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Allianz Makes Strategic Real Estate Investment With Archstone
Industry News
Homeownership: 13-Year Low
Complaints That NYC Rent Is Illegally High Often Languish
Tech and the San Francisco Rental Bubble
Apartment Vacancies Plunge in Downtown Minneapolis and St. Paul
Apartment Study Shows People Enjoy Iowa City
San Antonio Apartments Register a Great Quarterly Performance
Canada Pension Board Invests in U.S. Apartments
Construction Numbers Show Apartment Contraction
Freeman Webb Buys Jackson, Tenn., Apartments
Wood Partners to Begin Construction of $75 Million Luxury Apartment Complex in Los Angeles
Fraternity House Becomes Apartments
Consumers, Real Estate Pros Tap Shift to Rentals
Housing Occupancy Declines, But Rentals Up in Some Spots
Legislative/Legal News
An Unfair Scarcity of Military Housing
Congress Urged to Start Transition Away From Fannie, Freddie
Hampton Moves to Buy Troubled Harbor Square Apartments
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Allianz Makes Strategic Real Estate Investment With Archstone
Digested From "Allianz Makes Strategic Real Estate Investment With Archstone in the US Multi-Family Sector "
Europe Real Estate (08/03/11)
Allianz Real Estate this past week launched a strategic real estate investment with Archstone in the U.S. multifamily housing sector, beginning with co-investments in a couple of Class A apartment communities on Boston and the Washington, D.C., metro area. The German firm's investment commitment is more than US$200 million. Allianz Real Estate CEO Olivier Piani states, "The Archstone venture is a compelling means to begin an investment program in the U.S. multifamily sector, a core element of our U.S. real estate strategy and an investment alternative simply not available to the German Allianz investors within the euro zone." The commitment for new investments targets primary markets where Archstone already has a major presence and a proven operating history. Archstone's task will be to source and manage those investments. Allianz Real Estate of America CEO James Stolpestad states, "The investment is well timed to allow our German investors to participate in the most pronounced phase of market recovery of the U.S. multifamily sector with an excellent partner who can enhance returns from strong investment and operating skills."
Industry News
Homeownership: 13-Year Low
Digested From "Homeownership: 13-Year Low"
Investor's Business Daily (08/01/11) P. A1
U.S. homeownership slipped 0.5 percent in the second quarter to a rate of 65.9 percent and is expected by many experts to drop back even further, to about 64 percent. That was the norm in the early 1990s, before Washington actively began promoting homeownership. After the federal government intervened, the rate shot up to a record 69.2 percent in 2004 before beginning to ebb. The second-quarter figure -- influenced by a high level of foreclosure, a weak jobs market, tight credit, and declining prices -- represents the lowest level of ownership since 1998.
Complaints That NYC Rent Is Illegally High Often Languish
Digested From "Complaints That NYC Rent Is Illegally High Often Languish"
New York Times (08/05/11) by Cara Buckley
In a survey of 200 rent-regulated apartments, the tenant advocacy group Make the Road New York found that landlords for nearly half the units had registered rents above what they could legally charge. However, because enforcement is largely complaint-driven, the state housing agency usually investigated rent increases only after tenants complained. Processing the complaints, the advocacy group found, often took at least a year. Owners of rent-regulated apartments are required to report the legal rents for their units, as well as the actual amount they charge, to the housing agency, New York State Homes and Community Renewal. Christopher Browne, deputy commissioner for policy and communications at Homes and Community Renewal, says Gov. Andrew Cuomo has recently overhauled rent laws. "Enforcement is one of the things that is being strengthened," he says. Roberta Bernstein, president of the Small Property Owners of New York, says that while rent overcharges did happen, apartment owners were often hamstrung by the legal rent that they could collect, which, she said, often did not cover maintenance or routine repairs. "I'm not denying that it occurs, but in some cases, there could be legal reasons, valid reasons, for what's happening," Bernstein says. "You have skewed situations where tenants are subsidized by the owner, and the owner attempts to balance the scales." She questions the sources of the information in Make the Road New York's report, which is based on rent histories of 200 households, some of which came from rent histories collected by other community organizations.
