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Empty Apartments Harder To Find, and Owners Are Loving It
Industry News
The Boom in Apartment REITs
Apartments Look Ripe for a Boom in North Carolina's Triangle Region
Colorado Apartment Rents Continue to Rise
Apartment Market in Walnut Creek (Calif.) Shows Signs of Recovery
Post Properties Announces New Stock and Note Repurchase Program
Stellar Management Continues to Sell Off Apartments
Archstone and Lehman Units' Refinancing Deals Go Through
Commercial Delinquencies on the Rise as Apartments Face Headwinds
Praedium Closes on 18 Apartment Communities Across U.S.
NAR Chief Economist Forecasts a Solid 2011 for Multifamily Housing
Legislative/Legal News
Obama's Tax Deal Imposes 35 Percent Rate on Wealthy Estates
Deficit Commission's Proposals Could Hit Commercial Real Estate
Triangle Apartment Association Wants Pine Straw Ban Delayed 
Freddie Mac Halts Home Evictions for the Holidays, Fannie Mae to Follow
Many Alabama Apartment Owners Are Unaware Grills Are a No-Go
Ban Placed on New Apartments in Miss. Town
Dallas Housing Authority Rejects Apartment Proposals for Homeless
Top Story
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Empty Apartments Harder To Find, and Owners Are Loving It
Digested From "Empty Apartments Harder To Find, and Landlords Are Loving It"
Investor's Business Daily (12/03/10) by Marilyn Alva
The rental apartment market appears to be gaining steam, as mostly negative news continues to weigh down home sales. Analysts expect monthly rents to rise between 1.4 percent and 5 percent in the new year while vacancy rates keep falling. Many researchers single out multifamily housing as commercial real estate's crown jewel. According to Reis Inc., the U.S. vacancy rate fell from 7.8 percent in the April-through-June period to 7.1 percent in the third quarter -- one of the sharpest drops on record. Housing researchers cite pent-up demand from young people tired of doubling up with families and roommates, plus more optimism about the job market, for the surging apartment sector. In addition, owning a house is not so much a goal these days with home prices still falling and easy credit a thing of the past. Indeed, the U.S. homeownership rate has slipped from 69 percent five years ago to 66.9 percent. Among those who expect it to fall even more is Arthur Nelson, a University of Utah professor who has done extensive research on demographic and economic drivers for multifamily housing. He forecasts that the homeownership rate falling to 62% or lower by 2020 due to such factors as shrinking household sizes; a rise in young, so-called "echo boomers;" and growing numbers of senior citizens.
Industry News
The Boom in Apartment REITs
Digested From "The Boom in Apartment REITs"
Forbes (12/06/10) by Stephane Fitch
With the housing market still in the doldrums, many apartment REITs are profiting. For instance, Denver-based UDR invested $412 million in 1,374 apartments to take advantage of rising rents. Rents have increased 5 percent across the United States on average as new development has slowed, according to Axiometrics. As a result Green Street Advisors is hopeful that an average 12.5 percent annual earnings increase can be achieved over the next two years from REITs given the recent influx of apartment demand. The average apartment stock has produced a total return of more than 40 percent in 2010, according to the group. The number of renters is expected to rise by 13 percent to 4.5 million by 2015. Green Street Advisors Analyst Andrew McCulloch says that keeping apartment residents in place will require apartment owners to step up the amenities, such as electronic systems to help renters pay rent and request repairs, Facebook-style apps to organize parties, and the construction of on-site movie theaters.
Apartments Look Ripe for a Boom in North Carolina's Triangle Region
Digested From "Apartment Market Looks Ripe for Building Boom"
News Observer (NC) (12/02/10) by David Bracken
Developers plan to build more than 6,300 apartment units in the Triangle region of North Carolina over the next three years in an attempt to capitalize on the healthiest sector of the region's commercial real estate market. Developers are once more proposing new projects, with the hottest area being Brier Creek in northwest Raleigh where three new communities promise to add 803 new units. "The key [to the area] is that there's a lot of new investment capital, whether that be for new acquisitions or development, in the market," said Jeff Glenn, an investment broker at CB Richard Ellis in Raleigh. The apartment vacancy rate in northwest Wake County was 5.6 percent in September, while the average rent in the submarket in September was $814, up $13 from the previous year. The Triangle has already seen nearly $500 million worth of apartment deals this year, as investors target well-located properties in hopes of seeing solid returns.
