|
Headlines
Top Story
What's Ahead for Apartment REITs in '08?
Industry News
Memphis' Apartment Sector Weathers Credit Crunch
California's South Bay Apartment Market Chronicled
Orlando-Area Owners Shift to Apartment Rentals
REIT Index Reading Includes Apartments
Rreef Sells Multifamily Communities to N.C. Firm
Residential Downturn Could Affect Apartments
AIMCO Venture Buys Three L.A. Apartment Communities
San Jose Places Fourth in Apartment Study
Bloomington, Ind.'s Apartment Market Is Strong
Delaware Needs More Affordable Housing
Legislative/Legal News
Pittsburgh City Council OKs $12 Apartment Fee
New Fund to Boost Indianapolis' Affordable Housing
Fannie Mae in Multifamily: Looser Hand, Better Grip?
Top Story
What's Ahead for Apartment REITs in '08?
Digested From "Apartments in the Cellar"
BusinessWeek (12/21/07) by Christopher Palmeri
Dan Fasulo, managing director of research at Real Capital Analytics, is perplexed as to why AvalonBay Communities' stock has fallen 27 percent in 2007. After all, the REIT has ownership stakes in more than 51,000 apartments in such prime coastal cities as Boston, New York, and San Francisco. In all three of those markets, rents are high and new construction has become increasingly difficult to get off the ground. Similarly disappointing performances have been turned in by other apartment REITs. Apartment REITs were among the worst performers during the previous recession. Typically, as the job market slows, people are less likely to move or trade up to bigger apartments, leading to modest rises in vacancy rates. But all is not dire. In fact, market watchers are seeing some values. Apartment REITs pay an average dividend of 5 percent, and fundamentals still look good. David Baird, who tracks multifamily housing for Sperry Van Ness, predicts that rents will rise 3.5 percent in the new year - less than the 5 percent annual hikes property owners enjoyed over the last couple of years but still healthy. Additionally, new apartment construction is not expected to rise from the current pace of about 200,000 apartments per year. Those companies attracting interest include Essex Property Trust, which specializes in renovating older apartment communities in such markets as Seattle and coastal California; Apartment & Investment Management Co. (AIMCO), which also renovates older communities; and Home Properties, whose apartment communities are concentrated in the Northeast.
Web Link | Return to Headlines
Industry News
Memphis' Apartment Sector Weathers Credit Crunch
Digested From "Multifamily Properties Mostly Unfazed by Credit Crisis"
Memphis Daily News (12/28/07) by Eric Smith
CB Richard Ellis (CBRE) Memphis' multifamily division has issued its latest study, which shows that apartment occupancy, street rents, construction and absorption all registered solid gains locally during the July-through-September period. Still, how much the housing sector's losses have translated into multifamily gains is not certain. While foreclosure victims or people wary of buying homes in this shaky market might appear to be prime candidates for apartment residency, the slowdown has not resulted in the mass migration some initially forecast. Mark Fogelman, president of Fogelman Management Group, states, "Surprisingly, we have not seen much impact from the housing slump. In most cases, individuals who are having trouble with their mortgage payments will have a very difficult time qualifying for an apartment. Therefore, we do not expect a surge of prospects fleeing troubled mortgages and moving into our apartment communities." Nevertheless, Memphis' apartment sector has thrived over the past year. CBRE data shows that occupancy in Memphis apartments increased 1.7 percent from year-end 2006, reaching 91.4 percent marketwide and 93.8 percent for Class A and B properties by the end of September. Memphis' Germantown/Collierville submarket posted the strongest rent growth in old construction - communities built prior to 1984 - with a 3.5 percent increase. Meanwhile, downtown Memphis exhibited the strongest rent growth for 1980s construction - communities built between 1984 and 1992 - with a 5.5 percent increase, as well as new construction - communities built since 1993 -with a 7.5 percent increase.
Web Link | Return to Headlines
California's South Bay Apartment Market Chronicled
Digested From "South Bay Apartment Rents Soar"
Silicon Valley/San Jose Business Journal (12/27/07) by Sharon Simonson
A new report from Hendricks & Partners shows that average apartment rents in California's South Bay region rose more than $100 a month to $1,509 in the year ended September, the fastest pace of asking-rent growth in the whole San Francisco Bay Area. Researchers defined the South Bay as all of Santa Clara, San Mateo and Monterey counties. Net absorption (the difference between the number of apartments leased and the number of apartments relinquished by residents) totaled 1,368 in the first three quarters of 2007, up from less than 500 during the same time span a year earlier. The report went on to state: "In spite of the anticipated stagnation of the economy, the demographic composition of the area has many developers still bullish on the South Bay market. As one of the wealthiest concentrations of people in the country, the South Bay continues to attract residents due to its close proximity to high-paying jobs." Regardless, sales activity for apartment communities of 20 units or more seems to have peaked, with 40 communities changing hands in the first nine months of 2007 compared to 52 during the January-through-September period of 2006. The price per apartment also fell year over year, from $176,008 to $172,205.
