We hope everyone is off to a great new year. Preparations are underway for a fun year in 2020. We’d like to share with you several Association updates and a preview of upcoming events. 

Capitol Conference 2020Capitol Conference will be held on February 11-13 in Montgomery. Steve Murray of REAL Trends will be the keynote general session speaker on Tuesday, February 11. The Annual ARPAC & Advocacy Awards lunch will be from 12pm-2pm followed by Legislative visits and the annual Legislative Reception. Registration and more information can be found here.  

Major Investor DinnerOn the eve of Capitol Conference, an ARPAC Major Investor Dinner will be held on Monday, February 10 at the Capital City Club. If you’re a Major Investor and have not RSVP’d to the dinner, please do so soon. If you’re interested in becoming a Major Investor, please email Cyndi Lombardi, and an ARPAC Trustee will follow up with you. 

GRI 2020The Alabama Graduate, REALTOR® Institute (GRI) program has been redesigned with a new curriculum. Session 1 of the new GRI 2020 program will roll out at Capitol Conference and focus on practical business skills and tools that are essential for every top producer! Session 1 instructors are Shulanda Franks, Jim Lawrence, Bob McMillan, Anne Powell, and Brenda Wallace. Registration for Session 1 can be found here. More information about the GRI Program in 2020 can be found here. GRI 2020 will be offered in Huntsville April 8-9; Birmingham April 14-15; Mobile July 22-23; Baldwin County August 5-6; and Fairhope October 19-20. 

AAR BODThe first meeting of the new AAR Board of Directors will be held on Thursday, January 23 at AAR. This will be the first year having Directors’ meetings outside of the conference structure. We are excited about the future and hope the flexibility of a smaller, more nimble board will allow more frequent meetings as issues arise throughout the year. On the 23^rd, the Board will receive end-of-year reports, deliberate several governance proposals that coincide with the new governance structure and related impact in other areas of the Association, and review goals for 2020. 

2020 Alabama Legislative Session The Alabama Regular Legislative Session will convene on Tuesday, February 4 and must adjourn by May 18. Prison reform, budget reform, healthcare, work force development, and several gaming proposals are all expected to be heavily debated topics this session.  

U.S. Presidential PrimaryThe U.S. Presidential Primary in Alabama will be Tuesday, March 3 followed by a Primary Run Off on Tuesday, March 31. One U.S. Senate seat, all U.S. House of Representatives seats, and several state and local races will be included on the primary ballot. 

U.S. Census 2020The 2020 Census will begin this spring. Information will be sent to households in early March. National Census Day is on April 1 and responses can be made by phone, mail, or online. AAR hosted ADECA Director Ken Boswell at the 2019 Annual Meeting to emphasize the importance of high participation in the Census for future federal funding in Alabama and to maintain our current political representation in Congress. NAR has partnered with the Census Bureau to help promote the Census nationwide.

Financial and Asset Report: 

MembershipMembership numbers have continued to increase with the strong economy. As of December 31, 2019, our membership stands at a record high of 16,514. Previous Association highs were 16,139 (2007) and 16,066 (2018). These numbers represent extreme highs for the Association historically and are likely unsustainable long term. 

2019 General Fund The financial health of our organization has continued to improve. At the end of 2019, we have an (unaudited) general fund surplus of $761,319. Following the completion of the 2019 Audit, the surplus will be moved to reserve funds and potentially used to make a large principal payment towards the outstanding mortgage on the AAR building. 
 

General Fund Reserves General fund reserves currently stand at $2,076,491. This represents approximately nine months of operating expenses.As reported at previous Director Meetings, as the Association meets the recommended minimum general reserve fund of nine months operating expenses, focus will shift to rebuilding the building reserve fund and eliminating the remaining debt on the AAR building.
 

2019 Building, Grounds, & Maintenance FundThe total 2019 Building Fund Revenue ($611,444) exceeded 2019 Building Expenses ($601,294) by $10,150. Following the completion of the 2019 Audit, the remaining $10,150 surplus will be moved to the Building Fund Reserves. 

Building Fund Reserves The Building Fund Reserves currently stand at $961,662. The balance of this reserve fund will need to be rebuilt to maintain the building and keep up with required maintenance and replacement of building systems and assets. The building is a three story, 22,000 square foot, commercial building that is in its 10^th year of life. Many of the green friendly systems and products originally installed are nearing the end of their recommended life as the building ages and will need to be replaced. One major system failure could exhaust the majority of the building reserve balance. The Association must plan for those needs and be proactive with the maintenance and replacement schedule. Avoiding recommended maintenance will increase costs in the long run.

