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Big Developers Dabble in Apartment Market
Industry News
Multifamily Construction Drives Housing Starts Jump
Investors Pour Money Into N.C. Triangle Apartment Boom
AvalonBay Is Set to Launch a Couple of New Brands
EDR in Talks with University to Build, Manage all Student Housing
As Apartment Construction Booms, New Home Sales Lag
New Joint Venture Launches Fund to Target Seattle Properties
Analysis: U.S. Rental Demand Lifts Housing Sector
Apartment Construction Rises in Oregon's Rogue Valley
Developers See Growth in High-End, Rental Housing
Legislative/Legal News
Court Orders Lehman, Banks to Talk it Out on Archstone
Arbor Realty Board Approves 500,000-Share Buyback Program
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Big Developers Dabble in Apartment Market
Digested From "Big Developers Dabble in Apartment Market"
Wall Street Journal (12/21/11) by A.D. Pruitt; Dawn Wotapka
A growing number of U.S.-based developers of shopping centers and office buildings are turning their attention to the apartment sector, where demand for new projects is stronger than any other commercial property segment. Fueled by the decline in homeownership, the apartment boom is attracting a number of major companies, ranging from Boston Properties Inc. and Mack-Cali Realty Corp. to Macerich Co. and SL Green Realty Corp. They all have either acquired, completed, or broken ground on new apartment communities in recent months or have announced plans to do so in 2012. Many of these developers are getting in the apartment sector for the first time. For instance, mall giant Macerich is in the process of erecting a 430-unit apartment tower near its Tysons Corner Mall in Northern Virginia. The company says it also is exploring building new rental apartments at its Broadway Plaza shopping mall in Walnut Creek, Calif. SL Green has also has never developed or operated apartment communities before. But the largest owner of Manhattan office buildings in October announced that it had teamed up with Stonehenge Partners to purchase eight New York apartment and retail buildings with a total of 402 units for $416 million. The strategic shift by office and retail developers to apartment communities is a cause of concern among some investors, many of whom feel these companies should stick to what they know best.
Industry News
Multifamily Construction Drives Housing Starts Jump
Digested From "Multifamily Construction Drives Housing Starts Jump"
Wall Street Journal (12/20/11) by Alan Zibel; Jeff Bater
New Commerce Department data shows that U.S. home building rose to the highest level in 19 months last month, with most of the increase in housing starts coming from multifamily construction. Home construction in November climbed 9.3 percent to a seasonally adjusted annual rate of 685,000 from a month earlier. The results were better than most analysts expected. The month-to-month improvement was driven by a robust 25.3 percent increase in multifamily housing with at least two units. High unemployment combined with a glut of foreclosures and falling home prices have discouraged consumers from purchasing newly built homes. Consequently, builders kept construction to a minimum during the housing bust. However, the building industry has been exhibiting a bit more optimistic in recent weeks. A recent survey showed builder sentiment rose for the third month in a row in December.
Investors Pour Money Into N.C. Triangle Apartment Boom
Digested From "Investors Pour Money Into Triangle Apartment Boom"
News Observer (NC) (12/22/11) by David Bracken
As the commercial real estate market struggles due to sluggish job growth, investors cannot resist apartment communities in North Carolina's Triangle region. According to CB Richard Ellis, a total of 35 Triangle apartment communities have sold this year for approximately $848 million. Additionally, transaction volumes in 2011 have increased 60 percent from last year and 238 percent from two years ago. Investors are being lured into buying the apartment communities both by their steady cash flow and their improving fundamentals. The troubled residential housing market has pushed more people toward rental housing and increased demand for apartments. The significant growth potential has attracted deep-pocketed pension funds and other institutional investors.
