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DUS Lenders Fuel Fannie Mae's Multifamily Investment During the First Half of '08
Industry News
Denver-Area Apartment Vacancies Climb in Q2 2008
Equity Residential Reports Second Quarter Results
Essex Property Trust's Q2 2008 Profit Totals $9.7M
Camden Property Trust Announces Q2 2008 Operating Results
AvalonBay Communities Posts Q2 2008 Operating Results
Recent Community Buy Highlights West Raleigh Apartment Market
Mid-America Apartment Communities' Income Dips 5.2 Percent
Tulsa's Apartment Market Remains Hot
Chicagoland Apartment Association Reports on Local Apartment Sector
San Joaquin County Apartment Rents Remain Stable
Legislative/Legal News
Proposed Fines for Unsorted Trash Could Affect San Fran Apartments
NJ Legislators Seek to Give Apartment Owners Exterminator Bills
Stormwater Fee Sparks El Paso Apartment Association Lawsuit
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DUS Lenders Fuel Fannie Mae's Multifamily Investment During the First Half of '08
Digested From "DUS Lenders Fuel Fannie Mae's Investment of $20 Billion in Multifamily During the First Half of 2008"
Originator Times (07/28/08)
Fannie Mae confirms that its Delegated Underwriting and Servicing (DUS) lenders increased investment in multifamily rental housing by 30 percent between the first halves of 2007 and 2008. Multifamily housing investment--including multifamily bond purchases, debt financing through lending partners, and other financing options--reached an all-time high of $20 billion in the first six months of 2008. "It is fitting as we celebrate the 20th anniversary of the DUS program that the DUS lenders had record production for the first half of this year," noted Phil Weber, Fannie Mae's senior vice president of multifamily.
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Denver-Area Apartment Vacancies Climb in Q2 2008
Digested From "Apartment Vacancies Climb in 2nd Quarter"
Denver Post (07/30/08) by Margaret Jackson
According to a new report by the Apartment Association of Metro Denver and the Colorado Department of Local Affairs' Division of Housing, the Denver metro area's apartment-vacancy rate rose from 5.9 percent in this year's first quarter to 6.2 percent during the second quarter. The average rental rate, meanwhile, rose from $861 a month to $886 over that same time span. Steve Rahe, first vice president of CB Richard Ellis' multi-housing group, remarks, "The apartment market has been strong. Owners are raising rents, and that's pushing vacancy up." However, local apartment community owners are still giving concessions and discounts, pushing the economic vacancy rate from 16.6 percent in the first quarter to 18.3 percent. Kathi Williams, director of the Division of Housing, notes that "economic vacancy" is the vacancies plus concessions and discounts as a percent of gross potential rent. All Denver-area counties except Arapahoe posted slight increases in vacancies since the January-through-March period. Douglas County recorded the highest vacancy rate at 8.3 percent, while Denver County reported the lowest at 5.7 percent.
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Equity Residential Reports Second Quarter Results
Digested From "Equity Residential Reports Second Quarter Results"
Business Wire (07/30/08)
Equity Residential posted Q2 2008 earnings of $0.47 per share compared to $0.95 for the same period a year earlier. The decrease is mainly due to lower gains because of a lower volume of apartment community sales this year. Funds from operations for the three-month period ended June 30 totaled $0.64 per share compared to $0.60 per share a year ago. Equity Residential President and CEO David J. Neithercut states, "We are very pleased with our operating performance for the first half of the year with solid occupancy and good revenue growth across most of our major markets. And we will produce good results for the year, with same store revenue growth of 3 percent to 3.5 percent, which is modestly short of our original expectations as many of our markets are feeling the impact of job losses due to a challenging economic environment." Equity Residential is a Chicago-based REIT that specializes in acquiring, developing and managing high-quality apartment communities in the nation's leading growth markets. Equity Residential currently owns or has ownership stakes in 564 communities spread throughout 23 states and Washington, D.C. Together, they contain 150,699 apartments.
