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1 Hurdle Down, Many More to Go for the Economy
Industry News
U.S. Apartment Vacancies Reach 6.1 Percent as Rent Growth Slows
Economy's Impact On Multifamily Financing Small, Memphis Lenders Say
Metro Orlando Apartment-Vacancy Rate Dips to 10.4 Percent
UDR Inc. Launches Web Site on MySpace
Apartment Demand Strong in North Texas
Those Who Don't Own Homes Still Dream of Doing So -- But Not Soon
Galveston County Apartment Association to Rebuild Storm-Damaged Units
Apartment Owner Gets Nasdaq De-listing Notice
Plots & Ploys: Help Wanted
Equity Residential Positioned Well
UDR Announces Proposed Offering of Common Stock
Commercial and Apartments Flourishing on Mississippi Coast
Legislative/Legal News
New Apartment Regulation That Aims to Fight Crime Passed in Texas
Pittsburgh Apartment Owner Licensing Deadline Extended
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1 Hurdle Down, Many More to Go for the Economy
Digested From "1 Hurdle Down, Many More to Go for the Economy"
USA Today (10/06/08) by David J. Lynch
Critics of the $700 billion plan to revive the U.S. financial system--signed into law by the president on Oct. 3--say it will not be enough to resolve a shortage of capital, among other problems banks are facing. Some top economists believe the government eventually will have to come up with other massive measures, such as closing down insolvent lenders and providing direct financial aid to individual homeowners to curb foreclosures. The Treasury Department will focus on purchasing mortgage-backed securities, with hopes that removing the troubled assets from the balance sheets of financial institutions will enable them to return to normal lending. The latest data show the economy continues to struggle, and many analysts are expecting the Federal Reserve to cut interest rates this month.
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U.S. Apartment Vacancies Reach 6.1 Percent as Rent Growth Slows
Digested From "U.S. Apartment Vacancies Reach 6.1 Percent as Rent Growth Slows"
Bloomberg (10/06/08) by Peter S. Green
Reis Inc. reports that the third-quarter vacancy rate for U.S. rental apartment communities climbed to 6.1 percent, while the average monthly asking rent increased 0.6 percent to $1,053--the 26th consecutive quarter that rents rose or did not budge. Vacancies are on the rise partly because of a lack of jobs for recent college graduates, a trend punctuated by the fact that the United States shed 159,000 jobs last month. Reis chief economist Sam Chandan notes, "Twenty- to 30-year-olds are about 70 percent renters ... [and] when they are not finding jobs, they are not renting either.'' Geographically, New York posted the highest average U.S. rent at $2,855 a month, followed by such markets as San Francisco at $1,827 and Boston at $1,660.
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Economy's Impact On Multifamily Financing Small, Memphis Lenders Say
Digested From "Economy's Impact On Multifamily Financing Small, Lenders Say"
Memphis Daily News (10/05/08) by Eric Smith
Memphis-area lenders report that financing for multifamily housing has not been negatively affected by the recent Freddie Mac and Fannie Mae crisis. That is because the maximum loan on multifamily has always been just 80 percent of the value of the property. The multifamily housing portfolio of Freddie Mac, for instance, has remained intact with a low delinquency rate of less than half of 1 percent. Multifamily housing remains one of the strongest performing sectors in commercial real estate. According to Chandler Reports, apartment sales ranked third with 65 sales year to date among property types behind only vacant land of more than 1 acre and warehouses. Rick Wood, senior vice president at Financial Federal Savings Bank, observes, "There are merchant builders who actively develop multifamily properties across the country with the intention of selling them at completion and stabilization, [and] there is a ready market for willing buyers to find product and bid on it. There seems to be more willing buyers and willing sellers in the multifamily arena than in the other commercial product types." Because lenders consider apartments to be less risky, financing for such communities remains solid. For instance, apartment occupancy in the Memphis metro area was 90.2 percent for this year's second quarter. That was relatively unchanged from the first three months of this year and the second quarter of 2007, confirms the latest study by CB Richard Ellis Memphis’ multifamily division. Wood concludes, "There was a fear a year ago that the housing market's weaknesses would cause potential apartment dwellers to move into foreclosed homes. We can’t see evidence of that happening on a widespread scale. Occupancies on well-managed, well-located properties are increasing as are their monthly rents."
