Headlines
Top Story
Resort Living Comes to Apartment Residents
Industry News
BRE Properties to Offer 8 Million Shares
Five Questions for Harvard Housing Study's Director Eric Belsky
U.S. Construction Spending Up Despite Apt. Declines
Home Properties' Q1 2011 Net Soars
Zipcar is Partnering With Equity Residential
A Bull Market in Rental Housing
Apartments Factor in CMBS Delinquencies Being Up
Phoenix Realty Acquires Three Apartment Communities
How Generation Y Is Changing the Housing Market
Legislative/Legal News
L.A. Files Suit Against 'Slumlord' Deutsche Bank
Fairfax, Calif., Restricts Smoking in Apartments
NMHC Chair Says Housing Should Rely on Private Capital
Apartment Interests in Wis. Urge Keeping CCAP Funding
Bill in NY Senate Would Relax Rent Rules
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Resort Living Comes to Apartment Residents
Digested From "Resort Living Comes to Renters"
Wall Street Journal (05/06/11) by Dawn Wotapka
A multibillion-dollar apartment-construction boom is in full swing in which developers are throwing everything but the kitchen sink at a new generation of apartment residents who grew up in sprawling suburban homes and vacationed with their parents at high-end resorts. To catch the eye of so-called "echo boomers," loosely defined as those born in the 1980s and early 1990s, these new urban apartment communities boast smaller living spaces along with grand common areas where residents can entertain and socialize. At the Savoye in Dallas apartment, for instance, the offerings include a resort-style pool surrounded by high-end lounge chairs arranged under oversized umbrellas. There is also a poker lounge, a private movie room, and a banquet room. Echo boomers "want large communal spaces where they can gather with their friends and neighbors," said Jerry Davis, a senior vice president at Denver-based UDR Inc., which built the 392-unit Savoye in 2010 and is now working on a second phase of the development that will have 347 rental units.
Industry News
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BRE Properties to Offer 8 Million Shares
Digested From "BRE Properties to Offer 8M Shares"
Wall Street Journal (05/06/11) by Lauren Pollock
BRE Properties Inc. late last week joined a long list of real estate companies raising cash for acquisitions or other purposes when it announced plans to offer 8 million shares to repay the borrowings under its credit facility and redeem preferred shares. The multifamily REIT, which owns and manages 76 apartment communities, has seen higher rental rates and fewer expenses as of late. Near the end of this year's first quarter, Fitch Ratings upgraded BRE from the verge of junk territory, saying it expected the company's apartment portfolio to register better financial performance in the coming years. The majority of BRE's apartments communities are in California and Washington state.
Five Questions for Harvard Housing Study's Director Eric Belsky
Digested From "5 Questions for Eric Belsky"
USA Today (05/01/11)
Eric Belsky, managing director of the Joint Center for Housing Studies of Harvard University, discusses the current state of renting in America. He notes that approximately 10.1 million households currently spend more than 50 percent of their income on rent and utilities. Another 25 percent spend between 30 percent and 50 percent. When asked if there is an affordability crisis taking shape, he replied, "It is certainly becoming much wider spread, and it is moving up the income scale. When you talk about half of renters paying more than 30 percent of their income for housing, that's a serious issue. It's increased substantially over the last 10 years." Belsky and his staff studied the share of renter households in 100 large metro areas paying more than half their income for housing in 2009 versus 2000. They found that each market registered an increase in the share of those who were spending more than half of their income on rent. "In some cases," he noted, "they're up dramatically. Portland, Ore., went from 18.8 percent to 25.5 percent; Portland, Maine, from 15.5 percent to 26.9 percent. Shifts in the range of 5 percentage points are pretty common."
U.S. Construction Spending Up Despite Apt. Declines
Digested From "U.S. Construction Spending Up"
Investor's Business Daily (05/03/11)
Commerce Department figures show that U.S. construction spending increased 1.4 percent during March to $768.9 billion -- the first gain in four months and the biggest improvement since April 2010. With a gain in home-improvement projects outweighing declines in apartments and single-family homes, residential construction spending climbed 2.6 percent. Meanwhile, outlays for nonresidential projects were up 1.6 percent due to robust spending for hotel, office, and industrial construction.
Home Properties' Q1 2011 Net Soars
Digested From "Home Properties 1Q Net Soars On Higher Rents, Occupancy"
Wall Street Journal (05/05/11) by John Kell
Home Properties Inc. reports that its first-quarter earnings soared on higher rental rates and improved occupancy at its various apartment communities. Looking ahead, the REIT expects funds from operations will range from $3.37 to $3.49 a share, an improvement from the February estimate of $3.30 to $3.46. Analysts report that the fundamentals for apartment REITs have broadly improved amid the slow economy recovery. Home Properties, which focuses on the Mid-Atlantic and Northeast markets, has stated that it expects to raise rental rates this year. In the latest quarter, its base rental rates increased 2.2 percent. Revenue, meanwhile, rose 12 percent to $141.4 million.
