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Nonsmoking Apartments Still Expose Kids to Smoke, Research Shows
Industry News
Washington, D.C., Area Rental Housing Caught in Squeeze
KBW Report Projects Positive Growth for Apartment REITs
San Diego Multi-Housing Brokerage Launches New Interactive Web Site
Little Change in Davis Apartment Vacancy Rate
San Diego Housing Commission Leverages Equity in Real Estate
Aimco's Philadelphia Communities Launch Green Energy Systems
Zell Projects Apartments as the Only Sector to See New Production
CBRE Wraps Up Year-End Deals, Including One Big Apartment Transaction
Mid-America Buys Two Apartment Communities, Enters Charlotte Market
T. Rowe Price Economist Gives His Jobs Forecast 
Legislative/Legal News
Federal Housing Finance Agency Nominee Faces Opposition
Taking a Cue From Multifamily in Reforming Fannie Mae and Freddie Mac
Large Gulf Remains in Stuyvesant Town Rent Case
Missouri Apartment Community Ordered to Pay Resident Over Bed Bugs
EPA to Hold National Bed Bug Summit
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Nonsmoking Apartments Still Expose Kids to Smoke, Research Shows
Digested From "Nonsmoking Apartments Still Expose Kids to Smoke"
Reuters (12/14/10) by Lynne Peeples
A new study that measured a nicotine byproduct in the blood of more than 5,000 children nationwide cautions that living in a nonsmoking apartment is no guarantee against the dangers of secondhand smoke. Researchers found that among kids in households where no one smokes -- at least not inside -- those who live in multi-unit communities were exposed to an average of 45 percent more tobacco smoke than those who lived in detached houses. The study's results build on mounting proof of secondhand smoke's pervasive presence and health hazards. The results may also bolster the case for new initiatives to make apartment communities smoke-free and encourage the use of such exposure-mitigating tools as air filters. Lead researcher Dr. Karen Wilson of the University of Rochester states, "People need to be aware that the behavior of smokers in one apartment can affect the people living in other units. We're still learning more and more about just how significant the effects of secondhand smoke are and just how small the exposure can be to have an effect." Even if no one in an apartment smokes, tobacco smoke can find its way in through windows, walls, and ventilation systems. According to the researchers, the toxins can also hang around in a room long after anyone has lit up, creating so-called "third-hand smoke."
Industry News
Washington, D.C., Area Rental Housing Caught in Squeeze
Digested From "D.C. Area's Renters Are Caught in Squeeze"
Washington Post (12/21/10) by Dina ElBoghdady; Dan Keating
The latest inflation-adjusted Census figures show that rents in the Washington, D.C., metro area have skyrocketed to the highest level measured in at least two decades. This is due to a mix of economic and psychological factors that have thrust more people into the rental market following the downfall of the housing sector in the last half of the decade. In the D.C. region, rents soared 22 percent in 2009 from a decade ago partly because around 10,000 single-family homes that were occupied by their owners just two years earlier are now rentals. In area apartment communities, Delta Associates reports that rents increased 8.2 percent -- about double the long-term average -- to $1,643 this year as vacancies dwindled. The Washington area's vacancy rates are the second-lowest in the country, in fact, trailing only New York City. Delta Associates CEO Gregory H. Leisch remarks, "There's been a structural shift from owners to renters in this country in the past few years. It's the most rapid shift I've ever witnessed in the 40 years that I've been in this business." Washington's rental housing market is also thriving because the area added jobs more quickly than the rest of the country during the recession, luring newcomers who were unable or unwilling to buy a home in the market.
KBW Report Projects Positive Growth for Apartment REITs
Digested From "KBW: Sunny Days Ahead for Multifamily REITs"
Housing Wire (12/15/10) by Christine Ricciardi
A new report from Keefe, Bruyette, and Woods (KBW) predicts that revenue brought in by apartment REITs will increase at an annualized rate of 4.6 percent in 2011. That estimate is up from the firm's previous estimate of 3.6 percent released in early December. KBW says that as the recovery gains strength, so do prospective outlooks. "The Great Recession weighed heavily on fundamentals, driving down revenue (rent and occupancy) and (net operating incomes) across the board," the report states. "But improving consumer sentiment, unbundling of pent-up demand (i.e. new household formation) and a declining homeownership rate have 'jump-started' a resurgence that should accelerate . . . driving a recovery that we believe has legs through 2013." KBW forecast a 2.5 percent expense rate, which, when coupled with the rate of revenue growth, would result in a 6.1 percent increase in net operating income for 2011. Those statistics would make 2011 the best full-year operating performance since 2006, when the net operating income for multifamily REITs increased 7.3 percent.
