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The Industry Insider - January 8, 2008
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Headlines
Top Story
Apartments Positioned to Benefit From Housing Downturn
Industry News
PGGM to Boost Investment in Behringer Harvard's Apartment Portfolio
Study Shows Home Prices Must Fall to Be in Sync With Rents
Tarragon Sells Six Florida and South Carolina Communities
Dallas-Fort Worth Apartment Leasing, Rents Rise
Archstone-Smith Delists From NYSE
Apartment REIT Declares Quarterly Dividends
Public Housing Is in for Better Designs
Warren Retires From Cushman & Wakefield Florida's Apartment Brokerage
Legislative/Legal News
Washington State Court Rules on Apartment Door Displays
FHLBank Approves $9 Million in Grants for Affordable Housing
AT&T Accused of Breaking Law with Apartment Deals in Texas
Housing Not Among the Issues Talked About by 2008 Candidates
Multifamily Property Owners Use Hawaii Tax Break Program
Top Story
Apartments Positioned to Benefit From Housing Downturn
Digested From "Apartment Market Positioned to Benefit From Housing Downturn, Demographic Shifts"
Multi-Housing News (12/07) by Lynwood Thompson
In its 2008 forecast, Marcus & Millichap expects such factors as tighter mortgage underwriting, rising residential foreclosure activity and job growth will generate adequate demand in the nation's apartment sector to offset competition from shadow rentals at the macro level. Apartment development has remained largely in check, with only a moderate increase in completions projected over the next 12 months. Some previously hot housing markets, however, are facing a glut of for-rent condos and single-family homes. As a result, local vacancy rates in these markets are on the rise, although a major correction is not expected. The firm further predicts that upcoming demographic shifts will work in favor of apartments. For instance, approximately 70 million echo boomers will make their way through college over the next decade. It should be noted, though, that there are some near-term trends worth watching, including a projected shift in performance by property class. In 2008, the Class B/C market is poised to outperform Class A for the first time in years. Other report highlights ranged from apartment vacancy expected to hold steady at 5.8 percent this year to just over 100,000 apartments slated for delivery between now and the end of the year. That is up from approximately 84,000 apartments in 2007.
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Industry News
PGGM to Boost Investment in Behringer Harvard's Apartment Portfolio
Digested From "Behringer Harvard Apartment Portfolio Gets PGGM Boost"
Dallas Business Journal (01/03/08)
PGGM has announced plans to boost its investment in Behringer Harvard's growing portfolio of Class A apartment communities to $200 million. This amount doubles the initial $100 million that the Dutch pension fund invested in the company's multifamily platform this past spring. Additionally, PGGM retains an option to expand its commitment to $300 million. Behringer Harvard CEO Robert M. Behringer remarked, "Since partnering with PGGM in May, our multifamily team has completed, or is in the final stages of completing, transactions in 11 outstanding Class A apartment assets. We believe PGGM's decision to increase its investment in our platform is a testament to the quality of these properties, their geographic diversity and the unique approach we've developed to achieve exceptional pricing." Behringer Harvard's program targets well-located, high-quality apartments that are either in the planning or construction phases in such markets as Atlanta, Dallas and Las Vegas.
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Study Shows Home Prices Must Fall to Be in Sync With Rents
Digested From "Home Prices Must Fall Far to Be in Sync With Rents"
Wall Street Journal (01/03/08) P. A2; by Greg Ip
A recent study by University of Wisconsin-Madison economist Morris Davis and Federal Reserve economists Andreas Lehnert and Robert Martin looks at the annual rent/home price ratio as far back as 1960, revealing a decline in annual rents to 3.48 percent of home prices from 1996 to 2006 from a range of 5 percent to 5.25 percent between 1960 and 1995. While the rent/price ratio is down approximately 33 percent from its long-term average, the economists calculate that, assuming rents continue to rise at the average 4-percent rate recorded during the current decade, residential prices would have to decline 3 percent annually for the ratio to return to normal. Over a period of five years, they estimate that home prices would need to drop 15 percent. Davis notes that "rapid growth in rents" is necessary to justify the current level of home prices, but an increase in unsold properties on the rental market could hinder rent increases.
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Tarragon Sells Six Florida and South Carolina Communities
Digested From "Tarragon Sells Six Properties for $156 Million"
Market Wire (01/03/08)
Tarragon Corp. has inked a $156 million deal to sell its stake in a half-dozen multifamily communities in Florida and South Carolina to entities of Northland Investment Corp. To finance the purchase, Northland assumed, extended and modified more than $100 million in existing financing from Barclays Capital Real Estate. Tarragon, which is guaranteeing repayment of approximately 10 percent of this loan, has been retained to manage all six communities on behalf of the Northland affiliates. It may even share in future profits from the sale and operation of the assets. Tarragon is a leading mixed-use developer with a focus on multifamily housing.
