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Apartment Sector Shines Through Long-Term Prism
Industry News
Fears Grows for REITs With High Debt Levels
Apartment Owner Program Helps Cities Cut Crime
Slump Echoes in Manhattan Dwellings
Baton Rouge Rentals Stay Full
26-Story Apartment Tower Proposed For Downtown
Condo Crash Pushes Developers Into Rentals
Goldman Sachs Analyst: REIT Winners and Losers
JRK Adds AIMCO Portfolio
Developer Keeps A Steady Hand
New York, HFA Facing an Uphill Climb for 17 Deals Worth $150 Million
Average 'Asking' Rents Up in Albany Area
Legislative/Legal News
Obama Unveils National Security Team
City Voting on Housing Variance
$8 Million Awarded in North Miami Beach Shooting Death
Champaign Council to Consider Trash Screening Proposal
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Apartment Sector Shines Through Long-Term Prism
Digested From "Apartment Sector Shines Through Long-Term Prism"
Commercial Property News (11/25/08) by Eugene Gilligan
One of the leading drivers for the apartment market is job growth, which has been declining for the past nine months. An estimated 2.7 million jobs could be lost in the downturn, similar to the 2001 recession, reported Hessam Nadji, managing director of research services for Marcus & Millichap Real Estate Investment Services, in a recent Webcast. But over the long term, apartments could become an appealing investment as new apartment development becomes scarcer. Linwood Thompson, senior vice president & managing director of the multi housing group for Marcus & Millichap, said new apartment development represents only about 1 percent of inventory this year. He predicted that development will be off 30 percent from 2007 and another 50 percent to 70 percent from 2008 to 2009. Meanwhile, immigration into the United States continues to be strong, and many Echo Boomers, or those born between 1977 and 1994, are entering the apartment rental market. "Apartments are likely to be worth dramatically more in 2014 than they are in 2009," Thompson forecasted. At present, however, deal velocity will likely be weak in 2009 due to capital market dislocation and gaps between buyer and seller expectations.
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Fears Grows for REITs With High Debt Levels
Digested From "Fears Grows for REITs With High Debt Levels"
Investment News (11/30/08) by Janet Morrissey
Industry experts are worried about several real estate investment trusts (REITs) whose steep debt levels and pending debt expirations could put their future at risk. Of special concern are REITs whose debt levels surpass 70 percent of overall market capitalization and those with a substantial level of debt rolling over in 2009 and 2010. Among the REITs whose leverage surpasses 75 percent are Apartment Investment and Management Co.; CBL & Associates Properties Inc.; Developers Diversified Realty Corp.; Education Realty Trust Inc.; General Growth Properties Inc.; Glimcher Realty Trust; SL Green Realty Corp.; Kite Realty Group Trust; Macerich Co.; Maguire Properties Inc.; Pennsylvania Real Estate Investment Trust; and ProLogis. The REIT with the largest percentage of its overall debt rolling over in 2009 is Education Realty of Memphis, which has 66 percent coming due. Others with a minimum of 25 percent coming due are BioMed Realty Trust Inc.; Cedar Shopping Centers Inc.; DuPont Fabros Technology Inc.; Glimcher, Kite Realty; and ProLogis. REITs with unsecured debt will encounter the greatest challenge, says Fitch Ratings Ltd. Managing director Steven Marks. Meanwhile, REITs with secured debt will probably have a simpler time refinancing, mostly through life insurance businesses and pensions that have come onto the market. The exception will be mortgages on properties situated in areas where appraised values have dropped significantly, such as Las Vegas, Phoenix, Florida, and sections of California.
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Apartment Owner Program Helps Cities Cut Crime
Digested From "Apartment Owner Program Helps Cities Cut Crime"
Associated Press (11/30/08)
Some cities in Utah have launched a "good owner" program that is helping reduce crime. Under the program, owners spend eight hours learning how to conduct background checks on prospective residents. Owners also agree to evict any tenant who commits a crime on the property. In return, cities give discounts to participating owners on business licensing fees. Police in Ogden, Utah, were the first to launch such a program in 2004, which was subsequently replicated in the cities of Clearfield, South Salt Lake, Washington Terrace, and West Valley City. Renters must pay an application fee that covers the cost of a background check. In Ogden, the initiative has led to a city-apartment owner partnership where police notify owners of criminal activities committed by residents, says L. Paul Smith, executive director of the Utah Apartment Association.
