Investments, Real Estate

Net-zero Homes: Is this Part of the New American Dream?

A surge in energy prices and more awareness of the environmental impact have made consumers more energy-conscious, and this is directing more interest toward a government program with a goal of making energy-efficient homes more available.

The U.S. Department of Energy is sponsoring the Builders Challenge. The voluntary effort urges homebuilders to develop new technologies, designs and techniques for less energy consumption. Currently, the program is on course to make “cost-neutral” net- zero homes available throughout the country by 2030. The idea of the challenge is based on the lessons from the Building America Research program.

Net-zero homes save money and energy by reducing price and temperature fluctuations. The homes are still connected to the utility grid, but they can produce as much energy as they consume and can even function during blackouts, according to the DOE.

The program has had many successes with the creation of show homes and housing subdivisions and developments.

A bill passed in a U.S. Senate committee this summer sets the net-zero energy use as a goal for new homes and commercial buildings according to Bloomberg Markets, but opponents of the measure indicate that although it creates incentives, writers of building codes would have to increase efficiency prices and that could raise new home prices in a recovering real estate market.

What do you think?

 Photo Credit: phanlop88

Finance, Investments

Positive news for the European “debt crisis” and the US recovery?

I must admit I’ve been quite intrigued by all of the recent financial drama the United States and Europe endured during the summer; however, it now appears both can breathe a momentary sigh of relief. They received some good news after enduring tumultuous economic events.

Markets rose the last Monday in August upon word of Greece’s two merging banks, Alpha Bank and Eurobank. The move is a step forward in the reorganization of the country’s financial system and supports a resolution to the European debt crisis.

The crisis began in Greece and has spread during the past 22 months. The country’s projections for tax and revenue had fallen short. In addition, some rich nations had overspent and didn’t really consider a plan for vigorous growth. Consequently, many European banks have been plagued with devalued financial instruments.

The banks are in need of more money to cover “write downs,” but resolving the issue includes figuring out how to spread the losses.

Americans, on the other hand, are struggling through a turbulent recovery, yet they’ve loosened their tight grip on their wallets and even shelled out money for pricey retail goods. This helped to boost consumer spending to 0.8 percent, the largest gain in 18 months.

Indexes also charged ahead taking on some bullish chart formations, which were enough to crack those technical resistance levels. In fact, the NASDAQ Composite bolted ahead shooting up 3.3 percent.

Investors are more interested in buying. The evidence: advancing stocks drowned declining shares and upside volume submerged downside volume. Indicator charts strong advances provided confirmation. New stock buy signals catapulted. The Broad NYSE bullish percent chart and some 23 of the 47 industry sector indicators did an about-face to bull alert status thanks to the more than 320 stocks showing P&F breakouts to the upside during the September 29th trading.

Apparently, the positive market news at the end of August not only raised expectations for higher market levels by the end of the year, but  also Americans’ hopes that the country dodged a double-dip recession.

Photo credit: worradmu

Business, Investments, Small business

Considerations When Valuing Naming Rights

Selling naming rights are very common these days, but many businesses aren’t too sure about their worth. 

Getting a better gauge requires a good understanding of accounting. Its important to know, these rights aren’t a physical asset so they’re considered an intangible assets.  This means placing a dollar amount on a naming right can be more challenging compared to physical items. As a result, estimations and investigations are often the best ways to determine the value.

So, sellers and purchasers should consider the following:

  • future cash flows
  • comparisons of similar transactions in the marketplace
  • adjustments for inflation

Also, they should stay aware of external factors that could impact the deal, such as the following that I came across in a report entitled “Valuation of Naming Rights,” by Greg C. Ashley and Michael O’Hara.

  • Does the community support the sale?
  • Does the name dominate a sector and has it already worn out its welcome?
  • Is the financial health of the buyer weak since this could result in a merger, takeover or bankruptcy, and could ultimately compromise the naming agreement?
  • Are there any miscalculations of the present and future state of the economy?
Photo Credit: Renjith Krishnan
Business, Investments, Small business

The Economy’s Impact on Naming Rights Deals

Notice a rise in the use of corporate names associated with a building or an event?

Naming rights have enjoyed a rapid increase in number and expense over the past few decades. A boom in construction and the expansion of major sports leagues are among the factors. However, a drag in the growth spurt has occurred due to turbulence within the economy.

The use of a company name on major buildings, such as stadiums and museums, or local venues is done for financial gains. For instance, a university grants a brand name to be placed on a department in exchange for a large monetary contribution.

A brand also benefits from a boost in awareness and recognition. The placement can alter its public image, show its community involvement, support trade relations or goodwill, deter competition and increase market share. The business may use a venue, such as a museum or an event, such as a golf tournament, to launch or showcase a product.

