MBA reports Mortgage delinquencies hit record in first quarter

By Chris H. Sieroty

California and three other states continue to account for almost half of the foreclosures starts in the nation, according to the Mortgage Bankers Association.

In its report released Thursday, the trade association reported that foreclosures were at record levels, with 1.37 percent of all home loans nationally starting the foreclosure process in the first quarter of 2009. This was a 29 basis point increase over the fourth quarter of 2008 and a 36 basis point increase from one year ago.  Both the level of foreclosures started and the size of the quarter over quarter increase are record highs.

In California, Florida, Nevada and Arizona the rate of homes entering foreclosures was 2.45 percent, the report found.

“Those states continue to account for about 46 percent of the foreclosure starts in the country, and represented 56 percent of the increase in foreclosure starts, including half of the increase in prime fixed-rate foreclosure starts,” said Jay Brinkmann, MBA’s chief economist. “It is difficult to overstate the severe impact home price declines have had on mortgage performance in those four states.”

Brinkmann said absent those four states, the national foreclosure rate would have been 1.01 percent.

“The increase in the foreclosure number is sobering but not unexpected,” Brinkmann said in a release. “The rate of foreclosure starts remained essentially flat for the last three quarters of 2008 and we suspected that the numbers were artificially low due to various state and local moratoria, the Fannie Mae and Freddie Mac halt on foreclosures, and various company-level moratoria. Now that the guidelines of the administration’s loan modification programs are known, combined with the large number of vacant homes with past due mortgages, the pace of foreclosures has stepped up considerably.”  

Brinkmann didn’t expect the mortgage default rates to begin to decline until after the employment situation in California and nationally begins to improve. The MBA’s forecast is that the unemployment rate will not hit its peak until mid-2010.

“Since changes in mortgage performance lag changes in the level of employment, it is unlikely we will see much of an improvement until after that,” said Brinkmann.

If there is any good news in the MBA’s report, it’s that California is not the worst state nationally in terms of foreclosures. That distinction belongs to Florida, where 10.6 percent of mortgages are somewhere in the process of foreclosure, followed by Nevada, 7.5 percent, Arizona, 5.6 percent, and California, 5.2 percent.



The Business Press: Municipalities eye new bond program

By Chris H. Sieroty

Contributing Writer

With credit markets cautious about backing new municipal debt in the midst of a severe economic downturn, Inland Southern California cities and counties have been blocked from issuing municipal bonds to pay for a wide range of basic needs from new highways to school construction and new sewer systems.

But with the passage of the American Recovery and Reinvestment Act, President Barack Obama’s $787 billion stimulus package, cities and counties have the opportunity to go to market with a new type of debt, known as Build America Bonds. The bonds give issuers a 35 percent federal rebate on interest costs for taxable bond issuances.

Paul Sundeen, assistant city manager and chief financial officer with Riverside, said he was considering issuing Build America Bonds when the city goes to market in July with $260 million in Sewer Fund notes. The proceeds from the sale will be used to maintain and upgrade Riverside’s sewer system.

He said the federal rebate could save the city approximately $5 million over the life of the bonds. The Sewer Fund bonds were expected to have a 30-year maturity.

In 2007, the city issued $119 million in non-taxable certificates of participation, and $153 million in tax allocation revenue bonds was issued by the city’s redevelopment agency through a joint powers authority, the Riverside Public Financing Authority. Sundeen said the interest rate on the certificate-of- participation notes was 3.3 percent, while the total interest in the tax allocation revenue bonds, which are partially non-taxable, ranged from 4.56 percent to 5.58 percent. They all mature in 30 years.

He said what makes these new bonds so appealing is “the projected interest savings on the longer-term maturities” compared with the costs associated with the city’s 2007 issuance.

Emil Marzullo, interim executive director of the economic development agency in San Bernardino, said he was studying how much Build America Bonds would save the city if they go to market next year with an issuance to pay for infrastructure projects. Build America Bonds, or BABs, give state and local governments the opportunity to attract corporate debt investors while offering subsidies that reduce costs, particularly for longer maturities, to less than what issuers might obtain in the tax-exempt market.