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Slump Echoes in Manhattan Dwellings
Digested From "Slump Echoes in Manhattan Dwellings"
Los Angeles Times (11/28/08) P. A20; by Erika Hayasaki
Apartment prices are dropping across New York City, despite the number of people who desire to live in Manhattan, where apartment prices have tripled in the last decade. New York City lost nearly 14,000 private-sector jobs in October, and across the city, out-of-work residents are breaking leases and moving out of Manhattan, as owners lower rents and fees. The city's rental vacancy rate has doubled to nearly 2% since this time last year, and that vacancy rate is expected to grow. However, the real estate market has not yet slumped as it did after Sept. 11, 2001, says Howard Feingold, president of Best Apartments, who opened his company in the aftermath of the terrorist attacks. At the time, he remembers, "more people were leaving the city. It was a psychological thing. People were scared." Those who live in the city and have decided to stick it out are bracing for what is expected to be an even tougher financial year, and many are downsizing into cheaper rentals.
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Baton Rouge Rentals Stay Full
Digested From "Baton Rouge Rentals Stay Full"
Baton Rouge Advocate (LA) (11/27/08) by Gary Perilloux
Very low vacancy rates in Baton Rouge, La., should persist through 2009, despite the addition of 5,000 units in the greater Baton Rouge market, according to Wesley Moore of Cook More & Associates, a Baton Rouge appraiser who tracks the area apartment market. Steve Smith, chairman of the Baton Rouge Apartment Association, reports a strong occupancy rate of 97 percent for the last week in November in the 26,000 member apartments the group surveys, an increase of 1 percent from 2007.
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26-Story Apartment Tower Proposed For Downtown
Digested From "26-Story Apartment Tower Proposed For Downtown"
Tampa Tribune (11/26/08) by Jose Patino Girona
Developers Intown Group and Crossland have proposed a 26-story apartment building in downtown Tampa, Fla., that would have 404 apartments, 16,000 square feet of shops. and a parking garage. The developers will ask the Tampa City Council to rezone the property at a Jan. 29 hearing, seeking approval for the building's height and design, which they say will be an art deco style comparable to New York City's Chrysler Building and Empire State Building. "We know there will be a long-term demand for rental in downtown," says Gregory Minder, Intown Group president.
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Condo Crash Pushes Developers Into Rentals
Digested From "Condo Crash Pushes Developers Into Rentals"
San Francisco Business Times (11/21/08) by Steve Ginsberg
A revivification plan for downtown Oakland involved the construction of numerous condominiums and apartments over a 10-year period, but the housing crisis is forcing a rethinking in strategy to salvage such projects. Among the tactics being implemented by condo developers are cut-rate sales or conversion of buildings to rentals. Oakland's Foresight Analytics estimates that Oakland's home values have plummeted 29.1 percent since the market's peak, and more than 200 condo units have been recently converted to rentals. This trend may fuel a rental market glut, while RealFacts notes that in the third quarter of this year Oakland's apartment vacancy rates have surged to 12 percent, up from 5 percent over the last two years. Rental prices had risen 15 percent earlier in the year, and the average Oakland rent came to $1,611 by the end of the third quarter. A decline in rental rates is expected as new units come on the market, and some observers are anticipating a further drop in rent without job creation and with new large apartment complexes.
