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The Industry Insider - February 26, 2008
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Real Estate Downturn May Benefit Apartment Developers
Industry News
Apartment Sector to Be Star Performer in the Years Ahead
Charlotte's Apartment Sector Remains Brisk, Desite Oversupply Concerns
Enterprise Expands Debt Products in Its Multifamily Finance Group
Apartment Rents in Southern California Rise
Florida Workers Still Concerned About Affordable Housing
Construction of New Homes and Apartments Rose Last Month
Archstone-Smith to Shrink Name to Just Archstone
Lembis Become Big Apartment Sellers in San Fran
Apartment Sales in Denver Down in 2007
Multifamily Housing Communities Flourish in Current Housing Market
Legislative/Legal News
Large San Diego Apartment Communities Must Now Recycle
More Affordable Housing Is Needed for 'Grandfamilies' in Connecticut
Top Story
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Real Estate Downturn May Benefit Apartment Developers
Digested From "Real Estate Downturn May Benefit Apartment Developers"
Dallas Morning News (02/15/08) by Steve Brown
Home builders are facing the worst downturn in decades, but things are a bit brighter for apartment developers, as stricter lending standards have many would-be home buyers opting for apartments instead. According to Greg Willett, vice president of M/PF YieldStar, "While total housing demand might not be great over the next couple of years, apartments seem poised to capture a particularly large share of total demand." Not only are tougher lending standards keeping many people in the apartment market, but demographic projections also predict a rise in young renters over the coming few years. Still, Ron Witten, a longtime Dallas apartment market consultant, is predicting only a 1 percent rise in apartment rents this year across the country, as he says that "many markets in 2008 will suffer from overbuilt single-family." Meanwhile, apartment builders will also see negative impacts from the crises in the credit market--according to apartment developer Granger MacDonald, "The banks are very skittish. Six months or a year ago, you could have gone in with 15 percent equity and gotten a conventional loan and started an apartment project. Today you are going to put down 25 percent." There is also the concern that the downturn in the condo market will cut into the apartment market as unsold condo units are rented out instead, as more than a year's supply of condos is on the market across the country right now.
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Apartment Sector to Be Star Performer in the Years Ahead
Digested From "Investors Bide Time for US Realty"
Australian (02/25/08) by Turi Condon
CB Richard Ellis Investors has put a hold on new acquisitions, waiting for the U.S. commercial property market to hit bottom. Executive managing director Michael McMenomy believes the apartment sector will likely rank as the top performer over the next three years. CBRE Investors research shows that apartments account for roughly 20 percent of U.S. investment property, mostly held in listed apartment REITs. McMenomy and Douglas Herzbrun, CBRE Investors' global head of research, have tabbed pension funds as the most opportunistic investors for the remainder of this year. Last year, CBRE Investors made $11.7 billion of property investments in the United States, Asia and Europe and sold $4.8 billion worth of real estate.
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Charlotte's Apartment Sector Remains Brisk, Desite Oversupply Concerns
Digested From "Apartment Construction Emerges as Bright Spot"
Charlotte Business Journal (02/22/08) by Becky Bergman
In the Charlotte metro area, apartment construction is brisk with more than 4,000 units in various stages of construction. Many of the new units are clustered around the city's light-rail system. A strong economy coupled with such factors as stricter lending guidelines and an aging population are the main reasons behind this boom in the local apartment sector. However, this high level of activity is raising concerns about a possible oversupply that could be seen as early as 2009. So far, though, the market remains healthy. Real Data Apartment Market Research reports that approximately 2,000 apartments will go on line this year, with the remainder set to hit the market in the following 12 to 15 months. Another 16,000 or so apartments remain on the drawing board.
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Enterprise Expands Debt Products in Its Multifamily Finance Group
Digested From "Enterprise Expands Its Loan Products"
Banking Business Review (02/22/08)
Enterprise Community Investment this week announced the expansion of debt products available in its multifamily mortgage finance group. Also available from the lender is proprietary non-agency construction and permanent financing for multifamily housing communities, along with its Fannie Mae DUS product offering. Gary Alex, director of Enterprise Community Investment's FHA lending division, commented, "Enterprise's approval as a rural development lender is very timely, particularly for section 42 developers now applying for affordable housing fund reservations. Also, as a full-service FHA mortgagee, we offer a streamlined approach to originating, processing, underwriting, funding and servicing FHA-insured loans."
