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Equity Residential Agrees to Buy Stake in Archstone
Industry News
Survey Shows Most Expect Multifamily Cap Rates to Stay Put
Hampton Roads (Va.) Apartment Rents, Vacancies Both Up
Property Management Grows as U.S. Home Rentals Surge
Madison Apartment Vacancy Hits Historic Low
New Apartments Could Be Coming to Downtown Colorado Springs
Brookfield Reaches Deal With Multifamily Property in Manhattan
Equity Residential Sees Potential in Seattle Apartment Market
Property Managers Busy as Rental Market Surges
New Apartment Opportunities in Downtown Cleveland
The Anxiety of the Forever Renter
Legislative/Legal News
Fort Worth City Council to Look at Tougher Rules for Apartments
U.S. Supreme Court Lets Oakland Section 8 Ruling Stand, Renters Stay
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Equity Residential Agrees to Buy Stake in Archstone
Digested From "Equity Residential Agrees to Buy Stake in Archstone"
Chicago Tribune (12/05/11)
Equity Residential has inked a $1.325 billion deal to purchase a 26.5 percent ownership interest in apartment owner Archstone. Bank of America and Barclays were the sellers. The stake sale, which would be about half of the ownership held by those two banks, now puts pressure on the remaining owner, Lehman Brothers Holding Inc, to match it. Equity Residential spokesman Martin McKenna states, "A 26.5 percent stake gives us a seat at the table regarding making decisions and the long-term outcome of the portfolio." Equity Residential ranks as the nation's biggest publicly-traded apartment owner. Lehman retains the right to match the offer and is reportedly in talks with a number of potential partners, including Brookfield Asset Management. Archstone's three owners have not been able to agree with what to do with the Denver-based company, which owns more than 77,000 apartment units. Under a restructuring plan reached in 2010, all three have to unanimously approve almost all decisions with regards to Archstone's future. When the three failed to reach an accord, Barclays and Bank of America opted to sell their stakes.
Industry News
Survey Shows Most Expect Multifamily Cap Rates to Stay Put
Digested From "Survey: Most Think Multifamily Cap Rates Will Stay Put"
GlobeSt.com (12/02/11) by Ian Ritter
Most industry observers expect multifamily cap rates to either stay put or continue dropping, according to the new Jones Lang LaSalle/RealShare Apartments Outlook 2012 Survey. Indeed, 39 percent of respondents said cap rates will remain where they are next year, while 21 percent say cap rates will decline by 50 basis points. Another 15 percent predict a basis-point drop of more than 50. Only 15 percent of those polled said they expect cap rates to increase. Paul Belden, president of WLA Investments, comments, "I think cap rates are going to stay the same in 2012, for two reasons: one is the economy -- it's going to basically stay the same next year and interest rates are the lowest we've ever seen, and I just don't see that changing soon." Roughly 50 percent of all respondents added that if cap rates decrease between 5 percent and 6 percent, they will no longer invest in multifamily housing. Meanwhile, nearly 26 percent said if they fall between 4 percent and 5 percent, they will be out of the bid. Just 14 percent of investor respondents said they would stick around below the 4 percent mark.
Hampton Roads (Va.) Apartment Rents, Vacancies Both Up
Digested From "Hampton Roads Apartment Rents, Vacancies Both Up"
Virginian-Pilot (VA) (12/02/11) by Josh Brown
Real Data reports that both apartment rents and vacancies in Hampton Roads, Va., have been on the rise in the last year. According to the research, the average monthly rent for an apartment in the region climbed to $926 during the six months ended in October. Meanwhile, the vacancy rate for apartments in and around Hampton Roads increased to 6.4 percent from 5.7 percent a year earlier. Dan W. Johnson, a senior vice president at CB Richard Ellis and a specialist in the local apartment sector, states, "It's a bit over where we'd like it to be, but I think we're still looking much better than other metro areas in the Southeast." He adds that rental rates typically fall as vacancies rise. This time, however, the two figures are linked. Johnson concludes that more Hampton Roads apartments would be rented "if landlords weren't being so aggressive about keeping rents up."
Property Management Grows as U.S. Home Rentals Surge
Digested From "Once 'Ugly' Property Management Grows as U.S. Home Rentals Surge"
Bloomberg BusinessWeek (11/29/11) by Hui-yong Yu
Tighter mortgage standards and rising foreclosures have driven up the number of rental properties, and more real estate agents are taking advantage of the shift and moving into property management. Given that it can be easier to find renters instead of buyers in the current market, the National Association of Residential Property Managers reports a nearly two-fold jump in members over the last five years to an all-time high of 3,400. Census data shows that renter household formation has outpaced new owner-occupied homes over the last four years; the number of owner-occupied dwellings fell by about 147,250 per year from 2007 to 2010, but the number of renter households surged to 718,500 per year during that time. Property managers generally make less than real estate agents, but they have steady business in the current market, although their fees are on the decline in some areas due to increased competition.