Colorado Apartment Rents Continue to Rise
Digested From "Apartment Rents Continue to Rise"
Boulder County Business Report (12/03/10) by Michael Davidson
A new Colorado Division of Housing report shows that the cost of renting an apartment in the state continues to rise and the number of vacancies falls. The average rent in Colorado as of the end of this year's third quarter is $871.78 per month. The statewide apartment vacancy rate, meanwhile, is 5.5 percent. The research shows a fairly significant tightening of the apartment market in the past six months. Indeed, the first-quarter vacancy rate was 6.6 percent, and the average rent was $840.44. Looking at the individual markets, a market survey released in November by the Division of Housing shows the third quarter vacancy rate in the combined Boulder-Broomfield market was 3.5 percent. The average monthly rent, meanwhile, was $993.25.
Apartment Market in Walnut Creek (Calif.) Shows Signs of Recovery
Digested From "Walnut Creek's Apartment Market Shows Signs of Recovery"
Walnut Creek Patch (12/01/10)
In California, the Walnut Creek apartment market is beginning to show improvement, with monthly rents expected to rise 0.7 percent during the next year as the vacancy rate drops to 4.5 percent. A new report from Marcus & Millichap Real Estate Investment Services also foretells additional building and higher rents for dense housing areas near mass transit. Apartment communities in Contra Costa County are now selling at $116,000 per unit, a decrease of 14 percent from the previous year. Kevin Turner, a senior director of Marcus & Millichap's National Multi Housing Group, said the Walnut Creek multifamily housing market is "one of the best apartment acquisition markets in Northern California with better-than-average job formation and still-high house prices fueling the market."
Post Properties Announces New Stock and Note Repurchase Program
Digested From "Post Properties Announces New Stock and Note Repurchase Program"
American Chronicle (12/03/10)
Post Properties Inc.'s board of directors has adopted a new stock and note repurchase program under which the Atlanta-based apartment REIT may repurchase up to an aggregate of $200 million of Post's common shares or preferred shares or its operating partnership's senior unsecured notes from time to time until Dec. 31, 2012. This new stock and note repurchase program replaces programs that are currently in place through the end of this year. Post Properties currently has ownership stakes in more than 20,200 apartments in 56 communities, including 1,747 apartments in five communities held in unconsolidated entities and 344 rental units in one community currently under construction.
Stellar Management Continues to Sell Off Apartments
Digested From "Plots & Ploys: Saying Goodbye In Golden State"
Wall Street Journal (12/01/10) by Robbie Whelan
Stellar Management continues to unload apartment assets throughout the San Francisco Bay area. The latest transaction entails Equity Residential paying $52.3 million for Skyline Terrace, Stellar's 139-unit apartment community in the San Francisco suburb of Burlingame. Equity now owns approximately 6,000 apartment units in more than 30 San Francisco-area developments. Stellar was recently bailed out by Fortress Investment Group LLC, a New York private-equity firm.
Archstone and Lehman Units' Refinancing Deals Go Through
Digested From "Lehman Units' Refinancing Deals Go Through"
Reuters (12/03/10) by Caroline Humer
Archstone, which is partly owned by Lehman Brothers Holdings Inc., and two of Lehman's bank units completed financial restructurings this past week. Clearing the way for new acquisitions and development, Archstone swapped more than $5.4 billion in debt for equity and extended all near-term debt maturities. Additionally, Lehman transferred cash and other items to its Aurora Bank and Woodlands Commercial Bank units. This has allowed the banks to keep going as Lehman prepares to sell or shut them down as part of its efforts to raise cash for creditors. Archstone currently has ownership interests in more than 440 apartment communities throughout the United States and Europe. Company officials report that the finance deal has helped to clear up "legacy financial issues." Lehman's takeover of Archstone added hundreds of prime apartment communities nationwide to the investment bank's portfolio.