        Building Mortgage

Current Balance: $3,689,495  
TERM: 9 years with a 20-year amortization 
Interest: Fixed rate of 3.75% 
Payment: $18,920 principal plus interest. January payment was $30,824.
Maturity: Balloon payment of $2,289,379 on March 11, 2026.

Building Mortgage Pay Off Goal

Retiring the remaining debt on the building is an Association priority. AAR has set a goal to pay off the mortgage balance by 2023. The annual interest expenses associated with the mortgage payment are approximately $150,000 each year. The Association’s interest expenses and debt-to-income ratio are far higher than other REALTOR® associations and similar state trade associations. Most local Associations and state Associations have paid off the debt on their buildings. Membership will not remain at 16,000 forever and could drop substantially with the next economic downturn or as a result of other external factors such as the pending class action civil litigation or the pending Department of Justice Anti-Trust probe into Associations, MLSs, and brokerages across the country. 

Building Roof and Water RepairsA great deal of maintenance, water proofing, and roof repair has been done on the building over the last 24-36 months. The last of the roof leaks has been found. The original building general contractor, Jesco, and the roof installation company, Central Alabama Metal Roofing, have completed their repair work and provided a warranty for these repairs that extends through the period of the original warranty. Repairs of interior sheetrock, paint, and ceiling tiles have been completed. We also completed two rounds of air quality testing that showed no mold or air quality issues that would put staff or visitors to the building at risk. The mitigation, deferred maintenance, and repair expenditures resulting from the roof leaks totaled approximately $440,000. More than half of that cost was deferred maintenance to waterproof, paint, and reseal the building’s exterior surfaces. This will be required maintenance every 10 years. 

Building First Floor Renovation, Maintenance, and Meeting Preparation As reported to Directors in October, in anticipation of future governance meetings at the Association, the Washington Room is being updated to accommodate such meetings. The work includes paint, plumbing, electrical, HVAC, carpet, baseboards, computer, and audio and visual equipment. Also, in anticipation of the future meeting schedule, the Washington parking lot lease was not renewed for 2020 to ensure ample parking for members when needed.

Assets and InvestmentsApproximately $3,431,182 in Association assets and reserve funds are managed by the Association’s investment advisor, UBS, in a 100% CD portfolio.  The CD portfolio ranges had a return of 2.25% in 2019. The CDs range in annual yield from 1.75-3.2%.  All of the funds are FDIC insured, and there are no management fees for a CD-only portfolio. This is a conservative investment position for Association assets and reserve funds in the event of an economic slowdown or contraction. 

Audited Net AssetsPreparations are underway to begin the 2019 Audit with the audit firm of Aldridge Borden. The goal is to have the audit completed by April. The audit takes into account the organization’s total financial picture and net assets. The 2016, 2017, and 2018 audits have shown continued improvement in the overall financial health of the Association. The Association has increased the allocation of resources towards financial accountability and compliance efforts. 

The Association’s two wholly owned subsidiaries, the Alabama REALTORS® Political Action Committee (ARPAC) [527 organization] and the Alabama REALTORS® Foundation [501(c)(3)], will also be audited by Aldridge Borden, and the results will be presented to each entity’s directors.

2020: What’s ahead?

2020 Regular Legislative Session: The Regular Session begins February 4 and ends by May 18
AAR Capitol Conference: February 11-13 in Montgomery, AL
US Presidential Primary Election: March 3
US Presidential Primary Run Off Election: March 31   
US Census Day: April 1
GRI Session 2: April 8-9 in Huntsville, AL / GRI Session 3: April 14-15 in Birmingham, AL
NAR Legislative Meetings: May 12-16 in Washington, D.C.
GRI Session 4:July 22-23 in Mobile, AL/    GRI Session 5: August 5-6 in Robertsdale, AL
NAR Leadership Summit: August 16-18 in Chicago, IL 
AAR Public Policy Forum: August/September in Montgomery, AL 
AAR Annual Convention: October 18-20 in Point Clear, AL 
NAR Annual Convention: November 11-16 in New Orleans, LA 
Alabama NAR Core Standards Deadline: November 1
US Presidential General Election: November 3
ARPAC Contribution Deadline: December 9

Please reach out if you have any questions. Look forward to seeing you soon. 

Jeremy