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JPI Sells Management Services Business to Greystar
Industry News
Reis Study Shows Effective Rents Drop Four-Tenths of 1 Percent
Los Angeles-Area Apartment Rents Suffer Rare Decline
Apartment Vacancy Rate No Worry For New Managers in Texas
Colonial Rearranges Top Spots After President Resigns
Equity Residential to Take $115 Million Charge
Apartments in Outlying Ohio Areas Not Seeing Uptick in Residents
Despite Vacancy Increase . . . Rental Market Remains Tough
UDR Declares Quarterly Dividends
Apartment Vacancies Prompt Extended Market in Austin
Demand for Rental Apartments Grows in New Jersey
Wisconsin Apartment Owners Fear Economic Woes
Legislative/Legal News
Obama Plans to Keep Estate Tax
Obama Asks Congress to Delay Feb. 17 DTV Switchover
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JPI Sells Management Services Business to Greystar
Digested From "JPI Sells Management Services Business to Greystar"
Dallas Morning News (01/05/09)
JPI, a Texas-based apartment developer, has sold its management services business to Greystar Real Estate Partners LLC. The South Carolina-based firm acquired JPI Management Services in a transaction that will expand its operations to include approximately 140,000 apartments. Terms of the deal were not disclosed. Greystar Chairman and CEO Bob Faith remarks, "Although today's economy is tumultuous, we are blessed to be on solid financial footing. The combining of the companies is being done with no debt, allowing Greystar to continue to invest in our platform, systems and people." JPI Management Services currently operates more than 41,000 apartment units in Texas, California, the Pacific Northwest, the Midwest and the Northeast. Founded in 1993, Greystar already ranked as one of the nation's top 10 apartment managers prior to the deal.
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Industry News
Reis Study Shows Effective Rents Drop Four-Tenths of 1 Percent
Digested From "Apartment Landlords Find What Goes Up, Does Come Down"
Wall Street Journal (01/07/09) P. C10; by Nick Timiraos
A new Reis Inc. study shows that effective apartment rents, which includes free rent and other concessions, declined by 0.4 percent in last year's fourth quarter. That marked the first time rents have fallen since early 2003. For all of 2008, rents rose by only 2.2 percent--a decline from 4.6 percent a year earlier--as the country's apartment vacancy rate jumped nearly a whole percentage point to 6.6 percent. Now, even the biggest publicly traded apartment REITs are preparing for trouble ahead, with AvalonBay Communities Inc. deciding to halt all new construction in the first six months of the new year and Post Properties Inc. recently slashing its quarterly dividend to 20 cents from 45 cents. Meanwhile, the apartment sector continues to be negatively impacted by the "shadow market" of single-family homes and condominiums being rented at deep discounts by homeowners and investors unable to sell them. In the long term, though, some property professionals expect apartment owners to benefit from the limited amount of new multifamily housing construction that has taken place in the past five years.
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Los Angeles-Area Apartment Rents Suffer Rare Decline
Digested From "Housing Downturn Hits L.A.-Area Rents"
Los Angeles Times (01/08/09) by Peter Hong; David Pierson
After rising for several years in a row, apartment rents in the Los Angeles metro area are on the way down because of the recession and depressed home prices. The lower local rents match a national trend, according to a new Reis Inc. report showing apartment rents fell in 54 out of 79 U.S. metropolitan areas in 2008's fourth quarter. Economists warn that softening apartment rents add another roadblock to a housing market recovery, because residents with low rent payments feel less urgency to purchase a house. Los Angeles' apartment rents fell 0.7 percent in 2008's October-through-December period, the first decline since 2001. However, overall rents for the entire year rose slightly over 2007. Overbuilding during the property boom earlier in the decade added vacant units to the rental pool. At the same time, more and more home sellers unable to find buyers are renting their houses or condominiums rather than leaving them on the selling block. Foreclosures also add both supply and demand to the rental housing market, as many foreclosed homes become rentals and former owners seek places to rent. Century West Properties President Kevin McCabe adds that rather than rent apartments, many people are opting to add roommates or are moving back in with parents. To entice apartment residents, McCabe has been lowering rents 5 percent to 10 percent if a unit has sat vacant for at least 30 days. He recently used Craigslist to advertise a one-bedroom apartment in West L.A. Price at $1,495 a month. When no one came forward, he dropped it to $1,395. When the vacancy stretched on for two months, McCabe dropped it another $100 a move and found a resident.
