Tavistock’s Jim Zboril shares what’s ahead for innovative developer

Jim Zboril for 13 years has overseen cow pastures transformed into , offices, eateries and more in the 11,000-acre Lake Nona community.

And the president of Development Co. LLC still is leading the charge in developing one of Central Florida’s hottest communities. This year, Zboril is managing development of $3 billion worth of projects in the southeast Orlando community, including the next $300 million phase of Tavistock’s Lake Nona Town Center mixed-use complex, a fitness-oriented resort with a Crystal Lagoons recreational lake, the massive $132 million Amazon.com Inc. (Nasdaq: AMZN) fulfillment center, audit giant KPMG LLP’s $430 million training center and an expansion of the Lake Nona Golf & Country Club.

Plus, the company started site work on Sunbridge, a separate, Lake Nona-like community of 24,000 acres that straddles Orange and Osceola counties.

So what is Tavistock Development’s head honcho gunning for in 2018? Here’s what he had to say:

What’s the biggest thing you have going on next year? It’s hard to list just one. Our development pipeline is highlighted with numerous large-scale, economically significant projects. The Lake Nona Resort — the world’s first iconic performance resort and one of the largest man-made lagoons — and our 3.8 million-square-foot Lake Nona Town Center, which is poised to transform the future of retail through innovative technology. In addition, we are breaking ground on Sunbridge, our newest master-planned community. The most important thing is to continue to attract and retain the best development talent in Central Florida and to support a culture that will drive innovation throughout our projects.

What impact will this have on Central Florida’s The continued growth of our shops, restaurants, first-class entertainment options, hotel rooms and homes – the DNA that makes Lake Nona a great place to live, work and play – helps retain and attract new homeowners to our region. It helps our employers retain and attract top talent, adds new jobs, and brings new visitors to our hotels and Orlando International Airport. Growth is also helping our region become increasingly attractive to major companies that want to relocate here like the U.S. Tennis Association, KPMG and Amazon.

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What’s happening in your industry right now? Construction and development are booming for many players. However, resources are stretched with so much activity. We are fortunate in Lake Nona and in this region that we offer steady continuous work for our partners, so we aren’t experiencing as many issues as some in our industry in other parts of the country.

What are your benchmarks for 2018? Commencement of construction on the Lake Nona Resort and Crystal Lagoon, and starting sales in Sunbridge’s first neighborhood

Deb German takes the reins on teaching hospital that will ‘develop UCF into top-notch medical school’

The new year is ringing in new projects and new leaders, but one familiar face stands out in the crowd — and for good reason. 

Dr. Deborah German, the University of Central Florida’s first dean of the College of Medicine in Lake Nona, is taking the helm on a project that the college has waited for for nearly a decade: to establish a teaching hospital. And that’s why German is one of Orlando Business Journal’s 2018 game changers.

“Every great medical school has a teaching hospital, and great hospitals are affiliated with top-notch medical schools. If you’re sick and have exhausted all the treatments of your local hospital, where do you go for the next level of care? Many people say Harvard, Johns Hopkins, Stanford, Cleveland Clinic. All of those are teaching hospitals,” German told Orlando Business Journal.

A hospital to advance teaching and clinical research programs has been a priority since the university opened its medical school in 2009.

German is working with the university’s partners at Hospital Corporation of America in setting the strategy and vision for the new 100-bed teaching hospital adjacent to the 50-acre College of Medicine campus in Lake Nona. The teaching hospital is expected to be completed in 2020.

German will help select the new hospital CEO and serve on the hospital’s governing board, which has equal representation from UCF and HCA. Overall, she will work with HCA to ensure that the hospital keeps its promises to all of its stakeholders and the community.

The new teaching hospital will be a living/learning lab for training medical, nursing, physical therapy, pharmacy and social work students in teamwork skills and communication.

Plus, it will help address a serious statewide problem: lack of doctors. The Teaching Hospital Council of Florida and the Safety Net Hospital Alliance of Florida forecast that shortage will grow to 7,000 physician specialists in the state by 2025. German has said that UCF started building residency programs a few years ago to address the shortage and now has 255 slots and expects to have more than 560 by 2020 through the partnership with HCA.

What salary do you need to afford an average home in Orlando and 49 other cities?

Median home prices have risen in most major U.S. cities over the last year, including Orlando. So when factoring in interest, taxes and insurance payments, how much would you really need to make to afford a home?

 

See the slideshow with this story to find out where Orlando and 49 other large cities rank, including where national numbers fit among them, according to HSH.com.

