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Industry News
Spectrum Is Considering Apartment Investment Bargains
Triad Apartment Market Sees Vacancies Rise and Rents Fall
Jumbo Loan Defaults Rise at Fast Pace as Rich Suffer
Joint Venture to Acquire Troubled Multifamily Housing
Plots & Ploys: Post Says Goodbye to Bonuses
Colorado Apartment Vacancy Rate Rises
Commercial Property Prices Fell 15 Percent in '08, Led by Apartments
Middle Tennessee Apartment Vacancies Rise
Home Properties Reports Fourth Quarter and Year-End 2008 Results
Knoxville Is Becoming an Apartment Market for Some
Legislative/Legal News
Labor: U.S. Chamber Switching Focus to Fighting Arbitration Measure
San Francisco Identifies Apartments Most at Risk
Rental Inspections in Erie, Pa., Prove Worthiness
Industry News
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Spectrum Is Considering Apartment Investment Bargains
Digested From "Spectrum Latest Firm Eyeing Investment Bargains"
Commercial Property News (02/20/09) by Barbra Murray
Spectrum Properties has established Spectrum Properties Multifamily Acquisitions Inc., a new subsidiary that will seek to acquire between $200 million and $500 million in apartment communities and student housing at a considerable discount to replacement cost. Timing, though, will be crucial. John Gray, president of this new venture, remarks, "We're confident there's going to be multifamily assets that will be available at attractive prices, but there's been a gap between what buyers want to pay and what sellers want to sell for. Over the last six to eight months, pricing has come down, but the gap still hasn't closed enough to make buyers enthusiastic." In their "Emerging Trends in Real Estate 2009" report, PricewaterhouseCoopers and the Urban Land Institute assert that opportunities will eventually arise at significant discounts to peak pricing. When Spectrum Properties Multifamily Acquisitions does launch its shopping spree, it plans to focus on apartment communities in the Southeast, Mid-Atlantic and Midwest. Gray states, "These are markets I really know well and I think it pays to know your market. Also, I think these locations are where most rental growth will occur in the next few years, and in many of the markets I've selected, there has not been a lot of construction so there will be stronger demand." At the top of Gray's list are cities in 11 states--Alabama, Florida, Georgia, Indiana, Kentucky, Maryland, North and South Carolina, Ohio, Tennessee and Virginia--and the nation's capital.
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Triad Apartment Market Sees Vacancies Rise and Rents Fall
Digested From "Triad Apartment Market Sees Vacancies Rise and Rents Fall"
Business Journal of the Greater Triad Area (02/20/09) by Laura Youngs
In North Carolina, apartment owners in the Triad region were hoping to see more people turn to rental housing amid the sagging market for residential real estate. So far, though, the local housing sector has not turned out that way. In fact, some analysts and observers say the opposite is true. The Carroll Cos. President Roy Carroll states, "The market has softened, and we're seeing concessions come back. There are properties out there offering two months free rent, and other types of promotions." The Carroll Cos. manages more than 2,000 apartments in a half-dozen Triad-area communities. Between March and September of 2008, Real Data Apartment Market Research reports that apartment occupancy fell more than a percentage point to 88.4 percent throughout the Triad market.
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Jumbo Loan Defaults Rise at Fast Pace as Rich Suffer
Digested From "Jumbo Loan Defaults Rise at Fast Pace as Rich Suffer"
Bloomberg (02/20/09) by Bob Ivry
LPS Applied Analytics reports that luxury homeowners are falling behind on mortgage payments at the fastest pace in more than 15 years, further proof that the U.S. financial meltdown that started with the poorest Americans is now affecting the richest. According to the Florida-based mortgage data service, about 2.57 percent of prime borrowers who took out jumbo loans in 2008 are at least 60 days delinquent. The increase, while still substantially lower than the 20 percent delinquencies in subprime mortgages, signals that the borrowers with the best credit and most money are hurting as the U.S. recession deepens. Additionally, it means these loans will be even harder to obtain and more expensive to pay off. Keith Gumbinger, vice president of HSH Associates, states, "The biggest influence in rising delinquencies is related squarely to the economy rather than poor underwriting. We are apparently all suffering to some degree."
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Joint Venture to Acquire Troubled Multifamily Housing
Digested From "JV Going Full Bore to Acquire Troubled MF"
GlobeSt.com (02/19/09) by Amy Wolff Sorter
Partnered Property Acquisitions Group has teamed up with Principle Equity Properties to form United Equity Ventures, which will target lenders with distressed multifamily housing on their books that are willing to sell those communities at a discount. The joint venture is already performing due diligence on its first potential acquisition, a 3,000-unit apartment portfolio valued at around $250 million. Closing is expected to take place in about 90 days. United Equity principal and Partnered Property Acquisitions CEO Monte K. Lee-Wen comments, "There's a lot on the streets right now, and we're targeting that. There are lenders who don't want properties on their balance sheets, and we do want those properties." The partnership is focused solely on multifamily housing because of its rebound potential once the economy starts to show signs of recovery. The ideal targets are portfolios with values of more than $100 million, though the partnership has not ruled out single assets valued at more than $20 million. Both partners are based in Texas.
