General Summer 2nd Quarter Update from President Mugs Mullins and Jeremy Walker


July 28, 2017

To: AAR Board of Directors
From: Mugs Mullins, President & Jeremy Walker, Chief Executive Officer
Re: General Summer 2nd Quarter Updates


Dear Board of Directors,

On behalf of President Mugs Mullins, we hope everyone is having a great summer. Here are several updates on Association business and upcoming events:

Regional Meetings: Many thanks to everyone who attended and supported the 2017 regional meetings. We reached almost 400 members who attended one of the six different meeting locations. 388 members attended statewide which is up 11% from the 350 members who attended in 2016. The feedback and engagement from our members throughout the state was terrific.

Membership: Membership numbers have continued to increase, and we have crossed 14,000 for the first time since 2009. As of June 30, 2017, our membership stands at 14,062. Membership was at 13,332 at this time in 2016. Six months into the year, we’re at 96.7% of dues collected for the 2017 budget. Current costs are also in line with budget projections six months into the year.


General Fund. Financially the health of our organization continues to improve. Last year we had the strongest year in the general fund since 2010 with a year‐end surplus of $290,000. That’s an almost $400,000 turn‐around from 2015 to 2016 and one of the biggest turn‐arounds we’ve had. Controlling costs, streamlining our processes and achieving greater efficiency have made a big difference but there is more work to be done, and we need consistent and strong financial management over the next three to five years to get us back where we need to be.

Audit. The 2016 Audit was presented by Aldridge Borden to the Audit Task Force and AAR received a good report. The audit takes into account the organization’s total financial picture and net assets. Last year we had an increase in net assets of approximately $220,000. This is the first increase in net assets in six years and largest in seven years. The swing in net assets from 2015 to 2016 was almost $500,000, the largest swing in 10 years since the new building was built.

General Fund Reserves. With the 2016 audit complete, the finance committee can now allocate the 2016 general fund surplus to current reserves of approximately $1,007,171, or a little more than five months reserves.

Building & Assets:

Roof. Following our last update in April, Hixson Consultants completed their final series of water tests on the roof and were able to pin‐point multiple leak locations at the building and determine causation. We’ve continued to work with various contractors and subcontractors for the last 8‐10 months to fully address all of the issues on the green roof. We’ve worked with the roofing installer and roofing manufacturer to determine the extent of applicable warranty coverage and how best to repair the leaks. At this juncture, it appears that both the roofing installer and roofing manufacturer will honor some portion of the repairs through warranty coverage.

Water Proofing. The other issue remaining to be addressed is the completion of the water proofing of the exterior of the building. The caulking has degraded and needs to be replaced and the stone needs to be sealed. The rotunda and dome of the roof have already been water proofed earlier in 2017.

Hixson Consulting has been retained to help coordinate and manage the repair and water proofing process through completion.

Vendor Management. Work has been done to shop vendors and replace contracts at significant cost savings to the organization. This process is ongoing and will continue with other vendors as contracts expire.

Building Refinance. We recently modified the building note and were able to lock in a nine‐year fixed rate of 3.75% on a commercial building. The 2016 building loan with Regions had a variable interest rate that was LIBOR plus 2.95% and 10‐year balloon note. As interest rates started to rise this spring, we explored refinance options to lock in a fixed interest rate and cap our exposure and increased costs in a rising‐rate environment. Our effective interest rate on the mortgage payment had risen to almost 4% (3.94%) this spring and early summer.

Fortunately, our improving financial condition played a big part in helping us obtain multiple competitive offers from several lenders, and eventually, Regions came back and offered better terms that helped us obtain a lower fixed rate, stabilize our payments , modify the existing loan to avoid excess closing fees, and help us continue to reduce loan principal at our current rate. We are now no longer required to maintain $400,000 in a holding account with Regions, which is another sign of our improving financial situation.

In summary, the new terms for the building loan are the following:

TERM: 9 years with a 20‐year amortization.
Interest: The existing rate of 30 Day LIBOR + 295 basis points will be replaced with a fixed rate of 3.75%.
Payment: $18,920 principal plus interest. August payment is $32,164.
Balance: Current balance is $4,238,189.
Maturity: Balloon payment of $2,289,379 at maturity on March 11, 2026

Investments. We’ve engaged an investment advisor, UBS, to help manage the Association’s financial resources. Our financial assets are currently held in CD’s in different banks across the state. This process began approximately 18 months ago and is needed to be sure we are being the best stewards of the association’s investments and assets. We are in the home stretch of this process and will have further updates in the next quarter report.

