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How Pets Can Be an Apartment Owner's Best Friend
Industry News
San Antonio Apartments Are in for Hard Haul This Year
AIMCO Reports Q1 2009 Loss, Cuts Dividend
Pricey Apartments Compete for Residents in Portland
Gainesville, Fla., Apartments Double Vacancies in Last Year
Camden Property Trust Announces Q1 2009 Results
Apartment Vacancies in North Carolina's Triad Climb
Commercial Property Revival Comes After Economic Rebound
Rents Fail to Decline as Utah County's Vacancy Rate Rises
AvalonBay Communities Announces Q1 2009 Results
Colorado Springs Apartment Vacancies, Rents Both Down
Essex Announces Q1 2009 Earnings Results
Associated Estates Posts Mixed Results for Q1 2009
Legislative/Legal News
Dallas Police Checking List of Crime-Ridden Apartment Communities
Split Incentive Stalls Energy Efficiency in Rental Housing
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How Pets Can Be an Apartment Owner's Best Friend
Digested From "How Pets Can Be a Landlord's Best Friend"
MSN Real Estate (05/01/09) by Karen Aho
Apartment owners should reconsider using free rent or a big-screen TV as incentives to lure residents. Instead, they should bill their communities as "pet friendly" and roll out the welcome mat for Spot and Mr. Whiskers. The downside of allowing pets is the mess that isn't involved -- i.e. improperly disposed-of kitty litter, dog excrement in common areas and so forth. But there are many more good and conscientious pet owners than bad ones, and owners need to keep that in mind. National Association of Residential Property Managers President Fred Thompson states, "Somewhere in the neighborhood of 70 percent of your tenants are going to have some kind of pet, so you can't just say, 'No pets allowed.' If you do, you're going to see an extended vacancy period on your investment and that doesn't work out long term." A 2003 study by the Foundation for Interdisciplinary Research and Education Promoting Animal Welfare (or FIREPAW) found that pet-friendly apartments rented in 19 days versus 29 days for non-pet-friendly units. Back then, 9 percent of apartments surveyed allowed all pets, 44 percent limited pets by type or size (most allowed cats) and just 11 percent allowed large dogs. The U.S. Census Bureau reports that the apartment vacancy rate has spiked above 10 percent nationally and topped 20 percent in some areas, primarily because of an oversupply of condo conversions and fewer employed residents. The article gives several tips on how to rent to cats and dogs stress-free. Apartment owners are encouraged to meet potential residents' pets before approving applications. In addition, they should look into various insurance products regarding on-premise pets and request an additional security deposit as opposed to charging additional monthly fees for pets.
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Industry News
San Antonio Apartments Are in for Hard Haul This Year
Digested From "Apartment Market Is in for Hard Haul in '09, Report Says"
San Antonio Business Journal (05/03/09) by Tricia Lynn Silva
San Antonio's apartment sector has reached new lows in terms of occupancy rates and planned construction activity. As of the end of March, the local apartment market recorded an occupancy rate of 88.5 percent -- the lowest mark since 1994, confirms a new market analysis by Austin Investor Interests LLC. Given the pipeline of new apartment communities entering the market, occupancy figures are also expected to be under continued pressure in the months to come. Construction is currently under way on two dozen new apartment communities, which will contain 6,694 total rental units. More than 50 percent of these new apartments are slated for completion by the end of December, according to Austin Investor.
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AIMCO Reports Q1 2009 Loss, Cuts Dividend
Digested From "AIMCO Reports Q1 Loss of $37.7M, Cuts Dividend"
Denver Business Journal (05/01/09)
Apartment Investment and Management Co. (AIMCO) posted a Q1 2009 net loss of $37.7 million, compared to $38.9 million for the same period a year earlier. The Denver-based apartment REIT, which manages more than 160,000 units nationwide, adds that its quarterly revenue rose slightly from a year earlier to $349.3 million. Funds from operations (FFO) totaled $51.9 million, down from $67.3 million a year earlier. Finally, AIMCO's apartment occupancy dipped 1.3 percent to 93.5 percent in Q1 2009 from 94.8 percent. Looking ahead, the REIT expects second-quarter FFO to be in the 37 cents to 43 cents per share range. The company has also decided to slash its regular quarterly dividend by 60 percent, to 10 cents a share, in an effort to retain cash. That follows a 58 percent dividend cut announced back in February. Like other REITs, AIMCO has been taking steps and making tough decisions to reduce debt. In the first three months of this year, for instance, the company refinanced $110.1 million in loans related to apartment communities. That move generated net proceeds of $55.6 million. AIMCO expects to refinance more than two dozen additional property loans totaling $434.2 million, all of which mature during the rest of this year through 2011.