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Apartment Vacancy Rate No Worry For New Managers in Texas
Digested From "Apartment Vacancy Rate No Worry For New Complex Managers"
KFDX NewsCenter 3 (01/08/09) by Mechell Dixon; Christy Graham
Wichita Falls has one of the healthier apartment markets in Texas. The local apartment vacancy rate held steady at 10 percent in 2006 and 2007 before dropping to 9 percent this past year. New construction is following. On the East side of town, for instance, the first new apartment community in many years is now being built. Close by, construction crews continue their work converting a historic elementary school into the 27-unit Austin School Apartments. Finally, a 120-unit gated apartment community is in the planning stages to be built near Wichita Falls' Belair neighborhood. So many new apartments are being planned for the town that some local officials say over-saturation is a real risk.
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Colonial Rearranges Top Spots After President Resigns
Digested From "Colonial Rearranges Top Spots After President Resigns"
CoStar Group (01/06/09) by Laurie Forbes
Colonial Properties Trust has named board chairman Thomas H. Lowder its new CEO and C. Reynolds Thompson III its new president and CFO following Weston M. Andress' recent resignation from his posts as president, CFO and board member. Lowder remarks, "The board of trustees felt it would be in the best interest of our shareholders for me to take a more active role in the day-to-day operations of the company as we navigate the current economic environment." The Alabama-based apartment REIT does not expect any impact on its bottom line from the management changes. Lowder, who held the chief executive position for more than a decade until April 2006, has been the board's chair since Colonial Properties was established in 1993. He also served as president and CEO of the REIT's predecessor, Colonial Properties Inc. For his part, Thompson served as COO at Colonial from 1999 until he replaced Lowder as chief executive in 2006. He joined the apartment owner and operator from CarrAmerica Realty Corp. in 1997.
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Equity Residential to Take $115 Million Charge
Digested From "Equity Residential to Take $115 Million Charge as It Ditches 5 Projects"
Chicago Tribune (01/09/09) by James P. Miller
Equity Residential has decided to drop plans for five apartment communities it had been expecting to pursue. As a result, its fourth-quarter results will include a $115 million impairment charge. The Chicago-based apartment REIT notes that the charge will reduce per-share earnings in the October-through-December period by 39 cents. Analysts have been forecasting Equity Residential would post quarterly earnings of 63 cents a share. Equity Residential President and CEO David J. Neithercut comments, "We have said for some time that maintaining ample liquidity and credit capacity are our foremost priorities and as a result we would be very cautious regarding new development projects." Following the hefty non-cash charge, Equity Residential will have land held for development of about $250 million, representing nearly 1.5 percent of the REIT's total assets. A total of 10 apartment communities currently in various stages of planning and development will not be affected by the cutback.
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Apartments in Outlying Ohio Areas Not Seeing Uptick in Residents
Digested From "Apartments in Outlying Areas Not Experiencing Drastic Uptick in Renters"
Columbus Business First (01/02/09) by Drew Bracken
In Ohio, the outlying counties of Delaware and Licking have yet to experience a substantial shift to apartment living despite the troubles still being felt in the for-sale housing market. Licking County apartment owners, for example, have been reporting business as usual for the most part. Ginny Iler, secretary to the Licking County Apartment Association, comments, "I know the foreclosures are making more people come to the rental market. It's getting a little easier to find a decent [resident], but several in the group are struggling to keep their units full." A concession such as one month's free rent is still common throughout Licking County, she adds. Longtime area Realtor Pat Guanciale with Coldwell Banker/King Thompson adds, "Our vacancy rates are pretty much like they've been for the past couple years."