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Metro Orlando Apartment-Vacancy Rate Dips to 10.4 Percent
Digested From "Metro Orlando Apartment-Vacancy Rate Dips to 10.4 Percent"
Orlando Sentinel (FL) (10/03/08) by Jerry W. Jackson
Charles Wayne Consulting Inc. reports that the Orlando metro area's apartment market tightened this past spring and summer, as the vacancy rate dipped slightly from 10.6 percent at the end of March to 10.4 percent by Sept. 30. This could translate into higher rents in the coming months. However, there are signs the trend may not last because the area's population growth has stagnated and job growth is flat. According to the twice-yearly study by Charles Wayne Consulting, the Apopka, Fla., area ranked as the tightest of the dozen submarkets chronicled with a 3.7 percent vacancy rate. The survey chronicles apartment communities of 50 units or more in Orange, Seminole, Osceola and Lake counties. In addition, It covers communities in northeast Polk County near the Lake County line. The latest study found 604 communities in Metro Orlando with more than 144,600 rentable apartments versus 567 communities and just under 137,000 units a year earlier. Another 3,699 apartments were under construction, substantially below the average of around 5,000 units that have been under way at any given time during the past five years. Orlando's March vacancy rate of 10.6 percent was the first to surpass 10 percent since the end of 2002's first quarter. The Charles Wayne survey dates back to March 1987, when the Orlando market had only 293 apartment communities and 55,572 rentable units. The tightest apartment market on record locally was in March 2006, when the local vacancy rate was 3.6 percent. At the time, thousands of rental apartments were being converted to for-sale condominiums. As sales have since collapsed, many of those condo developments have since returned to the rental apartment sector.
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UDR Inc. Launches Web Site on MySpace
Digested From "UDR Inc. Launches Website on MySpace"
Centre Daily Times (PA) (10/06/08)
UDR Inc. has launched a Web site on the MySpace social networking site. Located at www.myspace.com/rentalapartments, the new site aims to extend UDR's marketing reach and generate incremental apartment search traffic for the Denver-based company's communities. A recent MarketTools' Insight Report indicates that nearly 70 percent of American adults access social media, and 47 percent of those polled report that social media sites have a direct impact on their buying decisions. Jerry Davis, UDR's senior vice president of operations, remarks, "The potential benefits of online marketing in this social space are too numerous for us to sit back and wait for others to go after this market segment. We believe our MySpace presence will help us connect with prospects, generate low-cost Web site traffic, increase awareness of our apartment home communities and build and grow a social community around the UDR brand." Features of the UDR MySpace site include video footage of various UDR apartment communities and a FlickR.com photo feed that displays UDR-related photos.
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Apartment Demand Strong in North Texas
Digested From "Apartment Demand Strong in North Texas"
Fort Worth Star-Telegram (10/02/08) by Andrea Jares
M/PF YieldStar reports that apartment demand in North Texas was strong in 2008's third quarter, with demand up 3,680 units. However, that demand was barely strong enough to keep up with increased competition from the number of single-family homes now flooding the rental market. Adding to the problem was the reality that more apartment residents moved out than moved in during the first six months of 2008. Consequently, North Texas' apartment sector has had a total increase of just 300 units since the first of the year, confirms M/PF YieldStar. As of Sept. 30, the occupancy rate in North Texas was 93.2 percent. The average monthly rent was $766, a 2.9 percent increase from the end of 2007's third quarter.