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Pricey Apartments Compete for Residents in Portland
Digested From "Pricey Apartments Compete for Tenants"
Portland Business Journal (OR) (05/03/09) by Wendy Culverwell
Apartment owners are scrambling to fill a glut of luxury apartments in downtown Portland. At least a half-dozen projects that began as condominiums have ended up as rental units. Consequently, around 1,500 new luxury apartments currently sit empty, driving up vacancy rates and lowering rents. Every luxury apartment community in Portland's downtown corridor is offering concessions to entice new residents. Discounts are currently running as high as 18 percent, and owners are offering everything from free parking to flat-screen TVs.
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Gainesville, Fla., Apartments Double Vacancies in Last Year
Digested From "Gainesville Apartments Double Vacancies Over Past Year"
Gainesville Sun (FL) (05/01/09) by Anthony Clark
In Florida, a recent Real Data study showed that Gainesville apartments had twice as many vacancies and lower average rents this year. The local apartment market was hit with a "double whammy" of increased supply at the same time the University of Florida was cutting both student enrollment and jobs. Consequently, apartment vacancy rates rose from 6.5 percent at the end of 2008's first quarter to 13 percent in March of this year. In 2007, the vacancy rate was 2.8 percent. Vacancy rates are highest in newer communities, with those less than a year old 40.8 percent empty and those between one and five years old 18.3 percent vacant. Real Data's quarterly results are based on surveys of communities with 30 or more units, totaling 21,527 units this year. Of those, just over 2,800 were vacant. With almost 66 percent of communities offering such concessions as cash discounts, average monthly rents were down from $1,030 a year earlier to $977. Meanwhile, new apartment development has slowed, with three communities of 430 total rental units under construction and none proposed compared to a half-dozen communities of 1,667 units were under construction. There were also 509 additional proposed apartments.
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Camden Property Trust Announces Q1 2009 Results
Digested From "Camden Property Trust Announces First Quarter 2009 Operating Results"
Business Wire (04/30/09)
Camden Property Trust's 1Q 2009 funds from operations totaled $0.88 per diluted share or $51.6 million, as compared to $0.89 per diluted share or $52.3 million for the same three-month period a year earlier. Quarterly net income, meanwhile, totaled $6.2 million or $0.11 per diluted share, as compared to $14.9 million or $0.27 per diluted share for 1Q 2008. As of March 31, construction had been completed on all of the REIT's wholly-owned apartment communities, with no material obligations remaining to fund. Camden presently has a half-dozen wholly owned apartment communities completed and in lease-up, including communities in such markets as Austin, Houston, Orlando and suburban D.C. Camden Property Trust has ownership stakes in 182 apartment communities containing 63,269 rental units nationwide. For the second straight year, the REIT has been named one of the "100 Best Companies to Work For" in America by FORTUNE Magazine.
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Apartment Vacancies in North Carolina's Triad Climb
Digested From "Apartment Vacancy Rate Continues to Climb"
Greensboro News & Record (NC) (04/30/09) by Richard M. Barron
In North Carolina, the Triad region's apartment vacancy rate was higher at the end of this year's first quarter than it was a year ago. A new Real Data report shows that 13.1 percent of the 54,520 apartments in the Greensboro-Winston-Salem-High Point area were vacant as of March 31 compared with 10.3 percent of 53,575 a year earlier. More than 4,000 new apartments have been added to the local rental supply in the last couple of years. Demand, however, lags well behind that. The poor economy and mounting job losses were cited as the main reasons by Real Data researchers. Construction of new apartments has declined substantially, however, with 1,659 apartments under construction in March compared with 2,416 a year earlier. According to analysts, the rising vacancy rate is keeping lease rates lower. The average monthly rent for an apartment of just over 900 square feet is $634, a decrease from $645 a year ago. Real Data forecasts that apartment supply will outpace demand through 2011 in the Triad, with the vacancy rate on pace to top 14 percent by the end of December. Rents, meanwhile, will continue to decline as apartment owners increase their concessions to entice new residents. According to Real Data, Greensboro currently has the most apartments under construction, primarily in the city's southern and northwestern parts.