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Dallas-Fort Worth Apartment Leasing, Rents Rise
Digested From "Dallas-Fort Worth Apartment Leasing, Rents Rise"
Dallas Morning News (01/03/08) by Steve Brown
A new M/PF YieldStar study shows that 2007 ended up with an overall increase of 8,240 rental apartments in the Dallas-Fort Worth area. That is nearly 10 percent below leasing the previous year but higher than had been anticipated. The increase was due mainly to total net leasing of about 1,000 apartments in the last three months of '07. M/PF Vice President Greg Willett states, "Demand is proving solid, helped by still healthy growth in the local economy and the fact that lenders remain hesitant to approve mortgages for would-be first-time home buyers." Last year's market was tight enough that apartment developers were able to boost average rents by 4 percent, with hikes being reported in every area of the city. In the months to come, the local multifamily housing sector's fortunes will hinge on how the housing market slump plays out. Willett concludes, "Lenders at some point are going to relax the temporarily too-stringent standards required for first-time home purchase. Loss of renters to home purchase then could come back into play as an influence on apartment market fundamentals in a big way."
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Archstone-Smith Delists From NYSE
Digested From "Archstone-Smith Delists From NYSE"
Denver Business Journal (01/02/08)
Archstone-Smith Trust confirms that it terminated its registration with the U.S. Securities and Exchange Commission on Jan. 2. The Colorado-based REIT had traded on the New York Stock Exchange under the symbol ASN. The termination follows this past October's $22.2 billion sale of Archstone-Smith to a partnership of Tishman Speyer Properties LP and Lehman Brothers Holdings Inc. Archstone-Smith owns apartment communities in such prime metro areas as Boston, San Francisco and Seattle. As of this past October, its portfolio included 359 communities and more than 87,600 apartments, including those under construction. Founded in 2001 via the merger of Archstone Communities Trust and Charles E. Smith Residential Realty, the REIT began with $9.1 billion in market capitalization.
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Apartment REIT Declares Quarterly Dividends
Digested From "UDR Declares Quarterly Dividends"
Business Wire (01/02/08)
UDR Inc.'s board of directors has declared a fourth-quarter dividend on its common stock of $0.33 per share, which will be payable on Jan. 31 to shareholders of record as of Jan. 11. This will be the Virginia-based apartment REIT's 140th consecutive quarterly payout on its common shares. Separately, UDR has declared a regular quarterly dividend on its Series E Preferred Stock for last year's October-through-December period in the amount of $0.3322 per share. That dividend also will be payable on Jan. 31 to Series E preferred shareholders of record as of Jan. 11. As of the end of last year's third quarter, UDR owned more than 68,600 apartments and had another 6,491 units in various stages of development.
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Public Housing Is in for Better Designs
Digested From "High Design for Low-Income Housing"
Wall Street Journal (12/28/07) P. W10; by Ben Casselman
There once was a time when public housing typically meant unsightly blocks and non-descript rows of cheaply constructed townhomes. Now, the trend is to erect privately developed homes and apartments that are well-designed, well-built, and attractive enough to win over even the most skeptical of neighbors. It helps that a growing number of architects, from established professionals to newcomers looking to make their mark, are regarding such projects as a chance to do important and innovative work. Still, this kind of groundbreaking architecture only comprises a small percentage of the thousands of units of low- and moderate-income housing that are developed in the United States on an annual basis. But even this small percentage represents progress. Until the 1980s, nearly all low-income housing nationwide was built by HUD and designed more with quantity than quality in mind. Today, most affordable housing is erected by private builders or local agencies, with a mix of public and private funding. Today's affordable housing also is incorporating "green" and sustainable features. Many such projects receive federal subsidies to keep rents or prices lower than market rates. This shift is due largely to reduced federal funding. For instance, HUD's $36 billion budget this past year is only a fraction of what the agency received three decades ago--$123 billion in adjusted dollars.
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Warren Retires From Cushman & Wakefield Florida's Apartment Brokerage
Digested From "Warren to Retire From Cushman & Wakefield"
Orlando Business Journal (12/28/07)
In late December, Hal Warren announced his retirement as senior director of Cushman & Wakefield Florida's apartment brokerage division. Warren will vacate the post sometime in January to pursue private interests. In the past decade, he has participated in more than 160 multifamily community transactions. In total, these deals involved approximately 45,000 apartments valued at $2.9 billion.
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Legislative/Legal News
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Washington State Court Rules on Apartment Door Displays
Digested From "WA Court: Signs on Apartment Doors Protected Speech"
Olympian (WA) (01/03/08) by Curt Woodward
Washington's state Supreme Court has ruled that a ban on apartment door displays in public housing projects is an unconstitutional violation of free speech. The court determined by a 5-4 vote that the Seattle Housing Authority's restrictions on everything from signs to flags constituted a violation of the First Amendment. The ban was challenged by a coalition of residents. The court's majority dismissed the housing authority's contention that property owners control the outside surface of apartment doors, not residents. The ban on door displays had been among several rules tied to each residents' lease.