Naming rights deals are usually longer than a year. Therefore, it’s important to understand the value of the name to avoid any negative issues.

Recently, naming rights deals were portrayed in a bad light. In 2009, banks, that secured multi-million deals with sports stadiums and events, received funds from the Troubled Asset Relief Program. This led lawmakers to question the appropriateness of the deals.

Many naming rights deals have terminated during the recession and economic recovery. Companies either went out of business, sold or bought.

On the other hand, cities and municipalities, attempting to lessen their budget gaps, are giving sponsors the opportunity to purchase naming rights on schools, parks, government buildings and other facilities.

Some colleges have even gone as far as asking for corporate sponsorship for their classes.

Naming rights are known to be expensive, and it appears as though local areas are benefiting the most in this economy. Do you agree?

Photo Credit: Cecelia

Business, Investments

JREITs: Japanese Real Estate Investment Trusts at Risk?

The catastrophic tsunami, earthquake and nuclear reactor events in Japan have increased fears and led to the cancellation of some deals in the stock market. The Bank of Japan has bought assets to help stabilize the markets. The purchases include real estate investment trusts, which are threatened by the potential of plummeting property values.

Michelle Meiklejohn / FreeDigitalPhotos.net

If you have an investment portfolio or have wanted to diversify your portfolio, you may have heard of real estate investment trusts, also known as REITs. This is either a company or business trust. In this case, investors combine capital to acquire and provide financing for real estate such as apartments, hotels, offices, warehouses and shopping centers.

Right before Japanese Real Estate Investment Trusts, or J-REITs, were introduced, Japan changed its Investment Trust & Investment Corporation law. This helped to create the investment tool because it “expanded the allowable use of capital by investment trusts to include real estate,” according to the Journal of Real Estate Literature’s 2006 report “The Growth of the REIT Market in Asia.”  This was part of Japan’s effort to make its financial markets more competitive after its severe recession in the early 1990s.

“The Tokyo Stock Exchange followed up in March 2001 with a listing system for REITs to be traded on its market,” the report stated. “Six months later, Japan became the first country in Asia to launch REITs…” By June 2005 17 J-REITs were trading and worth more than $1 billon. Nippon Building Fund led with nearly $3 billion.

 Credible sponsors and strict regulations were just a couple of reasons why they became so attractive, according to PricewaterhouseCoopers report, “The Growth of J-REITs in the Japanese Real Estate Market and Real Estate Investment Structures: An Overview.” Most of the J-REITs investors included local banks, individuals and foreign investors.

 J-REITs struggled during the recent global recession, but lately the Asia-Pacific Real Estate Association, which promotes and represents the real estate sector, indicated in its news release, the Asia-Pacific REIT market’s capitalization increased by 22.8 percent year-on-year in 2010 to $156.8 billion. This marked a strong recovery since the global financial crisis when it stood at $66 billion in March 2009.

 FRI, a J-REIT, which specializes in retail properties, held a leading position in the market. According to Reuters, its real estate portfolio included 24 properties across the country.

 Jon-Paul Toppino, president of SCJ Investment Management remained optimistic telling the Wall Street Journal in the article “Japan Spooks Its Property Recovery,” that “absent the nuclear uncertainty, I don’t believe there would be any long-term negative impact to the Tokyo real-estate market.” The firm has an office building in the hardest hit area, Sendai, but it was barely damaged.

However, the paper indicated that “Japan’s publicly traded landlords have lost as much as 20 percent of their value since the earthquake struck.”

How at risk are J-REITs? How do you think they will recover?

Photo Credit: Michelle Meiklejohn / FreeDigitalPhotos.net, http://www.freedigitalphotos.net/images/view_photog.php?photogid=901

Business, Education, Investments, Small business

Forging Relationships Between Community Colleges and Business with Virtual Incubators

The White House wants to help speed up high-growth entrepreneurship, and it’s looking at a familiar method for support.

scottchan / FreeDigitalPhotos.net

 An entrepreneurial company’s survival during the critical start-up period is often helped with business incubators. These are programs that offer businesses support services and resources, such as office space, lab facilities and access to financing. Among the programs’ goals are getting firms to the point where they can successfully create jobs, revitalize neighborhoods, commercialize new technologies and strengthen local and national economies. They vary in types and organizational structure.

 Business incubators have been around since the 1950s and have evolved with technology. They were popular for building Internet businesses between 1999 and 2001. Internet incubators appeared in droves and promised “entrepreneurs everything from marketing and accounting assistance to office space and computer equipment,” the Seattle Post-Intelligencer reported in the fall of 2000. In fact, “these hothouses of the Internet economy looked to create entirely new companies in half the time it took other businesses to get off the ground.”

