79,000,000 people are crossing the threshold...and bringing you opportunity. Born between 1946-1964, the boomers are entering their golden years, and America’s most vocal generation is likely to change the way we see this stage of life in the same way they turned “teendom” on its head. The lifestyle shift brings change in their choice of real estate as well. No sector will be unaffected as boomers’ choices in where to live, work, and shop begin to have national consequences in residential, multifamily, office, retail and senior housing in its many forms: age restricted housing, assisted living, congregate care and other venues yet to be created. More urban infill will result as the generation that fled cities for the suburbs now seeks the convenience of aging in 24-7 cities. Some will choose to “age in place” rather than flee to the sunbelt, but with fewer homeowner responsibilities, smaller space, more amenities. At the same time, their children who are now dubbed “echo boomers” are also fleeing the suburbs and looking for space in those same 24-7 cities. Urban infill, adaptive re-use, mixed-use are all taking larger roles. And the lending community is taking note with new programs and new underwriting parameters to accommodate shifting patterns. •

The “gap” and how to fill it
11% of families in Los Angeles county can afford the median price of a home. Which means that 89% can’t. Those numbers may differ somewhat in other major MSAs, but America’s affordability gap is very real and growing. As interest rates continue to rise, fewer families will be able to afford a home purchase. The natural consequence? Multifamily vacancies are already shrinking and concessions disappearing. Meanwhile, building starts haven’t kept pace with population growth and immigration even as rental units are withdrawn for condo conversion.

Affordable housing’s “midwife”wasJacob Riis, whose shocking 1890 expose, How the Other Half Lives revealed deplorable immigrant housing and spurred creation of livable shelter at lower prices.

All this is leaving America’s workforce with housing costs that approach 50% or more of their income. And since business moves where workers can afford to live, the problem is starting to get more attention from city officials concerned about attracting jobs and workers to their towns. But investors are taking notice too. For-profit developers (motivated by the promise of public sector funds to capitalize a deal) and non-profits (motivated by more philanthropic concerns) are both moving towards this specialized segment of multifamily housing. • ARCS can provide Fannie, Freddie, and FHA financing specifically geared for affordable housing. But even more importantly, ARCS has the experience and know-how to help simplify the complexities of affordable housing financing so that loans close and convert on time. As a long term leader in the area, we can help. And now that our population exceeds 300 million, it’s an opportunity you can’t afford to miss. For more information, call Keeley Kirkendall at 800-ASK-ARCS x3292. •

Small wonder
The 80-20 rule has some relevance for commercial real estate borrowers and lenders as well, even if not precisely. The lion’s share of multifamily loans are not for the $50 million multifamily megaplexes but for small properties needing $3,000,000 and under. Unfortunately the favorable lending programs developed for larger borrowers were seldom available for the smaller ones. In fact, it wasn’t until recently that smaller borrowers even had easy access to fixed rate loans. Most lending was done by local banks and most local banks offer adjustable rate loans. Fannie Mae saw the need and created the “Small Loan Experiment,” which expanded into the Small Loan Program, which evolved into 5-50, and eventually morphed into the 3MaxExpress…all the while, learning from hundreds of borrowers across thousands of miles. We’ve been on board since the beginning, and we’ve listened too. Together, we’ve been assessing, suggesting, adjusting, revising, improving, enhancing. The goal? To make it easier and more advantageous for the borrower needing $500,000 to $3,000,000. In some markets, 3Max can even lend up to $5,000,000. The result? A fixed rate lending product that’s streamlined, fast, cost effective, non-recourse, and has the proven reliability of a Fannie Mae execution. A huge improvement for small loans. NOTE: Only in commercial real estate would $3,000,000 be considered small. For more information, contact your loan officer or John Barbie, the Director of ARCS Small Loan Division, at 800-ASK-ARCS x3236. •

Americans on the move
Low interest rates in recent years have helped more renters become homeowners than ever before. The American dream has now been realized by 69% of US families. Still, not all would-be homeowners can afford the median home prices in their area. Thankfully, manufactured housing has stepped into the breach and altered many Americans’ prospects and perceptions. Progress from trailers, to mobile homes, and finally to manufactured housing took little more than a decade but in that time, homes and communities have changed dramatically. High-end communities have strong appeal that are wooing a sophisticated and important demographic – the boomers. High-end homes have amenities rivaling that of most conventional homes: walk-in closets,

Of necessity, nomadic people screated mobile housing. Yurts, teepees, wagons, gave way to trailers, mobile homes. Now manufactured housing in amenity-filled communities is no longer for the nomadic. It’s just practical, affordable and growing fast.

ergonomically designed kitchens, butler’s pantries, and hot tubs in the master bath. Moreover, improved construction standards make them as strong as they are beautiful. Communities like Saddlebrook Farms MHC in Grayslake, IL (recently financed by Lou Vela in ARCS’ Troy, MI office) offers a complete lifestyle for active retirees. If community craft fairs, block parties, and chili cook-offs aren’t your style, the community also boasts more than 100 acres of open space and lakes that are perfect for outdoor recreation. Opportunities in manufactured housing are benefitting all sides: affordable and stylish living for residents and an expanding market for the developers of communities. ARCS is there to help with specially designed programs for the financing of MHCs. With an acknowledged expertise in the financing of multifamily and MHCs, ARCS is Fannie Mae’s #1 DUS™ lender year after year and the MHI’s Community Lender of the Year for 2005 and 2006. Contact your ARCS representative for complete details. •