Commercial Delinquencies on the Rise as Apartments Face Headwinds
Digested From "Commercial Delinquencies Are on the Rise Again"
Wall Street Journal (12/01/10)
New data from Trepp shows that the delinquency rate for commercial mortgages bundled into bonds rose again last month after recording a big decrease in October. Last month, 8.93 percent -- or $60.3 billion --worth of the loans packaged into commercial-mortgage-backed securities (CMBS) were 30 days or more past due or in foreclosure. That is compared with 8.58 percent the month before -- the second-highest reading ever. The renewed increase in CMBS delinquencies indicates that the level of distressed commercial property debt has climbed. Most notably, the multifamily housing sector overtook hotels as the worst-performing property type, as apartment owners faced strong headwinds to stabilize rents amid an uncertain economy. Indeed, the delinquency rate for multifamily CMBS loans was 15.8 percent in November versus 14.56 percent for hotels, 7.59 percent for retail properties, and 6.95 percent for offices.
Praedium Closes on 18 Apartment Communities Across U.S.
Digested From "Praedium Closes on 18 Multifamilies Across U.S."
CoStar Group (11/30/10) by Laurie Forbes
The Praedium Group recently closed on 18 apartment communities throughout the United States, totaling 3,600 rental units and valued at more than $300 million. The New York-based property investment firm made the acquisition via its Praedium Fund VII LP, a $900 million private equity fund with $3 billion in purchasing power. The fund reportedly has $500 million remaining for investment in commercial real estate and debt secured by properties nationwide. Praedium President Russ Appel states, "In addition to the other property types, we are actively targeting investment opportunities in the multifamily sector as market fundamentals continue to improve, particularly in strong submarkets throughout the country. In several circumstances, we have been able to work with owners to recapitalize their assets pending debt maturities or equity partners seeking liquidity."
NAR Chief Economist Forecasts a Solid 2011 for Multifamily Housing
Digested From "Commercial Real Estate Markets Stabilizing, See Slight Improvement in 2011"
The Financial (11/30/10)
National Association of Realtors chief economist Lawrence Yun reports that U.S. commercial property markets are showing signs of stabilization, with modestly improving fundamentals expected in the new year. He predicts that an improving economy will fuel a rise in household formation, which in turn will boost demand for rental apartments and homeownership.
Legislative/Legal News
Obama's Tax Deal Imposes 35 Percent Rate on Wealthy Estates
Digested From "Tax Deal Suggests New Path for Obama"
New York Times (NY) (12/07/10) by David M. Herszenhorn; Jackie Calmes; Carl Hulse
President Obama has reached a tentative deal with Congressional Republicans on a two-year extension of the Bush-era tax cuts, an extension of jobless benefits, reductions in payroll taxes for one year, and other measures to improve the economy. The deal would revive the inheritance tax after a year-long lapse, imposing a 35 percent rate on estates worth more than $5 million for individuals and $10 million for couples. The package, as it stands, would cost about $900 billion over the next two years, which would add to the national debt. Included is a 2 percent reduction in the 6.2 percent Social Security payroll tax for all workers for one year, a college tuition tax credit for families, an expansion of the earned-income tax credit, a top rate of 15 percent on capital gains and dividends for two years, and an adjustment for the alternative minimum tax (AMT), and a 13-month extension of jobless benefits.
Deficit Commission's Proposals Could Hit Commercial Real Estate
Digested From "Deficit Commission's Proposals Could Hit Commercial Real Estate"
CNBC News (12/01/10) by Diana Olick
President Obama's deficit commission recommended some steep cuts in federal spending that could cut right through to commercial real estate, especially in the Washington, D.C. metro area. Christopher Macke of CoStar Group comments, "The commission’s recommendations, if implemented, would be a sizable drag on commercial real estate in the short term as increased taxes and reduced government spending will have a cooling effect on the economy." The recommendation to reduce the federal payroll by 10 percent would certainly reduce the need for office space in the Washington region. Sam Chandan of Real Capital Analytics remarks, "Even in other markets, there is some evidence that GSA-tenanted office buildings trade at a premium. Ultimately, the impact on fundamentals and property values would be concentrated in the one market that would stand to lose a meaningful share of total office space demand, i.e. Washington, D.C." While the District of Columbia has the highest share of federal workers, CoStar estimates it's still only 17 percent of the total 3.6 million employees. As a result, the pain will almost certainly spread outside the nation's capital.