More virtual incubators are on the rise, and today they’re considered “social networks that try to provide the mentoring and collaborative benefits of an incubator without the physical space,” the New York Times recently described.

The White House is taking note. A new government campaign called Start-Up America is encouraging these incubators to help link community colleges with businesses so the economy continues to recover. The American Association of Community Colleges (AACC), which represents nearly 1200 community, junior and technical colleges, was recognized in a White House announcement last January for selecting colleges in 10 states to pilot a Virtual Incubation Network. These colleges include Burlington County Community College in Burlington, New Jersey and Rio Salado College in Phoenix, Arizona. The initiative is getting a $995,500 grant from the Charles Stewart Mott Foundation to launch the pilot project this year, according to the AACC news release.

“Close to 35 business incubators are operated by two-year colleges nationwide,” according to the AACC statement. “The development of the virtual incubator network recognizes that these services need not depend on a traditional brick-and-mortar facility. Instead, the new network will ‘test-drive’ new delivery mechanisms that include support provided at the business site and hybrid in-person and technology processes.”

 AACC will put the initiative into action with the help of the National Association of Community College Entrepreneurship. The AACC will ultimately work with the national network of Small Business Development Centers.

What are some ways virtual incubators have helped? What new trend are you seeing with business incubators?

Photo Credit: Scottchan / FreeDigitalPhotos.net (http://www.freedigitalphotos.net/images/view_photog.php?photogid=1701)

Business, Foreclosures, Investments, Mortgages

Real Estate Speculators: Obstacles in Neighborhood Redevelopment?

Many communities around the country have been at odds with real estate speculators who’ve abandoned their properties.

scottchan / FreeDigitalPhotos.net

In some areas, they’ve become a new class of absentee landlords who often live out of the state or overseas. Comments from community officials in news reports indicate quite a few of these landlords have either slowed progress in redeveloped neighborhoods or reverted gains made.

“In some cities, speculators and vacancies essentially have turned the clock back on previous development successes, noted Harold Simon, executive director of the National Housing Institute,” in the Colorado Independent.

 Speculator Frenzy

Real estate speculators struck while the market was hot and helped to drive up prices during the housing boom. Some presumed the growth wouldn’t end. Condominiums were overbuilt in Florida driven by the speculators’ fervor. Also, the Financial Times described how some speculators were reeled in by “low” teaser rates.

“Prior to 2007, the underlying assumption was, build it and they will come,” Jeff Hardcastle, Nevada state demographer told the New York Times.

“California, Nevada, Arizona and Florida were among the states with the fastest home price appreciation over the last five years. This…attracted both speculators and home builders, a volatile combination that led to an over-supply of homes that was beyond the capacity of the local populations to support,” explained Doug Duncan, the Mortgage Bankers Association’s former chief economist in a statement.

“The market got overheated through speculative buying, because of the easy money that was available,” Larry Catlett of Liberty Realtors indicated in a Canwest News Service article. “You had people buying more house than they could afford.”

Ways of Abandonment

Some confident speculators acquired multiple unit apartment buildings or purchased more than one house. They’d flip the property to another speculator for a profit. When the rates reset to high levels, defaults rose.

“When this over-supply became apparent and prices began to fall, many of these investors simply walked away from their mortgages,” said Duncan.

Others acquired bank-owned foreclosed homes on eBay, through get-rich-quick companies or massed on courthouse steps during foreclosure auctions. Once the property was acquired, these speculators tried to flip them or rent them out before abandoning them.

Instead of abandoning the property, some speculators have kept the homes awaiting a change in the market but haven’t kept the property “habitable” or decorated.

Community Impact

Abandoned homes and dilapidated property can bring down property values and stimulate crime.

“For cities and counties, the problem is this: Foreclosed houses are accumulating and becoming blighting influences. Oftentimes, the houses sit vacant. They quickly deteriorate and attract ‘broken window’ problems that can drag down a neighborhood — the sort of problems that redevelopment agencies are often charged with solving after the fact,” the California Redevelopment Association stated.

Real estate speculators are among those blamed for interfering with redevelopment efforts in some Detroit neighborhoods.

“Public ownership of land alone isn’t enough to make redefining Detroit easy,” Mike Wilkinson of The Detroit News reported. “So many speculators have jumped into so many neighborhoods and picked up parcels for $500 or less that redevelopment could cost taxpayers millions of dollars to buy them out.”

What have you seen? Share an industry trend you’ve noticed.

Photo Credit: Scott Chan/FreeDigitalPhotos.net (http://www.freedigitalphotos.net/images/view_photog.php?photogid=1701)