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No Bailout: Feds Make New Policy Clear in One Dramatic Weekend
Industry News
Texas Apartment Association Provides Hurricane Resources for Members and Residents
Brevard County, Fla.'s Apartment Sector Continues Its Downward Spiral
Fannie/Freddie Bailout to Have Apartment Consequences
Study Cites a Fluid Pipeline for Seattle-Area Apartments
Exports Boost Smaller Markets, Leading to Apartment Opportunities
Apartments Not a Part of Slowdown in Downtown Milwaukee
Huntsville, Ala., Apartment Market Is Looking at a Glut
Memphis Apartment Market adds Units in Second Quarter
Dallas-Based Behringer Harvard Announces Public Offering of Multifamily REIT
Legislative/Legal News
Utah Program Aims to Screen Apartment Residents
GSEs' Homeownership Mission Vulnerable After Rescue
California County Offers Kits to Create More Smoke-Free Apartments
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No Bailout: Feds Make New Policy Clear in One Dramatic Weekend
Digested From "No Bailout: Feds Make New Policy Clear in One Dramatic Weekend"
Washington Post (09/16/08) P. A1; by David Cho; Neil Irwin
U.S. Treasury Secretary Henry Paulson spent the weekend of Sept. 12 with regulators and Wall Street players in New York discussing the fate of Lehman Brothers and Merrill Lynch, but Paulson's response to requests for aid was the opposite of what many Wall Street players expected--no bailout. Merrill Lynch was forced to sell itself to Bank of America, and Lehman Brothers--which posted a $2.8 billion second quarter loss this year--is expected to file for bankruptcy after months of discussions with Paulson about the firm's financial troubles. Paulson had told Lehman CEO Richard Fuld Jr. that the firm would either need to be restructured or be sold. Wall Street investors and bankers were convinced the Treasury and Federal Reserve would sweep in to save Lehman at the last minute, much like regulators had done with Bear Stearns earlier this year, but Paulson drew a hard line against another bailout. Meanwhile, New York Federal Reserve Chair Timothy Geithner said the government entity had contingency plans in place for Lehman's bankruptcy should the firm be unable to strike a private-sector deal. Both Paulson and Geithner reiterated their stances to the media that no further bailouts would be available to firms finding themselves in financial trouble, including powerhouses like American International Group, Merrill Lynch, and Washington Mutual.
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Texas Apartment Association Provides Hurricane Resources for Members and Residents
Digested From "TAA Provides Hurricane Resources for Members and Renters"
Business Wire (09/10/08)
As Hurricane Ike was bearing down on the Lone Star State, the Texas Apartment Association (TAA) went into action and provided storm-related resources for its members and their residents. The "Industry" section of the association's Web site was updated with a page dedicated solely to "hurricane awareness," with specific resources related to: disaster preparedness; property damage and other post-disaster issues; and notices and forms, which TAA members can use to communicate with their residents before and after a natural disaster. George B. Allen, executive vice president of the TAA, remarked, "Many of the resources we have developed are tried and tested and were used by rental housing owners who were affected during Hurricane Rita, as well as by those who housed hurricane evacuees after Hurricanes Rita and Katrina. While we certainly are hoping that our rental housing owners won't need these resources, we want to ensure that they are well prepared in the event of a disaster, like Hurricane Ike." The TAA currently boasts more than 10,000 members who own or manage more than 1.7 million apartments throughout Texas.
