Austin is at the Center of ARM's Rising Challenge to Intel

Austin American-Statesman

On a warm Friday afternoon in early September, many of the workers at ARM Holdings' chip design center on South MoPac Boulevard convened on the roof of the nearest parking garage to celebrate.

They put on their company T-shirts, drank beer or margaritas and hung out under shade canopies while listening to rock music.

They weren't exactly kicking out the jams, but they were celebrating a job well done: the completion of a major new chip project.

ARM had announced the completion of "Eagle" — officially called the Cortex A-15 processor — a few days before. The new design, which probably won't show up in products until 2012, dramatically expands the capabilities of ARM's product line and the kinds of markets it can serve.

The Eagle had landed right in the middle of a computer market dominated by Intel Corp., the biggest and toughest chip company in the world.

Although ARM is based nearly 4,900 miles away in Cambridge, England, Austin is becoming an important focal point for the company. Four years ago, the Austin team designed the Cortex A-8, which these days is being used in smart phones and tablet computers, including Apple Inc.'s popular iPad. The A-15 could extend ARM's reach into energy-efficient computing, wireless base stations and power-efficient Web servers.

"Our team is square in the middle of ARM's strategy," said Ken Reimer, ARM's design center manager in Austin. "For me, there is no better place to do processor design."

ARM, with about 1,700 workers worldwide, is a smallish chip company that punches far above its weight. That's partly because it licenses many of its designs to some of the biggest chipmakers in the world, including Samsung Electronics Co. Ltd., Texas Instruments Inc. and STMicroelectronics NV.

Analysts say TI and Samsung probably paid millions of dollars to be partners in the Eagle project, taking part in detailed discussions about the processor as it was being designed. Not only could they influence the design that evolved, but their engineering teams also got an early look at the technical characteristics of the new processor, so they could plan their own specialized versions of it in the years ahead. (ARM says the licensing fees and other payments it receives from its partners are confidential.)

"On Eagle, we are all over it," said Keith Hawkins, who heads Samsung's newly created processor design team in Austin. "It is a big part of our future."

Samsung is intent on passing Intel to become the world's largest chipmaker, and expanding its production and sales of low-power processors is a big part of its expansion plans.

In Austin, ARM's team has grown to more than 190 people, including chip designers, sales, marketing and support workers, who work with ARM's many partners. Those customer companies turn ARM designs into about 4 billion chips a year, used in everything from smart phones to computer disk drives and industrial control equipment.

Ahead of the power curve

From its earliest days, ARM has focused on chip designs that minimize electrical consumption. Chips that use less power can be used in more products and require fewer engineering steps to keep them running cool.

Whereas many personal computers use chips that consume as much power as a 100-watt light bulb, ARM chips typically use a fraction of a watt. That miserly power usage makes ARM chips a natural for battery-powered mobile devices and for other products for which power savings are crucial.

In Austin, the company has built an engineering team from veterans of other companies, including Texas Instruments, IBM Corp., Advanced Micro Devices Inc. and Freescale Semiconductor Inc.

Newcomers pick up quickly on the company's relentless focus on reducing power consumption. Every thousandth of a watt counts.

They also tune in to the company's collaborative style. New ideas count, but they are frequently challenged and must be proved to be superior.

"Ideas, no matter where they come from, are openly challenged at all levels," said Kerry McGuire, ARM's manager of strategic alliances in Austin. "There is the sense that if you believe in your idea, you will pursue it, and if it is a good idea, it will survive."

ARM focused on power consumption before the rest of the electronics industry realized how important low-power design would become. Now the entire industry is power-aware.

The industry once focused on performance for PCs and servers, but "the entire industry is now driven by mobile devices," said analyst Jim McGregor with technology research firm In-Stat. "Power efficiency is a key factor in all they are working on — even at the server level. It's a dramatic change, and it brings the whole industry around toward ARM."

Squaring up against an industry heavyweight

Intel, formerly an ARM partner, has morphed into a competitor. Intel acquired an Austin-based ARM design effort in 1998 and later sold the business to Marvell Technology Group in 2006.

While it was selling off that business, Intel was stepping up its effort on a new family of low-power Windows-compatible chips called Atom aimed at mobile products. Atom has become a big seller for Intel, especially in the emerging category of smaller, power-efficient subnotebook computers.

