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More Homeowners Opting Not to Move, Sending Apartment Rents Up
Industry News
AvalonBay Communities Closes $330M Financing
Apartment Occupancy High in Downtown Indy
Place Properties Developing Apartments for Military Nationwide
Analyst Upgrades Apartment REIT Sector
Houston Apartment Association Teaches Swimming as a Public Service
Affordable Housing Feeling the Pinch in Massachusetts
Legislative/Legal News
Cincinnati Might Expand Program to Include Apartments
More Multifamily Housing in Store for California's Moreno Valley
Florida Company Tries to Convert Condos to Rental Apartments
Solid Waste Fees Rise for Apartment Residents in Md. County
Impact Fees for New Multifamily Housing to Rise in Raleigh
Actor Urges Federal Lawmakers to Make Affordable Housing Green
Developer of Affordable Housing Faces New Challenge
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More Homeowners Opting Not to Move, Sending Apartment Rents Up
Digested From "Weary and Wary, Homeowners Stay Put and Rents Rise "
Wall Street Journal (05/22/08) by June Fletcher
Many Americans are confused as to whether they should buy or rent in the current housing market. Home prices continue to fall, leaving many would-be buyers uneasy to make the leap. At the same time, foreclosures have created one of the best buying opportunities in years, especially with apartment rents rising in numerous markets. Reis Inc. expects rents to increase 3.8 percent this year versus a 3.1 percent gain in 2007. In a recent poll sponsored by the National Apartment Association (NAA) and conducted by Harris Interactive, a panel of consumers--consisting of 1,258 homeowners, 563 renters and 228 "others" (i.e., folks living with family or friends)--were asked questions about why they live where they do and what their housing plans are for the future. The 2,000-plus respondents were generally pessimistic about the state of the economy. Eight out of 10 believe it will either stay the same or get worse over the next six months. As a result, 72 percent of the homeowners surveyed and roughly 50 percent of the renters and "others" say they plan to stay in their current residences for at least another year. This finding is a bit at odds with recent trends towards renting. Rising foreclosures and the credit crisis have contributed to a swelling in the apartment resident pool. NAA President Doug Culkin notes that multifamily housing developers, who previously favored condo development during the housing boom, are now concentrating on rental apartments. Culkin predicts that demand from three groups--young people entering the workforce, immigrants and downsizing empty-nesters--will keep the rental apartment market healthy for at least the next few years.
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AvalonBay Communities Closes $330M Financing
Digested From "AvalonBay Communities Closes $330M Financing"
Forbes (05/15/08)
Earlier in May, AvalonBay Communities Inc. closed on a $330 million financing, with proceeds going to pay down the Virginia-based apartment REIT's revolving credit facility. The $330 million unsecured term loan facility was comprised of three tranches that mature between next year and 2011. A consortium of a dozen banks took part in the facility, with J.P. Morgan Securities Inc. serving as lead arranger.
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Apartment Occupancy High in Downtown Indy
Digested From "Downtown Dwellers Drive Occupancy Surge"
Indianapolis Star (05/16/08) by Tom Spalding
A new Tikijian Associates Multihousing Investments Advisors study shows that apartment occupancy in downtown Indianapolis has reached its highest peak since the mid-1990s. In 2007, downtown's apartment vacancy rate dropped by 50 percent, and it could drop again this year. Only 4.2 percent of the 3,300-plus apartments in that part of the city were vacant last year, more than 300 fewer than in 2006. Tikijian Associates researchers note that the vacancy rate remains low because demand is so high. The surge in foreclosures have turned more homeowners into apartment renters. In addition, growth at Indiana University-Purdue University Indianapolis is attracting more students in need of downtown rental units close to campus. Soaring gas prices are also playing a role, with people wanting and even needing to be closer to their work. George Tikijian, principal broker for Tikijian Associates, applauds the city of Indianapolis for doing a good job touting the downtown corridor as a viable and exciting place to live. Part of the attraction is the amenities, which include a wide variety of restaurants, stores and cultural attractions. Jim Crossin, vice president of development for Flaherty & Collins, remarks, "People like the idea of living where the action is, and we have a city with a lot of action."
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Place Properties Developing Apartments for Military Nationwide
Digested From "Place Properties Developing Apartments for Military Nationwide"
Commercial Property News (05/20/08) by Denise Meyer
Place Properties LP recently celebrated the opening of its first five off-post military housing communities for soldiers, military contractors and area civilians. The five Independence Place communities are at Georgia's Fort Benning and Fort Stewart, Texas' Fort Hood and Fort Bliss, and Fort Sill in Oklahoma. A sixth community is currently in development at Fort Campbell in Kentucky. These new communities represent more than $300 million of private investment to develop apartments for soldiers who are obliged to live off post because the on-post barracks are either full or obsolete. Following the recent Base Realignment and Closures (BRAC) initiative, many military bases are struggling to house the influx of additional troops. Unlike conventional apartments, Independence Places lease individual bedrooms--a structure that limits the liability for each soldier should his/her roommate be deployed or leave for any other reason. Most utilities are included in the rental rate, eliminating set-up fees or utility deposits. Units come fully furnished, and each bedroom has its own bathroom. Additionally, each gated development offers such amenities as hi-tech clubhouses, fitness facilities and computer rooms. Atlanta-based Place Properties currently has more than 14 such developments in various stages of planning and development.