The securities are also exempt from state and local taxes if purchased within the state that sells them. The legislation created a two-year program that allows state and local governments to issue taxable bonds to fund infrastructure projects and have the U.S. Treasury Department pick up 35 percent of the annual interest cost of the debt.

On April 22, California sold $5.23 billion in the federally subsidized bonds that carry a rate of 4.83 percent. All are in 25-year and 30-year maturities.

“The funding will help secure thousands of jobs for workers and millions of dollars in revenues for businesses which depend on infrastructure projects,” state Treasurer Bill Lockyer said in a statement. “And with the Build America Bonds, we’re providing this much-needed economic stimulus at a substantial savings for taxpayers.”

The yield of the Build America Bonds will save taxpayers about $1.15 billion over the life of the bonds, the treasurer said.

The sale provided a further boost to some 5,000 state projects affected by an infrastructure financing freeze imposed in December 2008 by the state’s Pooled Money Investment Account (PMIA).

Normally, the PMIA lends money to infrastructure projects, then gets reimbursed when the state sells bonds. But in the last half of 2007, California could not sell bonds because of the state’s prolonged budget stalemate and the nationwide credit crunch. At the same time, the fiscal crisis required the PMIA to conserve as much cash as possible to ensure it could help the state pay for education and other high-priority services. So, the PMIA was forced to stop making infrastructure loans.

The freeze delayed or stopped projects across the state. Some got relief from the proceeds of the $6.5 billion bond sale completed on March 24.

BAB proceeds will fund road, school, flood control, water, environmental and other projects eligible to be financed with voter-approved tax-exempt bonds.

So far $7.4 billion in BABs have been sold. Analysts expect $100 billion to $150 billion may hit the market over the next 18 months.

“With all of the sales being successful, I expect others to take advantage of issuing these bonds,” said John Cummings, executive vice president and head of the municipal bond desk at PIMCO in Newport Beach. “The benefit is that the issuer saves on interest costs. If you are California it’s a 50 to 60 basis point savings on their recent bond issuance. That’s a lot of money.”

The funds are good news for state and local governments, whose economies account for almost 13 percent of gross domestic product. Local officials can use the proceeds to build bridges, fix roads and remodel schools, the kind of projects President Barack Obama is counting on to jump-start the U.S. economy and create jobs.

Cummings said BABs can also attract new buyers of municipal debt and help large issuers find a broader investor base for their bonds. He said he expected the bonds to become more popular with cities throughout San Bernardino and Riverside counties that need to pay for infrastructure projects but have had access to the markets denied because of the credit crunch and recession.

Pension funds, university endowments, insurers and other big investors can’t get enough of the debt, which hit the market in late April. The New Jersey Turnpike Authority, the agency that oversees the 148-mile highway, planned to offer roughly $250 million of Build America Bonds. But investor demand was so great that the agency actually sold $1.4 billion, and it plans to use the proceeds for road work.

The Rector and Visitors of the University of Virginia sold $250 million of triple-A-rated BABs in a single 30-year bullet maturity with the bonds priced to yield 6.222 percent. With the federal subsidy, the net yield fell to 4.04 percent, according to a university official. The New York Metropolitan Transit Authority, which runs the city’s subway system, issued $250 million more in bonds than expected.

On April 23, the agency sold $750 million of the federally subsidized notes. Yield for the bonds Series was 7.336 percent for the 2039 maturity, which is the equivalent tax-exempt yield of 4.768 percent.

“Further, by upsizing the issuance, the MTA was able to lock in these favorable yields for most, if not all, of its borrowing for the remainder of the year,” said Gary Dellaverson, MTA chief financial officer. “This is important because it will take away much of the uncertainty of the MTA’s debt service budget and also provide cost savings.”

Market News International – California Watch

13:27 EDT 05/20 

California Watch: Voters Render Verdict – Bring On Layoffs>

–Voters Defeat Budget Recommendations, Leave $21.3 Bln Deficit

–Governor Seeking Federal Guarantee to Sell $6 Bln in Bonds by July

By Chris H. Sieroty

     LOS ANGELES (MNI) – California voters, by defeating a series of ballot measures that Gov. Arnold Schwarzenegger and lawmakers had placed on the ballot as a way to narrow the state’s latest budget deficit, have set the stage for unpaid state bills as soon as July.