Government & Political Affairs:
One of our most vital and important areas is our advocacy mission, and it is probably our most effective. We will always advocate for policies that (1) keep the REALTOR at the heart of the transaction; (2) protect private property rights; and (3) promote homeownership.

Political Turmoil. The 2017 Regular Legislative Session was as memorable as the last three years of politics in Alabama has been. These are historic times in state politics and they are unprecedented with the removal of the head of each branch of government. The last two legislative sessions have had a cloud lingering with the pending criminal investigation of either the former Speaker of the House or the Governor. This is relevant in how it impacts each legislative session and the unpredictability it creates in an already unpredictable environment.

2017 Session Report: We saw the passage of the Historic Tax Credit legislation! This is a great program that was sunset earlier this year so the program could be studied for its impact and return on investment to the tax payers. It came back with a positive grade, and the program will be brought back for an additional five years! Overall, bill filings were down this year in the third year of the quadrennial given the uncertainty of impeachment proceedings. We actively engaged and monitored over 50 bills as they moved through the session. Many were opposed and we worked to amend many others to resolve concerns. The most important thing we do as an industry lobby is defeat bad bills.

State CFA. Thank you to everyone who participated in the state call for action on the Historic Tax Credit Bill in the Senate! We had a 15% response rate statewide and it helped make difference in the final passage of the bill! Great job.

Political and Advocacy Road Show: We are very excited to have partnered with the National Association of REALTORS® and several of our local boards to offer The Alabama REALTORS® Political and Advocacy Road Show that will span four days with week of September 18 and will make stops in Huntsville, Pell City, Auburn, and Mobile. Each day will begin at 9:00 am and end at 4:00 pm and will be comprised of three courses. Lunch will be provided.

Candidate Training Academy: Learn how to develop a successful campaign when running for local office.

Training ARPAC Champions: This course is a road map to guide volunteer‐leaders in making educated and fiscally responsible decisions when backing political candidates.

Local Municipal and County Monitoring: Learn how to develop a local municipal and county monitoring program.

We look forward to welcoming some of the best consultants from across the country to Alabama to work with our members and hope you will make plans to attend at one of the locations. Registration is free.

ARPAC: ARPAC fundraising and investments have been outstanding so far in 2017, continuing an upward trend the last three years. As of June 30, 2017, total state fundraising stands at $531,956 or 89% of goal. 2016 was an all‐time record for the PAC, and this year is on track to be even better.

Professionalism: Professional Development has had a great year so far! Our partnerships with local associations have enabled us to host over 25 courses across the state. For a quick video update, click here. Written updates on program areas are below:

GRI Update. We have had a great series of spring classes across the state. We hosted 13 GRI classes with over 17 GRI Graduates so far this year. 21 new GRI students have joined the program since January 1.

Fair Housing Update. To celebrate Fair Housing Month in April, we offered The American Dream for All: Fair Housing in Today’s Market in seven locations across the state to over 160 members.

Designations/Certifications. We have hosted eight NAR Designation/Certification courses since the beginning of the year. These included the new Real Estate Negotiation Expert (RENE), a successful week of Certified International Property Specialist (CIPS) Designation courses, as well as the always popular Military Relocation Professional. Nearly 200 members invested in their professional development by completing these courses.

AAR/CRS Roadshow in September. AAR and the Alabama CRS Chapter have partnered to bring a CRS Alabama Road Trip across the state September 11‐14 making stops in Huntsville, Birmingham, Auburn, and Mobile with nationally known instructor Frank Serio.

Professional Development Calendar. We have many more professional development opportunities scheduled through the end of 2017 with additional courses frequently added. Visit the Professional Development tab at for more information and the current course schedule.

Annual Convention: Registration will open very soon for the 2017 Alabama REALTORS® Annual Convention and Trade Show. We have a great lineup of national speakers, networking, and professional development opportunities.

If you have any questions, comments or suggestions, please do not hesitate to reach out to either of us. We look forward to seeing you soon!