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Analyst Upgrades Apartment REIT Sector
Digested From "Analyst Upgrades Apartment REIT Sector"
Associated Press (05/19/08)
Keefe, Bruyette & Woods Inc. (KBW) analyst Stephen Swett this past week upgraded his stance on the apartment REIT sector from "Underweight" to "Neutral" based on its strong first quarter performance and improving fundamentals in the marketplace. He notes that REITs specializing in owning and investing in apartment communities have returned 20.2 percent to shareholders through May 15. By comparison, the broader MSCI U.S. REIT index gained 12.3 percent during that time span, while the Standard & Poor's 500 index lost 2.3 percent. According to Swett, apartment market values are "likely to hold up better than for commercial real estate." He added that outside of a few markets, apartment revenue growth continues in the mid- to upper-single digits. In his research note, Swett stated: "With less downside risk, we now believe apartments REITs can hold their relative valuations." Swett went on to upgrade Apartment Investment & Management Co. from "Underperform" to "Market Perform" based on the potential for improving earnings through the remainder of 2008.
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Houston Apartment Association Teaches Swimming as a Public Service
Digested From "Houston YMCA Water Program Reaches Out "
KHOU.com--11 News (Texas) (05/22/08)
The Houston Apartment Association has teamed up with the YMCA of Greater Houston to launch the "Water Wise initiative" program. The goal of this initiative is to offer the city's children swimming lessons at area apartment communities and to teach them water safety. The program will also include a Web site with safety tips along with a public service campaign. A dozen people have drowned in Houston pools since the first of this year.
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Affordable Housing Feeling the Pinch in Massachusetts
Digested From "Affordable Housing Also Feeling Pinch"
Boston Globe (05/22/08) by Rachel Lebeaux
While the development of affordable housing remains fairly strong in a number of Boston-area communities, there has been a slowdown in the sale and rental of income-restricted units. Philip Hailer, spokesman for Massachusetts' Department of Housing and Community Development, states, "The overall economic climate, including the impact of the subprime mortgage and foreclosure situation, has definitely affected the production of affordable housing, but there is still a need and demand for it." Under the state's permit law, dubbed Chapter 40B, Massachusetts encourages communities to have at least 10 percent of their overall housing stock qualify as "affordable" to households making 80 percent or less of the area's median income. In communities that fall short of that goal, housing projects filed under 40B can avoid local zoning restrictions if roughly a quarter of the units are allocated for rent or sale under affordable guidelines. In the Boston suburb of Franklin, where 10.3 percent of the housing is considered affordable, the town has run into its share of difficulties. At the Residences at Union Place apartment community, for instance, 25 percent of its 300 units are set aside as affordable. While the property's market-rate units have been popular, the affordable apartments have not been as easy to fill. Maxine Kinhart, assistant to the town administrator, states, "The current market has had an effect on everything that trickles down to the affordable units ... and, over the past year or two, we have had a number of developments that have just languished." Affordability for developers is also an issue. If a Chapter 40B housing project's market-rate housing units are not selling or renting, the shortfall makes it even more difficult for the developer to subsidize the affordable apartments.
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Legislative/Legal News
Cincinnati Might Expand Program to Include Apartments
Digested From "City Might Expand Recycling Program"
Cincinnati Enquirer (05/20/08) by Jane Prendergast
The Cincinnati City Council is considering an expansion of its recycling program to people living in apartments, condominiums and public housing. The city's Environmental Advisory Council estimates that only about 10 percent of the trash generated in Cincinnati currently gets recycled. That amounts to 11,300 tons, which is even less than the 12,450 tons that were recycled nine years ago. The proposed changes include a campaign to boost that rate to 30 percent by 2015. Councilwoman Leslie Ghiz believes increased recycling is needed, but has cautioned colleagues to carefully consider the cost increase associated with picking up recycling at more places. She hopes to table the topic until later in the year when the rest of the city's budget is finalized.
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More Multifamily Housing in Store for California's Moreno Valley
Digested From "Moreno Valley Looks to Meet Future Housing Needs"
Press Enterprise (Riverside, CA) (05/21/08) by Dan Lee
Looking to meet a state mandate to plan for future housing needs, California's Moreno Valley Planning Commission is considering proposals to rezone some local properties for higher density, multifamily residential units. Specifically, city officials are looking at increasing density around Riverside County Regional Medical Center, near a Home Depot store in the southern part of town, and along one of its major thoroughfares. The housing would take the form of mid-rise apartment communities, with 30 units per acre. The proposals are part a general plan for Moreno Valley's future growth. The state requires all cities to plan for new housing to account for future population and job growth. Specifically, Moreno Valley must plan for 7,474 new housing units by 2014. The number includes just over 3,045 units for low- and very-low-income families. California defines "low income" in Riverside County as a family of four earning $53,300 a year or less.
