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San Francisco Buyer Acquires Lembi Apartments
Industry News
NAAEI Declares February 2010 National Apartment Careers Month
For Apartment Owners, Boomeranging Kids More Bad News
Orlando Apartment Market to Remain Weak, Report Says
Colorado Apartment Managers Add to Resident Appeal
Falling Rents Aid L.A. Homeowners in Mortgage Trouble
Texas Firm Brings Eco-Friendly Living to Down-and-Out Apartments
Dallas Condos Are Renting to Fill Vacant Units
S.F. Commercial Properties Seek Tax Relief
Eight Large S. Arizona Apartment Communities in Foreclosure
Insurers Face $23 Billion Loss on Commercial Property
Retiring Baby Boomers Take a Liking to Revitalized Cities
Legislative/Legal News
Apartment Association of Greater Dallas Opposes New Business Sign Rules
Pittsburgh Apartment Owners Hope for Rental Registration Compromise
Palo Alto Council Debates Protections for Residents
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San Francisco Buyer Acquires Lembi Apartments
Digested From "Local Buyer Scoops up Lembi Units"
San Francisco Business Times (11/27/09) by J.K. Dineen
UBS has sold another group of San Francisco-area apartment communities it took back in lieu of foreclosure from the troubled Lembi Group. Local investor Russell Flynn is the latest buyer, purchasing a total of seven San Francisco apartment assets. Flynn has now bought 15 Lembi communities since September from the Swiss bank, which has now sold about half of the 51-building portfolio it took back earlier in the year after the Lembi family went into default on the various properties. The most recent portfolio included buildings in the Haught and Lower Nob Hill areas of the city. This is the latest in a series of transactions involving communities that were part of the Lembi's 8,000-unit multifamily housing empire. Flynn remarks, "These are not as prime as the first tranche we bought, but [they are] still really good buildings."
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Industry News
NAAEI Declares February 2010 National Apartment Careers Month
Digested From "NAAEI Declares February 2010 National Apartment Careers Month"
NAA News Release (11/30/2009)
The National Apartment Association Education Institute (NAAEI) has declared February as the first-ever National Apartment Careers Month. "National Apartment Careers Month was instituted to create awareness of and to promote the attractive and recession-resistant careers in the apartment industry," Maureen Lambe, CAE, NAAEI Executive Vice President said. "With the current state of the economy, there are not only more people choosing to live in apartments, there are also more people seeking a career in our industry; we want to take this opportunity to show that a career in the apartment industry can be a viable career choice with many rewards and benefits." National Apartment Careers Month is also meant to encourage hiring personnel, whether they are onsite managers or corporate human resources managers, to evaluate the new and raw talent entering the industry more effectively, exploring applicants' core competencies and not just previous apartment industry experience before making their hiring decisions. NAAEI is also promoting National Apartment Careers Month as the perfect time for apartment management companies to partner with local high schools and community colleges to promote awareness of apartment careers through career fairs, job shadowing and speaking engagements. These companies are also encouraged to partner with local career organizations such as Jobs for America's Graduates (JAG), DECA, Job Corps, SkillsUSA as well as their local community college and technical schools, in activities such as internships, job shadowing or exhibiting at college career fairs.
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For Apartment Owners, Boomeranging Kids More Bad News
Digested From "For Apartment Operators, Boomeranging Kids More Bad News"
NASDAQ (11/27/09) by Dawn Wotapka
With more and more young Americans "boomeranging" back to their parents' homes or doubling up with roommates, the country's apartment operators continue to weather tough times and even tougher fundamentals as they await a rebound. According to the Pew Research Center, 1 in 10 adults ages 18 to 35 -- the prime renting years -- report that the weak economy has forced them to return to the nest. Job loss and pursuing further education are two of the main reasons cited for this trend. The fact that more older children are returning to the nest has resulted in more empty apartments -- the nation's vacancy rate is at its highest level in 23 years. In response, owners and managers are offering such incentives as rent reductions and even flat-screen TVs to entice new residents and retain existing ones. In some instances, new residents are not even being required to pay security or pet deposits. Additionally, more owners and managers are willing to overlook foreclosures on credit reports. Household formation remains the biggest issue, as growing families are essential to filling empty apartments. The latest Pew research shows that 15 percent of adults younger than 35 have postponed getting married due to the economic downturn. For this same reason, 14 percent have delayed adding to their families by having a baby. Michael Levy, an analyst with Macquarie Securities, concludes, "Absent household formation, landlords will likely be unable to raise rents in a meaningful way anytime soon. For this reason, we are skeptical that the apartment REIT sector will be able to generate robustly positive same-store revenue and [net operating income] before 2012."
