There is lot that goes into determining excess utilities given the increased densities of tenants. Sometimes, we are unable to install emon meters to track excess electric use. However, you will need to find ways to track excess water, trash, sewer, and gas. A certified energy analyst will count machines, appliances, and devises to figure out a tenants electric use. Headcounts will be used to estimate other over standard use. From this information, a certified energy auditor will help you  determine excess tenant utility billings.

We always ask our tech startup tenants what they would do if funding dried up.  When tenants are burning cash, they must rely on a new infusion of cash to sustain operations before an exit or attempt to achieve a positive cash flow. To date, this has been a hypothetical question. For the past few years, firms with clever technologies or growing users and revenues could easily raise capital at enhanced valuations. Firms focused on growth and market share. Most firms answered our question by saying that they could be cash flow positive if they needed to. To accomplish this — the firms would lower their research and development as well as their marketing and sales expenses. Even if the firm could lower these expenses, their business probably could not sustain such reductions very long without severely hurting their future.

Suddenly, capital providers are reevaluating their valuations and stiffening their capital requirements. Funding has not dried up but has become more difficult to obtain. Now our question will be more relevant and topical and will be met with less disdain.

The finishing touches can make a big impact on the curb appeal of an apartment renovation.  Here is an example of one of our recent renovations.

Here is a picture of the exterior landscape. Unfortunately, at the completion, a beautiful tree lost its leaves for the winter. We were left with the tree below.

Before

We were forced to remove the tree and put in new timber bamboo to create the curb appeal needed for marketing the space.

Also we had not finished our side entry corridor to the units before we started to market the units.

Before Landscape

We quickly painted the concrete, put a new cabinet to hide the water heaters, and installed landscape.

I

After

These are small items but do create a first impression and set the stage for the  interior that transformed your typical 1960s dingbat garden apartment into a contemporary hip Echo Park loft like apartment.

Renovated Interior

Investors and venture capitalists in January 2016  hammered the valuations of technology companies both in the public and private market. Recent stats show a reduced commitment to venture capital funding in the first two months of 2016. Some venture capitalists are warning startups to prepare for a long winter in fund raising and to conserve cash. Web 2.0 had a spectacular run and brought even more innovation than during Web 1.0. Technology is volatile and is prone to over valuation and under valuation. We may have indeed reached the point where  tech employment starts to contract and Bay Area office absorption slows and at some point turns negative.

It is not clear how this weeding will take place.  Without a concomitant recession, it can be lighter and less dramatic initially  Perhaps, we have lost site that most startups fail.  A business can still succeed even if every investor does not benefit.  The 2009 funding freeze was much different than the 2000 dot.com bust.   In the 2000 dot.com bust, most startups just failed, whereas during the 2009 funding freeze–startups and tech companies cut back and froze expansions.  Despite a nasty recession–many tech company revenues kept growing in 2009.  By 2010–fundings and expansions resumed.

However this revaluation of Web2.0 takes place– Web 2.0 will be followed by an even bigger Web 3.0. Innovations will be more startling. The entire world has shifted to a knowledge based economy.  Technology will dominate economic activity. Knowledge workers will make new and even more profound discoveries in life science, computational power, and artificial intelligence.

What ever dark days may be ahead–we must not lose sight of the long run. For the Bay Area–rents may fall and vacancies may rise precipitously over the down cycle. However, San Francisco and the Bay Area are the world’s capital of technological innovation.  The infrastructure and institutions are unparalleled anywhere else in the world.   During Web 3.0–San Francisco and the Bay Area will rise to even greater heights.

We are pleased to announce our completion of the renovation of a twenty seven unit apartment complex, located in Northeast Los Angeles. The property is located less than a mile from Sunset and Silver Lake Boulevard. It is known for its hip atmosphere and as an up-and-coming destination for millennials. This property demonstrates PMI’s Creative Multifamily Strategy and is located just steps from upscale dining, wine bars, boutiques, farmers markets, specialty food stores  and much more!

Creative Multifamily is a new line of small, low-rise apartments that are stylish, contemporary, playful and yet, still affordable.  Unlike many of the mega story amenity rich multifamily homes being built, our Creative Multifamily living spaces on London street offer  modernized bungalows with revamped  interiors and large outdoor patio spaces.  We stripped away the drywall ceilings in some units to expose and elaborate on the beauty of the high truss ceilings above.

Residents at properties like these are typically young creative’s that appreciate being located within walking distance of several diverse cultural amenities.