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Apartment Rents in Southern California Rise
Digested From "Southland Rents Rise Despite Falling Home Prices"
Los Angeles Times (02/22/08) by Andrea Chang
RealFacts' latest survey of larger apartment complexes in Southern California found that rents are on the rise, hitting an average of $1,494 a month during last year's fourth quarter. That was an increase of 4.5 percent over the same three-month period a year earlier. At the same time, housing prices are on the decline. DataQuick Information Systems confirms that the median price for homes and condominiums in the six-county region dipped to $415,000 during January--18 percent below 2007's peak. As it turns out, fewer people buying homes has meant more people looking to rent housing. Stuart Gabriel, director of the Richard S. Ziman Center for Real Estate at UCLA, states, "The downward pressure on house prices and the upward pressure on rents are in some respects reciprocal of one another. The two go hand in hand." He and other industry watchers caution that a prolonged downturn in home prices could eventually push rents lower also. This is especially true if unsold and foreclosed homes and condos end up in the rental market, offering further competition to apartments.
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Florida Workers Still Concerned About Affordable Housing
Digested From "Survey Shows Workers Still Concerned About Affordable Housing"
Naples Daily News (FL) (02/20/08) by Laura Layden
Affordable housing for employees in the Naples, Fla., region remains a significant concern. A recent survey conducted by the consulting company Markham, Norton, Mosteller, Wright and Co. reports that 55 percent of the 1,000-plus workers queried identified workforce housing as a "very big" problem. Thirty-four percent of employees surveyed indicated that they do not own a house. Among those individuals, 90 percent said they do not believe they can afford one. The poll places the number of employees in the Naples region who are renting but wish to own a house at 27,850. There are approximately 9,740 available houses in Collier County, resulting in a deficit of over 18,000 units. There are an estimated 12,000 employees who would like to own a house in the $135,000-to-$225,000 range, but they continue to rent. "I think inherently there is a short supply," Markham senior consultant Jim Warnken speculates. He says there needs to be a larger selection of more reasonably priced houses nearer to town due to a market decline that has sent listings up and prices down. "There is no question . . . that we need to create more affordable workforce housing, and we've got to create incentives for developers to do that," Warnken believes.
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Construction of New Homes and Apartments Rose Last Month
Digested From "Housing Construction Increases"
Associated Press (02/20/08) by Martin Crutsinger
According to the Commerce Department, construction of new homes and apartments rose by eighth-tenths of 1 percent last month to a seasonally adjusted annual rate of just over 1 million units. This marked the first increase since October of last year and followed a 14.8 percent plummet in December.
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Archstone-Smith to Shrink Name to Just Archstone
Digested From "Apartment Giant to Shrink Name"
Denver Post (02/20/08)
Archstone-Smith this week announced that it will shorten its name to Archstone. The REIT, which ranks as one of the country's biggest apartment companies, explains that it is "returning to its foundation as a national company with a single brand and strategy."
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Lembis Become Big Apartment Sellers in San Fran
Digested From "Lembi Group Takes a Walk on the Sell Side"
Wall Street Journal (02/20/08) P. B4; by Jonathan Karp
After five years as the most ambitious buyer of apartment communities in San Francisco, the Lembi family is currently the market's most aggressive seller. The Lembis currently have 18 local buildings on the selling block, a small fraction of the family's 307-building portfolio in one of the country's hottest apartment markets. Still, the recent listings have stoked rumors about this local empire. Some are wondering if the move is an effort to reshape the Lembi portfolio to take advantage of a run-up in prices that the family largely created. Others are questioning if the selloff is a sign the Lembi group is overextended. Walter Lembi, managing director of Lembi Group, assures that the latter is not the case. He remarks, "We're not under any pressure to sell. . . . We've been through many tough markets before, and from a financing standpoint, this is one of the toughest." The family has spent upwards of $1 billion since 2003 buying apartment communities throughout the San Francisco area, including some $491 million in 2007 alone. The Lembis' holdings currently total more than 8,200 apartments.
