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U.S. Apartment Sector 2011 Revenue Growth at 5.8 Percent
Industry News
Apartment-Vacancy Rate Improves to 2001 Level
Apartment Demand to Outweigh Supply for a While in N.C. 
Renter Nation Becomes New Reality in U.S.
Projection: Rents, Incomes to Grow Together
The New American Dream: Rent, Don't Buy
Industry Panelists Look for Continued Multifamily Growth
Maryland Suburb Enjoys Apartment Boom
RAIT Hires Acquisitions VP of Multifamily
Consumer Marketing Trends for 2012 Predicted
Richard Ellwood, Aimco Board Member, Dies at 80
Funds Investing in Apartments Expect a Positive 2012
Apartment Construction Outlays Climb
Developers Bet on Madison (Wis.) Apartments
Legislative/Legal News
Lehman Asks Court to Block Zell's Archstone Deal
FHFA to Review Foreclosure-Rental Proposals
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U.S. Apartment Sector 2011 Revenue Growth at 5.8 Percent
Digested From "RealPage® MPF Research Division Reports Robust Revenue Growth for the U.S. Apartment Market in 2011"
Sacramento Bee (01/05/12)
The U.S. apartment sector registered impressive revenue growth of 5.8 percent last year. National occupancy rose 1.1 percentage points during the year, MPF Research reports, while effective rents climbed 4.7 percent. Greg Willett, MPF Research vice president, observes, "Most of the jobs being formed are going to young adults, who tend to be renters. At the same time, loss of renters to purchase continues to run far below the historical norm. Those factors are combining to produce demand far in excess of the limited deliveries coming on stream right now." The nation's apartment occupancy rate registered at 94.6 percent as of the fourth quarter, an increase from 93.5 percent a year earlier. The October-through-December period did bring certain regional shifts in momentum that some are perceiving as signs of what's ahead in select markets during the new year, most notably Texas and the Pacific Northwest. Throughout the Lone Star State, for instance, MPF Research notes limited new product deliveries played the biggest role in the stronger-than-usual performances of such markets as Houston and San Antonio. MPF Research is the market intelligence division of RealPage Inc.
Industry News
Apartment-Vacancy Rate Improves to 2001 Level
Digested From "Apartment-Vacancy Rate Tumbles to 2001 Level"
Wall Street Journal (01/05/12) by Dawn Wotapka
Reis Inc. reports that the country's apartment vacancy rate in the fourth quarter fell to its lowest level since the last three months of 2001 as Americans continued to favor renting over buying homes. Multifamily housing has been the real standout of the real-estate sector for over a year now, generating profits for apartment owners but some hardship for residents struggling to keep up amid the economic downturn. Demand for units has swelled from two groups: people being foreclosed out of their houses and those who are either unable or unwilling to buy. In last year's fourth quarter, Reis researchers note that the U.S. apartment vacancy rate fell to 5.2 percent from 5.6 percent at the end of September and 6.6 percent a year earlier. Nationwide, apartment owners hiked asking rents an average of 0.4 percent from October through December to $1,064 a month. On the plus side for some, rent increases showed signs of moderating in certain markets. Overall, they were less than Reis had initially projected. The reason for this disparity, according to Reis, was the slower-than-anticipated economic expansion coupled with price resistance hitting owners in some locales. Moving forward, one lingering concern is that the housing market will bottom out or improve in the new year and thus curb apartment demand.
Apartment Demand to Outweigh Supply for a While in N.C.
Digested From "Apartment Rental Demand to Outweigh Supply for a While"
MyFox8 [Greensboro-High Point- Winston-Salem] (01/06/12)
Apartment demand is expected to outweigh supply in parts of North Carolina for a while. Jon Lowder, executive director of the Piedmont Triad Apartment Association, notes that the most recent projections are showing that demand will outweigh supply for at least the next two years. He adds, "Even though mortgage rates are great and the cost of housing is way down, the problem is no one can qualify for loans or a lot fewer people can qualify." Financing is still tough for some apartment developers, too, but multifamily housing still being built. Currently, there are more than 1,200 apartments under construction throughout the state's Triad region.
Renter Nation Becomes New Reality in U.S.