     Just one of the six measures passed in a special election held Tuesday. 

     Proposition 1F — that bans salary increases for Sacramento lawmakers in years the state runs a budget deficit — was overwhelmingly approved by voters. 

     Proposition 1A would have imposed new restrictions on state spending while temporarily extending a series of tax increases approved by lawmakers in February to close a nearly $42 billion shortfall through June 2010. 

     A companion measure, Proposition 1B, would have given educators $9.3 billion they claimed was due under Proposition 98, the 1988 initiative that set minimum spending levels for schools and community colleges. 

     Three other measures — Propositions 1C, 1D and 1E — had promised to raise more than $6 billion this summer to help close the state’s budget deficit. For example, Proposition 1C would have allowed the state to borrow $5 billion against future increases in California Lottery revenues. 

     After the polls closed, Gov. Arnold Schwarzenegger said: “Tonight we have heard from the voters and I respect the will of the people who are frustrated with the dysfunction in our budget system. Now we must  move forward from this point to begin to address our fiscal crisis with constructive solutions.” 

     Moving forward means increased cuts to state programs to balance the budget. The governor has called for an increase of $2.3 billion in budget cuts for education on top of $3 billion in cuts that were already planned. He has also called for a $400 million cut in prison costs by shifting inmates to local and federal authorities. 

     He has also announced plans to layoff 5,000 of the state’s 235,000 workers, selling off state properties and possibly reducing eligibility for healthcare programs. 

      Anti-tax opponents described the special election as voters sending a clear message that lawmakers had failed to solve the state’s budget problems. “With this election, the people of California have sent a clear message to Sacramento,” said state Sen. Dennis Hollingsworth, R-Murrieta. “They know that their government has failed them. They have lost confidence in government to fix the budget or the problems they face every day.” 

     California faced a shortfall of $15.4 billion for its next fiscal year even if the measures were approved. Without voter approval, the state now faces a $21.3 billion deficit, according to the governor. 

     The budget recommendations were designed by the governor and lawmakers as a way to balance the state’s books through mid-2010. With the special election over, the state now faces a cash crunch that could render officials unable to pay bills come July. 

     Schwarzenegger and lawmakers are meeting late Wednesday to discuss new proposals to keep California solvent. 

     Both the state Senate and Assembly are expected to hold public hearings Thursday to debate budget details. State Treasurer Bill Lockyer and Controller John Chaing are expected to appear before legislators Friday to warn them about the seriousness of the impending cash crisis. 

     Both Democrats and Republicans are to introduce separate proposals to deal with the state’s budget shortfall. “Senate Republicans have heard the voter’s message and are committed to overhauling and reforming that system to make it work for them again,” said Hollingsworth, the GOP Senate leader. 

     “We will be unveiling solutions to end the cycle of permanent budget crises, make government work efficiently, help create new jobs, and change the self-serving culture in Sacramento,” he said. 

     But as lawmakers debate how to close the state’s budget deficit, the state’s plan to sell $6 billion in revenue anticipation notes in July could be threatened by its worst-in-the-nation credit rating and concerns on Wall Street about a lack of tax revenues for debt service. 

     The governor, who was in Washington D.C. Tuesday, met with the state’s congressional delegation to gain their support for federal guarantees to ease investor’s concerns. Last week Lockyer urged U.S. Treasury Secretary Timothy Geithner to extend debt guarantees through the $700 billion Troubled Asset Relief Program to states and local governments to help them borrow short-term funds.


         ** Market News International Los Angeles ** 


[TOPICS: M$$CR$,M$U$$$]

The Business Press: Inland wineries continue growth trend

By Chris H. Sieroty 

Contributing Writer

Whether or not there is high demand for vintners’ products locally from retail outlets, the wine business in Inland Southern California has been growing rapidly over the past 10 years. Most of the local wines are produced in Temecula, but there are three major wineries — Joseph Filippi Winery and Vineyards, The Wine Tailor, and the Brandt Family Winery — located in San Bernardino County that are trying to capture a piece of a crowded market. A new winery, The Wine Down, opened in February in Chino Hills.