While Intel attempts to stretch toward low-power applications, the company dominates the market for processors that go into servers, the workhorse computers that do the heavy lifting involved in running the Internet and much of the world's business and technical computing.

It's a market where ARM had never openly challenged Intel — until now. One of the potential markets for the Eagle chip is seen as low-power Internet servers that do the repetitive work of fetching information for Web users.

To underscore its new interest in the server market, ARM is one of the investors in Smooth-Stone Inc., an Austin startup that aims to create complex server chips from a basic ARM design. Smooth-Stone thinks there is an important market developing among Web companies that want to buy large quantities of low-power servers to handle their sites.

Analyst Joe Byrne sees the coming rivalry between ARM and Intel as a contrast between two companies with different histories and very different business models. Intel, with its enormous revenue and profit, controls everything about its chips — from the engineering design to the manufacturing and the marketing and sales.

But ARM is a much smaller company that gets by with a lot of help from its friends. It had $489 million in revenue last year, compared with Intel's $35 billion.

ARM licenses its basic chip designs to a wide variety of partners that turn them into more specialized commercial products. ARM makes far less profit from the chips it designs, but it works with many customers, each of which takes its own risks on making and selling its end products.

"The fact that they spread their bets is very good for them," Byrne said. "They don't care if TI loses to Qualcomm Inc. because they supply designs to both companies. They have a lot of horses in the race."

ARM's top executives downplay the budding rivalry with Intel. "People want there to be this David-and-Goliath struggle between us and Intel," CEO Warren East told The New York Times recently. "It just isn't that way."

But in Austin, ARM managers know their new chips are starting to tread on Intel's turf.

"In Austin, we have Intel squarely in our view," McGuire said. "We want to defend our place in the mobile market and go after Intel's stronghold in computing and servers."

Austin Apartment Complex Gets $1M for Green Upgrade

Austin Biz Journal

 

The 60-unit St. George's Court affordable housing complex has qualified for more than $1 million to fund energy-efficiency upgrades.

The property is one of four Texas apartments splitting a $7.2 million award from the U.S. Housing and Urban Development. The agency portioned the grants from a $100 million federal stimulus act program meant to create jobs and save money for low income residents. In total, the American Recovery and Reinvestment Act allotted $13.61 billion for HUD-administered programs.

St. George's is the only Austin apartments property receiving funds. The complex, which offers an on-site food pantry, is owned and operated by an affiliate of St. George's Episcopal Church and was built partially with HUD funds. Residents are primarily low-income seniors.

Other Texas properties receiving funding through the grant include: Coolwood Oaks in Houston, 168 units; Country Club Village San Antonio Apartments, 82 units; and Fox Run Apartments in Victoria (loan), 150 units.

The program is part of HUD's green retrofit program, which pays for upgrades that save energy, cut water use and improve air quality.

Austin is Highest Rental Market in TX

Austin Business Journal

Austin is the most expensive city in Texas for paying rent and buying a home, according to a study released this week by Washington D.C.-based Center for Housing Policy.

The study “Paycheck to Paycheck" compares and ranks costs in more than 200 metro areas in the United States and ultimately concludes homeownership is still unaffordable for many workers despite low interest rates and steep drops in home prices.

Austin ranks as the 65th most expensive U.S. rental market and the 73rd most expensive homeownership market of all metro areas studied. The center studied data provided by the National Association of Home Builders, the National Association of Realtors and the U.S. Department of Housing and Urban Development.

Austin’s median home price is $176,000, unchanged from 2008, the study found. However, Austin’s ranking rose to No. 73 for 2009 compared with No. 84 in 2008.

The markets with the highest median home prices were in California: with San Francisco and San Jose leading the way, followed by Honolulu in third place, and then back to California in Santa Ana and Santa Cruz in fourth and fifth place respectively.

The typical rent for a two-bedroom home rose in 89 percent of the markets studied, with Austin’s price hitting $954 in 2009 from $912 in 2008, although Austin did fall in rankings down to 65 from 59. Once again, San Francisco was the most expensive city at $1,760.

Despite some perceptions it’s a renter’s market in the U.S., the study found that in the vast majority of metropolitan's fair market rents have held steady or increased, even occasionally surpassing monthly mortgage payments for a median-priced home.

