May 22, 2017
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By Dennis Kaiser
New seismic regulations are rippling across California. Connect Media asked Partner Engineering and Science’s Jenny Redlin to share how ordinances at the state level cascade out to local markets. She shared how the changes are expected to affect the Los Angeles CRE sector, as well as what they mean for owners, investors, and financing for properties in the market.
Q: Seismic retrofit ordinances are sprouting up around California. How do these new seismic retrofit regulations affect owners and investors in the state?
A: It’s like a domino effect! Ordinances now exist in San Francisco, Los Angeles, West-Hollywood, Santa Monica, Alameda, Berkeley, and Fremont that require vulnerable buildings (masonry; wood-frame soft-story; non-ductile concrete) to be reinforced or retrofitted. When served a notice to comply, owners can work with a structural engineer to appeal the requirement if they can demonstrate that the building is compliant or exempt, or they can perform the retrofit, in which case it pays to act soon to get ahead of the expected shortage of qualified engineers. Investors should also consider whether a building is – or will be – impacted by an ordinance.
Q: How long does it take and how much does it cost to comply with these ordinances?
A: The timeline to comply is relatively short. For the L.A. ordinance, the wood frame soft story retrofits are required to be completed within seven years, and retrofits on non-ductile concrete buildings to be completed within 25 years of receiving an order to comply. Construction costs can range anywhere from $30,000 for an easy job to $300,000 for more complicated projects. There are also consulting and design costs, which typically range from $10,000 to $50,000. Of course, all of this is dependent on the building and the scope of work that will be completed.
Q: What financing or other programs are available to help with the costs of retrofit?
A: The LADBS Cost Recovery Program allows landlords to pass up to 50% of costs to tenants through rent increases. PACE allows retrofits to be financed through the property’s tax bill. CalCAP recently established the Seismic Safety Capital Access Loan Program, which creates a lending incentive by offering loss reserve protection to those underwriting the retrofits. Loans of up to $250,000 can be enrolled, and CalCAP is currently enlisting participating lenders. Although tax credit bill AB428 was vetoed in October 2015, I expect others to be passed in the future to help building owners manage the financial impacts of retrofit ordinances.
For comments, questions or concerns, please contact Dennis Kaiser