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Brevard County, Fla.'s Apartment Sector Continues Its Downward Spiral
Digested From "Rental Space Available"
Florida Today (FL) (09/09/08) by Patrick Peterson
In Brevard County, Fla., apartment residents have become increasingly difficult to find and retain as local community owners weather a faltering economy. Roberta Altman, owner of several Brevard apartment communities, laments, "We have vacancies in some of our rentals that we never had before," adding that a good number of remaining residents have been struggling to pay their rent. The soaring housing market earlier in the decade was good for the rental housing market in Brevard. However, rising occupancy rates and rents started two years ago at this time. Since the fall of 2006, the Space Coast Apartment Association reports that apartment occupancy rates have fallen nearly 12 percent and rents have dipped almost 10 percent. Once the market started souring, construction workers went elsewhere for jobs and even some "snowbirds" could no longer afford to keep their Florida units. This has resulted in a surge of vacant apartments. Space Coast Apartment Association President Larry Berry comments, "We've had more people move out of the area due to job loss. The construction trade industry here has pretty much stopped." In 2007, county deputies served more than 2,500 eviction notices. This year, they project the number to top 2,700, a 5 percent increase.
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Fannie/Freddie Bailout to Have Apartment Consequences
Digested From "Commercial REIT Stocks Stage Retreat"
Wall Street Journal (09/10/08) P. C12; by Kris Hudson; Lingling Wei
The stocks of several commercial property firms got an initial boost from the government's decision last week to take over Fannie Mae and Freddie Mac. However, that enthusiasm has already begun to wane, as evidenced by the Dow Jones Equity REIT Index--which tracks 116 REIT stocks--falling by 4.1 percent on Sept. 9 as investors started expressing concerns about Fannie Mae and Freddie Mac possibly reducing their mortgage portfolios in the months to come. Some analysts remain concerned that the two government-sponsored enterprises will eventually scale back their lending activities in multifamily housing, in particular, making future apartment development difficult. Still, others note that the apartment industry might lose residents and the leverage to raise rents if the GSEs move to bolster the single-family housing market by slashing interest rates and helping would-be apartment residents purchase homes.
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Study Cites a Fluid Pipeline for Seattle-Area Apartments
Digested From "Residential Real Estate: A Fluid Pipeline for Seattle Area Apartments"
Puget Sound Business Journal (Seattle) (09/12/08) by Brad Berton
Dupre+Scott Apartment Advisors reports that plans now in the works by Seattle-area apartment developers would create more than 6,000 new rental units a year in 2009 and 2010. If those totals are realized, it would amount to the biggest rental-housing development boom the region this decade. Researchers say that is a big "if," considering such factors as rising construction costs, the increasingly unsteady national economy and a very challenging development finance environment. Grubb & Ellis apartment broker Greg Laycock cites those and other factors in doubting 2009 openings will come close to topping the 5,000-unit mark.
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Exports Boost Smaller Markets, Leading to Apartment Opportunities
Digested From "Exports Prop Up Local Economies"
Wall Street Journal (09/11/08) P. A1; by Timothy Aeppel
Job creation is a primary factor when choosing to develop new apartment communities or invest in existing ones. Such lesser-known towns and cities as Columbus, Ind., Kingsport, Tenn., and Waterloo, Iowa, are among those where job creation is on the rise despite the sluggish economy. Much of that success has to do with exports. Foreign buyers are scouring the U.S. for everything from wine corks to used dump trucks. The volume is currently so great that a number of inland trade hubs have been unable to find enough metal shipping containers to load products headed for overseas markets. Critics lament that the U.S. exports masses of scrap steel and other waste materials to recyclers in China and elsewhere. However, exports of manufactured goods, commodities and services are also increasing. Even automobiles, which continue to languish on showroom floors across the United States, have witnessed a 4 percent increase in exports. More products to ship have translated into more jobs for construction workers in expanding port towns. For instance, crews began work late in 2007 on a $660 million terminal at the former Navy base in North Charleston, S.C. When completed, it will be capable of handling up to 1 million containers.