According to MPF Research, developers will have delivered 6,000 new Los Angeles multifamily units in 2015. Yet, developers obtained permits for only 7,200 units in 2013 and 9,500 units in 2014 and 14,000 units in 2015. The pipeline grows but nothing comes out of the other end. The problem is that the time to process and build apartments has increased. Apartments, like oil, suffer from the hog cycle problem. By the time developers can deliver the units– the demand may have already already changed. In 2015–according to MPF Research–demand exceeded 9,000 units and further reduced vacancy from 3% to 2.7%.  Developers need the economy to be still humming when they finally can deliver these units.

I speculate that developers will file permits for 17,000 units in 2016. The apartment new supply will be the greatest since the 1980s and will be delivered in 2017 through 2019.   According to Marcus and Millichap–over 15,000 units are currently under construction. M & M anticipates the 6,800 units will be delivered in the Greater Downtown Region alone.

This new housing translate into 12,000 new Greater Downtown residents (includes parts of Northeast LA like Echo Park and Silver Lake). Indeed, Downtown is the new growth area for Los Angeles–a new young community within an old one.

PMI completes creative multifamily apartment at 1006 N New Hampshire Avenue in East Hollywood

We are pleased to announce our completion of the renovation of a four unit apartment complex, located in Northeast Los Angeles. The property is located less than a mile from Silver Lake’s Sunset Junction in East Hollywood, close to Los Angeles City College.  The property pushes the boundary of Silver Lake’s gentrification into East Hollywood and offers more affordable rents than prime Silver lake.   1006 New Hampshire illustrates PMI’s Creative Multifamily Strategy. The property is conveniently located just east of Hollywood and just west of supremely hip Silver Lake, and provides easy access to gourmet dining, bars, upscale shopping, and much more!

Creative Multifamily is a new line of small, low-rise apartments that are stylish, contemporary, and playful, yet still affordable. The complex retains the flavor of its era, but incorporates a totally redesigned interior. Residents at properties like this are typically young and well-educated, and appreciate being located within walking distance of several diverse cultural amenities

AFTER

BEFORE

My zoning consultant told me that the discussions today within city planning agencies have turned from increasing parking requirements to preparing for the advent of transit (like the  new Expo line extension), the extended use of ride sharing services like Uber and Lyft, and eventually the use of self driving cars.  Planner now see less need for parking spaces and are no longer responsive to communities looking for an increase in parking spaces.  Indeed, Santa Monica and San Francisco have gone the opposite way and have instituted parking maximums in some areas with access to  transit.

PMI completes another creative multifamily apartment at 1325 Sutherland Street in Echo Park

We are pleased to announce our completion of the renovation of an eight unit apartment building, located in Northeast Los Angeles. The neighborhood is located in Echo Park, and is known for its hipster atmosphere and an up-and-coming destination for millennials. 1325 Sutherland illustrates PMI’s Creative Multifamily Strategy. In 2013, “The Yelp Guide to Hip” named Echo Park as the hippest place in Los Angeles. The property is conveniently located just steps away from Sunset Blvd and provides easy access to upscale shopping, gourmet dining, bars, specialty food stores and much more!

Creative Multifamily is a new line of small, low-rise apartments that are stylish, contemporary, and playful, yet still affordable. Residents at properties like this are typically young and well-educated, and appreciate being located within walking distance of several diverse cultural amenities.

AFTER

BEFORE

We have experienced at our creative offices that cater to tenants 5,000 to 15,000 that credit tenants are far and few between and many prospects are startups or later stage tech tenant startups. We have therefore had to handicap the viability of these tenants. This function is more important today because tech tenants resist posting any significant security. Here are some different classes from best to worst:

1. Profitable (very rare), still has significant cash , significant and rapidly growing revenues (with total rent olbigations under 5%), significant and rapidly growing and diversified customer base , growing revenues, high profit margins, buyout rumors, one of the major players in a certain unique technology.

2.  Almost profitable but has everything else above.

3.  Still has a significant burn but has at least 2 to 3 years left of burn runaway based on current cash levels and a survival plan if venture funding is cut off.  It has everything else as shown above.

4.  Has a rapidly growing and large customer base (or at least unique visits)  and at least a 2 to 3 years left of burn runaway based on current cash levels and a reasonable survival plan if venture funding is cut off.

5.  A new startup with a lot of cash and at least 2 or 3 years left of burn runaway based on current cash levels and a survival plan if venture funding is cut off.

6  A new startup with only one year of cash burn and a very ordinary concept