Madison Apartment Vacancy Hits Historic Low
Digested From "Madison Apartment Vacancy Hits Historic Low"
Channel 3000 Madison (Wis.) (11/29/11)
The apartment vacancy rate in Madison, Wis., has reached its lowest level in at least 16 years, as thousands of city residents seek affordable units in response to the current economic climate. Approximately 2.6 percent of the city's apartment units were available in the third quarter, according to Madison Gas and Electric data. Vacancies have dwindled nearly every year since 2005, when 6.4 percent of units didn't have occupants. The high demand is causing rent prices to increase and allowing landlords to turn more potential tenants away, says Brenda Konkel, executive director at the Tenant Resource Center in Madison. "It's probably the worst I've seen it," Konkel states. "For people who have had problems with unemployment, who don't have steady income, for people who have any type of blemish on their rental record, it's become incredibly difficult." Many people who cannot afford to buy a home are staying in apartments, while banks turn others seeking a mortgage away. Many others facing foreclosures are returning to rentals. The vacancy rate was the lowest since 1995, the first recorded year in Madison Gas and Electric's data. The company tracks apartment vacancies through requests to turn on and turn off a unit's utilities.
New Apartments Could Be Coming to Downtown Colorado Springs
Digested From "Survey Says: New Apartments Downtown?"
Colorado Springs Gazette (11/29/11) by Andrew Wineke
Darsey Nicklasson, a former project manager for Pulte Homes who lives in Colorado Springs, is now sending out an online survey to gauge interest in a residential apartment community located downtown. Nicklasson, owner of DHN Planning and Development, said she’s still in the preliminary planning phases, but has received generally positive responses. Although the housing market has stagnated, there has been a boom in apartment construction in recent months, with several large new projects underway around the region. It is here that Nicklasson sees an opportunity. "There's always room for apartment buildings in any economy," she said. "There's a lot of apartment buildings going up, but they're all on the perimeter [of the city]." Her new apartment community would be purely residential, rather than mixed-use, and would be new construction instead of renovating an existing building.
Brookfield Reaches Deal With Multifamily Property in Manhattan
Digested From "Brookfield Takes Chase of Distressed Deals"
The Wall Street Journal (11/30/11) by Eliot Brown; Kris Hudson
Brookfield Asset Management has been targeting large distressed properties hit hard during the recession. The company has reached a tentative deal to work with residents of the sprawling Stuyvesant Town and Peter Cooper Village property in Manhattan to convert many of its apartments into condominiums or cooperative units. Brookfield, a low-profile but increasingly influential real-estate player, says its moves are motivated by values that are still significantly lower than they were during much of the real-estate boom.
Equity Residential Sees Potential in Seattle Apartment Market
Digested From "Developer Breaks Ground for Ballard Apartments at Former Denny's Site"
Seattle Times (11/29/11) by Eric Pryne
Equity Residential, the country's biggest publicly traded apartment owner, has purchased a 1.4-acre site in Seattle. The property's previous owner, Seattle's Benaroya Cos., had obtained permits to build an apartment community on the property. Those permits were granted after a long, loud debate over whether the previous structure on the lot -- a Denny's restaurant -- warranted protection as a historic landmark. It was designated as one by the city's Landmarks Preservation Board in February 2008. However, three months later the panel determined preservation would impose an unreasonable financial burden on the owner, clearing the way for its demolition. The restaurant was torn down in June 2008, and the property has remained vacant since. Chicago-based Equity's decision to start construction on an apartment community is a sign of the perceived strength of Seattle's multifamily housing market. Rents are rising, vacancies are dropping, and developers are rushing to put up new rental units to meet demand from young adults who either cannot or choose not to buy. Nearly 1,700 new apartments are expected to be completed in the Ballard area by the end of 2014, according to apartment research firm Dupre + Scott. That will more than double the neighborhood's apartments in complexes of 20 or more units. Equity Residential owns or has investments in more than 400 apartment communities in 16 states and the District of Columbia. The apartment owner's properties in the Seattle area include downtown's Harbor Steps, the region's biggest apartment community.
Property Managers Busy as Rental Market Surges
Digested From "Property Managers Busy as Rental Market Surges"
San Francisco Chronicle (12/02/11) by Hui-Yong Yu
Due to a surge in foreclosures and stricter mortgage standards, services for rental properties are thriving. Additionally, membership in the National Association of Residential Property Managers has nearly doubled in five years to a record 3,400 members. An average of 718,500 renter households a year were formed between 2007 and 2010, while owner-occupied households fell at an average annual rate of 147,250 during the same time. "There has been a dramatic shift toward renting," said Chris Herbert, research director of Harvard University's Joint Center for Housing Studies. Property management services charge homeowners between 8 percent and 14 percent of the monthly rent to screen tenants, set rents, resolve disputes and ensure upkeep is completed. Additionally, since it is easier to rent than to sell, managers are seeing steady income, making up to $1,800 per property per year.