Tech and the San Francisco Rental Bubble
Digested From "Tech and the San Francisco Rental Bubble"
New York Times (08/05/11) by Nick Bilton
Real estate brokers in San Francisco have seen the evidence of a new dot-com style bubble, with rents shooting up as the demand for apartments grows. San Francisco area renters are now seeing rent increases that are similar to those during the dot-com bubble that occurred a little more than a decade ago. RealFacts, a real estate analysis firm, says a new wave of San Francisco residents who work for technology giants and start-ups seems to be responsible for the rise in apartment rental costs. "I think a lot of new dot-com employees, specifically those who work for companies like Apple, Google. and Twitter, are now moving into the city and can afford to pay much higher rents," says Sally Kuchar, editor of the real estate blog Curbed San Francisco. "As a result, San Francisco rental rates have risen by 6 percent between 2010 and 2011." Real estate brokers note that although the San Francisco market has always been challenging for renters, the current state of affairs is extraordinary. Kuchar says rents are also rising because more apartment owners are choosing to turn their properties into short-term rentals using services like AirBnB, a company that lets people rent out their spare bedrooms or homes to travelers. "A lot of residential property owners are now converting their long-term rentals into vacation rentals; that has also depleted the market," says Kuchar.
Apartment Vacancies Plunge in Downtown Minneapolis and St. Paul
Digested From "Apartment Vacancy Rates Have Plummeted in Downtown Minneapolis and St. Paul"
Minneapolis Star Tribune (MN) (08/02/11) by Jim Buchta
Multifamily housing is booming in Minnesota's Twin Cities. As a result, finding a rental apartment in Minneapolis and St. Paul is getting increasingly difficult as vacancy rates continue their downward spiral. In the Twin Cities metro area, the average vacancy rate during the April-through-June period was just 2.4 percent, notes a new Marquette Advisors survey. That is down from 5 percent a year earlier and 3.1 percent as of March 31. The declines were especially pronounced in downtown Minneapolis and St. Paul. In the former, the rate slipped from 6 percent during last year's second quarter to 1.2 this year. In the latter, the rate plummeted from 7.1 percent in 2010 to a scant 0.8 percent during the most recent quarter. Marquette Vice President Brent Wittenberg attributes this trend to a strengthening job market and continued reluctance on the part of locals to make the leap to homeownership. Indeed, many are nervous about how long it would take to recoup their investment with home prices still falling.
Apartment Study Shows People Enjoy Iowa City
Digested From "Rental Study Shows People Enjoy Iowa City"
Iowa City Press-Citizen (08/03/11)
A new Cook Appraisal study shows that the average apartment rent in the Iowa City, Coralville, and North Liberty area is currently $816 per month, a 7.2 percent increase from the last time the firm conducted its biennial study in 2009. The monthly increase over the same time frame in downtown Iowa City was slightly less on a percentage basis, up 5.8 percent -- or $60 -- to $1,093 a monht. Researchers note that the area also has a lower vacancy rate than most markets. Casey Cook, founder of Cook Appraisal, concludes that how one looks at the area's rental apartment market depends greatly on his or her point of view. Cook explains, "If you're a mother with three kids and vacancy rates are very low, that's a terrible thing. [But] if you're a property owner who's renting to a student in downtown Iowa City, it's a great thing." At the very least though, the study shows that the presence of the University of Iowa, employment opportunities at three area hospitals, and a vibrant cultural scene has translated into more people wanting to live in and around Iowa City.