Of the 25 largest wineries located in the two-county region, 22 of them are located in Temecula, according to a list of wineries compiled by The Business Press. There are a total of 38 wineries in Temecula, according to the Temecula Valley Winegrowers Association (TVWA), a nonprofit organization that promotes the region’s wine industry.

“When I started here 20 years ago there were eight wineries in the area,” said Peggy Evans, TVWA’s interim executive director. “We have grown gradually over the years, but in the last five years we added 15 new wineries.”

She said local wineries are still attracting thousands of visitors during the recession, but those visitors are buying fewer bottles of wine on each visit. In 2008, the 22 largest wineries in southern Riverside County generated almost $48 million in revenue. Despite their relatively small size, wineries in San Bernardino County generated more than $4 million in revenue last year.

Ken Lineberger, owner of The Wine Tailor in Rancho Cucamonga, said 95 percent of the 5,000 cases produced annually are sold through his winery.

“We only distribute a few cases to local stores and restaurants,” Lineberger said. “Most of our business is generated through tour groups that visit our winery, our wine club and from sales that are generated through the distribution of our newsletter. Our market is the wine buyer in Rancho Cucamonga, Claremont, Upland, La Verne and Ontario.”

The Wine Tailor’s wine club, which began in 2006, has grown to 500 members and the monthly newsletter currently has 7,500 subscribers. He said along with offering tastings, his winery has created a niche among local wine buyers by offering them the opportunity to create their own vintages or purchase wines with their own custom labels.

“We let customers choose the wine they want and create their own label while they wait,” he said. “The wine costs between $12 to $20 a bottle plus $1 or $2 for the label. It’s been very successful, with the winery creating 10 cases or more per day. We also let guests make their own personal vintages. It starts by letting them sprinkle the yeast into the wine and then they come back in five to seven weeks and bottle it.”

Lineberger said the winery has created more than 1,500 personal vintages, which depending on the wine a customer chooses can cost between $140 for a half-batch, or 12 bottles, and more than $300 for a full batch, or 29 bottles.

Being located in San Bernardino County hasn’t hurt his business. Lineberger said The Wine Tailor generated $2 million in revenue last year.

“We are operating at 90 percent of capacity,” he said. “I would love to be able to distribute our wines through Pacific Wine Merchants, but we just don’t have the capacity to produce enough wine to increase our distribution to local shops and restaurants. We are actively looking for a larger facility in the area. We hope to make an announcement soon.”

Whether it’s in the Inland Empire or Napa Valley, the wine industry continues to be big business even in a recession, according to a survey recently released by the San Francisco-based Wine Institute. The survey found that 2008 California wines sales to the U.S. market edged up 2 percent in volume over the previous year to an estimated 467 million gallons (196.3 million 9-liter cases). The estimated retail value of these shipments totaled approximately $18.5 billion, down slightly from 2007.

“Consumers are enjoying California wines during these challenging economic times,” said Robert P. Koch, president and CEO of the Wine Institute, in a statement.

Koch added that the Wine Institute is currently lobbying against proposed tax and fee increases on wine nationwide at a time the industry is trying to preserve 875,000 wine-related jobs in the U.S., 309,000 of which are located in California.

The Business Press: Upscale wine remains in favor, in moderation

By Chris H. Sieroty

Contributing Writer

When downtown Upland’s Pacific Wine Merchants showcased several new moderately priced vintages at a recent winetasting, it was a reflection of owner Fred Paciocco’s sense of direction as he steers his business through tough economic times.

He has created a casual atmosphere in an area once home to a Santa Fe train depot; it now houses a tasting room, cigar store and retail store that features more than 1,000 bottles of wine neatly stacked in rows of redwood racks and priced from $10 to more than $300 per bottle.

Paciocco originally opened his business as Cigar Exchange International in July 1995 in a 400-square-foot space tucked in the back of the Second Avenue Mall in downtown. The following year he opened Pacific Wine Merchants in a 700-square-foot retail space at the corner of Euclid Avenue and Foothill Boulevard.