With little new housing supply, continues to be a problem in most cities, the researchers conclude.

 

Overall across the nation, an average salary of $55,390 would pay for a home that averaged $254,000, which is a 5.26 percent increase from 2016. That’s if the homebuyer put a 20 percent down payment — the salary needed increases to $63,941 if only buying with a 10 percent down payment, reports HSH.com.

While most markets in the 50 largest U.S. states saw a decline from the second quarter to third quarter of 2017, almost all saw rises in median home prices from this time last year.

Orlando-area home prices still on the rise

Home prices in the Orlando-Kissimmee-Sanford metropolitan statistical area increased by 6.8% in November compared with the year-ago period, a new report from CoreLogic shows.

On a month-over-month basis, home prices, including distressed sales, increased by 0.8% in November compared with October.

Nationwide, home prices nationally year over year by 7% from November 2016 to November 2017, and on a month-over-month basis home prices increased by 1% in November compared with October, CoreLogic reports.

Looking ahead, the CoreLogic forecast indicates that home prices will increase by 4.2% on a year-over-year basis from November 2017 to November 2018, and on a month-over-month basis home prices are expected to decrease by 0.4% from November to December.

“Rising home prices are good news for home sellers, but add to the challenges that home buyers face,” said Frank Nothaft, chief economist for CoreLogic. “Growing numbers of first-time buyers find limited for-sale inventory for lower-priced , leading to both higher rates of price growth for ‘starter’ homes and further erosion of .”

OIA seeks south terminal eateries; shares details about new stores

International will begin searching for the concessionaires at its new $2.15 billion south terminal, while also locking down the theme park retail stores planned to go there.

The airport will release the first advertisement for food and beverage concessionaires on Dec. 28 for more than 30,000 square feet of food and beverage space.

Meanwhile, the airport is already in talks with Walt Disney WorldUniversal Orlando Resort, SeaWorld Orlando and Kennedy Space Center Visitor Complex about having shops there, said airport officials during the Dec. 20 Greater Orlando Aviation Authority meeting.

The south terminal will have more than 61,000 square feet of overall retail space. Here’s a breakdown:

  • Nineteen total food and beverage spaces (30,678 square feet)
  • Three theme retail spaces (17,902 square feet)
  • Six general retail spaces (6,353 square feet)
  • Two specialty retail spots (1,866 square feet)
  • One duty-free shop (4,600 square feet)

Stan Thornton, COO at the Greater Orlando Aviation Authority, said during the meeting that the airport is seeking to fill out themed retail spaces — those used by theme parks for merchandise — and move onto filling out food and beverage space and other specialty shops.

Maps of the new airside terminal show most of the retail space is split between two levels, with Disney and Universal both having dual-level stores. Other spaces are earmarked for a sports bar, casual dining, gourmet market, fast casual/ethnic cuisine, a burger stop and more.

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Take a tour through Central Florida’s top 5 wealthiest ZIP codes

“We will be looking at food and beverage, but a lot of different concepts. We hope to focus on something that’s emblematic of Orlando. You can’t do that all over, but more airports are doing local fare. For retail, you have the themed retail and news/gift and specialty retail,” Phil Brown, CEO of the Greater Orlando Aviation Authority, told Orlando Business Journal.

Site work already is underway at the new south terminal. The expansion will add 16 new gates to the airport — for both domestic and international flights — and will provide for future growth. The terminal, dubbed Terminal C, will be ready for flights by 2020 and is a vital cog to the overall growth of the $60 billion tourism and travel industry that serves more than 68 million annual visitors.

7 things to know today and 8 financial predictions for 2018

Good morning, !

We’re nearing the end of a very eventful 2017, and as a way to get you ready for the months to come, WalletHub surveyed more than a dozen economics experts, analyzed big-bank projections and Federal Reserve forecasts, and produced a list of financial predictions for 2018:

  • U.S. GDP growth will remain near 2.5%.
  • Unemployment will crack 4%.
  • The S&P 500 will top 2,900 and finish at 2,838.
  • The Fed will raise rates three times, costing borrowers billions.
  • Credit card debt will break all-time records, topping $1 trillion owed.
  • Consumer credit scores will peak in 2018.
  • U.S. auto sales will top 17 million for the fourth straight year.
  • Existing home sales will again top 5 million, despite higher rates.

Want to know more about what the panel of economists sees ahead for next year. You can read the full report here.

And be sure to check out these other Tuesday headlines:

Brightline gets final OK from feds for Orlando-West Palm Beach segment

The long-awaited Orlando-to-Miami intercity passenger train got the final federal go-ahead to build the rail project between West Palm Beach and Orlando, with starting in first-quarter 2018. The Phase 2 segment to Orlando will take 30 months of construction, setting it up for a 2020 operating date.

