green Technologies and true game changing innovation has taken a backseat because developers have restrictions on how much they can borrow and they have to work with what they get. Green building could have made bigger strides in the past year, had end user loans been able to reflect energy savings and increased value with sustainable construction.
MHN: Is flipping foreclosed homes one of the big trends of 2010?
Berman: Absolutely. A lot of people want to buy distressed properties simply because of the lure of a great deal. They want to say: “Oh it was such a bad recession but we acquired some properties at great discounts.”
How will foreclosed properties and new product on the market compete with each other?
Berman: It is very challenging. Many distressed property transactions are below construction cost needed for a new building. Regulations and other fixed costs make it even more expensive. So developers are discouraged to build new product and instead invest in distressed properties. We have done that too.
MHN: It’s been a year since President Obama came into office. Have his policies affected building and construction in any significant manner?
Berman: We were very worried about the health care bill, which includes a clause that small businesses (which they have defined for our industry as greater than 5 employees but for all other industries as greater than 50 employees) must provide all employees with healthcare. This is not achievable for many contractors and vendors who are already suffering from the recession.
At the same time, the funds available to community colleges through the stimulus bill will be beneficial for the student housing sector. But many of these policies take time to have any kind of impact locally. So a lot of it is still up in the air.