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Orlando Apartment Market to Remain Weak, Report Says
Digested From "Orlando Apartment Market to Remain Weak, Report Says"
Orlando Sentinel (FL) (11/29/09)
According to a recently released quarterly report by Marcus and Millichap, Orlando's apartment sector is expected to further erode for the rest of this year as "a weak economy stifles household formation and rental housing demand." The company's Apartment Research Market Update noted that the opening of University of Central Florida's medical school during the third quarter has done little to avert a rise in vacancies. However, the new institution is expected to help diversify the metro area's economy in the months to come and fuel some future growth. Construction and permits continued to ease during the July-through-September period, likely increasing demand with fewer new projects coming on line. While rents have dropped, researchers forecast that rental decreases may lessen with a rebound in the economy expected in the coming months. Apartments in Orlando's northwest sector have been among the hardest hit during the downturn, with monthly rents dropping more than 5 percent in the past year to an average of $616. Finally, Marcus and Millichap confirms that the Orlando area's apartment vacancy rate was about 15 percent at the end of September -- the highest overall for Central Florida.
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Colorado Apartment Managers Add to Resident Appeal
Digested From "Fresh Touches by Apartment Managers Add Appeal to Renters"
Denver Post (CO) (11/29/09) by Christian Toto
Apartment owners and managers in the Denver metro area are sprucing up their rental units to appeal to prospective residents. A down economy coupled with the realization that a professionally prepared apartment simply rents faster have local apartment management companies stepping up their game with everything from vibrant room colors to imaginative wall accents. Michelle Conway, property manager with Windsor at Meridian, cautions, "There's not an immediate payoff, but it's well worth it. We're renting a lot more apartments than we would normally." Indeed, Windsor at Meridian occupancy rates were around 95 percent as of the end of this year's second quarter. William Bronchick, president of the Colorado Association of Real Estate Investors and an aea apartment property owner, makes it a policy to have all of his units spruced up before they hit the market. He and his staff do not fully furnish rental units. Instead, the plan is to display dried flowers, have towels hung in bathrooms and use pieces of furniture so prospective residents can envision each apartment's potential. Numerous area apartment companies will personalize units, reports Laura Russmann, executive director of the Apartment Association of Southern Colorado. Such firms present residents with the opportunity to pick their own accent wall colors and even select carpet color if the unit is scheduled to receive new flooring. Russmann concludes, "Owners see it as a good investment. It has pretty dramatic results." A final option is for owners and managers to show a fully furnished, model apartment to allow residents to see how their unit can look.
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Falling Rents Aid L.A. Homeowners in Mortgage Trouble
Digested From "Falling Rents Aid Homeowners in Mortgage Trouble"
Los Angeles Times (11/29/09) by Alejandro Lazo
Southern Californians facing the loss of their homes are finding refuge in rental housing. At larger apartment communities throughout the region, monthly rents have declined an average of 4.9 percent in the last year. Rents peaked at $1,501 a month in last year's third quarter after 12 years of consecutive gains. Since then, RealFacts reports that rents have declined 4.9 percent to an average of $1,427 in the third quarter of this year. The decrease came as the occupancy rate of the communities dipped 0.8 percent to 93.7 percent. The research did not include homes converted into rentals or smaller apartment communities. Los Angeles County's unemployment rate skyrocketed to 12.8 percent in October, up from a revised 12.6 percent the month before. Western National Property Management Thomas Shelton says he is offering a month of free rent for every 12-month lease signed. In some of the hardest-hit areas of Southern California, especially the Inland Empire, he and his competitors are vying with investors who are renting out condominiums and houses. Stuart Gabriel, director of UCLA's Ziman Center for Real Estate, states, "The fact that rents are coming down is, of course, favorable to those who need to rent. But it is an artifact of larger economic weakness, and that larger economic weakness is not a good thing."