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Goldman Sachs Analyst: REIT Winners and Losers
Digested From "Goldman Sachs Analyst: REIT Winners and Losers"
TheStreet.com (11/25/08)
Goldman Sachs analyst Jonathan Habermann said in a Nov. 25 note that he remains cautious on the real estate investment trust sector and made several ratings changes, citing ongoing challenges in the commercial real estate lending environment. "As long as the credit markets remain tight, several REITs may be forced to sell assets at sharply reduced pricing, cut their dividends as many have already, and issue new common shares to de-leverage," Habermann wrote. Habermann added Regency Centers to his "Conviction Sell" list and downgraded the REIT to "Sell" from "Neutral," citing concerns over near-term debt maturities and a concentration in weak commercial real estate markets. Habermann also reduced office REIT SL Green Realty and shopping center owner Developers Diversified Realty Corp. to "Neutral" from "Buy." Habermann recommended that investors focus on better-capitalized companies with limited development exposure, including large-cap mall REIT Simon Property Group and apartment REIT AvalonBay Communities. Habermann also said he is beginning to see more positive signs from the apartment sector. He removed AvalonBay from his "Conviction Sell" list and upgraded the stock to "Neutral" from "Sell."
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JRK Adds AIMCO Portfolio
Digested From "JRK Adds AIMCO Portfolio"
Atlanta Business Chronicle (11/24/08)
Los Angeles-based JRK Property Holdings Inc. has purchased a portfolio of 17 multifamily properties from Apartment Investment and Management Co. The price or names of the properties were not disclosed, but JRK says the portfolio is worth about $285 million. "Dislocation in the credit markets has created opportunities to acquire fundamentally sound multifamily properties at attractive prices, but you need to provide sellers with speed and certainty of execution in order to compete," says Jim Lippman, chairman and CEO of JRK. "We are well-positioned to capitalize on these opportunities due to the strength of our balance sheet, proven ability to close with certainty, and long-standing relationships with institutional owners."
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Developer Keeps A Steady Hand
Digested From "Developer Keeps A Steady Hand"
St. Petersburg Times (FL) (11/28/08)
Officials from Newland Communities, builders of master-planned communities across the country, continue to see a strong future in two ongoing projects in Hillsborough County, Fla. They say they have found that adapting to market changes while keeping an eye on the uncertain future is the best approach for now. "For us, it's all about taking the long view," says Rick Harcrow, senior vice president of operations for the Tampa division. "We build master-planned communities, and our projects go for 10 to 15 years. We have to be patient. We're not making silly decisions in a down market that will come back to hurt us." He says Newland continues to move forward with design and development in Hillsborough, but with more focus on multifamily housing than its traditional upscale single-family developments. At newly named Circa FishHawk, part of the 1,100-acre Lithia, Fla., site formerly known as Lake Hutto, Newland will build on 710 acres. At Starling, Fla., multifamily housing also will be mixed in with single-family homes.
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New York, HFA Facing an Uphill Climb for 17 Deals Worth $150 Million
Digested From "New York, HFA Facing an Uphill Climb for 17 Deals Worth $150 Million"
Bond Buyer (10/16/08) Vol. 365, No. 32987, P. 22; by Ted Phillips
The credit crunch is complicating the New York State Housing Finance Agency's efforts to gather 17 deals worth $150 million to the market by the end of 2008. HFA President and CFO Priscilla Almodovar says the agency is "doing everything we can to save any of the deals that are in our pipeline and are in line to close by the end of the year." To preserve the deals, HFA plans to sell fixed-rate bonds to underwrite the projects. However, Almodovar says financing the deals is difficult to do because "we don't know what mortgage rate to ultimately use." So far HFA has approved $6.4 million of financing for a 62-unit senior apartment community in Wayne County, NY, and plans to sell $4.8 million of bonds as part of a pooled bond deal to underwrite the mortgage and supply a $1.62 million second mortgage using a portion of $54 million of funds approved by the state for affordable housing funds. The agency is working with the state Department of Housing and Community Renewal to obtain additional subsidies for other projects.