Web Link | Return to Headlines
Orlando-Area Owners Shift to Apartment Rentals
Digested From "Orlando-Area Landlords Shift to Apartment Rentals After Condo Bust"
Orlando Sentinel (FL) (12/26/07) by Jerry W. Jackson
During the past year, multifamily community owners in the Orlando metro area tapped the brakes on the condo conversion mania. As 2007 draws to a close, the leasing side is regaining its marketing advantage. Marcus & Millichap's third-quarter Apartment Research Market Update for the Orlando market shows that "supply and demand are still being realigned" because of the "considerable number of condo conversions." Researchers note that the overall market's vacancy rate, which a year earlier hovered around the 5 percent mark, is expected to be higher - as much as 6.4 percent - by year's end. Marcus & Millichap further determines that community owners' average asking rate has risen slowly - by 2.2 percent - to $882 per month compared with the third quarter of a year ago. Effective rents - the average actually paid after discounts and such - also inched up 2.2 percent to $825. Meanwhile, pressure on the supply-side continues, particularly in such areas as Altamonte Springs, Apopka and Casselberry. Consequently, apartments rents are projected to increase less than 3 percent in the coming year.
Web Link | Return to Headlines
REIT Index Reading Includes Apartments
Digested From "REITs Look Built to Withstand Hard '08"
Wall Street Journal (12/26/07) P. B4; by Kemba J. Dunham
SNL Financial's U.S. REIT Equity Index reveals a 21.9-percent slide in REIT returns since they hit a peak in February, and analysts say concerns about falling property values in the apartment, office and other sectors have prompted investors to put their cash elsewhere. Despite a bleak outlook, REITs are not highly leveraged, and they have access to revolving bank credit and the ability to generate cash via joint ventures with institutional partners. As for particular property sectors, analysts believe global trade will bolster industrial REITs, while the housing slump will help apartment REITs.
Web Link | Return to Headlines
Rreef Sells Multifamily Communities to N.C. Firm
Digested From "Rreef Sells 1,585 Apartments to NC Firm"
GlobeSt.com (12/26/07) by Joe Clements
The North Carolina-based investment firm of Steven D. Bell & Co. has acquired four multifamily communities - one each in Massachusetts, Pennsylvania, Georgia and Texas - from Rreef America. CB Richard Ellis' Atlanta office negotiated the sale of the portfolio, which included 1,585 apartments in all. Steven D. Bell & Co. Principal Jon Bell said his firm will rename some of the multifamily communities it has purchased and assume management duties for all of them. Although both sides declined to confirm the exact price paid for the communities, one source put it "well in excess" of the $100 million mark.
Web Link | Return to Headlines
Residential Downturn Could Affect Apartments
Digested From "Blame Housing for Commercial's Slide in Sales From July?"
Investor's Business Daily (12/21/07) P. A10; by Joe Gose
While there is no empirical proof that the housing market has a direct influence on the commercial property sector, economic fallout from the residential downturn could have an impact on apartments, offices and industrial real estate. These property segments require growth in discretionary income to trigger consumer spending. This, in turn, means successful residents that can afford higher rents. At the same time, however, the nation's swollen inventory of houses has scaled down the amount of work available to construction laborers. With such factors in mind, prospective investors in commercial real estate are advised to choose quality properties in major markets with a growing population and little room for new development.
Web Link | Return to Headlines
AIMCO Venture Buys Three L.A. Apartment Communities
Digested From "DEAL OF THE DAY: Denver Apartment Co. Enters Into Joint Venture"
Multi-Housing News (12/07) by Erin Brereton
Just before Christmas, Apartment Investment and Management Company (AIMCO) entered into a joint venture with a fund managed by JPMorgan Asset Management Inc. for the co-ownership of three multifamily communities in West Los Angeles. The Denver-based REIT will own approximately 53 percent of the venture and will operate the communities in exchange for a property management fee and certain other fees. Together, the three communities contain 1,382 apartments. With the deal valued at $726 million, that equates to roughly $525,000 per apartment. AIMCO plans to use proceeds from the deal for general corporate purposes, such as the buyback of common shares. In total, the company owns more than 1,100 apartment communities serving approximately 750,000 residents.
Web Link | Return to Headlines
San Jose Places Fourth in Apartment Study
Digested From "Spaces and Places: San Jose Is No. 4"
San Jose Mercury News (CA) (12/18/07) by Katherine Conrad
Marcus & Millichap has released its 2008 National Apartment Report, a yearly survey that ranks 43 of the nation's top rental community markets for investors. Among the markets recording the biggest year-to-year jumps was San Jose, Calif., which moved from eighth place a year ago to fourth. In San Jose, builders are expected to add 900 apartments in the new year versus about 700 this past year. In addition, the vacancy rate is expected to decline to 3.2 percent.