Adventist Health System buys Lake Nona land for $9M

Adventist Health System, parent of Hospital, just bought more land in southeast Orlando’s Lake Nona community that potentially could be used for several medical purposes, including a freestanding emergency department and/or an outpatient surgery center. More here.

One of Orlando’s largest banks sells to North Carolina bank

HomeBancorp Inchas signed a definitive merger agreement with First Citizens Bank & Trust Co. First Citizens, headquartered in Raleigh, N.C., will pay $15.03 in cash for each share of HomeBancorp stock. The deal gives First Citizens (Nasdaq: FCNCA), two new markets — Orlando and Tampa.

Foundry Commercial to embark on third industrial park in Charlotte region

Orlando-based Foundry Commercial is expanding its development footprint in the Charlotte, N.C., region with a third industrial park, this time in Huntersville. In a joint venture with PGIM Real Estate, Foundry will initially develop three light industrial buildings on a 48-acre site at Bryton Town Center. At full buildout, the park, Bryton Commerce Center, will total six buildings and 700,000 square feet. More here.

Delta testing facial recognition project

Delta Air Lines (NYSE: DAL) — the second-largest carrier at Orlando International Airport — and U.S. Customs & Border Protection are launching a test project at Hartsfield-Jackson Atlanta International Airport this week that will allow travelers to board flight DL82 from Atlanta to Paris through facial recognition. The airline said it plans to expand the test to multiple daily flights. More here.

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New Construction

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Woohoo? We’re the No. 2 most-spoofed area code in the U.S.

Well, this is not a list we wanted to be on: Orlando’s 407 was the second-most-spoofed area code in 2017, trailing only Atlanta’s 404 area code, according to Hiya. In fact, unwanted calls to U.S. consumers overall have increased by a whopping 76% in 2017, up from over 10 billion last year.

Adventist Health System buys Lake Nona land for $9M

Adventist Health System, parent of Hospital, just bought more land in southeast ‘s community that potentially could be used for several medical purposes, including a freestanding emergency department and/or an outpatient surgery center.

Freestanding emergency centers typically are owned and operated by licensed hospitals. The facilities are not connected to a main hospital campus, but offer the same comprehensive 24/7 emergency services. The number of such facilities is on the rise in Florida, in part due to overcrowded ERs and a desire to grow hospital system revenue. Such facilities also act as a toehold for future hospitals.

Adventist spent $8.975 million on roughly 15 acres on the north and south sides of Lake Nona Boulevard, according to documents filed on Dec. 15. The land is adjacent a 67.24-acre site Adventist bought last year, which currently is zoned as grazing land and doesn’t have any structures built on it.

The land is 13 miles from Florida Hospital East Orlando on Lake Underhill Road.

Adventist representatives were not immediately available for comment on what it plans to develop on the site.

The latest land sale deed restricts Adventist to a maximum of 145,000 square feet to be used for medical offices, an emergency department, an outpatient surgery center, and health and wellness services that can include chiropractic services, general physical therapy and rehabilitation services. The deed also allows for dining, vitamin and nutritional supplement retail sales, day care and a church or other place of worship.

Lake Nona’s currently houses the Orlando VA Medical Center, which opened last year, and the 5-year-old Nemours Children’s Hospital, and plans are in the works for a 100-bed University of Central Florida/HCA teaching hospital expected to open by the end of 2020 adjacent ‘s 50-acre College of Medicine campus.

How Much Is Your Home’s Collateral Value?

Traditional Appraisal and Automated Valuation Models Don’t Always See Eye to Eye.

Recently the two government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac announced plans to waive the requirement of a professional appraisal on qualified purchase loans with a loan-to-value ratio at or below 80 percent.  For Fannie Mae, the new waiver option extends the Property Inspection Waiver program which was initially only applicable to refinancing loans. Similarly for Freddie Mac, the move has expanded lenders’ option to use automated evaluation tools, in lieu of a traditional appraisal, on both purchase and refinancing loans when working with its Loan Advisor Suite.

The GSE announcements came amid reports of a shortage of state-certified and licensed appraisers, especially in rural areas.  Nonetheless, the announcement was not without controversy. The Appraisal Institute (AI), the country’s largest trade association of real estate appraisers, has raised safety and soundness concerns of eliminating the appraisal requirement and is seeking a legislative rollback as it regards “the requirement for the completion of full appraisals to determine the true equity position of individual properties” fundamental to prudent risk management for the mortgage finance sector.  Under the federal banking regulations for real estate transactions, automated appraisal methods are generally reserved as a due diligence tool rather than as the primary valuation.