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Essex Property Trust's Q2 2008 Profit Totals $9.7M
Digested From "Essex Property Trust's Q2 Profit $9.7M"
Silicon Valley/San Jose Business Journal (07/30/08)
Essex Property Trust recorded second-quarter net income of $9.7 million versus $9.9 million a year earlier. The California-based apartment REIT's funds from operations (FFO) totaled $40.3 million for the three-month period, compared to $36.5 million for the same three-month period a year earlier. The company reaffirmed its previous full-year FFO guidance of $5.90 to $6.15 per diluted share, and full-year earnings per share guidance of $1.85 to $2.10 per diluted share.
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Camden Property Trust Announces Q2 2008 Operating Results
Digested From "Camden Property Trust Announces Second Quarter 2008 Operating Results"
finanzen.net (07/31/08)
Camden Property Trust reports that its Q2 2008 funds from operations totaled $0.94 per diluted share versus $0.92 per diluted share for the same three-month period a year earlier. The apartment REIT posted net income of $17.3 million for the quarter as compared to $42.6 million for the April-through-June period of 2007. For the 42,166 apartments included in consolidated same-property results, same-property net operating income rose 0.8 percent from a year earlier. Same-property physical occupancy levels for the portfolio averaged 94.6 percent during this year's April-through-June period, down slightly from 94.8 percent in the second quarter of a year ago. Camden defines same-property communities as apartment communities owned and stabilized as of Jan. 1, 2007, excluding communities held for sale and those under redevelopment. Nationwide, Camden Property Trust currently has ownership stakes in 178 apartment communities containing 62,065 rental units. It was also recently named to Fortune Magazine's list of the "100 Best Companies to Work For."
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AvalonBay Communities Posts Q2 2008 Operating Results
Digested From "AvalonBay Communities, Inc. Announces Second Quarter 2008 Operating Results"
Business Wire (07/30/08)
AvalonBay Communities Inc. reported earnings per share (EPS) of $1.61 for the second quarter, compared to $0.61 for the same period a year earlier--a whopping 163.9 percent gain. For the six months ended June 30, 2008, EPS soared 90.5 percent from $1.16 to $2.21. According to AvalonBay officials, the increases are mainly due to gains from the sale of apartment communities and growth in income from existing and newly developed communities in 2008. Funds from operations (FFO) totaled more than $97.8 million in the April-through-June period versus just over $94 million for the second quarter of 2007--a 7.7 percent increase. AvalonBay Chairman and CEO Bryce Blair comments, "The strength of our balance sheet and the quality of our portfolio allowed us to raise $1 billion this year, better preparing us to address both future risks and opportunities. Continued solid performance allows us to raise our full year 2008 FFO guidance by $0.03 to a new range of $5.00 to $5.15." During this year's second quarter, the Virginia-based apartment REIT sold four communities, completed development work on three and began construction on three others. As of the end of the second quarter, AvalonBay owned or had ownership stakes in 180 apartment communities containing more than 51,100 rental units in 10 states and the nation's capital.
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Recent Community Buy Highlights West Raleigh Apartment Market
Digested From "Grubb Buys Palms Apartments"
Raleigh News & Observer (NC) (07/31/08) by Jack Hagel
Raleigh, N.C., developer Gordon Grubb and a group of partners recently paid $9.5 million for the Palms Apartments in West Raleigh. Grubb, who is president of Grubb Ventures, plans to continue operating the Palms' 212 apartments as rentals for at least the foreseeable future. However, most observers believe he will eventually have bigger plans for the 39-acre property. Recently, he has focused on acquiring older apartment communities and turning them into something more grand. Three years ago, for instance, he acquired the 1950s-era Whitaker Park apartments near the city's Five Points neighborhood. Grubb tore it down and planned The Oaks at Fallon Park, where $800,000 homes are today being sold. A year later, he bought the Country Club Homes apartment community and is considering redeveloping that 24-acre site into a retirement community. In West Raleigh, the Triangle Apartment Association reports that the occupancy rate has risen three points to 93 percent since 2006, while average monthly apartment rents have increased 5.4 percent to $681 per apartment. Grubb expects demand to grow as residents look to slash commuting costs by gravitating closer to employment centers. He remarks, "It doesn't make a whole lot of sense to be knocking down income-producing properties."