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Texas Firm Brings Eco-Friendly Living to Down-and-Out Apartments
Digested From "Live Green, Save Green"
MSNBC (11/25/09) by Lisa Petty
Dallas-based Nessel Development has emerged as a leader in bringing affordable, eco-friendly living to formerly down-and-out apartment communities. David Danish, vice president of operations at Nessel, states, "Our goal is to find communities that . . . have life left in them." One such site is City Scape, which had been a rundown apartment community in central Dallas that today rivals any new construction in the area. City Scape apartments, which start at $499 a month, now feature everything from stone tile floors to stainless steel appliances. Meanwhile, its community building offers a state-of-the-art fitness facility and Internet coffee bar. Nessel takes care to operate in an environmentally-friendly fashion, promoting various personal practices that go along with that philosophy. For one, the company works exclusively with existing structures. Danish notes, "By rehabbing a community, rather than building new, you've already conserved tons of resources." As a result, monthly rents can be kept low along with each project's environmental impact. Company officials closely scrutinize each new apartment community added to its portfolio, keeping features that are still in good condition and making adjustments where needed to improve energy efficiency. Utility usage is one of the main things evaluated on a continuing basis. Nessel also landscapes its various apartment communities to require minimal water, using everything from rock gardens to native plants. One of Nessel's key objectives is to create an environment at each community that encourages outdoor activities. To this end, common exterior features include hammocks, fountains and even dog runs.
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Dallas Condos Are Renting to Fill Vacant Units
Digested From "Condos Look to Leasing to Fill Units During Sales Slump"
Dallas Morning News (TX) (11/27/09) by Steve Brown
In the Dallas metro area, more and more condominium developments are having to lease out their units amid ongoing economic woes. For instance, almost 50 percent of the four-year-old Metropolitan condominium tower in downtown Dallas is unsold despite such building amenities as a private theater and a rooftop pool. Consequently, the Metropolitan has joined the growing number of condominium projects to offer units for rent. Christine Lutz of Garrison Partners Consulting remarks, "It's a great deal for someone who is not sure if they want to be a downtown condo owner. You can test drive the product." At the same time, it is a way for condo developers to fill vacant units at a time when condo sales in North Texas are off nearly 20 percent from 2008. Another high-profile condo development that has gone this route is the Residences at Palomar, where remaining condos are renting for between $2,000 and $5,400 a month. Those who rent get to partake of the same amenities as owners, including a fitness facility and swimming pool. Sam Gillespie, COO of building owner Behringer Harvard Opportunity REIT, comments, "We are very flexible and will lease anywhere between six months and two years, including a popular lease-to-own program." Following its cue, the Metropolitan will debut its lease-to-own plan in January. Of course, the last thing rival apartment owners want is competition from condos. Apartment vacancies in North Texas are more than 10 percent and likely to go higher in 2010. On the bright side, the number of for-sale units turned apartments is lower in Dallas than in many other U.S. markets suffering from a condo glut. Greg Willett, vice president with MPF Research, notes, "For Dallas, condos comprise a very small share of the total multifamily stock, even in the heart of the city. So they don't have much impact on apartment sector fundamentals in the big picture." On the horizon, construction of approximately 4,000 new traditional apartments are on pace to be completed in the next few months.