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Commercial Property Revival Comes After Economic Rebound
Digested From "Commercial Property Revival Comes After Economic Rebound"
Investor's Business Daily (05/01/09) P. A06; by Marilyn Alva
Commercial real estate is usually at least a year behind the overall economy, most experts say, and is currently weakening even as the economy shows signs of recovery. Maria Sicola, executive managing director of research at global real estate firm Cushman & Wakefield, expects leasing fundamentals to continue a slump through 2009 and 2010 in "pretty much all markets." Commercial real estate faces ongoing job losses and a wave of loan maturities, and will return only in late 2010, at the earliest. Some sectors, however, will recover sooner than others. While multifamily housing may be among the first to recover, retail will likely lag behind as layoffs continue and household wealth declines.
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Rents Fail to Decline as Utah County's Vacancy Rate Rises
Digested From "Rents Fail to Fall as S.L. County Vacancy Rates Rise"
Deseret News (UT) (04/30/09) by Jasen Lee
A new CB Richard Ellis Apartment Report shows that apartment vacancy rates in Utah's Salt Lake County more than doubled in the first quarter of 2009 versus the same period a year earlier. The study tracked rental rates for 140 apartment communities with more than 100 units in the county. Combined, they have more than 29,500 rental units. CBRE researchers further found that apartment vacancies in the state's most populous county climbed from 2.49 percent a year ago to 6.56 percent. Seth Rossow, a multifamily housing specialist at CB Richard Ellis in Salt Lake, remarks, "Landlords are increasingly losing renters because of increasing job losses. In addition, many would-be renters in these challenging economic times are bypassing renting an apartment unit and instead moving in with friends or family." He added that many former and potential apartment residents are living in basements, doubling-up with roommates or opting to rent homes that have been on the selling block for too long. Rossow concludes, "When these homes that are sitting on the market can't be sold, a lot of the owners are choosing to rent out these homes. So, it's creating a 'shadow market' of rental units." Looking ahead, Rossow expects apartment vacancy rates to likely trend upward with Utah's unemployment rate over the next year, with market rents remaining stable or decreasing slightly to allow for concessions to leave the market.
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AvalonBay Communities Announces Q1 2009 Results
Digested From "AvalonBay Communities, Inc. Announces First Quarter 2009 Operating Results"
Business Wire (04/29/09)
AvalonBay Communities Inc. reports that its 1Q 2009 net income totaled $47,425,000, resulting in earnings per share of $0.59 for the three-month period ended March 31. AvalonBay Chairman and CEO Bryce Blair states that his company's portfolio operations performed as expected. He adds, "The closing of our $740 million secured facility, the final closing of our $400 million acquisition fund and the reduction in our development activity all strengthen our liquidity and provide capital to pursue emerging investment opportunities. While accelerated job losses during the quarter will likely affect future rental demand, a strong balance sheet and access to cost effective capital help mitigate the overall financial impact." The Virginia-based apartment REIT currently has investments in and serves as the manager for two private, discretionary investment management vehicles, dubbed AvalonBay Value Added Fund L.P. and AvalonBay Value Added Fund II L.P. Looking ahead, AvalonBay is set to take part in the three-day NAREIT Institutional Investor Forum in early June. The company has ownership stakes in 173 apartment communities in 10 states and Washington, D.C. Together, these communities contain containing 50,291 rental units.
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Colorado Springs Apartment Vacancies, Rents Both Down
Digested From "Apartment Vacancies, Rents Both Down"
Colorado Springs Gazette (04/29/09) by Wayne Heilman
The latest quarterly survey by Apartment Insights shows that apartment vacancies in the Colorado Springs metro area fell slightly in the first three months of this year. However, rents also fell as the first quarter offered a mixed bag of results for both apartment owners and residents. The first-quarter vacancy rate declined from 10.2 percent in last year's fourth quarter to 9.9 percent, but was up from the 9 percent rate of 1Q 2008. Showing the most improvement were areas near Fort Carson, where several apartment communities close to the post recorded "substantial" declines in vacancy rates -- some to less than 4 percent. Apartment communities near the Colorado Springs Airport posted the highest vacancy rates in the first quarter, averaging 15.4 percent. Meanwhile, apartments in southwest Colorado Springs had the lowest vacancy rate overall at 7.1 percent. According to Apartment Insights, Colorado Springs is one of a handful of apartment markets around the country "poised for improvement during the next 12 months," especially with the expected arrival this summer of more than 5,000 troops at Fort Carson. In total, more than 40,000 apartments provide housing for families, students, employees and military personnel spread throughout the Colorado Springs area.