The study also found that some occupations are more prone to being priced out of renting. Specifically, retail salespeople continue to be priced out of renting a two-bedroom apartment in every market studied. Janitors fare almost the same, being able to afford a two-bedroom apartment in only one of the 210 rental markets studied. Licensed practical nurses are unable to rent a two-bedroom apartment in 55, police officers in 12, and elementary school teachers in 11, of the markets studied.

“We must develop the common sense, cost-effective policy solutions at the state and local levels that will help ensure long-term affordability for homes and Austin apartments,” said Center for Housing Policy Chair John K. McIlwain, senior resident fellow and the J. Ronald Terwilliger chair for housing at the Urban Land Institute.

“Otherwise, our workforce will face longer commutes and higher transportation costs, leading to increased traffic congestion and adverse environmental impacts."

Drop in Construction Could Lead to Apartment Shortage

The Dallas News

A dramatic decline in U.S. apartment construction could lead to a shortage of rental housing in the years ahead.

This year, developers are expected to start about 87,000 units – less than a third of what they build on average each year. And the outlook for 2011 isn't much better.

"We will be facing a severe shortage of apartments in the next few years, which will increase the cost of housing for consumers," Sharon Dworkin Bell, senior staff vice president of the National Association of Home Builders, said at this week's convention in Las Vegas. "We believe we should have 300,000 starts every year to have a stable market."

That's not likely in the foreseeable future.

"We have a combination of limited supply coming on and increased demand when the economy recovers," Bell said.

Michael Costa, a partner in McFarlane Costa Housing Partners of California, said, "We know that the demand for housing – especially rental housing – is going to be there. Each month we are not able to get our starts going, we fall further and further behind."

At some point, a lack of rental units will take a bite out of consumers' pocketbooks. "We are predicting now we may see upwards of double-digit rent increases," Costa said.

His firm, which typically starts up to 35 rental communities nationwide each year, has just four projects in the works.

The slowdown has been even sharper for developer Jerry Durkin, whose Wood Partners builds rental units across the country, including several recent projects in the Dallas area.

In 2006, Atlanta-based Wood Partners started about 6,500 units.

"We closed one start in 2009 – a 150-unit deal," Durkin said. "I don't know how 2011 ramps up unless capital frees up."

Over the last couple of years, the Dallas-Fort Worth area has been one of the country's top rental housing construction markets. But startups of new Texas apartments have virtually stopped.

More than 11,000 Houston and Austin apartments were under construction in North Texas at the start of 2010, however, and there are lots of new units on the market, so rents have been falling and vacancies increasing.

The same is true in other U.S. markets, which makes apartment analyst Greg Willett of MPF Research skeptical about a shortage.

"To get back to an essentially full occupancy rate of about 95 percent, we've got to absorb about 600,000 apartments nationally and about 30,000 Dallas-Fort Worth apartments," Willett said.

"The builders are overestimating the number of kids in the basement" who will move out of their parents' homes when the economy rebounds, he said.

Dr. James Gaines of the Real Estate Center at Texas A&M University also says a shortage is a ways off.

"An offsetting factor is the number of foreclosures and other distressed properties being bought by investors and turning into rentals," he said.

Dallas apartments analyst Ron Witten predicts apartment markets around the country could be full by 2012, but that doesn't mean building would start right away.

"Developers have to find and entitle sites, then begin construction," he said. "It could easily be 2014 and possibly later before a meaningful number of new apartments are available for residents."

Permanent Housing For Gulf Storm Refugees

Austin American-Statesman

If there was a lesson to be learned from the government's response to the series of hurricanes that battered the Gulf Coast beginning with Katrina in 2005, it was how not to respond to large natural disasters — especially when it came to housing.

"There are poor people who more than four years after the storm are still not housed," said John Henneberger, co-director of the Texas Low Income Housing Information Service. "That's ridiculous."

Henneberger thought the state could do better. Now, following a wildly successful statewide design competition, Texas stands poised to learn from the early mistakes of the Federal Emergency Management Agency.

After Katrina, FEMA spent hundreds of millions of dollars on trailers that were not only temporary but, in some cases, turned out to be toxic. More money was spent sheltering evacuees in trailers, hotels, apartments and even cruise ships.

Eventually it became clear that there was no real long-term plan, especially for people who couldn't afford to rebuild their destroyed homes. Efforts to produce inexpensive permanent houses stalled, and many displaced Texans still live in temporary residences.