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Apartment Sales in Denver Down in 2007
Digested From "Apartment Sales in Denver Down in 2007"
Denver Business Journal (02/14/08)
A new CB Richard Ellis Inc. (CBRE) report shows that sales of Denver-area apartment communities fared well last year, even amid turmoil in the local capital markets. Denver recorded $1.8 billion in apartment sales in 2007, a decline from $2.5 billion a year earlier but an increase from $1.3 billion in 2005. The CBRE study notes: "Prior to 2005, a brisk year for multifamily sales activity was $750 million." One reason apartment investors continue to favor the Denver market is the high occupancy of apartment communities, which keeps rents up. With little in the way of new construction, vacancies should remain tight for at least the foreseeable future. Indeed, CBRE researchers confirm that only 2,262 new apartments were added to the local multifamily housing sector last year and only 738 units were added the year before that. By contrast, nearly 8,600 units were added in 2002. During last year's October-through-December period, the Denver metro area's apartment vacancy rate was 6.1 percent, with the average unit renting for $860.35 a month. During the same three-month swing a year earlier, apartment vacancies stood at 7 percent, with an average rent of $849.89.
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Multifamily Housing Communities Flourish in Current Housing Market
Digested From "Multifamily Properties Flourish in Current Housing Market, IBS Speakers Say"
Multi-Housing News (02/08)
Attendees at the recent International Builders' Show noted that many non high-rise condo developers have switched to building apartments due to changing market conditions. At the same time, buyer traffic has increased in condo sales offices that are still open. Because the condo market is fairly new in such large southern cities as Atlanta and Dallas, some developers are dealing with problems of inventory and declining sales for the first time there. Bill Donges, CEO of the Lane Company, remarked, "The fundamentals of the condo market are solid, but it will take 12 months to two years to burn off the supply."
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Legislative/Legal News
Large San Diego Apartment Communities Must Now Recycle
Digested From "City's Next Step in Recycling"
San Diego Union-Tribune (02/19/08) by Mike Lee
In San Diego, large multifamily housing communities and major commercial buildings must now offer recycling under a new order from the City Council. This is part of a larger plan aimed at increasing recycling by 100,000 tons annually to keep the city above California's mandate to reuse or recycle no less than 50 percent of its overall waste stream. In addition, the move is meant to help save space at the San Diego-owned Miramar Landfill, which has been targeted for closure by 2013. San Diego officials estimate that approximately 66 percent of the trash at that particular landfill is recyclable, including huge amounts of paper from offices and private homes. The new recycling rule that kicked in on Feb. 18 affects nearly 2,900 commercial properties and approximately 175 multifamily housing communities. Local property owners had quarreled with city officials over details of the recycling mandate for years. In recent weeks, though, the two sides moved closer to a consensus. By Jan. 1, 2010, the recycling ordinance will cover all businesses and homes in San Diego.
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More Affordable Housing Is Needed for 'Grandfamilies' in Connecticut
Digested From "We Need More Affordable Housing for 'Grandfamilies'"
Courant.com (02/17/08) by Susan Campbell
More projects like the 40-unit affordable housing campus in Hartford, Conn., for men and women raising their grandchildren are needed, say local analysts. The Community Renewal Team opened the Grandfamily Housing Development last year. The joint city, state, and federal initiative offers 24 new townhouses and 16 one-bedroom apartments carved out of a former school nearby. Cost is subsidized and based on the grandparents' income and size of household. Grandparents will have the opportunity to live in the housing units for as long as they are rearing their grandchildren and then the agency will help them buy their own homes. They also can choose to move into a one-bedroom apartment in the old school site. Grandparents raise about 21,000 children in the state and about 4.5 million children nationally. Eight times more children live in grandparent-led households than in the foster-care system. "If you really think about it, these grandparents are coming to the rescue of the children, but they are really coming to the rescue of our governmental system," says Elizabeth Horton Sheff, director of community services for CRT.
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