San Diego Multi-Housing Brokerage Launches New Interactive Web Site
Digested From "San Diego Multi-Housing Brokerage Launches New Interactive Website"
Benzinga (12/16/2010)
Nooren Apartment Investments recently launched www.SDApartmentBrokers.com to showcase the best apartment communities for sale in San Diego. Founder Jack Nooren remarks, "Our site is a one-stop resource for investors looking for apartment buildings in San Diego plus other communities in San Diego County, including Coronado, Carlsbad, Del Mar, Encinitas, Oceanside, Cardiff by the Sea, Carmel Valley, Rancho Santa Fe, La Jolla, and more." Investors who visit the new site will find it easy to navigate. They will also have easy access to specific communities they want. The site has featured listings of current property offerings, along with extensive listings by region of property data from San Diego County's Regional Multiple Listing Service. Additionally, SDApartmentBrokers.com has separated sections for Nooren Apartment Investments' comprehensive list of services, such as valuation and due diligence, for their private and institutional clients. Finally, the site's offerings include numerous downloadable documents, including investment spreadsheets. Noreen concludes, "Our focus on apartments allows the team to create and present the most effective multifamily marketplace. We ensure that every detail -- from new marketing techniques to the collection of market data -- achieves maximum value for apartment owners, investors, lenders, and servicers."
Little Change in Davis Apartment Vacancy Rate
Digested From "Little Change in Davis Apartment Vacancy Rate"
Daily Democrat (Calif) (12/17/10)
According to a survey by UC Davis, the apartment vacancy rate in the city of Davis, Calif., has risen slightly since last fall to 3.4 percent. During that same time span, monthly rents have crept down by an average of 0.55 percent. The UCD Office of Student Housing conducts the annual vacancy- and rental-rate survey, now in its 35th year, to provide the campus and the surrounding Davis community with information for proper planning. In 2009, the local apartment vacancy rate was 3.2 percent, and the average rent hike was 1.05 percent. Economists and urban planners consider a vacancy rate of 5 percent to be the ideal balance between the interests of owner and resident. Over the past decade, the apartment vacancy rate in Davis has varied from as low as 0.2 percent in 2002 to as high as 4.2 percent in 2005. Ramona Hernandez, associate director for business services in Student Housing, comments, "Based on the responses received, the survey indicates that the market has remained flat since last year, both in terms of the vacancy and rental rates." According to the UCD study, the average monthly rent this year for unfurnished two-bedroom apartments -- which account for 44 percent of the units in the survey -- rose by 0.9 percent from $1,226 to $1,237.
San Diego Housing Commission Leverages Equity in Real Estate
Digested From "San Diego Housing Commission Leverages Equity in Real Estate"
ReviewsandOffers.com (12/14/10)
The San Diego Housing Commission confirms that the creation of more than 700 additional affordable housing units in San Diego is now underway. The new units are the result of an entrepreneurial investment strategy implemented by the San Diego Housing Commission to construct or acquire multifamily housing. The Housing Commission's effort reflects an approach similar to an initiative by HUD encouraging housing authorities to tap property equity and create public-private partnerships to preserve and produce affordable housing. Through a Finance Plan approved last year by the San Diego Housing Authority and its Board of Commissioners, the Housing Commission raised $95 million in low-interest Fannie Mae and FHA mortgages by leveraging the equity of 1,366 housing units granted to the agency in a 2007 agreement with HUD. The Commission's partners in developing the Finance Plan and securing the loans range from Keyser Marston Associates and NorthMarq Capital to PNC Real Estate and Greystone Servicing Corp.