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S.F. Commercial Properties Seek Tax Relief
Digested From "S.F. Commercial Properties Seek Tax Relief"
San Francisco Chronicle (11/22/09) by Carolyn Said
With commercial real estate in a slump, San Francisco may soon see its coffers not quite so full. Such trophy buildings as the Bank of America Center and the Marriott Marquis lead a list of more than 1,000 commercial properties citywide asking to have their property taxes reduced. Collectively, these various apartment communities, hotels, office towers and shopping centers have an assessed value of $21.25 billion. Their owners, though, say they are worth about half that amount. If such claims stand, that could erase more than $115 million off the property taxes city officials collect. Residential appeals, meanwhile, could subtract another $13.47 million in property tax revenue. Of course, the potential property tax reductions come at a time when the city is already grappling with budget cuts and deficits. San Francisco's controller recently cautioned that the city faces a potential $500 million deficit in its next fiscal year.
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Eight Large S. Arizona Apartment Communities in Foreclosure
Digested From "8 Large S. Arizona Apartment Complexes Are in Foreclosure"
Arizona Daily Star (11/27/09) by Josh Brodesky
Eight large-scale apartment communities in Southern Arizona have recently gone into foreclosure on $90 million worth of loans made during the peak of the market. One apartment community is owned by Seattle-based S-J Management LLC. The other seven -- six in Tucson and one in Sierra Vista -- are owned by The Bascom Group, which acquired the portfolio in the fall of 2006 when the housing market was still going strong. The apartment communities are cross-collateralized, meaning if one goes into foreclosure, the others do, as well. Bascom acquired numerous apartment communities in the Tucson metro area during the boom period with the intention of improving them, but with hardly any money down. The foreclosure notices were not a surprise given that both Bascom and S-J Management have had other communities go into foreclosure since the first of the year. For instance, earlier this summer, Bascom had five communities in Tucson alone go into default. Bob Kaplan, a commercial broker with Picor Commercial Real Estate Services, observes, "What's happening is just a natural part of an economic cycle, and those of us in the business are not surprised. The owners are upside down."
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Insurers Face $23 Billion Loss on Commercial Property
Digested From "Insurers Face $23 Billion Loss on Commercial Property"
Bloomberg (11/17/09) by Jamie McGee
Fitch Ratings forecasts that U.S. life insurers may lose as much as $22.6 billion on investments in commercial real estate through 2011. Losses on investments in apartment communities, office buildings, shopping centers and other income-generating properties will begin to increase in the next six months to a year as rents fall and vacancies rise, states Fitch senior director Andrew Davidson. He adds that life insurer losses on commercial real estate have been "virtually nil" so far, stating, "It will be more of a 2010 and 2011 issue. It will put some stress on the capital positions as they realize the losses." Since October 2007, the Moody's/REAL Commercial Property Price Indices show that commercial property prices have plummeted nearly 41 percent. The dollar value of loans fell 40 percent for apartment communities and 56 percent for office complexes, according to a Nov. 5 statement from the Mortgage Bankers Association.
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Retiring Baby Boomers Take a Liking to Revitalized Cities
Digested From "Welcome to Boomerhood"
Continental (In-Flight Magazine) (11/09)
More and more retiring Baby Boomers are shunning gated communities for vibrant cities and towns. A recent study by the Natural Marketing Institute determined that 77 percent of Boomer-age women and 68 percent of men believe the best years of their life are still ahead of them. Just as intriguing, 61 percent of men and 53 percent of women polled say they are aspiring to live to age 100. Life expectancy is often determined by lifestyle factors, with the two most important being where and how one chooses to live. Consequently, many are looking for places where they can exercise both their bodies and their minds through learning. At the same time, with so many retirement accounts being hard hit by the economic downturn, the option of returning to the workforce remains in demand. Indeed, a recent study of Boomers by Merrill Lynch found that 75 percent of respondents intend to continue working in retirement, though not in the same type of job. These are just some of the reasons why cities are proving to be more attractive to Baby Boomers in their retirement years. More Boomers are shunning traditional retirement communities and moving to revitalized sections of such major cities as Atlanta, Boston, Chicago, Denver, Minneapolis and Seattle. Even such non-traditional retirement spots as Cleveland and Detroit are proving to be appealing to this demographic. Finally, there continues to be a movement among universities to attract retirees to cities and towns located close to college campuses. Boomers have shown an interest in wanting close access to college classes, on-campus entertainment facilities, and even the chance to interact with retired faculty in their communities.