So, Henneberger wondered: What if you could spend the same amount of money on a safe, good-looking house that could be set up quickly when the storm waters receded but then could also be transformed easily into a permanent home?

Two years ago he issued a challenge to Texas architects: Design a small building that could withstand 100-mph winds, be delivered on a single flatbed truck and set up in an afternoon. It should cost next-to-nothing to maintain and be easily expandable and attractive. All for less than $70,000, or what it cost to buy, deliver, set up — and eventually discard — a FEMA trailer.

Nearly 90 Texas building designers responded — "the most popular design competition in state history," said Tom Hatch, an Austin architect who helped set it up. They presented their results last year in a one-day marathon competition — "an architectural smack-down," Henneberger said.

Supporters say the selected homes, the first of which are just now being completed, have the potential to radically change the way government responds to large-scale housing catastrophes.

"We've got a lot of experience with disasters here in Texas — not all of it good," Henneberger said. "We need to learn a lesson. Because this will happen again."

Early mistakes

In the months following Hurricanes Katrina, Rita and, later, Dolly and Ike, it became clear that the storms hit the poor disproportionately. Although large numbers of low-income Gulf Coast residents had owned their homes, many had no or insufficient insurance to replace them.

As a result, Henneberger said, FEMA's rebuilding plans, which depended on people eventually returning to work and being capable of helping to pay for their new homes, turned out to be useless for a large number of the storms' victims.

"The whole premise behind federal relief is people have insurance and will resume a job and be credit-worthy," he said. "But none of that applies if you're poor and old."

As time dragged on for evacuees still in temporary housing, FEMA sponsored attempts to create more permanent homes for displaced Gulf residents. The Katrina Cottage, a small, stylish house designed by a New York architect, was unveiled to rave reviews in 2006.

But the homes were tiny — as small as 300 square feet — and when it came time to set them up permanently, local communities balked, fearing that the minuscule residences would lower real estate values. While thousands of the Katrina Cottages were manufactured in Mississippi and Louisiana, many have yet to be put into use.

In 2007, Texas embarked on its own federally sponsored home-replacement project. The state Department of Housing and Community Affairs solicited designs from manufactured housing companies for a structure that could be set up quickly and could replace some of the state's thousands of lost homes.

After asking local community leaders for ideas, the Texas housing department submitted a half-dozen designs to FEMA and requested $67 million to build them.

"When you look at the 22-county region hit by Rita, it's a very large area with many different housing needs and styles," explained Kelly Crawford, Texas Department of Housing and Community Affairs' director of emergency housing and disaster recovery.

Instead, the federal agency selected a single design and released only $16 million to produce the so-called Heston Home. The structures could be shipped and set up easily, and they cost only $60,000 each.

Unfortunately, said Henneberger, "It looks like a glorified shipping container with a porch added. The house is not, by any stretch of the imagination, a structure that would be welcomed into existing neighborhoods."

"It would work well to bring a bunch in and put them in a desert to house soldiers," added Crawford. "They're much better than tents, no doubt."

The state severed its contract with the Heston Group during the summer because of the company's failure to meet deadlines. Meantime, only six Heston Homes have been set up statewide "due mainly to a limited interest," said Gordon Anderson, spokesman for the Texas housing department.

Houston is still planning to install a cluster of the units in a small development. But a full 50 months after Rita, the city has yet to find an acceptable location for the project, and three dozen of the unassembled homes are gathering dust in a warehouse.

"Everybody was just kind of frozen in place," said Henneberger. "We said, 'We're not going to solve this problem for everyone. But this is about making sure the next time we don't make the same mistakes.' "

After lining up the Texas Society of Architects and Covenant Capital, a Houston nonprofit, as partners, Henneberger persuaded the Texas housing department to commit $250,000 to what he labeled the Grow Home project. More than 150 teams of architects registered to submit plans; nearly 90 actually did.

The trick, said Hatch, was to design a ready-to-occupy home that could be mass-produced rapidly all while "fitting in with the neighborhood so it doesn't look like a government house. It should look like it's always been there."

That meant no industrial-park designs, as well as "something real cutesy with frilly gingerbread trim that didn't look like anything else in the neighborhood," said Henneberger.