Aimco's Philadelphia Communities Launch Green Energy Systems
Digested From "Aimco's Philadelphia Apartment Buildings Launch Green Energy Systems"
TheStreet.com (12/14/10)
Apartment Investment and Management Company (Aimco) confirms that it has installed cogeneration plants in three of its Philadelphia apartment communities. The projects were made possible via a public-private partnership and funded by a $1 million competitive, matching grant from the State of Pennsylvania's Green Energy Works! Program. Pennsylvania Gov. Edward G. Rendell applauds the effort, stating, "Aimco's innovative effort not only conserves resources and protects the environment, but also contributes to Pennsylvania's continued goal of becoming less dependent on traditional forms of energy production. This is a wonderful example of how government and business can work together to implement alternative strategies to meet growing energy needs." The Combined Heat and Power (CHP) systems simultaneously produce useable heat and electricity from one fuel source, in this case natural gas. By using CHP technology, Aimco is reducing the carbon footprints of its apartments and increasing system efficiencies. Martin Sprang, Aimco's vice president of energy, concludes, "The systems we've installed in our apartment buildings will yield combined electrical and thermal efficiencies of nearly 85 percent, as compared to 33 percent from traditional centralized electric power stations. With the state grant and support of the Department of Environmental Protection, we are able to reduce the load on the city's power grid and cut our carbon emissions by 2,500 tons."
Zell Projects Apartments as the Only Sector to See New Production
Digested From "Zell Sees Little New U.S. Commercial Property"
Reuters (12/14/10) by Ilaina Jones
Speaking at last week's Argyle Executive Forum in Manhattan, real estate mogul Sam Zell said apartments are the only category of commercial real estate likely to report significant activity in the next one to three years. "We're now approaching three and a half years of no development, and I see little prospect for new supply over the next 12 to 36 months except multifamily," he said. Zell expects a drop in supply to boost property values and reduce vacancy rates, which would prompt lenders to cease extending maturities on "underwater" properties and bolster sales. Zell said, "When the buildings fill, then pretend and extend is over."
CBRE Wraps Up Year-End Deals, Including One Big Apartment Transaction
Digested From "CBRE Capital Markets Inks Year-End Deals"
GlobeSt.com (12/17/10) by Jennifer LeClaire
As 2010 draws to a close, CB Richard Ellis Capital Markets has been wrapping up transactions for its clients. For one, CBRE recently executed a $166.7 million refinance of a multifamily housing portfolio owned by Eaton Vance Management. The portfolio consisted of seven loans for seven apartment properties with 2,100-plus rental units in three states. Each loan was underwritten individually and, through the refinance, CBRE specialists were able to arrange 10-year fixed financing under Freddie Mac's Capital Markets Execution program.
Mid-America Buys Two Apartment Communities, Enters Charlotte Market
Digested From "Memphis-Based Mid-America Buys Two Apartment Communities, Enters Charlotte, N.C., Market"
Memphis Commercial Appeal (TN) (12/15/10)
Mid-America Apartment Communities Inc. has acquired two new apartment communities and, in the process, has entered the Charlotte, N.C., market for the first time. The acquisitions are the 1225 South Church apartments in Charlotte and the 268-unit Bella Casita apartments in the Las Colinas area of Dallas-Fort Worth. The former will grow to 406 rental units when completed. Al Campbell, Mid-America executive vice president and CFO, states, "Charlotte is a terrific fit with our operating footprint and provides a cost efficient expansion of our Carolina operating region." The acquisitions, totaling $57 million, were funded by borrowings under existing credit facilities and common-stock issuances via the Memphis-based apartment REIT's at-the-market program. Mid-America has ownership stakes in more than 46,300 apartments throughout the nation's Sunbelt region.
T. Rowe Price Economist Gives His Jobs Forecast
Digested From "Jobs Outlook & the Possibility of QE3"
MarketWatch (12/03/10)
Alan Levenson, chief economist at T. Rowe Price, recently issued his unemployment outlook for the new year in which he predicted areas of potential job growth for the U.S. economy. He expects the nation's unemployment rate will drop from around 9.6 percent currently to 8.6 percent by the end of 2011 -- a definite improvement, but still high by historic standards. He is hopeful the rate can fall closer to 7 percent over the next three years with a healthier economy. One of the problems, he sees, is the number of people who are out of work for prolonged periods of time whose skills remain stagnant. In a video interview with Veronica Dagher, Levenson went on to give his view on the odds of another quantitative easing program by the Federal Reserve.