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Mid-America Apartment Communities' Income Dips 5.2 Percent
Digested From "Mid-America Income Drops 5.2 Percent"
Memphis Business Journal (07/31/08)
Mid-America Apartment Communities Inc. posted a 5.2 percent decline in its Q2 2008 net income to $8.6 million from a year earlier. Funds from operations totaled $27.8 million during the three-month period, a 19 percent increase from $23.4 million in 2007's April-through-June period. Total property revenues, meanwhile, rose 6.9 percent from $86.8 million to $92.8 million over that same time span. Memphis-based Mid-America acquired one new apartment community near Raleigh, N.C., in the second quarter and is now conducting due diligence on three additional communities. Mid-America has ownership stakes in 40,804 apartments throughout the nation's Sunbelt region.
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Tulsa's Apartment Market Remains Hot
Digested From "Tulsa's Hot Commercial Market"
Journal Record (OK) (07/31/08)
CB Richard Ellis/Oklahoma's Mid-Year Apartment Report for Tulsa showed the city's vacancy rate to be 6.5 percent--a near record low. Some of Tulsa's submarkets boasted even lower vacancies with the central market recording a vacancy rate of 6 percent and the Broken Arrow area showing just a 3 percent vacancy. Factoring in the 10 percent rental rate increase seen over the last year, Tulsa's apartment sector is becoming increasingly attractive to investors even with the effects of the credit crunch lingering. The major challenge will be the fact that there is very little product available on the market for sale. Nevertheless, analysts say it appears all the right forces have come together to boost Tulsa back into a prime commercial real estate market both locally and nationally.
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Chicagoland Apartment Association Reports on Local Apartment Sector
Digested From "Rent Prices React to Mixed Forces"
Chicago Sun-Times (07/30/08)
The Chicagoland Apartment Association (CAA) reports that apartment rent increases have varied from 1.5 percent to as much as 7 percent in the Windy City and more than 5 percent in the suburbs this summer. This comes as apartment owners continue to wrestle with a marketplace battered by recession fears, job losses and soaring prices at the pump. Judy Roettig, executive director of the CAA, states, "Some apartment managers have comfortably raised rents, while others have resorted to rental concessions." CAA is a 300-member organization that represents more than 2,500 apartment professionals who own or manage more than 600 communities and more than 136,000 apartments in the six-county Chicago area. Apartment rents on Chicago's South Side are rising 1.5 percent to 2 percent at the most. For apartment residents in the Old Town and Lincoln Park areas, increases averaged between 5 percent and 6 percent this past spring on empty apartments and 3 percent on occupied units with holdover residents. Those looking for an apartment in downtown Chicago are finding some bargains because owners there are facing increasingly lean occupancy rates. Appraisal Research Counselors calculates that Class A apartment occupancies downtown rose slightly to 91.9 percent from 91.3 percent in the fourth quarter of last year. However, the Chicago-based consultancy notes that total is lower than a year earlier when occupancy was at 93.4 percent in the first three months of 2007.
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San Joaquin County Apartment Rents Remain Stable
Digested From "San Joaquin County Rents Remain Stable"
Stockton Record (CA) (07/30/08) by Bruce Spence
RealFacts reports that the apartment occupancy rate in San Joaquin County, Calif., has risen by 1.7 percent for the year to a solid 96 percent. However, monthly rents averaged $887 in this year's second quarter, up only 0.9 percent from the same period a year earlier. Randy Thomas, a Sperry Van Ness commercial real estate broker who specializes in Northern California apartments, said high occupancy is the most important factor for apartment owners. He adds, "There's nothing more costly to multifamily property owners than vacancy." Although a year-to-year rent climb of 0.9 percent may not sound like a lot for a market where demand is still strong, Thomas says that is really the most that can be reasonably expected in this era of high food and fuel prices. Dave Midura, president of locally based Patmon Co., said 97 percent of the apartments are occupied at the upscale Torcello apartment community his firm manages in Stockton. Despite this, the company has not been raising rents. He explains, "We're trying to help the community, and right now, with gas prices what they are, we're trying to hold rents just for the sake of the people who are feeling it in their pocketbooks."