From a market economics perspective, a clash between automated evaluations and traditional appraisal seems rather inevitable, as advanced analytics and big data technology have steadfastly pushed the boundaries of collateral evaluation capabilities. Today’s automated valuation alternatives are often powered by large databases that can capture information on a given property as well as transaction records in and around the property in consideration.

 What Title of figure 2 is

In mortgage underwriting and securitization, collateral risk is typically quantified by loan-to-value (LTV) ratios. For purchase loans, the LTV ratios at origination are valued at the lesser of purchase price and appraised value. Since traditional appraisals infrequently come in below purchase price – about 10 percent of the time among loan applications or less than 4 percent among funded loans – a loan’s collateral risk measure is typically unaffected by appraisal.

But that could change quickly using an automated valuation model (AVM). Here is a quick look at the difference between traditional appraisal and AVMs, with implications for origination LTV. This blog analyzed a sample of recently appraised single-family purchased with mortgage financing for which a CoreLogic AVM value was also available.  The sample consists of approximately 190,000 purchase-loan properties appraised between July 2016 and June 2017.

Figure 1 shows the distribution of the properties’ traditional appraisal value relative to their purchase price. A majority of the appraisals were either exactly at the contract price (31.6 percent) or slightly above it (58.6 percent), leaving about 10 percent of the properties appraised below the purchase price. With very few appraisals on the low end, the purchase price effectively determined origination LTV during loan underwriting.

Figure 2 shows the distribution of the AVM values relative to the purchase price: 45.4 percent of the AVM values were at or above the contract price, while 54.6 percent were below it. Compared with traditional appraisals, the AVM values were more symmetrically distributed about the purchase price but with thicker tails on both ends (that is, greater uncertainty in the valuation). For the 5-in-9 properties with an AVM value below the purchase price, the LTV ratios for these loans would be higher had the AVM valuations been used instead of a traditional appraisal.

Since the odds of an AVM coming in below the purchase price were 55-45 in this analysis, compared with 10-90 for traditional appraisals, AVM usage will increase the underwriting LTV on a much larger number of loans. And the ‘fatter tail’ of the distribution below the contract price means that the upward LTV adjustment will more often be larger than for a traditional appraisal.

While the industry may debate which valuation method is likely more accurate than the other, or more importantly, which is more useful than the other in predicting default risk and loan performance, there is one thing we can all agree on: Lenders and mortgage investors need reliable information about a loan’s and portfolio’s collateral risk to make informed underwriting and investment decisions.

[1] The property must be a single-family, primary residence or second home with a value less than $1 million; additional restrictions apply.

[2] See the Interagency Advisory on the Availability of Appraisers, issued by the federal banking regulators on May 31, 2017. https://www.occ.gov/news-issuances/news-releases/2017/nr-ia-2017-60a.pdf

[3] The Appraisal Institute press release, “Appraisal Institute Joins 35 Groups Seeking to Halt Appraisal Waivers,” September 7, 2017.

[4] See the Interagency Appraisal and Evaluation Guidelines 2010, which was originally issued in 1994 by the FDIC, OCC, FBR, and OTC, in accordance with Title XI of the 1989 FIRREA.

[5] A recent study by researchers at Fannie Mae reported less than 4 percent of the purchase loans guaranteed by the agency during 1992-2015 had an appraisal below the purchase price. The study can be accessed at http://www.fanniemae.com/resources/file/research/datanotes/pdf/working-paper-102816.pdf

[6] The AVM valuation date (or, AVM “as of” date) did not fall exactly on the appraisal date, but ranged from 15 days to about 3 ½ months after the appraisal date.

[7] Because the data set did not include the buyers’ loan amount, analysis by LTV ratio could not be performed. It remains to be seen whether the distribution of AVM valuations or appraisal is affected by leverage. However, if the valuations are unbiased, we should not expect leverage to affect the valuation outcome.

Housing Forecast 2018-2019: Declining New Demand

Take a step back from whatever data you normally look at. We’ll begin big picture with how many housing units are needed to accommodate changes in the United States. By housing units, I’m including single family dwellings, apartments and condos, as well as mobile . This is the key to a housing forecast, after which it makes sense to think about construction by different types, home prices and rental vacancy rates. We’ll keep this analysis at the national level; you can use the same logic to look at your own state or metropolitan area.