San Antonio Apartments Register a Great Quarterly Performance
Digested From "San Antonio Apartments Register a Great Quarterly Performance"
Property Management Insider (07/19/11) by Greg Willett
The National Association of Real Estate Editors held their annual meeting in San Antonio, a city that illustrates well the momentum that registers in the country’s apartment market. The city's second quarter performance results exhibited everything a property owner or operator wants to see: healthy demand at a time when no new supplies are provided, rent increases, and a large bump in occupancy. After six months of pretty lackluster absorption, demand strengthened to 2,020 units during 2nd quarter, a gain that accounted for most of the 3,470 units absorbed between mid-2010 and mid-2011. Occupancy rose 1.4 percentage points during the past quarter, reaching 93.4 percent. That is the strongest result for San Antonio in about four years. Furthermore, top-tier communities in the metro now are almost completely full, with occupancy topping 95 percent in developments built during the 2000s as well as the 1990s. Finally, effective rents for new leases in San Antonio surged 2 percent during second quarter, fueling much of the metro’s 3 percent annual growth in pricing. San Antonio’s apartment market is known for its stability, and its middle-of-the-pack positioning probably will hold over the next couple of years.
Canada Pension Board Invests in U.S. Apartments
Digested From "Canada Pension Board Invests $330M Plus in US"
GlobeSt.com (08/03/11) by Robert Carr
The Canada Pension Plan (CPP) Investment Board has invested more than $330 million into portioned interests in eight U.S. apartment communities and office properties. The apartment investment marks the board's first entry into the U.S. multifamily housing market. It should be noted that the CPP investments do not total more than 50% interest in any of the properties. The board further disclosed that it has invested $284 million in some of the apartments and around $30 million in one of the offices. However, it did not report all of its financial investments in these properties. The apartment communities include the 426-unit Archstone North Point in Cambridge, Mass., and the 392-unit Archstone Woodland Park in Northern Virginia. The board has also taken a 49 percent stake in the 350-unit Palazzo Westwood Village apartments in Los Angeles and a 45 percent interest in the 569-unit Cadence apartment community in San Jose. The latter deal is with Essex Property Trust and is scheduled to begin construction next month. The office investments were completed in New York City and Washington, D.C., two core U.S. markets.
Construction Numbers Show Apartment Contraction
Digested From "Construction Up, But Still Depressed"
Boston Globe (08/02/11)
Construction outlays are up for the third month in a row, rising 0.2 percent in June to $772.3 billion, reports the Commerce Department. But the figure is still just half of the $1.5 trillion pace considered to be healthy. Private residential construction declined 0.3 percent to $235.8 billion, as single-family home building rose 0.3 percent and the apartment sector contracted 2.8 percent.
Freeman Webb Buys Jackson, Tenn., Apartments
Digested From "Nashville Firm Buys Jackson Apartment Complexes"
Jackson Sun (TN) (08/03/11)
Freeman Webb last week purchased a trio of Jackson, Tenn., apartment communities -- Cedarwood, Northridge, and Whispering Oaks -- for $13 million. Kent Burns, president of the Nashville-based real estate investment and management firm, states, "This transaction marks the 20th apartment acquisition that Freeman Webb has made in the last 24 months, continuing their trademark investment strategy of being active buyers in down real estate cycles." Founded in 1979, Freeman Webb ranks as the biggest private owner and operator of apartments in Nashville with more than 13,000 rental units. Late last year, the firm was named "Management Company of the Year" by the Greater Nashville Apartment Association.