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Essex Announces Q1 2009 Earnings Results
Digested From "Essex Announces First Quarter 2009 Earnings Results"
Marketwire (04/29/09)
Essex Property Trust Inc.'s 1Q 2009 funds from operations totaled $71.8 million, up from $44.8 million for the same three-month period a year earlier. Net income, meanwhile, increased from $14.8 million to $42.3 million over that same time span. During this year's January-through-March period, the apartment REIT repurchased approximately 350,000 common shares for $20.3 million at an average price of $57.89. Additionally, the California-based company obtained fixed-rate mortgage loans totaling $81.9 million during the first quarter and paid off $17 million in maturing loans. Essex currently has ownership stakes in 132 apartment communities containing 26,862 rental units nationwide. It has another 972 apartments in various stages of development.
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Associated Estates Posts Mixed Results for Q1 2009
Digested From "Associated Estates Turns in Mixed Results for First Quarter"
Crain's Cleveland Business (04/28/09)
Associated Estates Realty Corp. has posted mixed results for its January-through-March period versus the same period a year earlier. The Ohio-based apartment REIT confirms that its net loss applicable to common shareholders totaled $936,000 in the first quarter and compares to a year-ago quarterly profit of $36.8 million. Associated Estates adds that Q1 2009 funds from operations increased 67 percent to $5.9 million from $3.5 million in 1Q 2008. Associated Estates President and CEO Jeffrey Friedman remarks, "Our quarter-end occupancy was a solid 94 percent. I believe our debt maturities are manageable, and the long-term fundamentals of the apartment business remain solid. We are well positioned to benefit when the broader economic conditions improve."
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Legislative/Legal News
Dallas Police Checking List of Crime-Ridden Apartment Communities
Digested From "Dallas Police Checking List of Crime-Ridden Apartment Complexes"
Dallas Morning News (TX) (04/27/09) by Steve Thompson
Earlier this year in Dallas, a city ordinance targeting apartment owners who fail to address crime was enacted. City police have since been compiling a list of apartment communities facing the most instances of crime. The owners and managers of the most problematic apartments will eventually be forced to sit down with law enforcement to discuss what they plan to do about it. However, police officials concede that the process will take time. The first step is to establish that those communities on the list really belong there. Chief David Kunkle comments, "In my view, we need to go slow. While we'll start talking to the apartment owners and managers immediately, it may be a year or so before we get comfortable with the data, give them a chance to respond, and use the full force of the ordinance." To date, police have identified more than 1,300 apartment communities throughout Dallas and have singled out 87 that show the worst crime numbers. Officers are now checking each offense assigned to a given community, making sure it really happened there. Those communities that remain on the list after the double-checking process will be required to enter a crime-reduction program. Among the mandates, operators will be required to permit police to come onto their properties to enforce trespassing laws; schedule at least one monthly crime watch meeting per month; and provide adequate security lighting for stairwells, doorways and parking lots. The program is modeled after a similar one in Houston. Dallas police say the key is to approach apartment owners in a friendly, rather than punitive, manner. He adds, "We think it's an opportunity to build positive relationships with these apartment [communities]."
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Split Incentive Stalls Energy Efficiency in Rental Housing
Digested From "Split Incentive Stalls Energy Efficiency in Rental Housing"
Sightline Daily (04/27/09) by Roger Valdez
Making changes that increase energy efficiency can decrease greenhouse gas emissions and save money on energy bills. Too often, though, those who live in rental units and their apartment managers resist efficiency investments. The main cause is split incentives. Owners do not make investments in energy efficiency because they are not paying the utility bills, and apartment residents typically do not invest in communities that they have no ownership stake in. One solution is green leases that allow owners to spend money on efficiency enhancements and save money on their costs by raising rent as much as the savings minus an amount that is passed on to the resident. An example of this would be a refrigerator replacement. An apartment resident will not purchase a new refrigerator because he/she may not be in the unit long enough to recoup the initial investment, and the owner will typically purchase the cheapest model because he is not paying the electric bill. However, the owner could raise the rent enough to pay for the model, but since the utility bill will be lower, the resident will end up saving money. Such leases can be complicated, but they have been successfully implemented in other commercial real estate rental settings and tend to work. Legal energy performance standards could also solve the problem in the rental apartment market. By nudging more owners toward energy efficiency, the practice could become more widespread.
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