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Legislative/Legal News
Apartment Association of Greater Dallas Opposes New Business Sign Rules
Digested From "Irving's New Business Sign Rules Send Wrong Messages, Owners Say"
Dallas Morning News (TX) (11/30/09) by Brandon Formby
Strict new rules concerning business signs in Irving, Texas, have been enacted in an effort to eliminate what many local officials and residents say are cluttered thoroughfares and unsightly shopping centers. Business owners, though, contend the rules are either discouraging people from opening up shop or encouraging them to skirt the rules and undermine the city's efforts. The new rules prohibit any new pole signs from being put up except for at businesses situated along major highways. Most existing pole signs are permitted to remain, as long as a new business does not open in a building with a sign. The ordinance also prohibits businesses from using banners except for during grand openings. Kathy Carlton, director of government affairs for the Apartment Association of Greater Dallas, says that takes away a major marketing tool that apartment communities depend on to bring in potential residents. She adds, "In this economy where our occupancies are going down, our hands are tied to what we can do to advertise to somebody driving by."
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Pittsburgh Apartment Owners Hope for Rental Registration Compromise
Digested From "Landlords, City Working Out Rental Registration Compromise"
Pittsburgh Post-Gazette (11/27/09) by Rich Lord
A city of Pittsburgh ordinance, approved almost two years ago, that requires apartment owners to register their communities is on indefinite hold. However, it may re-emerge soon. According to the city's Web site, owners have until Dec. 1 to register. A Nov. 5 court order signed by Allegheny County Common Pleas Judge Joseph James, though, nixed that latest of many deadlines. Indeed, implementation has been postponed until either the city, or apartment groups that have sued to overturn the ordinance, petitions the court. There are varying degrees of optimism that a compromise rental registration ordinance can be crafted and submitted to City Council soon. Sticking points remain, most notably a proposed $12-per-unit annual fee. City Councilman Jim Motznik, one of the ordinance's sponsors, "The majority of the problems in [Pittsburgh's] neighborhoods unfortunately come from rental properties. When we try to address it, it's sometimes difficult to identify who owns the property." Owners are pushing for a fee that only reflects the city's costs to implement the program. Furthermore, they do not want to pay annually.
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Palo Alto Council Debates Protections for Residents
Digested From "Council Debates Protections for Tenants"
Mountain View Voice (11/26/09) by Daniel DeBolt
In Palo Alto, Calif., the City Council is considering an ordinance designed to protect low-income apartment residents. However, several council members are concerned that it might have "unintended consequences." Council member Jac Siegel cautions, "This incentivizes landlords not to rent to very low income people, and I don't want to do that." Meanwhile, council member John Inks said language in the ordinance would discourage apartment owners from making improvements to their communities. Under the proposal for dealing with displaced low-income tenants, certain owners would be required to help residents relocate when a rental community is demolished, redeveloped or converted to for-sale condominiums. Under those circumstances, owners must pay very low-income residents the equivalent of two months rent. An additional $2,000 would go towards households with "special needs," such as seniors or a disability. Residents would also get a full refund of their security deposit, along with a 180-day notice to vacate, a subscription to a rental agency and bilingual assistance if needed. The ordinance would apply to apartment communities with two units or more where the majority of the residents earn 50 percent or less of the county's median household income -- $105,500 for a family of four in 2008. The Silicon Valley Realtors Association and the Tri County Apartment Association have agreed with the principle of the ordinance, but both have concerns with its language. Joshua Howard, executive director of the California Apartment Association's Tri County Division, is optimistic. He states, "I believe you'll have a policy that gets it right."
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