Digested From "Renter Nation Rages On As New Reality"
CNBC.com (01/05/12) by Diana Olick
Renting is becoming the reality across the country as wariness after the housing crash and the increasing difficulty of getting loan financing push former homeowners and those seeking to build new households turn to the rental market. The increasing demand has pushed up apartment occupancy rates, though the slow growth of the economy and continued levels of widespread unemployment have kept rents from sharp increases. Washington, D.C., is among the metro areas that has seen climbing rents, as home prices did not fall far and are already in the process of recovering. D.C. also has increased numbers of developers building new multifamily housing and, along with Detroit, is the only major market that has reported annual gains in housing prices. A manager with Camden Property Trust, one of the largest apartment REITs, thinks that the economic difficulties have created a different attitude toward renting that will last for several years. Looking ahead, apartments may start seeing competition from single-family homes as banks, the government, and the private sector look to invest in real estate and may turn those homes into rental properties.
Projection: Rents, Incomes to Grow Together
Digested From "Projection: Rents, Incomes to Grow Together"
Wall Street Journal (01/04/12) by Matthew Strozier
The outlook for apartment owners heading into 2012 is not so bad, according to research from the real-estate forecasting company Property & Portfolio Research (PPR), which says median household income and average rent over the next five years will grow at similar rates. Nationwide, PPR, which is owned by CoStar Group, projects growth of 16.1 percent for median incomes between now and 2016, versus 15.6 percent for rents. But conditions vary from market to market, depending on level of household formation and the speed of income growth. Conditions in places such as Raleigh, N.C., could spur property owners to increase rents at a higher rate in the next few years. By contrast, new supply and prior rent growth in Washington, D.C., will likely temper rental growth there, according to PPR. Rent-to-income ratios nationwide should stay essentially flat, and below the prior apex reached in 2001. To be certain, renters will not be pleased to learn that their monthly rent is expected to jump to a national average of $1,436 in 2016, up from $1,242 in 2011, according to PPR. Higher rents and drops in home ownership are helping to spur investors' interest in the apartment sector, even from developers who typically focus on malls and offices. Construction starts in multifamily in November spiked 25.3 percent from the previous month, according to the Commerce Department, although construction of new multifamily developments is still low on a historical basis.
The New American Dream: Rent, Don't Buy
Digested From "The New American Dream: Rent, Don't Buy"
Fiscal Times (01/04/12) by Steve Yoder
The effective homeownership rate in the United States, which excludes borrowers whose homes are underwater, is now 62 percent. That is down from 69 percent in 2006, according to a 2010 report by the New York Federal Reserve. As more adults move from owning to renting, apartment vacancy rates have dropped rapidly from 8 percent in 2009 to 5.6 percent in the third quarter of 2011. Local Market Monintor notes that this has driven up monthly rents across most markets by 2.5 percent -- including apartments and single-family homes -- to an average of $846 nationwide, . For a two-bedroom unit, the average rent was at $1,020 in June 2011. Those trends are just the start, finds a separate report from investment bank Morgan Stanley. That firm's researchers have concluded that the United States is becoming a country of renters and homeownership rates will continue to fall.
Industry Panelists Look for Continued Multifamily Growth
Digested From "Apartment Kick-Off Webinar: Look for Continued MF Growth"
GlobeSt.com (01/05/12) by Amy Wolff Sorter
In describing what multifamily housing has in store for 2012, panelists participating in the third annual Kick-Off Event for Apartment Development predicted ongoing growth and activity throughout the United States. Anyone with any level of expertise on the multifamily sector understands the underlying fundamentals driving growth: Limited supply, a growing pool of young renters, and a sector fueled by Fannie Mae and Freddie Mac. These fundamentals are not changing, noted Mark Humphreys, CEO of Humphreys & Partners Architects LP, which hosted the webinar. Another trend to add to the mix is that the roughly 5 million apartments built during the 1960s and 1970s during the last rental housing boom are now dwindling away. Humphreys and colleague Greg Faulkner, president of Humphreys & Partners, also observed that, on the development end, the trend is more toward urban mid-rises and high-rises, as well as mixed-use developments and higher densities.