New Apartment Opportunities in Downtown Cleveland
Digested From "With Apartments Full, Developers Look for New Rental Opportunities in Downtown Cleveland"
Cleveland Plain Dealer (OH) (11/26/11) by Michelle Jarboe McFee
The downtown apartment market in Cleveland has tightened up dramatically as a result of a growing zest for urban living and a housing crash that helped make apartments the hottest commodity in the real estate business. The occupancy spike - to 98 percent or higher at some buildings - has developers looking for their next project and wondering whether Cleveland can create enough supply to meet renter demand. Apartment are filling up across the country, and apartment managers in the Cleveland-Elyria-Mentor area are having their best year since the early 2000s, according to data from research firm Reis Inc. The region's occupancy rate hit a recent low of 93 percent during the first quarter of 2010, but it is now 95.2 percent - better than the national rate of 94.4 percent in the third quarter. The Downtown Cleveland Alliance, which represents property owners, found that occupancy at market-rate buildings was nearly 95 percent in the third quarter. Now, the group is pushing developers to focus on housing first in order to avoid a shortage. Downtown Cleveland is still finding its footing as a neighborhood rather than a business district. Young professionals are driving the downtown market, as are students, empty nesters and people moving from other cities. Census data and research by the Downtown Cleveland Alliance estimate downtown's population at roughly 10,000 in 2010, up 74 percent from a decade before. "What's happening today in the city of Cleveland is different - and better - than I've seen it in the almost 40 years that I've been doing business in this community," said Jeffrey Friedman, chief executive officer of Associated Estates Realty Corp., a publicly traded apartment company based in Richmond Heights.
The Anxiety of the Forever Renter
Digested From "The Anxiety of the Forever Renter"
The Atlantic (11/14/11) by Emily Badger
Columnist Emily Badger notes that it's more difficult to obtain a mortgage today than it was a decade ago. At the same time, a lot of people just don't want one any more. Around 69 percent of U.S. households owned their homes at the height of the housing boom. Housing researcher Arthur Nelson expects that number to decrease to 62 percent by the end of the current decade, Badger notes, "meaning every residence built between now and then will need to be a rental." She wonders how entire cities will accommodate this new demographic of the "middle-class forever renter." The time may soon come for some kind of hybrid rental/homeownership model to emerge -- a system that would decouples "renter" status from income class. "Short of putting us all in houseboats," she writes, "I don’t know what these hybrid homes would look like, how they'd be paid for, or if anyone will be willing to build them. But I suspect the trick lies outside of the architectural and financial details, that it lies in removing that fear of the approaching property manager, that lack of control over a dying dill plant." In short, she believes it will entail creating a feeling of ownership without the actual deed.
Legislative/Legal News
Fort Worth City Council to Look at Tougher Rules for Apartments
Digested From "Fort Worth City Council to Look at Tougher Rules for Apartments"
Fort Worth Star-Telegram (12/04/11) by Bill Hanna
At many of Fort Worth's problem-plagued apartment communities, city officials have had a hard time removing residents who are engaging in criminal activity. In addition, electric meters have continually been either stolen or hot-wired. To deal with these issues, the city's Code Compliance Department has recommended modifying rental registration rules to give officials more tools to deal with apartments where crime and dangerous code violations continually occur. The crime-free multihousing ordinance would include a lease addendum requiring apartment residents to sign a prohibition against criminal conduct. This addendum would make it much easier to evict those who commit crimes or allow criminal activity to take place on the premises. In addition, apartment owners would be permitted to use standard leases from the Texas Apartment Association that include this language.
U.S. Supreme Court Lets Oakland Section 8 Ruling Stand, Renters Stay
Digested From "U.S. Supreme Court Lets Oakland Section 8 Ruling Stand, Renters Stay"
San Francisco Chronicle (11/30/11) P. C2; by Bob Egelko
The U.S. Supreme Court has upheld an appeals court decision that blocked an apartment owner in Oakland from evicting low-income residents after dropping out of the Section 8 program. The high court denied review of the case, Mortimer Howard Trust vs. Park Village Apartment Tenants Association, 11-36, without comment. Owners have not had much success in their attempts to evict Section 8 participants in order to charge higher rents. Last February, the Ninth U.S. Circuit Court of Appeals in San Francisco let stand the January 2010 ruling by U.S. District Judge Saundra Brown Armstrong that favored the group of 15 elderly renters. The court said that Park Village Apartments had the right to leave the Section 8 program, but noted that a 2000 federal law "provides tenants a right to remain in their rental units" as long as they continue to pay their share of the rent and give landlords no other legitimate reason to evict them. The attorney for the owners of the apartment community, Paul Alaga, called the appeals court ruling "an egregious invasion of the rights of private property owners" in seeking the review by the U.S. Supreme Court.
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