“When we started we were just a cigar store, but that changed as customers began asking for a glass of wine along with their cigars,” Paciocco said. “Today, wine is two-thirds of our business, but cigars are still a major factor.”

After almost a decade of operating his business out of an inadequate space, he began looking for a larger retail location. That’s when in March 2007, the city of Upland and the San Bernardino Associated Governments (SANBAG) offered him a chance to lease space in the Depot, a 1937 Santa Fe Train Station located at 210 A St. The former depot also houses Boomers Coffee House and a Metrolink train station.

“They have been trying to revitalize downtown Upland for a longtime,” Paciocco said. “We benefited from being located downtown, but there just wasn’t the space available when we needed to expand our business. Our current location has benefited from the added foot traffic from the Metrolink station next door and from various local events and a new mix of businesses located downtown.”

Paciocco, who owns the store with his wife, daughter and son-in-law, takes a personal approach to purchasing and selling wine.

“One of the things we’re most successful in doing is going out and visiting wineries ourselves,” he said. “We also have several wine buyers that have been successful in creating relationships with wineries and a steady stream of vendors who visit our store on a regular basis. We are working hard at providing what our market is asking for.”

That market for the most part is the upscale wine and cigar buyer from Upland, Claremont and Rancho Cucamonga. But with an eye on the recession and some of his customers changing their shopping habits, Paciocco said his store needed to bring “price levels down” to around $25 to $50 per bottle on average to meet the new demand.

“We had to adjust to the market,” he said. “The trick is not to try and overload at any one price level. In the wine business, the margins are pretty thin.

“With about 1,100 different labels, we can offer a bigger selection than Costco or BevMo!. For us to be a profitable wine business competing with Costco or BevMo! on volume gets pretty tough. The way we make our money is to offer more selection, including the obscure brands you won’t find at the larger retailers. We also can give our customers more personal service.”

For example, Paciocco said his business relationships with various vendors allowed them to purchase a 2005 Mount St. Helena Cabernet Sauvignon from Napa that retails for about $20. “It’s been a big seller as customers still want to enjoy a quality bottle of wine at a quality price,” he said.

Paciocco said even though some of his customers are looking to spend less on a bottle of wine, there are still people willing to spend hundreds of dollars to acquire a limited vintage. To satisfy his high-end customers, he was able to acquire a “very limited” amount of a 2005 Dana Estates Cabernet Sauvignon that retails for $275 a bottle.

“As a small-business owner, the high unemployment rate is a concern of ours,” he said. “We are just trying to keep most of our offerings affordable to attract the widest customer base we can, from the blue-collar worker wanting a $5 cigar and $12 bottle of wine, to the customer who can afford $300 for a bottle of wine.”

Jon Fredrikson, a consultant with Gomberg-Fredrikson & Associates, a Woodside-based consulting firm specializing in the wine industry, agreed, saying: “Wine continues to move further into mainstream American adult lifestyles, with sales expanding incrementally based on cautious consumer spending. Consumers are changing their buying patterns by ratcheting down their everyday wine purchases to lower price points, but splurge on higher-priced wines at times because they view wine as an affordable luxury.”

Pacific Wine Merchants also offers products from Upland’s only winery, the Brandt Family Winery. For $26.99, customers can purchase a locally produced 2005 Santa Barbara County Syrah.

“It’s my son-in-law’s winery,” Paciocco said. “Brian (Brandt) buys his grapes out of Santa Barbara County and produces his wine locally. He produces 400 cases a year and has settled on producing Syrahs for the last couple of years.”

With the move to the depot has come the addition of a state-of-the-art wine bar, featuring the Enomatic Wine System. He said 24 wines are available by the ounce for customers to create their own winetastings. Customers can pay for the wine, which retails for between $1.29 per ounce and $3.39 per ounce, by using a debt card, he said.

Pacific Wine Merchants also offers tastings two nights a week. “On Wednesday, we might offer four different (wines) that are recent new arrivals,” he said. “While on Friday nights we might feature a representative from a winery who’ll bring a number of different choices for our customers to sample.”

Paciocco said the tastings and wine bar have been a successful addition to his business, as customers usually purchase several bottles after an event. He declined to release Pacific Wine Merchants’ annual sales figures.