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Florida Company Tries to Convert Condos to Rental Apartments
Digested From "Plots & Ploys: Condo Coercion"
Wall Street Journal (05/21/08) P. C10; by Alex Frangos; Jonathan Karp; Maura Webber Sadovi
As the majority owner of a Tampa, Fla., condominium complex, Providence Management is threatening to terminate the building's condo association in an effort to buy out residents for less than they initially paid and convert the 396-unit property back into rental apartments. The Chicago-based company has scheduled a May 28 meeting to vote on its termination plan, which has some residents up in arms. While the showdown stems from the larger real estate downturn, it is also the unintended consequence of a Florida amendment that was crafted to help severely damaged condo projects dissolve after natural disasters. Providence also contends that its original condo declaration agreement clearly spells out that the controlling owner can buy units from owners who oppose termination at fair market value, which is currently less than what most owners originally paid for their units.
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Solid Waste Fees Rise for Apartment Residents in Md. County
Digested From "Throwing Trash Away Gets More Expensive"
Frederick News-Post (MD) (05/22/08) by Meg Bernhardt
In Maryland, the Frederick County Commissioners voted on May 21 in favor of increasing solid waste fees to make up for a nearly $6 million shortfall in the county's fiscal 2009 solid waste budget. The result is an increase in the system benefit charge, which is levied on every household in the county, from $20 this year to $44 in fiscal '09 for multifamily residences. In the following two years, that charge will continue to increase to $47 and $49. For single-family homes, the charge will increase from $36 this year to $80 in fiscal 2009, $84 in fiscal 2010 and $88 in fiscal 2011. The fee will help pay for expansions to Frederick's recycling program. Commissioner Jan Gardner comments, "In the long run, an expansion of recycling and diversion of recycling out of the long-haul transfer will save money but the upfront costs must be covered. Residents will be receiving a new and expanded service." Fiscal 2009 starts July 1 for Frederick.
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Impact Fees for New Multifamily Housing to Rise in Raleigh
Digested From "Impact Fees to Rise in Raleigh"
Raleigh News & Observer (NC) (05/20/08) by David Bracken
On May 20, Raleigh City Council members voted 7-1 in favor of hiking impact fees for new construction, including apartments. Despite opposition from builders and developers, City Council members fulfilled a campaign pledge by voting to more than double many of the city's impact fees to help pay for new roads and parks. Road fees alone on a multifamily housing unit would increase from $322 to $925 per unit; fees on a single-family residence of 2,000 square feet would go from $528 to $1,386; and on churches, the fee would go from $232 to $865 per 1,000 square feet. Increasing such fees appealed to a large number of voters concerned about paying for the city's growth. Opponents, though, say the timing is terrible. Since the last election, they point out, the economic outlook in North Carolina's Triangle region has worsened due to soaring gasoline prices and a dramatic slowdown in residential real estate.
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Actor Urges Federal Lawmakers to Make Affordable Housing Green
Digested From "Actor Edward Norton Urges Congress to Make Affordable Housing Green"
Multi-Housing News (05/08) by Anuradha Kher
Actor Edward Norton, grandson of Enterprise Community Partners co-founder James Rouse, addressed the U.S. House of Representatives recently on the importance of green housing initiatives. According to data from Enterprise, which oversees the Enterprise Green Communities initiative, eco-friendly communities generate significant cost savings by lowering water and energy usage--benefits that are achievable through slightly higher building costs. “Low-income people and communities suffer disproportionately from housing challenges, energy costs and the effects of climate change," said Norton at the hearing, titled "Building Green, Saving Green: Constructing Sustainable and Energy Efficient Buildings." "We can make progress on all these issues, create green jobs and lock-in long-term environmental benefits by making green affordable homes a national priority.” The Enterprise Green Communities program has $570 million invested so far in 250 green developments, with more than 11,000 units completed or underway for lower-income earners.
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Developer of Affordable Housing Faces New Challenge
Digested From "Developer of Affordable Housing Faces New Challenge"
New York Times (05/21/08) P. C6; by C.J. Hughes
Under New York state's 421-a negotiable certificate program, developers earn certificates that provide property tax abatements as a reward for erecting below-market-rate apartments in sections of the city short on housing. These abatements--which significantly reduce tax bills on individual apartments for a decade--can then be sold to developers of market-rate co-ops, rental apartments, and condos in wealthier neighborhoods. As a result, the abatements have become powerful sales tools for market-rate developers. At the end of June, though, the 23-year-old certificate program is scheduled to end. Furthermore, the New York Legislature has tightened the 421-a law so that the tax abatements it provides will only be available if developers erect low-income housing at the same site as their market-rate units. The changes are causing Atlantic Development Group, which has accounted for about two-thirds of New York's total certificate units, to change direction and branch into more market-rate projects. Peter Fine, the company's principal, states, "The new system won't have as much fluidity. It will take longer to get deals done, because of extra layers of bureaucracy." One of four market-rate buildings now on Atlantic's drawing board is Two Cooper Square, a 15-story red brick tower that is rising in the East Village. Its 160 units do not have prices yet, but neighborhood rents for units of similar size average $2,000 to $5,000 a month. The $81 million project is on track for a 2010 completion.
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