Wood Partners to Begin Construction of $75 Million Luxury Apartment Complex in Los Angeles
Digested From "Wood Partners to Begin Construction of $75 Million Luxury Apartment Complex in Los Angeles"
National Real Estate Investor (08/04/11)
Wood Partners has purchased a four-plus acre development in the Woodland Hills district of Los Angeles and plans to begin construction of its new $75 million Warner Park luxury apartment community on the site by mid-August, with construction time estimated at 22 months and the first units expected to be available in early 2013. The 298-unit complex, evenly divided between one- and two-bedroom units, will be located six miles west of I-405 and the Van Nuys airport and two miles north of the Ventura (101) Freeway, which provides direct access to Ventura and Santa Barbara to the west and north and downtown Los Angeles to the southeast. “Our Warner Park development is occurring at an ideal time,” says Brian Hansen, Wood Partners’ director of development for Southern California. “We will be building during a favorable construction market, delivering when all the supply of 2007-2010 in Warner Center has been absorbed and competing against limited new supply.” The Los Angeles apartment market has consistently outperformed the nation, posting an average occupancy of 96 percent and average rent growth greater than 6 percent from 1999-2007. After bottoming out at 92 percent in the fourth quarter of 2008, the overall apartment occupancy in the Los Angeles market rebounded to just under 95 percent, with the San Fernando Valley submarket above 95 percent. Furthermore, rents have stabilized and are expected to increase 5.8 percent in 2011 and 6.6 percent in 2012.
Fraternity House Becomes Apartments
Digested From "Fraternity House Becomes Apartments"
Lansing State Journal (MI) (08/05/11) by Melissa Domsic
The newest apartments in Lansing, Mich. - including an 84-year-old former fraternity house and a 220-unit complex - discard the stereotype of cramped, run-down college housing. Instead, the buildings that cater to students at Michigan State University boast amenities like granite countertops, leather couches, and washers and dryers in every unit. The higher-end apartments come with higher price tags - more than $600 per bedroom. All but one of the 14 four-bedroom apartments are leased out for the school year, says West Bloomfield, Mich.-based developer Mike Dowdle. Dowdle and his two partners purchased the three-story home for $585,000 last September from Lambda Chi Alpha fraternity's national property division. "We just thought it was a great-looking building and we were looking for something that would stand out," he says. "We were aware that there's been some upgrading in student housing and we thought we could put something nice in a very distinctive building." It was the first student housing project for the developers. They built an 8,000-square-foot addition for a total of 20,000 square feet of usable space on three stories and a garden level. About two miles away, management at The Lodges of East Lansing is preparing for hundreds of students to move in as the new school year begins. The complex has 220 apartments with a total of 683 bedrooms. Most are four-bedroom, four-bathroom partially furnished units. Amenities include a pool, fitness center, tanning beds, seasonal ice skating rink, and free shuttle to campus and downtown East Lansing. "We are just a few leases away from being 100 percent occupied," says Jen Wilson, director of leasing-new construction for Birmingham, Ala.-based Capstone Development Corp., the complex developer.
Consumers, Real Estate Pros Tap Shift to Rentals
Digested From "Consumers, Real Estate Pros Tap Shift to Rentals"
Inman News (07/29/11) by Andrea V. Brambila
Both real estate professionals and property owners can generate new income through the rental industry. Homeowners can rent out rooms or apartments on a per-night basis using Airbnb.com, making enough money to cover mortgage payments or even purchase another property. Meanwhile, real estate agents can benefit from offering rental services, given that the U.S. homeownership rate is expected to fall to 64 percent by 2015 from 66 percent currently. David Vivero, CEO of RentJuice, a provider of online rental relationship management software, says more than 10 million people will become renters over that period -- at the same time that home sales will fall by 436,000 and agent commissions will drop by $2.4 billion. Vivero says, "If you offer only sales, (a total of) $11 billion in commissions (will be) out of your reach. Leasing commissions can help agents stay in the game, and Vivero notes that renters often become homeowners later on. He believes agents looking to enter the rental niche should create related content, connect with development firms, and take a different approach to marketing by focusing on commute times, amenities, and other lifestyle factors.