Triangle Apartment Association Wants Pine Straw Ban Delayed
Digested From "Group Wants Pine Straw Ban Delayed"
NBC 17 (11/29/10) by Justin Moss
The Triangle Apartment Association is calling on Raleigh's elected officials to delay the start of a citywide ordinance regarding pine straw. The ordinance was passed earlier in the year after a fire destroyed a number of homes in the city's Highland Creek neighborhood. According to fire officials, pine straw around those homes helped spread the flames more quickly. Under the ordinance, all buildings that are made of combustible materials must keep pine straw at least 10 feet away from the structure. However, the ordinance does not impact one or two-family homes due to legal and property rights issues. Consequently, it will mostly impact apartment communities. According to the Triangle Apartment Association, though, some communities are being forced to spend thousands of dollars to take out pine straw and replace it with mulch. Association leaders add that most apartment managers set their budgets months in advance. Triangle Apartment Association President Frederick Dean states, "For it to be passed and put into effect the same year makes it very difficult on apartment communities. We want to abide by the law. It's just very difficult for us to do it the same year it's passed without spending significant money."
Freddie Mac Halts Home Evictions for the Holidays, Fannie Mae to Follow
Digested From "Freddie Mac Halts Home Evictions for the Holidays"
Associated Press (12/02/10)
Freddie Mac will suspend foreclosure evictions during the holiday season for the third straight year. Borrowers with mortgages backed or guaranteed by Freddie Mac will not be displaced from their homes from Dec. 20 through Jan. 3 of next year. Fannie Mae also plans to announce that it will temporarily stop foreclosure evictions until after the New Year.
Many Alabama Apartment Owners Are Unaware Grills Are a No-Go
Digested From "Grills a No-Go at Many Apartment Complexes"
Montgomery Advertiser (12/02/10) by Laura Camper
A large number of apartment owners and managers in Alabama are unaware that the state's fire code makes it illegal for many apartment residents to use a grill. The fire code specifies that charcoal grills and other open-flame cooking devices cannot be used on combustible balconies or within 10 feet of combustible construction unless the building, balcony, or deck has an automated sprinkler system, according to Anniston Fire Marshal Chief David Randle. Randle adds that it is up to the apartment manager to enforce the code and that violations could be issued. Surprisingly, many apartment owners and managers are unaware the code even exists.
Ban Placed on New Apartments in Miss. Town
Digested From "Ban Placed on New Apartments"
Clarion-Ledger (11/30/10) by Dustin Barnes
Officials in Flowood, Miss., have placed a moratorium on building new apartment communities within the city limits in an effort to balance the number of residential and multifamily housing units. Mayor Gary Rhoads explained that the goal is to make sure the city is "not an apartment city instead of residential (homes)," but added the city may lift the ban once it receives the results from a study by the Central Mississippi Planning and Development District. Approximately 60 percent of the city's residents rent an apartment, house, or mobile home, and the report will examine apartments as well as overall land use, transportation, and public facilities. Rhoads said he hoped aldermen would be able to address the final report by the board's first meeting in January. This is not the first time a moratorium on apartments has been enacted in the state. Byram officials issued a three-month ban on new apartments in 2009 that has been extended several times and remains in effect. Pearl officials enacted a similar moratorium on apartments that lasted nearly two years while developing a comprehensive plan. Finally, Rankin County's Board of Supervisors passed a moratorium on new multifamily housing in December 2009 that is still in place today.
Dallas Housing Authority Rejects Apartment Proposals for Homeless
Digested From "Dallas Housing Authority Rejects Apartment Proposals for Homeless"
Dallas Morning News (TX) (11/29/10) by Kim Horner
The Dallas Housing Authority's (DHA's) plan to move 350 homeless people from a packed Dallas shelter to their own apartments has hit a snag. DHA officials solicited proposals from apartment owners in November to provide the homes at existing private apartment communities. However, the agency -- which would pay rent subsidies to the various owners -- rejected each of the eight responses after terming each as "weak." MaryAnn Russ, the housing agency's president and chief executive, comments, "We want to award the units, but we want to do it right." Russ declined to disclose the locations of the apartment communities in the proposals, stating only that they did not meet the agency's criteria for a number of reasons. According to the Morning News, two were in high-crime areas, one was still being built, while a fourth was located five miles away from public transportation. The DHA has partnered with the Metro Dallas Homeless Alliance to meet a city goal of adding 700 housing units for the chronically homeless by 2014. Residents pay a portion of the rent based on their incomes, and the Authority covers the rest.
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