The one-day competition took place in January 2008 at the Capitol. The judging panel, made up of architects and evacuees, occasionally clashed. The pros favored sleek, modern designs; the refugees pointed out that the big picture windows provided scant security. They preferred the more traditional bungalow look.

Some of the designs were discarded for lack of ramps or for having second-story bedrooms — both hindrances for the large number of evacuees who have disabilities. Other designs, although attractive, "would have looked great in New Mexico or Arizona," said Hatch. "But not in Port Arthur."

In the end, the panel settled on four designs: two traditional bungalow-type homes; a longer and narrow shotgun-style model that would be built in Port Arthur; and a modern cedar, glass and steel version designed by a Houston firm to be constructed in that city.

A new start in Port Arthur

By the time Hurricane Rita was through with Lisa January's Port Arthur home in September 2005, it was unusable. The roof, already weak from deferred maintenance, had been ripped open; the house filled with water.

January and her teenage son moved in with her mother for a temporary stay. She assumed it would be only a matter of months before she could return to her own house. But with no homeowners insurance, the $2,000 she said she received from FEMA didn't go very far.

"They had so many reasons they couldn't help me," she said.

The months turned into years. Port Arthur Mayor Deloris Prince said several hundred city residents who lost houses in Rita are still waiting for permanent replacement homes.

Last week, four years after Rita, January moved into the first of what Henneberger hopes will turn into hundreds of Grow Homes. Designed by Waxahachie architect James Gleason with "a down-home feeling," the compact white house with blue trim sits where January's old home once did.

Over the next year, Henneberger said he's encouraging new residents of Austin apartments and housing to cast a critical eye on the homes so the designs can be improved. Already, he said, "I'm wondering about the durability of the fixtures. And whether it can be cooled inexpensively with all the windows."

For the moment, however, January, a single mother who was recently laid off from her job as a corrections officer, has no complaints. "I love everything about it," she said. "From the front door, all the way to the back."

Post Investment Group, LLC, Acquires Distressed Apartment Units

PR Newswire

HOUSTON, Post Investment Group, LLC, a Los Angeles based opportunistic real estate investment firm recently announced the acquisition of two distressed multi-family projects: the 438 unit Serrano Apartments in Houston, Texas and the 300 unit Longhorn Station Apartments in Austin, Texas. These latest acquisitions serve to expand Post's distressed real estate platform. Post acquired the assets through separate joint ventures with two existing equity partners.

The two assets, though purchased separately, carried similar transaction structures characteristic of both the current real estate environment and Post's strategic directive. The properties were acquired directly from or through the special servicers, in both circumstances requiring the lender to substantially discount the outstanding principal balance of the notes and amend financing terms in favor of Post. In each case, Post will infuse significant rehabilitation and renovation capital through a focused, individualized investment thesis tailored toward short term stabilization and long term operational viability.

This method of distressed investment is a transactional direction Post has been pursuing over the past calendar year. However, until recently lenders were either unwilling or unable to discount the outstanding balance of their holdings to levels that were both in-line with market and operationally accretive. "These two acquisitions signify a discernible shift in lender expectations," remarks Jack Ehrman, Principal of Post, "in that expanded consideration is now given to the active preservation of remaining equity in lieu of blindly pursing an exit at par, an argument we have been touting for some time." In contrast to the bandwagon flock to direct note acquisition, Post has identified the foregoing as a way to capitalize on the depressed real estate market while avoiding the intangibility of loan purchases consistently void of solid underlying collateral and absent of direct operational oversight at the entity level. Mr. Ehrman goes on to add that, "While this approach may not be as lucrative on exceptional assets, it enables us to significantly reduce an investments risk-coefficient and still attain market leading returns."

The acquisitions of Houston apartments and Austin apartments increase Post's collective holdings to over 6,200 units, 1,400 of which were acquired in the second half of 2009. Jason Post, President of Post comments, "The next two to three year period will provide multiple unique and opportunistic prospects for our company." He went on to emphasize the increased importance of developing strategic relationships with lending institutions and special servicers, stating, "The processes and protections Post employs from both an operational and transactional standpoint have enabled us to further access these entities and produce constructive conversations unthinkable in prior years".

About Post Investment Group, LLC

Post Investment Group is an opportunistic real estate investment firm focused on the acquisition of multi-family assets nationwide. The company specializes is both core plus and distressed investment opportunities capitalized through private and institutional investors.