Maryland Suburb Enjoys Apartment Boom
Digested From "Wheaton's Apartment Boom Sets Stage for Redevelopment"
Gazette.Net (01/04/12) by Aaron Kraut
The Washington, D.C., suburb of Wheaton, Md., is currently enjoying an apartment boom. Delta Associates is projecting 11,694 new apartment units in suburban Maryland over the next three years, with Wheaton at the forefront. Washington Property Co., for instance, is planning to build 221 apartments on the site of the First Baptist Church of Wheaton. A few blocks to the north, Alliance Residential is looking to erect 255 luxury apartments in place of an office building. As of the 2010 census, Wheaton had a population of 48,284. Late last year, the Montgomery County Council adopted the Wheaton Central Business District Sector Plan, which cited old buildings and a lack of growth for a population decline from a peak of about 66,000 residents in 1970. Leonard Greenberg, CEO of locally based Greenhill Capital, is pushing county council members to speed up approvals of zoning changes that would allow for taller buildings. Greenberg, who says the numerous apartment construction projects are an encouraging sign, states, "To me, Wheaton should be more of an Adams Morgan, more of a village-like environment. The reasons why places like Adams Morgan [in D.C.] are popular is that they are high-demand areas where there's lots of activity. . . . Wheaton needs to be a place where people want to go, not just go to work and leave at the end of the day."
RAIT Hires Acquisitions VP of Multifamily
Digested From "RAIT Hires Acquisitions VP of Multifamily"
Citybizlist Philadelphia (01/04/12)
RAIT Financial Trust has hired Jeffrey Katz to serve as vice president of acquisitions for Independence Realty Trust Inc., a multifamily-focused REIT. Katz most recently sourced and underwrote the acquisition of more than $100 million of apartment communities. In addition to being a member of the National Multi Housing Council, he is a director of the Real Estate Investment Association. Katz will work in the Chicago office of RAIT's Jupiter Communities LLC subsidiary, which is Independence Realty Trust's property manager.
Consumer Marketing Trends for 2012 Predicted
Digested From "*&%@#! and Other Ads Trends for 2012"
Wall Street Journal (01/04/12) by Suzanne Vranica
Advertising executives agree that technology will continue to "invade and rejigger" every aspect of marketing in 2012. At the same time, social media may lose some of its potency. While Facebook users now spend an average of six and a half hours a month on the social-networking site, some ad execs expect the site's popularity will indeed fade somewhat in the new year. Daniel Khabie, CEO of Digitaria, a digital-marketing firm owned by WPP PLC., predicts, "Facebook finally jumps the shark. IPO plus privacy issues plus your grandma joining plus one redesign too many plus general social-network fatigue equals 'Fonzie on water-skis.'" Khabie is referring to the old "Happy Days" episode that gave rise to the expression "jumping the shark," a TV-industry idiom that essentially means it's all downhill from here. Banyan Branch President Blake Cahill concurs, explaining that consumers will start to be driven away by a proliferation of ads as Facebook comes under mounting pressure to turn a bigger profit. At the same time, Khabie projects that more and more Fortune 500 companies will forsake their stodgy corporate websites in favor of moving their "primary online identity to a social network -- most likely Facebook."
Richard Ellwood, Aimco Board Member, Dies at 80
Digested From "Richard Ellwood, Aimco Board Member, Dies at 80"
Denver Business Journal (01/03/12)
Richard Ellwood, a longtime board member of Apartment Investment and Management Co. (Aimco), died this past week at the age of 80. Ellwood had been a member of the Denver-based REIT's board since 1994. During that time span, he served on the following committees: audit, compensation and human resources, and nominating and corporate governance. Aimco Chairman and CEO Terry Considine comments, "We are deeply saddened by the passing of our dear friend. Dick Ellwood was a valued and much appreciated colleague, who served and cared for Aimco for 18 years." Ellwood was perhaps best known as the founder and president of R.S. Ellwood & Co, a real estate investment banking firm which he operated until 2004. Prior to that, he had over three decades of experience on Wall Street as an investment banker. For its part, Aimco owns and manages 565 apartment communities in 38 states.
Funds Investing in Apartments Expect a Positive 2012
Digested From "Funds Investing in Commercial Real Estate Have Good Year"
USA Today (01/04/12) by John Waggoner
Lipper reports that real estate funds gained an average 7.6 percent in 2011 compared to a 2.9 percent loss for the average stock mutual fund. Real estate funds typically buy and sell shares of REITs, which invest in everything from apartment communities to shopping centers to office complexes. Jeffrey Kolitch, portfolio manager of Baron Real Estate fund, notes, "Dividend yields had a big appeal in a low interest-rate environment, with 10-year Treasury yields at less than 2 percent." Apartments have especially thrived in the current economic climate, with high demand for rental housing and rising rents. Steve Brown, senior portfolio manager at American Century, reasons, "People are concerned about their jobs, and don't feel confident buying a new home." To that end, another type of REIT that is benefiting from the hard times are those that own storage units. Kolitch observes, "REIT storage companies are benefiting as activity has picked up from foreclosures." In this niche, such major companies as Public Storage are muscling out smaller mom-and-pop storage companies. Finally, office space REITs remain somewhat problematic considering the current high unemployment rate. Still, some REITs in areas like Boston and New York City where it is hard to put up new buildings could fare well in the coming year.