Capital improvements
As the business world digitizes, the pace accelerates, and the processes grow more transparent, the financial community is confronted with ever more savvy and sophisticated borrowers, wanting more choices and better ones. Lenders have added products to serve distinct niches and specialized needs. With Fannie, Freddie, FHA, mezzanine and bridge financing, it was only logical for ARCS to expand the Capital Markets Group to meet the changing needs of the marketplace. We’ve added people and programs for flexible financing options covering the full range of commercial property types. Retail? Been there. Hotel? Done that. Self storage? That too. And while some borrowers may have been deterred in the past by the inability to put a supplemental mortgage on conduit loans, ARCS unveiled a plan last year to offer supplemental seconds on most properties financed through ARCS Capital Markets Group. There’s nothing like it in the industry, and there’s nothing to lose by calling us. For more information, contact Jon Leeb in our San Francisco office. 415-981-9700 x216. •

Flex your muscle. But use your noodle.
At a recent conference featuring a panel of lenders, one of the panelists voiced the wish, “In my next life, I want to come back as a borrower.” It was not an idle jest. The complaint heard from the lending community is that there’s too much money chasing too few deals. Bad for some. Good for you. Choices galore. Sources, programs, lenders, terms, rates. You’re definitely in the catbird seat. But more choices require more careful comparisons. Thankfully, ARCS is able to offer you virtually every program: Fannie, Freddie, FHA, capital markets, mezz and bridge. Plus, with our track record over the decade, we can guide you to the loan that best satisfies your needs. One good reason why ARCS was named Favorite Fannie Mae Lender for the 2nd year in a row by the experienced readers of Apartment Finance Today. We can help you too. •

Fannie Mae updates
According to a recent report from Harvard’s Joint Center For Housing Studies, the recent spike in American homeownership hasn’t significantly reduced the need for rental housing. Due largely to immigration, nearly 34 million households still reside in rental housing, fully one third of the population. Because of the fundamental importance of the rental sector to Americans, Fannie Mae and ARCS are committed to providing financing solutions that work for the owners, investors, builders, and developers that provide housing for so many Americans. Most recently, Fannie Mae announced the following updates to their existing programs, designed to meet the needs of an ever-changing marketplace:

Unfunded Forward Rate Lock Commitment
Fannie Mae is making it easier than ever for developers to lock in today’s low rates for a permanent loan before beginning construction. Fannie Mae’s Unfunded Forward Rate Lock Commitment for 9% LIHTC deals now protects borrowers from the expected interest rate hikes ahead and saves them money during construction. It also provides:

• Fixed rate, locked today
• No negative arbitrage
• Simplicity of execution
• No bank letter of credit required

15 Year Cap
Until now, long term interest rate caps were available but costly, forcing most developers to purchase short terms caps and exposing investors to risk. Fannie Mae has engineered a 15 Year Cap that works for everyone, providing the security that investors crave and the affordability that developers want. Benefits include:

• Peace of mind for the equity investor
• Similar loan size compared with a fixed rate
• Greater cash flow
• Quicker payment of developer fee
• 15 year protection from rising interest rates
• Engineered to minimize cap costs

Expanded Delegation
As a Fannie Mae DUS™ lender, ARCS has always had the authority to underwrite each transaction but within specific Fannie Mae guidelines. In response to the fast-paced, ever-changing needs of the marketplace, Fannie Mae has recently expanded our delegated authority to permit faster, more efficient decision-making. Now more than ever, borrowers will continue to experience the seamless progression from origination to closing.

Award shows
It happens every year. Movies have the Oscars. Music has the Grammies. TV the Emmies. And Fannie Mae has…not a golden statuette but a coveted acknowledment of excellence. In 2005, ARCS was lauded by Fannie Mae for our excellence in “flow”… how we conduct our business. And by the end of the year, ARCS had provided more funds than any other DUS™ lender. Top dog. Number one. And not a title we take lightly.

In 1996, the company’s first full calendar year, ARCS won that title for the very first time against a field of well-established competitors. In the intervening years, we’ve grown bigger but stayed nimble, maintaining our #1 ranking by doing things better, faster, and always with the customer in mind. As a result, we’ve been #1 nine of the past ten years and developed an acknowledged expertise in the area of multifamily financing.

But perhaps even more gratifying has been the “Reader’s Choice” award from the readers of Apartment Finance Today. For the second year in a row, ARCS was named their “Favorite Fannie Mae Lender” in 2005. It’s one thing to put up big numbers and win based on size, but it’s something else to have a sophisticated readership and customer base select you for the intangibles: extraordinary customer service, expertise, speed and efficiency.

That’s why time and again, our customers have come back to ARCS. Fannie Mae’s choice is the people’s choice too. You’re the reason for our success and it shows.•

Where we’ll be
ARCS is active in conferences and trade shows nationwide. Here’s a partial list of shows where we’ll be exhibiting in 2006. Please come see us:

Multi-Housing World
McCormick Place – Booth 428
Chicago, IL / Sept. 19-21, 2006

Multifamily Executive Conference
The Venetian – Booth TBD
Las Vegas, NV / October 4-6, 2006

AHF LIVE! Tax Credit Developer’s Summit
Hyatt Regency Chicago – Booth TBD
Chicago, IL / November 1-3, 2006 •

Park Station Apartments • $4 million supp.
Gaithersburg, MD • 386 units

Hunter’s Creek Apartments • $5 million
Houston, TX • 144 units

Parkside Court Retirement Residence • Columbus, IN
$7,620,000 • 118 units

Marsh Creek Apartments • $9,750,000
Dallas, Texas • 276 units

Pattywood Apartments • Simi Valley, CA
$2,375,000 • 20 units

Maple Gardens • $80 million
Irvington, NJ • 1,744 units