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Legislative/Legal News
Proposed Fines for Unsorted Trash Could Affect San Fran Apartments
Digested From "S.F. Mayor Proposes Fines for Unsorted Trash"
San Francisco Chronicle (07/31/08) by John Cote
Under a proposal by San Francisco Mayor Gavin Newsom, garbage collectors would inspect city residents' trash to make sure discarded food is not mixed in with wine bottles or newspapers. If businesses or residents do not separate the coffee grounds from the recyclables, they would face fines of as much as $1,000 and eventually could have their garbage service halted. Local apartment community owners are concerned that they will have to pay for a resident's behavior and will not be able to pass the fine along. Sean Pritchard, government affairs director for the San Francisco Apartment Association, asks, "How do you determine which tenant is at fault? Or do we indiscriminately start fining all tenants for one tenant's poor choice of judgment?" Environment Department Director Jared Blumenfeld shrugged off such fears. He replies, "We won't enforce against owners of apartment buildings if their tenants don't do this." If passed, this would be the country's first mandatory recycling and composting law. The duty of inspecting the trash would fall on garbage collectors to make sure the right blue, black and green bins are being used properly, according to a draft of the legislation prepared by the city's Department of the Environment. The program's main goal is to limit the amount of food and foliage that goes into the city-contracted landfill in Alameda County. While plenty of U.S. cities have imposed mandatory recycling, none require all food waste to be composted.
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NJ Legislators Seek to Give Apartment Owners Exterminator Bills
Digested From "4 Legislators Vow to Give Landlords Exterminator Bills"
Newark Star-Ledger (NJ) (07/29/08) by Amy Sara Clark
In New Jersey, four Hudson County lawmakers are pushing a state law that holds apartment community owners responsible for exterminating bedbugs, but permits them to pass on those costs to residents. Hudson County Democratic Assembly members Joan Quigley and L. Harvey Smith, along with state Sens. Brian Stack and L. Grace Spencer, D-Newark, are now preparing the legislation. Quigley remarks, "Landlords have the responsibility to maintain a clean and safe environment, and that includes getting rid of vermin. The very thought of anybody living with bugs crawling on them as they sleep is intolerable." The four legislators maintain that the problem is worsening because residents cannot afford the high exterminator bills. While the New Jersey Tenants Organization supports the proposed legislation, many building owners oppose the plan and note that they already pay for extermination in most cases. They simply want to retain the right to charge residents in certain cases, such as those who reintroduce an infestation or are uncooperative during the extermination process. Nicholas Kikis, director of regulatory affairs for the New Jersey Apartment Association, states, "Rarely are residents asked to fully compensate owners for the damage they've caused. Nonetheless, it is their responsibility to pay for an infestation they brought in and it would be counterproductive to absolve them of all responsibility."
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Stormwater Fee Sparks El Paso Apartment Association Lawsuit
Digested From "Stormwater Fee Sparks Another Lawsuit"
KFOXTV.com (07/24/08)
The El Paso Apartment Association has filed a lawsuit against the local Public Service Board (PSB), charging the PSB with treating apartments as commercial properties in the charging of a special stormwater fee. Jerry Carlson, executive director of the El Paso Apartment Association, laments, "We are the only city in all of Texas that is being charged a commercial rate. Everybody else has either a residential rate or a multifamily residential rate." Under the PSB's stormwater fee formula, an apartment community must pay more than three times what the same size residential property would pay. Carlson adds, "Being charged a commercial rate, we're going to have to pass that on to our residents, and they'll be paying considerably more than the people who live in individual homes." PSB members dispute Carlson's assertions, noting that at least seven other Texas cities--including Arlington and Amarillo--treat apartment communities as commercial properties. PSB President Ed Archuleta insists that apartment communities are commercial properties with large parking lots and other land that could flood. He reasons, "If you have a parking lot and you can get 20 homes on there, you're going to pay the equivalent of 20 homes. That's just the way it is." Carlson counters that some apartment residents are essentially being charged the stormwater fee twice because they have individual water meters on which they are charged the fee, and their community owners are passing on their fee costs in the form of higher monthly rents. Despite the differences in opinion, PSB officials say they are open to negotiating the fee with apartment owners.
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