Initially, the store’s focus was on wines from Napa Valley, but gradually that emphasis changed as he listened to customers’ requests and brought in what they wanted, including additional vintages from Europe and South America.

“We have always been able to get good deals on quality wines from Napa Valley,” he said. “But because of the economy, we have been able to import quality, more affordable wines from places like Australia, Italy, France, Argentina and Chile, which have been good sellers with our customers.”

But what you won’t find is a wide selection of wines produced by Inland Southern California wineries. Paciocco said his business features only a small selection of ports produced by Joseph Filippi Winery and Vineyards in Rancho Cucamonga.

He added that Inland wineries were producing high-quality products, but there just wasn’t the demand for them from his customers.

The Business Press: Frugal Frigate reaches out to sell children’s books

By Chris H. Sieroty

Contributing Writer

While many businesses in Redlands beg for customers in a troubled economy, business is thriving at a small bookstore, the Frugal Frigate.

Housed in a former carriage shop at 9 N. Sixth St., the independent children’s bookstore has undergone a complete overhaul since Brad Hundman and his wife, Jana, purchased the business. Among the many changes are new paint outside, new graphics, a new awning, new flooring and improved lighting.

The store eliminated its adult section, which accounted for almost half of its floor space, but contributed only marginally to the store’s profits, Brad Hundman said. The section was eliminated because it was hard for the independent store to compete with the mass merchandisers on adult selection.

“We saw the potential of the Frugal Frigate when we purchased the store almost five years ago,” said Hundman, who declined to disclose the purchase price. “To be successful, we refocused the business to concentrate solely on selling children’s books.”

The Frugal Frigate used some of that space to install a science room, which mixes science books with volcano kits, among other items. Titles by authors such as Christopher Hitchens and Thomas Frank were replaced by an additional 6,000 children’s books by authors ranging from Nikki Grimes to Diane Adams and Marla Frazee.

The store has taken a different approach to bookselling. In an effort to expand his business, Hundman stages book fairs regularly at elementary, middle and high schools throughout the Inland Empire.

“We take the best books and hold book fairs at area schools, selling them at a discount to teachers,” he said. “It’s been very successful as teachers have bought hundreds of titles to share with their students. It’s also a way we can say thank you to teachers and all that they do to educate our children.”

The Frugal Frigate is part of a trend, according to Paige Poe of the American Booksellers Association.

“America has clearly reached a tipping point — people are choosing Main Street over malls,” Poe said in a recent news release. “Nationwide, people are renewing their ties to friends, neighbors and institutions in their cities and towns. We believe booksellers and other indie retailers are at the forefront of a movement that is already being embraced by shoppers.

The Frugal Frigate is a member of the Southern California Independent Booksellers Association in Pasadena and is not a member of the American Booksellers Association.

Hundman’s bookstore also hosts book signings, most recently for Grimes’latest book, “Barack Obama, Son of Promise, Child of Hope.” Grimes is a New York Times best-selling author and recipient of the 2006 NCTE Award for Excellence in Poetry for Children.

The store will host a signing Jan. 18 by author Sid Fleischman at The Farm Artisan Foods, a restaurant at 22 E. State St. in Redlands.

“To grow our business, it has been crucial to hold signings to attract parents and their children to our store,” he said. “Holding signings at The Farm Artisan Foods has allowed us to expand our presence in the community.”

In 2007, Hundman created the Children’s Literacy/Literature Conference, which is held each September at the Mission Inn Hotel & Spa in Riverside. The program focuses on children’s authors and illustrators. Grimes, Adams, Graeme Base, Sonya Sones, Paul Brewer and Frank Beddor appeared at the last conference.

During the conference each author makes a presentation, visits with attendees and signs books. The Frugal Frigate will host its third annual conference in September, featuring authors Rosemary Wells and Laura Numeroff.

The Frugal Frigate has been drawing street traffic, but Hundman and his four-person staff know that could change because of competition from Barnes & Noble, Borders and “In any business today, the challenge is picking and choosing the best merchandise that will attract consumers to your business,” he said. “We can compete in the children’s book world. We hand-sell and tell people about a book. The mass merchandisers can’t do what we do.”