Housing Occupancy Declines, But Rentals Up in Some Spots
Digested From "Housing Occupancy Declines, But Rentals Up in Some Spots"
USA Today (07/26/11) by Haya El Nasser
An analysis of U.S. Postal Service data by Tufts University urban planning professor Justin Hollander and researchers at the Lincoln Institute of Land Policy shows an increase in occupied housing in some neighborhoods around the country, which can be attributed to a substantial jump in rental demand. Since 2009, about 33 percent of ZIP codes have experienced a decrease in occupied housing; and the number of postal areas reporting a jump in vacant houses has climbed 26 percent from the years prior to the recession. Many of the ZIP codes where occupancy rates have fallen are in the suburbs, where most single-family construction occurred during the housing boom. Hollander says many new housing developments are unoccupied in the South, and foreclosure has led to a large number of vacant older houses. However, experts say the rental market in Tacoma, Wash., has picked up steam due to the merger of Fort Lewis and McChord Air Force Base, boasting a 98 percent occupancy rate. Demand for rental housing also is on the rise in the Bronx as housing prices in Manhattan continue to increase, and experts say occupancy rates have risen in New Orleans and Albuquerque as well.
Legislative/Legal News
An Unfair Scarcity of Military Housing
Digested From "An Unfair Scarcity"
Apartment Finance Today (08/11) by Doug Culkin
Doug Culkin, president and CEO of the National Apartment Association, warns in this opinion piece that "[t]he nation's inventory of apartments is heading toward a shortage as early as next year," noting specifically that "demand already exceeds supply for the very group of Americans who most deserve the safety and comfort of a home: the men and women who serve our country in the armed services." Housing shortages currently exist for personnel at 19 of the 26 military bases identified as "growth" installations under planned changes in U.S. armed forces structure. Culkin says the situation presents an opportunity for participants in the Military Housing Privatization Initiative (MHPI) "who, on the other hand, are seeing their multifamily housing construction projects draw to a close over the next few years." Military personnel draw a housing allowance— called the Basic Allowance for Housing (BAH)—to pay for rent, utilities, and renters' insurance. While housing officials at growth installations are developing plans to negotiate with private partners to expand the supply of adequate housing, concern exists over the accuracy of BAH cost estimates. A GAO study detailing these concerns has prompted the Department of Defense to make a number of changes to help installations address their housing challenges, including publishing cost elements as a percentage range of total costs across all six types of housing. Culkin concludes that "[u]nderstanding how the calculations are currently obtained—and making comparisons with private survey practices—should only improve [the calculation] process."
Congress Urged to Start Transition Away From Fannie, Freddie
Digested From "Industry Players Push Congress to Start Transition Away From Fannie, Freddie"
American Banker (08/03/11) by Kevin Wack
Industry professionals discussed ways to improve mortgage finance at an Aug. 3 Senate subcommittee hearing, as the effort to craft legislation for a new housing finance system losses momentum. Recommendations put forward included further lowering the size of loans that Fannie Mae and Freddie Mac can guarantee, limiting the amount that banks can borrow from the Federal Home Loan Banks, developing a market for covered bonds, and allowing Fannie Mae and Freddie Mac to develop a coordinated bond structure.
Hampton Moves to Buy Troubled Harbor Square Apartments
Digested From "Hampton Moves to Buy Troubled Harbor Square Apartments"
Daily Press (Virginia) (08/03/11) by David Macaulay
Hampton, Va., has signed a letter of intent to purchase the crime-ridden Harbor Square Apartments, which could unlock downtown Hampton development on a key 18-acre site. Hampton offered the owners Olde Towne Associates LLC, $14.5 million for the apartments on the site. The complex, with 368 apartments and about 1,200 residents, is home to a considerable number of tenants who receive Section 8 subsidized housing. Crime data based on the last six years shows there's an annual average of 171 "group A offenses" in the complex, equating to a serious crime occurring at the apartments almost every other day. City officials have said the apartments are incompatible with the Hampton Downtown Master Plan, which includes streets that will be extended through the area and housing that is valued higher. The purchase price includes assumption of an existing $12.7 million Virginia Housing Development Authority loan that cannot be prepaid before 2015, though rents would likely cover the payment. The city's desire to buy the site follows some interest from the private sector: in March, the Richman Group of Florida offered to take over and invest about $11 million rehabilitating Harbor Square. However, city council members voted unanimously not to designate Harbor Square a housing revitalization area.
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