Dr. Bill Conerly; historical data from Census Bureau

Drivers of growth are population, changes in household size, and pent-up demand. Population growth is the biggest factor, so let’s start there. The surprising news is how soft population growth has been in recent years. Last year’s increase of 0.7 percent was the lowest percentage gain since 1937. For the 20 years prior to the last recession, growth averaged 1.2 percent. That may seem close to 0.7, but most housing is built for new demand, not as replacement. At 0.7 percent growth, new demand is just 58 percent of what it would be at 1.2 percent population growth. That tells us that we need to forget old averages, like housing starts of 1.5 million units a year. Let’s assume that next year is like last year. Population will grow by about 2.278 million people.

 

The second driver of housing demand is reduction of average size of households. When a couple split up and each get their own home, that increases demand for housing. (Recall that we include apartments when we use the word “housing.”) In the opposite direction, when a young adult gives up an apartment to move back home with the parents, demand for housing decreases. We can measure this by average size of a household. When average size (number of people) goes down, demand for housing is going up.

Despite the meme about young adults living in their parents’ basements, the average household size is now lower than before the recession. (In 2006, average was 2.57 people per household; most recently 2.53.) If average household size levels out, we’ll have about 0.881 million new households. But if the recent downward trend continues, we’ll have 1.183 million. That’s a pretty big swing, so household size is a large driver of housing demand.

The ability to live on one’s own, whether that means moving out from parents or from an ex-spouse, ties to employment and wage rates. As we noted in our article on the consumer spending forecast, job growth has been moderately slow, and wage inflation has not accelerated. I expect wage rates to improve next year, but not soon enough to change the trend in household size. So new demand for housing units will be (under these assumptions) 1.183 million units. For comparison purposes, so far this year we are on pace to build 1.287 million single family houses, apartment and condo units, and manufactured homes. Looks like we’re building too much, at least nationwide.

Will pent-up demand take up some of these homes? I look at how many vacant housing unitsthere are. Some vacancy is normal and even good. For non-rental housing (mostly single family homes, but also some condos), average vacancy is 1.4 percent. In the recession, vacancy hit 2.9 percent, but most recently was down to 1.5 percent. So supply is not tighter than normal despite talk of another housing bubble.

On the rental side (mostly apartments but some single family homes included), average is 7.0 percent but we are now at 7.3 percent (down from 11.1 percent in the recession). The underlying data are not terribly precise, but we’re certainly in the ballpark of normal vacancy. This looks to me like we do not have too much or too little inventory relative to demand. (Note that some real estate analysts use the word “inventory” to describe the number of houses listed with real estate agents. That is not at all a measure of inventory or supply.)

A few points makes the analysis a little more difficult. These are national data. While people are mobile, most housing is not. An excess of houses in Detroit or Cleveland cannot help people moving to Utah or Florida. We also don’t count demolitions or houses left permanently vacant very well, nor do we have a solid handle on vacation homes.

Nonetheless, I’m comfortable saying that we don’t need an increase in home construction, and would be just fine with a five percent reduction in housing starts next year and in 2019, which is my forecast.

Given that both owned and rental vacancy rates are about normal, do we need to change the mix of single family and multifamily construction? For most of the 1990s and 2000s about 80 percent of new construction were single family units; that figure is down to around 65 percent now. With millennials entering their child-rearing ages, we should see greater demand for suburban houses and less demand for urban apartments and condos, as I argued in my Multi-Family Real Estate Forecast: 2014-2020.

As for home pricing, if we’re currently building more houses than we need, then prices don’t need to firm up. I expect long-term interest rates to rise a little, which won’t help prices. Although there’s not much reason to expect a collapse, the recent six percent nationwide price increase seems a bit much given the demographics. I would think that three percent would be more realistic.

This national picture may not apply to your neighborhood at all. Real estate is local, so look at your community. Begin with population data. (Household data are harder to find at the local level.) Understand your own community by looking at historic data on housing units permittedper 100 new residents. Don’t be too swayed by local gossip. Instead, begin with demographics.

Snapshot of $172M worth of Lake Nona projects underway

The fast-growing, 13,000-resident Lake Nona community in southeast Orlando is dotted with cranes, piles of earth and the machines to push ’em around.

Among developer Development Co.’s projects underway are three valued at  $172 million combined:

Flip through Orlando Journal‘s slideshow for a closer look at these developments emerging out of former pasture land.

Lake Nona is home to several businesses, including the new $430 million KPMG training and innovation center and New York-based Drive Shack Inc. (NYSE: DS), a new global golf entertainment company opening its first location in Lake Nona in 2018.