Zipcar is Partnering With Equity Residential
Digested From "Zipcar is Partnering With Equity Residential"
Boston Globe (05/03/11)
Zipcar Inc. has agreed to team up with Equity Residential to make its vehicle-sharing service available to approximately 17,000 apartment residents. Under terms of the deal, the Cambridge, Mass.-based company will place Zipcars at Equity Residential apartment communities in four major markets -- Boston, New York, Seattle, and the nation's capital. Both companies say this program has the potential to expand to additional U.S. metro markets. Chicago-based Equity Residential owns or has ownership interests in 450 apartment communities with a total of 129,125 rental units.
A Bull Market in Rental Housing
Digested From "A Bull Market in Rental Housing"
Wall Street Journal (04/30/11) by Anna Andriotos
According to recent S&P/Case-Shiller housing data, the single-family housing market remains in a slump, with house prices down 3.3 percent in February compared to last year. But this ongoing downturn has been good for the apartment sector. Apartment investors have found great deals, while rents are close to all-time highs. "As an asset class, it looks awfully attractive," says Dan Fasulo of Real Capital Analytics. Rents now average $991 compared to $930 in 2006 and are forecast to rise to $1,025 by 2012. Part of the reason for rising rents is a drop in vacancies, which fell to 6.2 percent in 2011's first quarter compared to 8 percent the previous year. Demand will continue for some time, analysts say, as prospective buyers remain wary and turn to rental housing. Also, many of those who moved in with family during the economic crisis are now in the process of moving out to form their own households.
Apartments Factor in CMBS Delinquencies Being Up
Digested From "Commercial Real Estate Clouded by Delinquencies"
CNBC News (05/04/11) by Diana Olick
Trepp LLC has issued its monthly report on the delinquency rate for commercial mortgage backed securities (CMBS), and the news isn't good. After two months of very minimal rate increases, the number jumped 23 basis points last month to 9.65 percent -- "the highest reading in the history of the CMBS market," reports Trepp. The rate should be going down for two reasons. First, as new CMBS deals are added to the pool of all CMBS loans, the larger denominator in itself should push the rate down. Second, Trepp researchers write, "special servicers have been resolving a greater number of troubled legacy CMBS loans than they were 18 months ago." Multifamily housing, industrial, and retail delinquencies are leading the way up, despite the fact that apartment rents and demand are soaring and retail is supposedly in a state of recovery. The problem is these property assets are just not worth what they were when the loans were made. As result, they cannot be refinanced.
Phoenix Realty Acquires Three Apartment Communities
Digested From "Phoenix Realty Group Acquires Three Apartment Properties"
RealtyBizNews (05/04/2011) by Tavis J. Hampton
Phoenix Realty Group (PRG) has acquired a portfolio for three apartment communities containing 432 rental units in San Bernardino and Highland, Calif. The total purchase price was $21.5 million. PRG acquired it from an unnamed lender that had taken over the assets two years ago. The three apartment communities had gone through a period of distress and neglect due to poor management. After aggressive rehabilitation and management by the lender, on-site conditions have greatly improved and the occupancy is now up to 95 percent. This enabled PRG to receive what it describes as "attractive" financing via Freddie Mac. Edward Ratinoff, managing director of PRG's national acquisitions, confirms that the three properties have been restored "into the type of middle-market, family-friendly apartments that our institutional real estate funds target."
How Generation Y Is Changing the Housing Market
Digested From "Boomer Effect"
Central Penn Business Journal (04/29/11) by Jim T. Ryan
As Generation Y buyers enter the housing market, Baby Boomers will encounter some challenges. The homes being sold by Baby Boomers tend to be too expensive for Gen Yers and are located in the suburbs, not the urban center when Gen Yers are drawn. At the same time, city-based rental housing is becoming increasingly desirable. Wagman Construction is building trendy apartments in downtown York, Pa., to appeal to Gen Yers. Still, some real estate professionals say suburban homes still have some drawing power. Brookings Institute visiting fellow Christopher Leinberger says homes in walkable communities in large metro areas are in high demand, with price premiums of 40 percent to 200 percent. He says, "Suburbia is not a bad thing. It's certainly a relevant product type; but the problem is we have too much of it." In the meantime, more builders in Central Pennsylvania are erecting village centers, with high-density apartments and condominiums, commercial space, and pedestrian friendly areas.