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Average 'Asking' Rents Up in Albany Area
Digested From "Average 'Asking' Rents Up in Albany Area"
Albany Business Review (11/28/08)
In the Albany, N.Y., region, average asking rents at large apartment complexes increased by $16 during the past six months, according to a new survey by Sunrise Management & Consulting. The average asking rent this autumn was $900, an increase of 1.8 percent in the counties of Albany, Rensselaer, Saratoga and Schenectady, according to the survey of 123 apartment complexes. The average asking rent per square foot remained the same as last spring, at 96 cents, according to the survey. Reasons for the rent increase include supply and demand factors and more landlords offering bundled services like cable television and high-speed Internet. Such services can boost prices by $40 to $50 per month. Actual rents are often different from "asking" rents because landlords can offer various discounts to tenants. Sunrise President Jesse Holland noted that "the only housing group not facing an oversupply of inventory is the multi-family segment."
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Legislative/Legal News
Obama Unveils National Security Team
Digested From "Obama Unveils National Security Team"
Miami Herald (12/01/08) by Steven Thomma
President-elect Barack Obama unveiled his national security team on Dec. 1, including formally announcing his intention to nominate his onetime rival for the Democratic nomination, Sen. Hillary Clinton of New York, as the next secretary of State. Obama also announced his intention to keep current Defense Secretary Robert Gates in his post, likely for at least a year in the new administration. The president-elect also said he would nominate Susan Rice as ambassador to the United Nations, retired Marine Gen. James Jones as his national security adviser, Arizona Gov. Janet Napolitano as homeland security director, and Eric Holder as attorney general. "The national security challenges we face are just as grave, and just as urgent, as our economic crisis," Obama said during a news conference where he was surrounded by his newly chosen team. "We are fighting two wars. Old conflicts remain unresolved, and newly assertive powers have put strains on the international system. The spread of nuclear weapons raises the peril that the world's deadliest technology could fall into dangerous hands." Obama said he, his security team and the American people believe "now is the time for us to regain American leadership in all of its dimensions" as he sought to strike a balance between "maintaining the strongest military on the planet" and employing "the wisdom of our diplomacy."
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City Voting on Housing Variance
Digested From "City Voting on Housing Variance"
Belleville News-Democrat (IL) (12/01/08)
The Fairville Heights, Ill., City Council is expected to vote Dec. 2 on a multifamily housing development near Fountains Place Villas. O'Fallon, Ill.-based H&L Builders is requesting a variance for the 160-unit plan on 13.5 acres on Dunhill Drive because only 136 units are permitted under city code. Developers of The Fountains Parkway Apartments will need two-thirds approval from City Council because the plan had been rejected unanimously by the Planning Commission and aldermanic Planning Committee. The resolution has drawn opposition from residents at the neighboring Geneva Village villas, who say the development would increase noise, traffic, and parking issues in the area.
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$8 Million Awarded in North Miami Beach Shooting Death
Digested From "$8 Million Awarded in North Miami Beach Shooting Death"
Miami Herald (11/26/08) by Scott Hiaasen
A jury in Miami-Dade County, Fla., has decided that the owners of an apartment community in North Miami Beach must pay $8 million in damages to the family of a man who was murdered in the property's parking lot two years ago. The jury agreed with the plaintiff's argument that the owners of the apartment community, New York-based Maxx Properties, were partly responsible for the death of 27-year-old Starsky Garcia because there were no security guards or surveillance cameras at the complex despite the fact that crime in the area had increased. In addition, the owners of the apartment complex were found to be negligent in failing to fix a fallen fence and broken security gates, which in turn allowed anyone to have access the property. Maxx Properties has denied any wrongdoing. The company has not said whether it plans to appeal the verdict.
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Champaign Council to Consider Trash Screening Proposal
Digested From "Champaign Council to Consider Trash Screening Proposal"
Champaign News-Gazette (IL) (11/24/08)
Champaign, Il., Mayor Jerry Schweighart is opposing a proposal, that would require the screening of trash containers on properties built before 1997, calling it an unfunded mandate that will set apartment owners back $2,000 to $4,000. The proposal is heading to the city council for what is expected to be a close vote. Council member Michael La Due claims it makes little sense for the city to invest tens of millions of dollars in Campustown improvements and then allow open trash containers in plain sight.
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