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FHLBank Approves $9 Million in Grants for Affordable Housing
Digested From "FHLBank Grants $9M for Affordable Housing"
GlobeSt.com (01/02/08) by Marita Thomas
The Federal Home Loan Bank of Pittsburgh has approved about $9 million in grants for affordable housing ventures in Pennsylvania, Delaware, Kentucky, New Jersey, Rhode Island, and West Virginia. Over 30 separate projects will be supported by the grant, yielding just under 1,000 rental and sale homes. In Pennsylvania, for example, the Lancaster Area Habitat for Humanity Queen Street Homes will be sponsored by an Affordable Housing Program (AHP) grant allowing the group to replace row houses and convert them into affordable homes. In West Virginia, projects will be designated for individuals transitioning from state mental health facilities and for domestic violence survivors. Philadelphia will renovate 75 apartments in a $17 million plus venture dedicated to providing affordable housing for seniors. The AHP is supported by private funding that distributes capital through participating financial institutions for such projects. According to FHLBank President and CEO John Rice, over 2,000 affordable housing units were developed under the Pittsburgh bank's program in 2007.
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AT&T Accused of Breaking Law with Apartment Deals in Texas
Digested From "AT&T Accused of Breaking Antitrust Laws with Apartment Deals"
San Antonio Express-News (TX) (01/02/08) by Sanford Nowlin
A federal government lawsuit claims AT&T Inc. violated antitrust rules by striking deals to serve as exclusive phone, Internet and sometimes pay-TV provider to Texas-based apartment buildings. Lawyers for the plaintiffs said the country's largest phone company has such contracts with possibly thousands of communities throughout the Lone Star State. They are seeking class certification for the suit, which was filed late last month in U.S. District Court for the Western District of Texas. The lawsuit brought by a couple of apartment residents seems to piggyback an earlier FCC ruling that barred cable providers from stopping such phone companies as AT&T from offering video service in apartment buildings where they had exclusive contracts. The FCC voted unanimously on the measure, which it stated would boost competition and thereby improve both prices and service for apartment residents.
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Housing Not Among the Issues Talked About by 2008 Candidates
Digested From "Housing 300 Million Well: What Do Candidates Propose?"
City Limits Weekly (12/31/07) by Jarrett Murphy
While many Americans believe the lack of affordable shelter nationwide is a major problem, housing is not among the issues talked about most by the 2008 presidential candidates. Occidental College politics professor Peter Dreier notes that access to health insurance has been given more attention than access to affordable housing. While 45 million Americans do not have medical insurance, an estimated 105 million struggle to meet their housing needs, spending more of their incomes than they can afford to pay rent or a mortgage. Housing has been mentioned by some candidates, however, with Sen. Barack Obama calling for a fully funded Community Development Block Grant program and New Mexico Gov. Bill Richardson lobbying for a reduced Federal Housing Administration down-payment requirement. In terms of what can be done differently to promote affordable housing, former Sen. John Edwards wants to impose a work requirement on recipients of Section 8 vouchers. Other housing proposals include Sen. Hillary Clinton's pledge to get new public housing built on the Gulf Coast and Edwards' call for state and regional incentives for smart growth and transit-oriented development. Observers note that candidates have not addressed the issue of boosting the volume of tax-exempt housing bonds, though they have voiced support for a national housing trust fund that would be funded by Fannie Mae and Freddie Mac.
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Multifamily Property Owners Use Hawaii Tax Break Program
Digested From "Landlords Use Hawaii Tax Break Program"
Honolulu Advertiser (HI) (12/30/07) by Kevin Dayton
Hawaii's Big Island is offering a special tax break to property owners in hopes of improving the number of affordable rental housing units in the county. The stock of affordable rentals has declined in recent years as many owners took advantage of rising prices and sold their properties during the real estate boom. New home and rental construction picked up during the market upswing, but individuals and families now face higher rents on the Big Island. Property taxes will fall by 30 percent or more for building owners who hold rents at or below affordable rates, which in 2008 will be $1,016 per month for a three-bedroom rental in Hilo and $1,160 for a three-bedroom rental in the Kona area. Under the Affordable Rental Housing Program, landlords would be taxed at the lowest rates in the Big Island county tax code. "The rent prices have steadily gone up over the past few years, so this is a way, we believe, to stabilize the rental market and make it more affordable," says Sharon Hirota, housing and community development specialist for the county.
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Abstract News © Copyright 2008 INFORMATION, INC.
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