That personal attention has led to an increase in community recognition and a growing business.

“It’s working,” Hundman said. “We’re showing an increase in our gross revenues. We had a five-year plan when my wife and I bought the business, and we’re starting to show progress. .”

Welcome to Rock Row

Editor’s Note: This story was originally published at
By Chris H. Sieroty
In a tree-lined neighborhood of Eagle Rock a new housing development is under construction. The project is the first small lot subdivision in the city of Los Angeles to be LEED certified, and according to the Wronske brothers, it’s the first affordable opportunity for first-time home ownership in the area.
Kevin and Hardy Wronske founded Heyday Partnership, a develop-design-build firm, in 2001. Since then they’ve completed single-family and multi-family homes in Echo Park, Lincoln Heights and Glassell Park. 
All of their projects have meet LEED standards developed by the U.S. Green Building Council (USGBC) in Washington D.C.
“When we first started the company we were driven by sustainable building,” says Kevin Wronske. “Today, we want our homes to meet LEED standards, but more importantly be affordable. Our company builds quality homes for the middle class.”
You can buy a Rock Row home for between $450,000 to $545,000. If you were house hunting a couple of years ago, you know that it was difficult if not impossible to purchase a home in Los Angeles for a half-million dollars. But if you’re in the housing market today, you know that for $500,000 a new home is within reach for the average buyer.
The homes range in size from 1,310 square feet to 1,540 square feet. “We wanted Rock Row to have a bigger impact on the community, so we came up with this project instead of building condos,” says Kevin. “We also wanted to be in the forefront of LEED home building, setting a standard for other developers. 
But the modest homes are contemporary in design. They feature balconies and patios, sustainable water and lighting systems and amenities like stainless steel appliances, solid core doors and recessed lighting. They also included sustainable bamboo floors and central A/C with ultra-high 14 seasonal Energy Efficient Ratio.
The development includes a water permeable grass pave system for the driveway; tankless water heaters and low-flow fixtures for water conservation; green roofs and water efficient, drought tolerant landscaping; and pre-wiring for a rooftop solar array.
“Rock Row was designed and will be built for certification under the LEED for Homes program,” says Hardy Wronske. “The certification shows that we are not just green washing and helps show that green development has come a long way from where we were just six years ago.”
Kevin says for the price this is a “pretty unique” project. “I believe people will chose to live here,” he adds.
Between them, the brothers have degrees in architecture and engineering. They’ve worked for private companies and Habit for Humanity. Together they fill the roles of architect, developer and builder, which Kevin claims is a fancy way of saying ‘my brother and I do everything.’
“Hardy did an internship with Habitat for Humanity,” Kevin says. “It gave us a good foundation to say development is something that needs to be socially responsible. There’s nothing wrong with making a profit, but the question is ho much profit do we need to make?”
But the project almost never broke round because of the collapse of the housing market.
“We were lucky,” says Hardy. “Our financing came through just before the collapse. If this project was funded in June it would be safe to say it wouldn’t have happened. Had we also not presented an affordable and LEED certified design, the project would not have happened.”
Talking with their mortgage broker recently, Hardy says, he was joking that he thinks we might have gotten the last construction loan in Los Angeles. 
“We are building something that people are going to be excited about no matter the market,” Kevin says.
The brothers share the same goals. They want to renovate and build single-family and multi-family homes with respect for the environment and homeowner. They also like to push the boundaries
“One thing we are trying to do is push the boundaries of zoning and architecture with Rock Row,” says Kevin. “But we will never do a project if the community doesn’t like it. You have to remember, the city has the zoning power, so if you have to fight them, you shouldn’t do the project.”
They named their partnership Heyday because the term evokes nostalgia.
“It’s often used to refer to the good old days of a city,” says Hardy. “We are looking forward. Heyday doesn’t refer to the past, but instead we want to make today your heyday or making a life style that could be described as their heyday.”
As for naming their project Rock Row, Kevin says it was pretty much an open competition among their friends.
“In the end, Rock came from Eagle Rock and Row because it’s a row of homes,” he says. “After we named the development, we went to the planning department, which named the new street Rock Row.”