Legislative/Legal News
L.A. Files Suit Against 'Slumlord' Deutsche Bank
Digested From "L.A. Says Deutsche Bank Among City's Largest Slumlords, Files Suit Seeking Hundreds of Millions of Dollars"
Los Angeles Times (05/04/11)
The Los Angeles city attorney's office last week accused Deutsche Bank officials of being among "the largest slumlords in Los Angeles," filing an unusual lawsuit Wednesday asking a judge to fine the company hundreds of millions of dollars. Also being sought is an injunction that would force the German institution to clean up the foreclosed apartment communities it owns in Los Angeles, which have numbered 2,000 over the past four years. After a yearlong probe, L.A. officials charge that Deutsche Bank has illegally evicted residents , shut off their water and electricity, and then let hundreds of apartment developments turn into graffiti-scarred dens for gang members and other criminals. Deutsche Bank spokesman John Gallagher counters, "The Los Angeles city attorney’s office has filed this lawsuit against the wrong party. As we have repeatedly advised the Los Angeles city attorney’s office, loan servicers, and not Deutsche Bank as trustee, are contractually responsible for both the maintenance of foreclosed properties and any actions taken with respect to tenants of foreclosed properties." If successful, the suit would be the first of its kind in the nation in which a city was able to collect penalties and restitution from banks for the civic woes that foreclosures have wrought.
Fairfax, Calif., Restricts Smoking in Apartments
Digested From "Fairfax Restricts Smoking in Apartment Complexes"
Sacramento Bee (05/06/11)
In California, the Fairfax Town Council late last week unanimously approved an ordinance that requires apartment communities with four or more units to designate at least 75 percent of them as non-smoking. The restriction, which still requires a second reading in June before it becomes law, would also apply to apartments' private balconies, porches, decks, and patios. The Marin County cities of Larkspur and Novato have approved similar apartment smoking bans. The Fairfax ordinance also bans smoking in town parks and the entrances to bars, restaurants, and other buildings where smoking is already prohibited.
NMHC Chair Says Housing Should Rely on Private Capital
Digested From "Government Mortgage Guarantees Have Their Place "
Wall Street Journal (05/03/11) by Peter Donovan
In a recent letter to the editors of the Wall Street Journal, National Multi Housing Council (NMHC) Chair Peter Donovan stated that the housing market should rely primarily on private capital. However, Donovan cautioned that a private-market only solution is currently impractical for rental housing and could have serious consequences for the 17 million Americans who rely on it. While private capital can serve higher-end properties and top-tier markets well, it does not meet the majority of the rental housing market's capital needs. "As evidence, fully 90 percent of the government-sponsored enterprise-financed apartments over the past 15 years -- 10 million units -- were affordable to families at or below their community's median income," he says. Providing a federal guarantee to the multifamily housing sector has cost taxpayers nothing, given that multifamily programs were not part of the financial meltdown and their default rates are below 1 percent. While the government-sponsored enterprises have been in conservatorship, their multifamily holdings have earned over $1 billion in net revenues. Donovan says, "Given their successful track record and the clear market need, policymakers should not remove federal credit support for rental housing until they can conclusively prove that doing so won't create unintended consequences. This is particularly important given the rising demand for apartments; renters are projected to make up half of all new households this decade -- more than seven million households. The multifamily sector should not become a collateral victim of the single-family sector's excesses."
Apartment Interests in Wis. Urge Keeping CCAP Funding
Digested From "State Council Says Keep CCAP Funding"
Ashland Current (WI) (05/02/10)
The Wisconsin Rental Housing Legislative Council has called on the Joint Finance Committee to change a provision of Governor Scott Walker's budget that the group says would adversely impact the state's circuit courts. Council members argue that the provision would put approximately 45 percent of the funding used to pay for the Consolidated Court Automation Programs (CCAP) under the control of the Department of Administration if enacted. The board of directors of the Wisconsin Apartment Association, which works in partnership with the Council, voted unanimously in favor of the opposition at a recent meeting. Mike Mokler, president of the Wisconsin Rental Housing Legislative Council, reasons, "Access to court records is essential for us to maintain our small businesses. We use CCAP records to protect our properties, our current tenants and the communities we work in. What we are concerned about is keeping this system stable, so there are no gaps in this service that will impact people all around Wisconsin."
Bill in NY Senate Would Relax Rent Rules
Digested From "Bill in State Senate Would Relax Rent Rules"
New York Times (05/01/11) by Charles V. Bagli
With current New York rent control regulations set to expire June 15, the New York State Senate is considering legislation that would deregulate thousands of vacant apartments and let owners increase rents. The so-called "legislative solution" would rectify a New York Court of Appeals decision that claimed the owners of the Manhattan-based Stuyvesant Town and Peter Cooper Village "erroneously" deregulated thousands of apartments while accepting special tax benefits from the city. The decision impacted about 40,000 other apartments facing similar conditions. The bill would enable owners to buy their way out of the problem by repaying tax breaks and maintaining private-market rental rates for their apartments.
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