AvalonBay Is Set to Launch a Couple of New Brands
Digested From "Plots & Ploys: Targeting Hipsters"
Wall Street Journal (12/21/11) by Dawn Wotapka
AvalonBay Communities Inc. is starting to brand its apartments. The company, which owns nearly 60,000 mostly upscale rental units in almost 200 communities, is set to launch a couple of new brands. One, dubbed AVA, will target younger residents who want to live in cities. These buildings will feature smaller apartments and be designed for roommate living. In fact, there are already a trio of AVA-branded apartment communities in development. The other new brand, to be known as eaves, will offer less-expensive apartments and mostly in suburban settings. Next year, AvalonBay expects to reflag as many as 25 of its apartment communities as eaves and redevelop another 10 new communities with the brand. Company officials believe branding will help it diversify its income and differentiate its apartments in an increasingly crowded and competitive market. These mark AvalonBay's first major initiatives under Timothy Naughton, who is set to take the reins as CEO on Jan. 1.
EDR in Talks with University to Build, Manage all Student Housing
Digested From "EDR in Talks with University to Build, Manage all Student Housing"
REIT.com (12/21/11) by Carisa Chappell
Education Realty Trust is in final negotiations to become the first real estate investment trust to be put in charge of the entirety of a major university's student housing portfolio. The REIT has been chosen by the University of Kentucky to negotiate a deal to build and manage more than 9,000 residence hall beds over the course of the next seven to 10 years. Once a final accord is hammered out, it would indeed mark the first time a major university has outsourced its entire student housing program to a separate firm, reports Tom Trubiana, executive vice president of Education Realty. Tight budgets have left a number of universities slow to replace student housing. As a result, Trubiana believes more higher education institutions may start looking to private companies to provide student housing. He remarks, "With today's economy, every state is struggling to find funding appropriations, and universities are looking to alternatives." Education Realty will likely use its "ONE Plan" to finance the deal. Under the plan, the REIT takes on 100 percent of the equity investment and debt responsibility for a project. Once finished, Education Realty takes either ownership of the property or a leasehold interest in the development for a designated period of time.
As Apartment Construction Booms, New Home Sales Lag
Digested From "Ahead of the Bell: New Home Sales"
Associated Press (12/23/11)
Based on a poll of economists by FactSet, November sales of new homes will rise to a seasonally adjusted annual pace of 312,000 -- less than half the 700,000 in sales needed to sustain a healthy housing market. Regardless, homebuilding has begun a gradual comeback, with the rate of new apartment construction nearly twice the pace two years ago. In terms of single-family homes, builders will continue to have a tough time competing with foreclosures and short sales in the coming months.
New Joint Venture Launches Fund to Target Seattle Properties
Digested From "Trinity JV Launches Fund to Target Seattle Properties"
GlobeSt.com (12/20/11) by Natalie Dolce
Trinity Real Estate has teamed up with Norman Partners to launch Northstar Realty Fund, a new limited partnership investing in multifamily housing and commercial real estate. According to a company statement, Northstar is currently targeting "well-located properties" in the Puget Sound region that "would benefit from creative repositioning, redevelopment work and strategic remarketing to enhance returns." The fund amount is expected to be $20 million once it is fully subscribed. Northstar's goal is to provide individual investors with greater control over their invested capital, enabling each investor to take part only in investments they select. Northstar's principals each bring over a quarter-century's commercial real estate industry experience in the Seattle market. They range from Richard Leider and Pete Stone of Trinity Real Estate to Jim Norman and Rob Larsen of Norman Partners. Leider concludes, "Over the years, we've observed that many real estate investors desire the ability to select individual properties in which to participate, not just broad parameters. Thus, our investors choose whether or not to invest a portion of their total commitment in any particular asset."