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Despite Vacancy Increase . . . Rental Market Remains Tough
Digested From "Grand Junction Apartment Market Stays Tough"
KJCT 8 (Grand Junction, Colo.) (01/09/09)
In Colorado, Grand Junction's rental apartment market remains tight. Despite recent increases in the number of available apartments, many locals are still finding housing hard to come by. Lori Rosendahl of the Grand Junction Housing Authority states, "Apartments here are still full. . . . We're still seeing a low vacancy rate." That rate crept up slightly to 2.4 percent as of the end of 2008's third quarter. Those looking for a place to live in the Grand Valley region are often surprised at the lack of available apartments. One such resident is Amber Livingston, who states, "I thought a bigger city would have more opportunities and more options and a greater variety, and there's not." Rosendahl says people are coming to her agency for help everyday--people who are homeless mainly because they have been unable find a place to live. She laments, "Some of them have the money to rent a place. They just can't find an appropriate place for their income level."
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UDR Declares Quarterly Dividends
Digested From "UDR Declares Quarterly Dividends"
Business Wire (01/06/09)
UDR Inc.'s board of directors has declared a fourth-quarter dividend of $0.3322 per share on its Series E Preferred Stock, which will be payable on Jan. 30 to shareholders of record as of Jan. 9. In addition, UDR's board declared a regular quarterly dividend on its Series G Preferred Stock for the period of Oct. 30 to Jan. 30 in the amount of $0.421875 per share. That dividend will also be payable on Jan. 30 to Series G shareholders of record as of Jan. 9. As of the end of 2008's third quarter, the Denver-based apartment REIT owned 44,223 rental units and had another 2,047 apartments in various stages of development.
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Apartment Vacancies Prompt Extended Market in Austin
Digested From "Vacancies Prompt Extended Austin Renters Market"
Austin American-Statesman (TX) (01/09/09) by Kate Miller Morton
In Central Texas, a faltering economy coupled with an ill-timed apartment construction boom have created a resident's market throughout the region that is likely to continue well into the new year. Capitol Market Research reports that the occupancy rate among Austin-area apartment communities declined from 96.6 percent in 2007 to 91.4 percent at the end 2008. This resulted in the highest vacancy rate since 2004. Meanwhile, the citywide average rental rate for a two-bedroom, two-bathroom apartment increased slightly to $962 in 2008. Capitol Market Research President Charles Heimsath reports that is because many of the new apartment communities that opened in the past year were high-priced downtown communities near the University of Texas. Those commanded rents substantially higher than the citywide average, causing the overall numbers to rise. He adds that rents actually declined slightly year-over-year for apartment communities that were open at least a year. Heimsath forecasts a dip of another 2 percentage points in occupancy and 5 percent in rental rates in 2009 before the market improves the following year. Furthermore, new apartment construction is expected to slow considerably in 2009, with approximately 2,000 additional units on track to be completed.
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Demand for Rental Apartments Grows in New Jersey
Digested From "Demand for Rentals Grows"
Asbury Park Press (NJ) (01/10/09) by David P. Willis
While New Jersey's for-sale housing market remains weak, the market for apartment communities is strong. Ron Schrader Jr., a sales associate at the commercial real estate brokerage Sitar Co., observes, "The appetite that buyers have for this type of product is still tremendously high. Why? It's tough to build new apartment [communities] in New Jersey. No towns want them built, [and] they are very tough to get approvals for." The ongoing housing woes have made apartment living attractive for a wider range of people who are unable to afford homeownership. Since 2004, Marcus & Millichap Research Services reports that when Jersey was approaching the height of the real-estate boom, vacancy rates at apartment communities in Monmouth and Ocean counties have fallen. Ocean County's apartment vacancy rate dipped to 4.6 percent as of 2008's third quarter, down from 10.2 percent four years earlier. Monmouth County, meanwhile, saw its vacancy rate drop from 3.2 percent to 2.1 percent over that same time span. Meanwhile, average rents stabilized in 2008 after increasing 3.8 percent in Ocean County and 5.6 percent in Monmouth County, according to Marcus & Millichap.