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Those Who Don't Own Homes Still Dream of Doing So -- But Not Soon
Digested From "Those Who Don't Own Homes Still Dream of Doing So -- But Not Soon"
MarketWatch (10/03/08) by Amy Hoak
According to the results of a recent Trulia.com survey, more than 50 percent of all non-homeowners still believe homeownership is integral to achieving their own American dream. The majority of respondents, however, are not planning to turn that dream into reality in the next year. In fact, more than 70 percent said they had no plans at all to buy a home in the next 12 months. Furthermore, 44 percent of those between the ages of 18 and 34 said that the main reason they do not currently own a house is because it is too expensive. Trulia CEO Pete Flint remarks, "It appears that the financial and mortgage meltdowns really have had their greatest impact on the sector of American consumers who haven't yet bought a home." The survey further found that 92 percent of current homeowners said they would not be buying another home in the next year.
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Galveston County Apartment Association to Rebuild Storm-Damaged Units
Digested From "Apartment Group Plans to Rebuild Units Damaged by Ike"
Houston Chronicle (10/03/08) by Harvey Rice
In Texas, the Galveston County Apartment Association reports that most of its 130 members plan to repair or rebuild apartments recently damaged by Hurricane Ike. Such efforts will help to alleviate the serious shortage of rental housing in the wake of the storm. The association accounts for 13,000 rental apartments that house more than 30,000 residents. Association President Rusty Legg comments, "We recognize that the situation has created hardships for our residents, and we are working hard to make sure they have the information they need as we move forward."
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Apartment Owner Gets Nasdaq De-listing Notice
Digested From "Apartment Owner Gets Nasdaq De-listing Notice"
New London Day (CT) (10/04/08) by Karin Crompton
In late September, Tarragon Corp. received a deficiency notice from the Nasdaq Stock Market after the apartment owner's stock fell below listing standards for 30 consecutive days. In fact, the company's stock hit its lowest-ever level of 17 cents a share this past week after trading in the mid-$20 range just a few years ago. Tarragon has 180 days to regain compliance or be de-listed. Tarragon CEO William Friedman remarks, "We're not going to do anything in response to this [notice], but we are developing a strategy to respond to this terrible economy in a way that will permit the company to survive in a condition to expand when times change." According to Friedman, the "principal element" of this plan is to convert debt to equity. That typically means selling off apartment communities, as Tarragon spent the bulk of last year doing. Friedman adds current economic conditions preclude developers from undertaking new projects in an effort to boost revenues. He remarks, "Right now, it's unfortunately true that you really can't start any new projects or developments, and even if you have the money in hand to do it, it's not a sensible thing to commit in the midst of such uncertainty."
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Plots & Ploys: Help Wanted
Digested From "Plots & Ploys: Help Wanted"
Wall Street Journal (10/01/08) P. C14; by Jonathan Karp; Lingling Wei; Kris Hudson
Thanks to the mortgage and credit crises, there has been a decline in prospective hiring in the commercial real estate sector during the last couple of months. According to a new study by Cornell University and Select Leaders, Texas has been among the few bright spots. The state now offers nearly as many property-job opportunities as New York--a 10-percent national share--but receives only 3 percent of all applicants. The second annual Job Barometer shows continued demand for jobs in the stable multifamily housing sector, but overall it warns that the worst "may yet still be ahead" as property firms face everything from layoffs to hiring freezes.
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Equity Residential Positioned Well
Digested From "Equity Residential Positioned Well"
Zacks Equity Research (10/01/08) by Greg Sukenik
Despite the national economic slowdown, Zacks Equity Research still rates Equity Residential as a "Buy." According to Zacks analyst Greg Sukenik, "We think multifamily will continue to be one of the best-performing REIT sectors in 2008. The company has a strong balance sheet and plenty of liquidity to be active in acquisitions and development." He adds that some attractive acquisition opportunities could open up in the next six months or so as smaller developers struggle to secure financing and are forced to sell. Equity Residential is a Chicago-based apartment REIT that ranks as the largest publicly traded, self-administered and self-managed multifamily housing operator in the country.