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Plots & Ploys: Post Says Goodbye to Bonuses
Digested From "Plots & Ploys: Post Says Goodbye to Bonuses"
Wall Street Journal (02/18/09) P. C8; by Alex Frangos; Kris Hudson; Nick Timiraos
According to a Securities and Exchange Commission filing, Post Properties Inc. CEO David P. Stockert will not receive his 2008 bonus, which had been budgeted at $420,000. In addition, Chairman Robert Goddard III gave up any stock compensation for 2009 along with his $100,000 retainer. Three other Post Properties executives saw bonuses slashed 70 percent, while most officers had their bonus compensation cut by 50 percent. The Atlanta-based apartment REIT posted an annual loss of $16.3 million for last year versus a $171.1 million profit for the year before. The move to cut bonuses was applauded by Post founder John A. Williams, who has been critical of management in the past. Post Properties owns and manages more than 14,000 apartments systemwide.
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Colorado Apartment Vacancy Rate Rises
Digested From "Colorado Vacancy Rate Rises"
Denver Post (02/20/09) by Margaret Jackson
In Colorado, the statewide apartment-vacancy rate increased to 8 percent during the fourth quarter. The increase was driven primarily by increases in Greeley, Grand Junction, Loveland and metro Denver. In Greeley, the vacancy rate climbed from 7.2 percent during the last three months of 2007 to 8.1 percent in the same period last year. In Loveland, it rose from 5.6 percent to 6.1 percent over that same time span. In Grand Junction, the rate rose to 3.1 percent from 2.4 percent mainly due to the fact that there are fewer oil and gas workers in need of rental housing. Gordon Von Stroh, professor of management at the University of Denver Daniels College of Business, confirms, "The price of oil is going down, and there's just lesser demand for oil and gas exploration." Another reason vacancies are on the rise is because apartment residents are doubling up with friends or moving in with their parents to save money. Colorado Springs and Fort Collins were the only two areas in the state to experience declining apartment vacancies. The former's vacancy rate fell from 10.8 percent to 10.4 percent on a year-over-year basis, while the latter's vacancy dipped from 4.4 percent to 4.2 percent. Finally, average apartment rents increased in all areas except Greeley and Loveland.
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Commercial Property Prices Fell 15 Percent in '08, Led by Apartments
Digested From "Commercial Property Prices in U.S. Fell 15 Percent in 2008"
Bloomberg (02/19/09) by Hui-yong Yu
According to the Moody’s/REAL Commercial Property Price Indices, commercial property prices in the U.S. fell by nearly 15 percent last year. Fourth-quarter depreciation was greatest in the nation's apartment sector, declining 11.5 percent. Even in the Western U.S. where real-estate prices held up better than the nation as a whole, apartment prices were down 9 percent in the October-through-December period and more than 16 percent for the full year. Looking at offices and the other sectors, researchers say the deepening recession is compelling commercial tenants to cut jobs and vacate space. This, in turn, is bringing down building incomes. At the same time, a prolonged credit crunch continues to make it difficult to finance property purchases. Moody's began publishing its commercial property indexes in the fall of 2007. Meanwhile, in its quarterly outlook published last month, Prudential Real Estate Investors wrote: "The commercial real estate market has followed the larger economy into a downturn that is likely to last through 2009 and possibly into 2010. With unemployment rising, consumer spending falling and home prices dropping, the recession will impact all sectors of the real estate market."
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Middle Tennessee Apartment Vacancies Rise
Digested From "Rising Middle Tennessee Apartment Vacancies Show Recession's Bite"
Tennessean (TN) (02/16/09)
Vacancies are increasing in Middle Tennessee's apartment communities, catching some owners who had expected to get a boost from the struggling economy off-guard. In past recession eras, apartment occupancy rates rose as more people delayed homebuying decisions and large numbers of out-of-work homeowners either lost their homes to foreclosure or were forced to sell and move into apartments. This recession is proving to be different. The Greater Nashville Apartment Association reports that the metro area's occupancy rate fell to 90.6 percent in last year's fourth quarter, a decline of nearly 3.6 percentage points from the same period a year earlier. This marks the Nashville area's lowest occupancy rate since the late 1980s. Apartment vacancies are highest around Briley Parkway and in North Nashville, where more than 12 percent of all rental units now sit empty. By contrast, the market is tightest along the West End Avenue corridor and in northwestern Rutherford County, where only about 6 percent of apartments are empty. The average apartment rent in Middle Tennessee has held steady, rising $1 to $751 since the end of 2007. Still, that comes after an extended period in which apartment rents grew at a robust pace year to year. Researchers further note that the average rent figure does not take into account such owner concessions as periods of free or reduced rent and painting allowances.
