Texas Real Estate Business

OCT 2017

Texas Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in Texas.

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46 • October 2017 • Texas Real Estate Business www.REBusinessOnline.com W ith roughly 70,000 housing units potentially impacted by Hurricane Harvey, it may be months before the true extent of the damage is known. As smaller property owners and REITs release updates on their assets, the state of the Houston's multifamily market begins to crystallize. We sat down with Norman Radow, CEO of RADCO Cos., an Atlanta- based firm that owns four multifam- ily properties totaling about 1,800 units in Houston, to try to get a jump on figuring things out. Texas Real Estate Business: Prior to the storm, the consensus in Hous- ton was that multifamily rents and occupancies would stabilize in 2018 with fewer construction starts How has Harvey changed this outlook? Norman Radow: I would gener- ally agree with that consensus, pre- Harvey. Still, in all likelihood, there are have been more units destroyed or damaged than the volume of ex- cess units that exists today, which was expected to take another year to stabilize. The opti- mism of 2018 may accelerate into the fourth quarter of this year. You'll also see FEMA workers, engineers and con- struction workers coming in for the restoration effort, which will also help absorb some inven- tory. My gut tells me that the absorp- tion may now occur faster than the pre-Harvey pundits thought. TREB: How was RADCO able to safeguard its properties from water damage? Radow: We took a lot of precau- tions. We had hurricane straps on the roofs of our properties; we put in all new windows. We retrenched over the summer and added more drain- age to our properties and lowered the water levels in our pools so they wouldn't overflow. We also instituted an emergency plan that involved hav- ing every property manned during the storm. As a result, only about 1 percent of our units were impacted, even as our neighboring properties severely dam- aged. We're really in better shape than most, and we're very grateful for that. TREB: Can you describe your plan to help tenants who have been dis- placed by Hurricane Harvey? Radow: We have a lot of units that we wanted to make available as soon as we could to people in need. We've already gotten calls from charities and FEMA, but we're not allowing the demand to affect our pricing. All our units will remain at pre-Harvey pricing levels for those in need. The company has also put up a significant amount of money, which employees and investors are match- ing, in our 501(c)(3). We've used it to buy linens and beds and emergency supplies. We recognize that many of our residents make hourly wages and have been out of work, so we've put a hiatus on notices of rent collection. We're working with our existing ten- ants to give them every opportunity to maintain and keep their homes. TREB: Can you describe the repair and restoration process for units that were hit with heavy water damage? Radow: The first thing to realize is that the systems for most of the garden-style apartments in Houston are on the ground level. So even if the second and third floors were un- touched, the systems could have been damaged or destroyed, especially if they had to shut off the power. And if the air conditioning units met water, suddenly they're blown and have to be replaced. So the second- and third- floor units may be uninhabitable for a period of time, even if no water touched them. With all this humidity, if the air conditioning systems go offline, those units could get mold. And even if it's just an inch or two on the first floor, the water wicks up the drywall and you have to take down much more beyond the affected area. When the drywall comes out, you have to air it dry, treat it, put in new installation, then reapply the drywall, so there's a lot more work than meets the eye. Companies that specialize in this work are inundated now. There's no infrastructure to deal with 67,000 housing units, let alone the commer- cial structures that were also affected. So there just aren't enough resourc- es to service these units, which means there won't be any air circulating and mold is going to fester. There will be a lot of residual effects, not to men- tion all the insurance claims. So un- fortunately, I think the optimists for a quick recovery are going to be disap- pointed. TREB: How might the effects of the storm impact future develop- ment and construction practices in Houston's multifamily market? Radow: What's more important than an approach to any one project is for the government to address this with a forward-thinking solution. Houston has no zoning laws. We ap- preciate that the government allows the private sector to determine what to build and where, but there has to be some overall arching scheme that considers water runoff and absorp- tion. That amount of water had to go somewhere. And without advance planning on where that water should go, where it will percolate and where it will be re-deposited to the water ta- ble or run off into the gulf, you're go- ing to have a lot of damage. I'm hope- ful that this storm will serve as a call to action for better public planning. n Small Balance Bridge Loans Multifamily & Commercial $3,300,000 Refinance Retail $1,813,500 Refinance Office $3,134,800 Purchase Light Industrial Recent Transactions Loan Amount $1,000,000 to $5,000,000 States Western States, TX, FL, IL LTV Multifamily LTV up to 70% Comme Commercial Real Estate LTV up to 65% Terms Up to 3 Years Fixed, I/O with Balloon No Prepayment Penalty Option Non-Recourse Available This communication is intended for real estate professionals only. Rates and terms sub- ject to change without notice. Wilshire Finance Partners, Inc. CA Bureau of Real Estate Broker Lic. #01523207 and CA Department of Business Oversight Lic. #603K729 (800) 594-9457 SRE@wilshirefp.com Los Angeles Office | 1990 South Bundy Drive, Suite 630, Los Angeles, CA 90025 Mission Viejo Office | 25950 Acero Drive, Suite 345, Mission Viejo, CA 92691 MULTIFAMILY MARKET CHANGING OVERNIGHT RADCO CEO: Hurricane Harvey has accelerated multifamily absorption in Houston. Interview by Taylor Williams Norman Radow The RADCO Cos.

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