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Wisconsin Apartment Owners Fear Economic Woes
Digested From "Landlords Fear Economic Trouble In Rental Industry"
Channel 3000 Madison (Wis.) (01/09/09)
While Wisconsin residents struggle with a challenging housing market, the Madison area's rental apartment sector has seen its vacancy rate rise to about 3.5 percent currently. Madison Gas and Electric, which tracks local gas and electric service, says that rate is the lowest since 2002. Some, though, are concerned that the current good times could soon be undermined by substantial layoffs in the public sector. Gregg Shimanski, owner of Shimanski Realty Inc., cautions, "We may see another further regression in the whole thing that really affects the rental industry almost as heavily as it's affecting the homeowners." Shimanski is working harder than ever to retain his residents out of fear of the projected state government and university layoffs down the road due to a growing budget deficit. Shimanski currently owns 400 Madison-area rental units, boasting a nearly 100 percent occupancy rate. The local apartment sector is vulnerable due to the fact that over 50 percent of Dane County residents rent, according to WISC-TV. In Madison alone, 65 percent of residents rent. Experts add that the top apartment owner and manager concern for applicants and residents now is: "Do you have a stable job?" as opposed to "Do you have good credit?" Nancy Jensen, director of the Apartment Association of South Central Wisconsin, remarks, "It's really not a discussion of a credit crunch. It's more a discussion of employment and do they have the monthly income." Jensen adds that her apartment group is continuing to work with banks, owners and apartment residents to avoid both foreclosure and evictions.
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Legislative/Legal News
Obama Plans to Keep Estate Tax
Digested From "Obama Plans to Keep Estate Tax"
Wall Street Journal (01/12/09) P. A1; by Jonathan Weisman
Top congressional tax writers indicate members of the U.S. Senate Finance Committee plan to work on legislation to prevent the disappearance of the federal estate tax in 2010. While President-elect Barack Obama did pledge to increase taxes for high-wage earners during the campaign, he seems reluctant to do so during a recession. Observers say the likely result of proposed legislation will be a federal estate tax exemption of $3.5 million or $7 million for couples and a top rate of 45 percent. The Joint Committee on Taxation states the Obama plan would cost the U.S. Treasury $324 billion more than maintaining an exemption of $1 million and a top rate of 55 percent. Meanwhile, advocates of estate tax repeal have suggested an exemption of $10 million or $20 million per couple to ensure all small businesses are exempt from taxation.
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Obama Asks Congress to Delay Feb. 17 DTV Switchover
Digested From "Obama Asks Congress to Delay Feb. 17 DTV Switchover"
InformationWeek (01/08/09) by W. David Gardner
Late last week, President-elect Barack Obama urged Capitol Hill lawmakers to postpone the Feb. 17 switch from analog to digital television broadcasting as problems with the switchover continue to mount. While most Americans won't be affected by the switch, an estimated 15 million TV watchers have old analog sets that will not deliver the new digital broadcasts without converter boxes. Obama's action follows a Jan. 7 plea by Consumers Union, which petitioned both President Bush and Obama to consider delaying the DTV switch. Joel Kelsey, policy analyst for Consumers Union, states, "The federal government is getting $19 billion from selling the analog TV spectrum while people with analog TVs have to go out and spend their own money for a converter box." Now, the U.S. has spent almost all of the $1.4 billion that was allocated for a program, under which the government has been sending $40 coupons to consumers to be applied toward the purchase of a converter box so reception can be received in old analog TVs. One problem is that the $40 coupons expire after 90 days, and many holders were unable to find converter boxes early on. When many folks did, the coupons had expired. Since then, consumers have been placed on waiting lists for the coupons with no dates set for their availability. Consumers Union also has serious doubts over whether the call centers established to field complaints starting on Feb. 17 are prepared to handle the expected volume of calls.
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