Analysis: U.S. Rental Demand Lifts Housing Sector
Digested From "Analysis: U.S. Rental Demand Lifts Housing Sector"
Reuters (12/23/11) by Margaret Chadbourn
With U.S. unemployment still high, home foreclosures on the rise, and property prices under pressure, a growing number of Americans are opting to rent apartments -- a shift that property professionals say is changing the face of the U.S. housing industry. The percentage of Americans who own their home dropped from a peak of 69.2 percent in 2004's fourth quarter to 66.3 percent in this year's July-through-September period. At the same time, the percentage of rental housing units that are currently vacant slipped to 9.8 percent in the third quarter from 10.3 percent a year ago. Morgan Stanley analyst Oliver Chang wrote: "Rents are rising, vacancies are falling, household formations are growing, and rental supply is limited. We believe the demand for rental properties will continue to grow." Groundbreaking for new housing increased 9.3 percent last month to the highest level in 19 months. However, the gains were almost solely in multifamily housing. Indeed, groundbreaking for communities with five or more units soared more than 30 percent from October. Bill Zach, a third-generation homebuilder in the Milwaukee, has noticed the change. He remarks, "It used to be my competition was every guy that owned a pick-up truck and called himself a builder. Hundreds of them. That's no longer the case, those guys are dropping by the wayside."
Apartment Construction Rises in Oregon's Rogue Valley
Digested From "Apartment Construction Rises in Rogue Valley"
KDRV (OR) (12/20/2011) by Yessenia Anderson
In Oregon's Rogue Valley, an uptick in home building last month came mostly from new apartment construction. Nationally, permits for new apartments increased by 16 percent, nearly 10 percent more than home building permits. Rogue Valley is seeing the same trend. In this region, permits for apartment construction with more than five units has increased by more than 80 percent in just the past year.
Developers See Growth in High-End, Rental Housing
Digested From "Real Estate Developers See Future Growth in High-End, Rental Residential Projects"
Newark Star-Ledger (NJ) (12/18/11) by Sarah Portlock
Real estate developers say one segment of the market that is starting to see a revitalization are the high-end rental apartment buildings in urban downtown areas throughout New Jersey near public transportation hubs and with extensive amenities. The projects are springing up in popular towns along the Hudson River waterfront, but also now include regions like New Brunswick, Harrison, Morristown, Woodbridge, and Lyndhurst. Some projects originally intended to be condos have been converted to rentals because of the changing market dynamics, including the Vue in New Brunswick and Harrison Station in Harrison. Developers cite the "renters by choice" theory that people who could afford to buy are instead choosing to rent because of its flexibility and ease. "We have what I’d call a perfect storm of demand, opportunity and capital," said Jean Maddalon, executive director of the New Jersey Apartment Association. "There is the demand for the population to be in these downtown areas, the opportunity [because] the municipalities are really encouraging growth, and the capital is there."
Legislative/Legal News
Court Orders Lehman, Banks to Talk it Out on Archstone
Digested From "Court Orders Lehman, Banks to Talk it Out on Archstone"
GlobeSt.com (12/22/11) by Robert Carr
On Wednesday, a U.S. Bankruptcy Court judge in Manhattan ordered Lehman Bros. to sit down and try to work out a dispute with Bank of America and Barclays Bank over the banks' sale of a 26.5 percent interest in Archstone to Equity Residential. Lehman, which owns 47 percent of the Denver-based apartment owner, has looked to block the sale by filing a right-of-first-refusal offer of $1.3 billion for the banks' interest. The company also filed suit against the two banks in bankruptcy court to push back the contractual first refusal deadline for the sale. The two banks currently own 53 percent of Archstone.
Arbor Realty Board Approves 500,000-Share Buyback Program
Digested From "Arbor Realty Board Approves 500,000-Share Buyback Program"
Wall Street Journal (12/20/11) by Ben Fox Rubin
Arbor Realty Trust Inc.'s board of directors has approved a stock buyback program of up to 500,000 shares, as the New York-based REIT joined a growing number of companies looking to bolster shareholder value. The company specializes in investing in multifamily housing and commercial real estate. Earlier this year, Arbor Realty's board approved a share repurchase program of up to 1.5 million shares. As of Nov. 4, the REIT had nearly 24.1 million shares outstanding, with the new buyback program representing around 2.1 percent of outstanding shares.
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