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Home Properties Reports Fourth Quarter and Year-End 2008 Results
Digested From "Home Properties Reports Fourth Quarter and Year-End 2008 Results"
PRNewswire (02/19/09)
Home Properties President and CEO Edward J. Pettinella boasts that his company "is the only apartment REIT projecting an increase in net operating income for the year." Indeed, earnings per share for the quarter ended Dec. 31 was $0.85, compared to $0.48 for the same three-month period a year earlier. Also for the fourth quarter, funds from operations (FFO) totaled $46.1 million versus $36.7 million a year earlier. For the year, FFO totaled $162.4 million, or $3.57 per share, compared to $151.1 million, or $3.20 per share, for 2007. The New York-based company has only two apartment communities now under construction. Additionally, the company owns no raw land and has no property development investments in which the cost is more than the fair market value. As a result, Home Properties has not had to record any development pipeline impairment charges, unlike the great majority of its market rivals. Home Properties owns, manages, develops, and rehabilitates apartment communities throughout the Northeast, Mid-Atlantic and Southeast Florida markets. Currently, the REIT's portfolio contains 109 communities offering 37,539 apartment units.
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Knoxville Is Becoming an Apartment Market for Some
Digested From "Buyer's Market Turned Renter's Market, but Only for Some Properties"
WBIR-TV (Knoxville, TN) (02/17/09) by Alison Morrow
In Knoxville, decreased home appraisals have more people renting than owning, since those appraisals will affect property values for at least the next few years. Wallace & Wallace Rental Property Realtor Katie McHargue states, "We do have those folks who have been affected by foreclosures or bankruptcies. It gives them a bit of time to work themselves back into a better credit." However, local property professionals say the growing rental trend seems to have bypassed apartment communities. The Apartment Association of Greater Knoxville recorded nearly a 2 percent decline in occupancy from 2007 to last year. Kingston Pointe Apartments manager Kathy Horning explains, "Not necessarily because traffic has decreased but because folks are having a harder time making their rent payments or they're losing their jobs." Horning concedes that may be pushing better deals among her rivals.
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Legislative/Legal News
Labor: U.S. Chamber Switching Focus to Fighting Arbitration Measure
Digested From "Labor: Chamber Switching Focus to Fighting Arbitration Measure"
CongressDaily (02/19/09)
In a letter sent to the chairmen and ranking members of the Senate Health, Education, Labor and Pensions Committee and the House Education and Labor Committee this past week, the Chamber of Commerce wrote that using government arbitrators to force labor and management into first collective bargaining agreements eliminates employees' opportunity to vote to ratify contracts. The letter focuses on a provision of the Employee Free Choice Act (EFCA) that would force unions and companies into arbitration if they do not agree on a first contract within 90 days. The Chamber wrote: "Today, employees as a rule have an opportunity to vote on the employer's final contract offer. . . . Under a mandatory interest arbitration process, an employee's opportunity to vote on ratification is lost." Labor groups have not embraced this stance. Mark McCullough, a spokesman for the Service Employees International Union, comments, "If employers were so concerned about workers and their ability to effectively form a union and exercise their collective bargaining rights and exercise the rights in the workplace, we would not need EFCA."
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San Francisco Identifies Apartments Most at Risk
Digested From "San Francisco Identifies Buildings Most at Risk"
New York Times (02/20/09) by Malia Wollan
According to a newly issued report by the San Francisco Department of Building Inspection, an earthquake with a magnitude of 7.2 or higher could render unlivable as many as 85 percent of the city's "soft-story" apartment buildings. Such structures are less sound due to the fact that their ground floors are open space, often used as garages or retail stores. The cost to retrofit the lot of them would be approximately $260 million. The expense would be borne by both the apartment owners and the city, which is currently dealing with a $576 million budget shortfall. Mayor Gavin Newsom is working on legislation to make earthquake safety upgrades mandatory on soft-story buildings. Owners remain nervous about both the cost of earthquake damages and of mandatory changes. According to the report, few apartment owners in the city carry earthquake insurance. Janan New, director of the San Francisco Apartment Association, comments, "We want to keep our tenants safe, but we're fearful in this economy. No one is going to get financing for construction in this market."
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Rental Inspections in Erie, Pa., Prove Worthiness
Digested From "Rental Inspections Prove Worthiness"
Erie Times-News (PA) (02/15/09)
When Erie's rental-inspection program was first implemented in the fourth quarter of 2006, local apartment owners were concerned that the registration fee would ultimately be the undoing of numerous good communities. Inspections were given the green light after 10 fatal apartment and house fires a year earlier. Now, as Erie City Council decides whether to renew the program beyond its March 31 expiration date, the Apartment Association of Northwest Pennsylvania has thrown its support behind the program--albeit with some modifications. The Apartment Association is advocating inspections every three years, instead of every two years. Additionally, it wants the $40-per-unit fee prorated for partial-year ownership. Local owners say that data on the timetable for correcting violations and the turnover rate for apartment residents would be useful in determining whether a longer time frame is warranted. Some are also pushing for the program to be expanded so that exteriors will also be inspected for building-code violations. Andy Zimmerman, Erie's manager of code enforcement, comments, "We're going to start working on curb appeal. We want to address the rotted decks, rotted stairs, missing or broken exterior doors." Of the 14,000 or so registered units, approximately 13,500 have been inspected. Zimmerman reports that inspections have resulted in the installation of 10,000 smoke detectors.
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