Web Link | Return to Headlines
Bloomington, Ind.'s Apartment Market Is Strong
Digested From "City's Rental Market Still Strong"
Bloomington Herald-Times (12/18/07) by Bethany Nolan
Bloomington, Ind., presently boasts both the highest average apartment rent and the highest apartment occupancy rate among similar college towns statewide. According to 2006 data made available by Tikijian Associates, Bloomington has a 93.8 percent occupancy rate versus a 93.2 percent rate for Muncie and 91.5 percent for Lafayette. The former is home to Ball State University, while the latter features the campus of Purdue University. Monroe County Apartment Association President Linda Brown states, "We've always had a high occupancy rate because of the university. This market is better than any in the state." The latest results, though, are still below Bloomington's all-time record high occupancy rate of 97.6 percent set back in 2002. City planning director Tom Micuda notes that apartments are still "our most requested type of land use. . . . The influx of residential housing downtown hasn't really seemed to change the demand for this particular type of land use in Bloomington."
Web Link | Return to Headlines
Delaware Needs More Affordable Housing
Digested From "Report Says State Needs More Affordable Housing"
Associated Press (12/18/07)
At least 1,500 new affordable housing units are needed in Delaware in order to keep pace with rising shelter costs, according to state officials. A new report from the state Housing Authority shows that residential prices have risen a staggering 180 percent over the past 10 years, which is faster than any other state. Moreover, more than 2,200 assisted rental units need substantial renovations; and subsidy contracts are on the verge of expiring for more than 4,000 assisted rental housing units. Delaware only has about 12,000 assisted housing units.
Web Link | Return to Headlines
Legislative/Legal News
Pittsburgh City Council OKs $12 Apartment Fee
Digested From "Pittsburgh City Council OKs $12 Apartment Fee"
Pittsburgh Tribune-Review (12/27/07) by Jeremy Boren
Under a registration program that the Pittsburgh City Council approved on Dec. 27, apartment owners citywide must pay a $12 per-apartment annual fee in 2008. The ordinance requires owners to register their addresses, number and types of apartments and pay the registration fee. The city will then store the information in a confidential database. The ordinance, which goes into effect on July 1, features a Sept. 30 registration deadline. Those who do not register could be socked with a $1,000-per-apartment penalty. City Councilman Dan Deasy sponsored the legislation to hold owners accountable for the upkeep of their communities.
Web Link | Return to Headlines
New Fund to Boost Indianapolis' Affordable Housing
Digested From "New Fund Helps Boost Indianapolis Housing"
Fort Wayne Journal Gazette (IN) (12/27/07)
Indiana's new tax on real estate documents will go toward providing affordable housing for low- to moderate-income families, veterans and homeless persons in Indianapolis and other areas of the state. The tax on mortgage documents and deeds - which can add between about $4 and $20 to a document's cost, depending on its size - is expected to generate $1.6 million a year and will be divided 60/40 percent between Indianapolis's housing trust fund and the state housing fund, respectively. This year, the city fund provided $350,000 for the Hoosier Veterans Assistance Foundation, which leveraged the money to get the federal government to provide an additional $900,000 to purchase an apartment building to serve as long-term assistance housing for veterans. City funds also will help meet goals set forth by Indianapolis's Blueprint to End Homelessness.
Web Link | Return to Headlines
Fannie Mae in Multifamily: Looser Hand, Better Grip?
Digested From "Fannie in Multifamily: Looser Hand, Better Grip?"
American Banker (12/26/07) P. 1; by William Launder
Back when it was competing with conduits in the multifamily market, Fannie Mae gained a competitive edge with its Delegated Underwriting and Servicing (DUS) program, in which lenders that agree to hold onto some risk can make credit decisions without consulting the government-sponsored enterprise. However, red tape has hindered the program's efficiency and flexibility in recent years, with lenders forced to seek waivers from Fannie Mae on appraisals, replacement reserves and other matters. In a move that some observes believe comes too late, Fannie Mae has eliminated certain waiver requirements and cut approximately 350 pages from the 400-page lender manual so that lenders participating in the program can make funding decisions in a more timely manner. Michele Evans, vice president of multifamily corporate affairs at Fannie Mae, hopes the streamlined process will boost fully delegated DUS loans to 80 percent from the current level of 30 percent. Revising the process, according to Evans, will allow the GSE "to home in on what is the greater risk." Observers believe the GSEs will pay closer attention to the multifamily sector as condominiums and single-family homes are taken off the market and rented out.
Web Link | Return to Headlines
Abstract News © Copyright 2007 INFORMATION, INC.
|