Apartment Construction Outlays Climb
Digested From "Construction Outlays Climb"
Investor's Business Daily (01/04/12) P. A1
Construction spending on private homes and apartments rose 2 percent in November, Commerce Department data shows, with the pace of multifamily construction nearly double that of two years ago as more Americans turn to rentals. Total spending for the month increased 1.2 percent, marking the third gain over the past four months. Private nonresidential outlays were flat, while government projects climbed 1.7 percent.
Developers Bet on Madison (Wis.) Apartments
Digested From "Developers Bet on Apartments as Weak Demand Continues in Housing Market"
Wisconsin State Journal (01/03/12) by Karen Rivedal
In and around Madison, Wis., more and more developers are turning to apartment construction as the for-sale housing market remains lukewarm. One such builder who has gone this route is Terrence Wall. He states, "You can buy probably 50 to 100 McMansions in Dane County right now, and they're all available at half-price. But the apartment market is hot right now." Packed apartment communities coupled with demographic trends producing more young people and empty nesters who either can't or won't buy a house or condominium right now have made multifamily housing a safe bet for Wall and his competitors. Downtown Madison developer Chris Schramm of Urban Land Interests observes, "In the past, a lot of [the new renters] might have been buyers of entry-level condos. But things have changed, to some degree maybe permanently." Building permits issued over the last year show a handful of big apartment communities under way in such markets as Madison, Middleton, and Sun Prairie. Madison-area activity mirrors the national trend. U.S. housing starts climbed 9.3 percent in November, but most of that growth was due to increased apartment development. In the third quarter of last year, the Madison-area rental apartment vacancy rate was 2.57 percent -- the lowest since at least 2005.
Legislative/Legal News
Lehman Asks Court to Block Zell's Archstone Deal
Digested From "Lehman Asks Court to Block Zell's Archstone Deal"
Reuters (01/06/12)
Lehman Brothers Holdings Inc., which owns close to 50 percent of real estate company Archstone, urged a judge on Jan. 5 to permit it to buy the remaining stake without having to participate in a bidding war with billionaire Sam Zell. The hearing in the U.S. Bankruptcy Court in Manhattan is the first big showdown in a lawsuit filed in December by Lehman seeking to stop Zell's Equity Residential from obtaining a 26.5 percent stake in the apartment company. Barclays PLC and Bank of America Corp. are trying to sell half of their 53 percent holding in Archstone to Zell's Equity Residential for $1.325 billion. Lehman, which holds 47 percent of Archstone, argues that deal would shift a significant enough portion to Equity Residential to effectively give Zell veto power over the company's daily operations. The deal "looks at the world from Equity Residential's perspective, not Lehman's," Lehman lawyer Paul DeFilippo told Judge James Peck. "And we're here to determine whether Lehman's rights were violated, not whether Equity's were." Lehman's Archstone stake is a core part of its plan to exit bankruptcy and repay creditors. The $65 billion payback plan involves liquidating assets for the benefit of creditors and Archstone is among Lehman's most valuable assets. While the repayment plan will move ahead regardless of Archstone's fate, Lehman argues giving Zell's company an ownership stake would curb creditor returns from Archstone.
FHFA to Review Foreclosure-Rental Proposals
Digested From "FHFA to Review Foreclosure-Rental Proposals"
RealtyBizNews (12/30/2011) by Mike Wheatley
The Federal Housing Finance Agency has fielded at least 4,000 proposals -- roughly 400 of them viable -- for addressing the glut of foreclosed properties that continue to dog housing markets nationwide. Many offer solutions for converting foreclosures into rental units -- a concept that would carry a broad impact, given that Fannie Mae and Freddie Mac service more than 50 percent of all home loans in this country. The latest data reveal that two firms are maintaining 122,616 and 59,616 foreclosed properties, respectively, as of Sept. 30.
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