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UDR Announces Proposed Offering of Common Stock
Digested From "UDR Announces Proposed Offering of Common Stock"
Business Wire (10/01/08)
UDR Inc. has announced plans to sell 5,750,000 common shares in an underwritten public offering. In addition, the Denver-based apartment REIT plans to grant underwriters an option to buy up to an additional 862,500 shares to cover any overallotments. All of the shares of common stock will be issued under a shelf registration statement filed with the SEC. Net proceeds will go to repay outstanding debt under the company's revolving credit facility, for working capital and other general corporate purposes. Serving as joint book running managers for the offering are Merrill Lynch & Co., Citi and Morgan Stanley. As of the end of August, UDR owned a portfolio of 44,089 apartments and had another 5,116 units in various stages of development.
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Commercial and Apartments Flourishing on Mississippi Coast
Digested From "Commercial Flourishing on Coast"
RedOrbit (09/29/08) by Lynne Jeter
While residential construction on Mississippi's Gulf Coast continues to decline, the flow of new commercial building contracts remains strong. May was an especially strong month, with $112 million in contracts completed for Gulfport, Biloxi, and Pascagoula. Sam Ford, commercial specialist with Coldwell Banker Alfonso Realty Inc. and a 31-year veteran of the local market, comments, "GO Zone funding has been extended to Mississippi's five coastal counties until the end of 2010. With a huge cut in the local bank loan rate, investors can get money for 5.7 percent to 5.8 percent interest--it's a good deal." Ford notes that there has been an especially big run on apartments, retail stores, and fast-food restaurants along the Mississippi Gulf Coast.
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Legislative/Legal News
New Apartment Regulation That Aims to Fight Crime Passed in Texas
Digested From "Irving City Council Approves Stricter Rules for Renters at Poorly Rated Apartment Complexes"
Dallas Morning News (10/03/08) by Brandon Formby
In Texas, the Irving City Council has passed new ordinances governing apartment housing. Irving city officials the new regulations for apartment communities will help fight crime and improve poor living conditions. However, local apartment industry representatives called the changes invasive, accusing city staffers of surprising them with a litany of new regulations. They pleaded with council members to postpone action, but to no avail. The changes are part of a 166-page overhaul of Irving laws governing building standards. Owners of lower-rated apartment communities would be required to conduct criminal background checks on all new residents and would have to take part in a police training program. Owners who lease to residents who have committed certain crimes could face Class C misdemeanors. Irving Assistant Police Chief Steve Ramsey says his department will work with apartment owners and managers on which prospective residents are granted exceptions for such crimes as theft, misdemeanor drug use, bad checks and driving while intoxicated. The ordinance also requires all apartment owners and managers to obtain a license from the city to operate.
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Pittsburgh Apartment Owner Licensing Deadline Extended
Digested From "Landlord Licensing Deadline Extended"
Pittsburgh Post-Gazette (10/03/08) by Rich Lord
Having missed a Sept. 30 deadline for registering the owners of 62,000 apartments and rental homes citywide, Pittsburgh officials have reset the deadline to Dec. 1 under legislation submitted by Councilman Bruce Kraus and backed by Mayor Luke Ravenstahl. Apartment owners would then have until April 1 to register and pay the new $12-per-unit fee. Failing to do so could result in a $1,000-per-month fine. The new bill changes an ordinance passed late last year and signed by Ravenstahl on Jan. 9 that set a Sept. 30 deadline to register all owners. However, the mayor's administration failed to hire two needed clerks and create a Web-based registration system in time, so no apartment communities have been registered. Councilman Dan Deasy, a sponsor of the original ordinance, states, "Folks in our neighborhoods are ready for this to take effect. The sooner, the better." Some owners, though, maintain that the ordinance is little more than a new tax. Officials at the Apartment Association of Metropolitan Pittsburgh have yet to weigh in on the issue.
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