Legislative/Legal News
Federal Housing Finance Agency Nominee Faces Opposition
Digested From "Housing Pick Faces Opposition"
Wall Street Journal (12/20/10) by Nick Timiraos
The confirmation of Joseph Smith, the North Carolina banking commissioner nominated by the White House to lead the Federal Housing Finance Agency, is being delayed by Senate Republicans, and if a deal is not reached soon, his nomination will need to be resubmitted when the Senate reconvenes in 2011. Republicans are concerned that Smith may be too willing to accommodate the Obama administration's plans for Fannie Mae and Freddie Mac, particularly one that would allow the government-sponsored enterprises to participate in an initiative to write down loan balances. Such a move would constitute "redistribution from taxpayers in general to certain classes of home owners," according to Sen. Richard Shelby (R-Ala).
Taking a Cue From Multifamily in Reforming Fannie Mae and Freddie Mac
Digested From "Plan of Attack"
Apartment Finance Today (12/10) by Doug Bibby
According to National Multi Housing Council (NMHC) President Doug Bibby, Congress should consider the government-supported multifamily secondary market programs as a model for reforming the U.S. housing finance system and the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. Performance within the $2 trillion multifamily housing sector is healthy, with default and delinquency rates under 1 percent. The National Apartment Association's GSE Reform Task Force has teamed with the NMHC to create eight points that Congress should consider when reforming the housing finance system. First, lawmakers must preserve the working parts of the system, which include the apartment finance component, and then seek out ways to encourage additional private capital support to ensure innovation and flexibility to meet the housing market's evolving needs. Also, lawmakers should retain an explicit federal government guarantee on multifamily mortgage securities and portfolio-held loans, though the guarantee needs to reflect the level of mortgage risk and the value of the credit enhancement from the government. Additionally, a liquidity backstop should be available and unrestricted by housing type or renter population, and mandates or federally supported public missions should focus only on providing incentives for affordable housing or liquidity. Finally, the government must ensure proper oversight to preserve strong loan performance, protect taxpayers, and maintain the current resource levels now within the GSEs during the transition.
Large Gulf Remains in Stuyvesant Town Rent Case
Digested From "Large Gulf Remains in Stuyvesant Town Rent Case"
New York Times (12/16/10) by Charles Bagli
Thousands of residents at Stuyvesant Town and Peter Cooper Village in New York City face a potential increase in rents after a year-old accord expired on Dec. 15, ending a period of calm at the financially troubled communities. The agreement followed a 2009 Court of Appeals ruling that the owners had wrongfully deregulated about 4,400 apartments and raised their rents while receiving special tax breaks from the city. Under the accord, the owners agreed to temporarily reduce rents in those apartments. But since then, the two sides have been unable to bridge their differences. The closely watched case has surprised apartment owners who may also have improperly raised rents and deregulated apartments while receiving special tax breaks, though the full implications of the decision remain ambiguous. The expiration of the accord puts the issues back into the courtroom of Justice Richard B. Lowe III of State Supreme Court, who is overseeing the case. While the court ruled in favor of the residents on the principal issue of deregulation, it left it to a lower court to decide exactly how much each apartment's rent should be and how much each overcharged resident should receive in rebates, if any.
Missouri Apartment Community Ordered to Pay Resident Over Bed Bugs
Digested From "Missouri Apartment Ordered to Pay Tenant Over Bed Bugs"
Associated Press (12/15/10)
A Missouri appeals court recently ruled that DeVille 1 Properties owes Craig and Laura Kolb damages for the bed bugs they found in their apartment. The opinion, written by Judge James Edward Welsh, upheld Cole County Circuit Judge Paul C. Wilson's ruling from March 4 that requires apartment owner DeVille I Properties LLC to refund the $405 per month rent. The three-judge appeals court panel concluded the company did not do enough to make an apartment habitable after being notified of a potential infestation. The apartment company called a pest control company, which did not find evidence of bed bugs. The pest company still sprayed the apartment once to kill beg bugs, but the pest company says killing such pests requires at least two to four sprayings.
EPA to Hold National Bed Bug Summit
Digested From "EPA to Hold National Bed Bug Summit"
The Hill (12/09/10) by Andrew Restuccia
A multi-agency summit has been planned by the U.S. Environmental Protection Agency (EPA) to formulate solutions to the nation's "bed bug problem." Progress made by the Federal Bed Bug Workgroup will be a focus of the Feb. 1-2 meeting, which will include representatives from the federal Departments of Defense, Commerce, and Agriculture. The agenda also will cover "identifying knowledge gaps and barriers to effective community-wide bed bug control, proposals for next steps in addressing knowledge gaps and eliminating barriers, and developing a framework for addressing the highest priority needs," according to the EPA.
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