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Apartments Not a Part of Slowdown in Downtown Milwaukee
Digested From "Apartments Not a Part of Slowdown"
Milwaukee Journal Sentinel (09/14/08) by Tom Daykin
Development in Milwaukee's downtown corridor has largely ground to a halt, except for apartments. In the last year or so, as banks have been cutting their commercial real estate loans, five major apartment communities in and around downtown have obtained financing. Three of the communities, boasting a combined 233 rental units, have started construction. Building activity on the other two are set to begin later this fall, adding another 157 apartments to the mix. Only one of the five projects will offer apartments at subsidized, below-market rents, while the rest will provide upscale apartments at monthly rents starting at around $800. Robert Joseph, head of Joseph Property Development LLC, says apartments "are the only thing there's a demand for right now." The apartment projects are being erected at a time when downtown-area condo development has fallen by the wayside due to overbuilding and economic factors. Due to the collapse of the subprime mortgage business, lending standards for condo buyers have gotten stricter. Most lenders now want at least a 10 percent down payment from would-be buyers, compared with 5 percent or even smaller down payments just a couple of years ago.
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Huntsville, Ala., Apartment Market Is Looking at a Glut
Digested From "Does Huntsville Have Too Many Apartments?"
Huntsville Times (AL) (09/14/08) by Gina Hannah
A new Rock Apartment Advisors study confirms that Huntsville and neighboring Madison, Ala., already have more than 15,000 apartments and another 4,600 rental units in the pipeline. As of mid-August, this market had 1,574 units under construction, with some ready for immediate occupancy. Another 843 units are expected to break ground by the end of this year, while about 2,200 units are in the planning stages and will be built based on market demand. The lion's share of the new construction is taking place in west Huntsville. David Wilson, deal manager for Rock Apartment Advisors, explains, "That's primarily because of available land. There's not much land left in the southeast [part of town] for multifamily properties. Also, the proximity to jobs in [Cummings] Research Park and Redstone Arsenal make it appealing." At the same time, several developers are concerned that supply may eventually outpace demand in the local apartment sector. If the apartment market does indeed become mired in an oversupply scenario, apartment residents could benefit in the form of lower rents.
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Memphis Apartment Market adds Units in Second Quarter
Digested From "Coffee Break: Multifamily Market Adds Units in Second Quarter"
Memphis Commercial Appeal (TN) (09/10/08)
According to the CB Richard Ellis Memphis midyear Multi-Housing Marketview report, Memphis' apartment market continues to record solid results despite the sluggish economy. After a brief halt in the first three months of 2008, construction is back with 691 units completed and more scheduled in the third and fourth quarters. Occupancy is up slightly from a year ago, remaining steady overall at 90.2 percent marketwide. Average rents also rose in the April-through-June period by 2 percent versus the end of 2007. Average monthly rent is currently $701 per unit, confirms the CBRE report.
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Dallas-Based Behringer Harvard Announces Public Offering of Multifamily REIT
Digested From "Dallas-Based Behringer Harvard Announces Public Offering of Multifamily REIT"
Dallas Morning News (09/11/08) by Sheryl Jean
Looking to raise more than $2 billion, Behringer Harvard has launched the initial public offering of the Behringer Harvard Multifamily REIT I Inc. The public, non-listed REIT is offering up to 200 million common shares priced at $10 a share via a national network of independent financial advisors. In addition, the Dallas-based property firm is offering up to 50 million shares of common stock at $9.50 each through its distribution reinvestment plan.
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Legislative/Legal News
Utah Program Aims to Screen Apartment Residents
Digested From "Program Aims to Screen Tenants"
Salt Lake Tribune (UT) (09/11/08) by Derek P. Jensen
To better control crime and deal with problem apartment residents, Salt Lake City leaders are considering a new program that would require training of apartment owners in return for a discount on their business-licensing fees. Developed by the Utah Apartment Association (UAA), the so-called "good landlord" plan is one piece of a yearlong campaign to improve the city's quality of life. City Council members hope to pass it in ordinance form later this fall. Rental units currently comprise almost 50 percent of all capital housing, or roughly 37,000 units. UAA Executive Director Paul Smith says the goal of the training is to reduce the need for city services, particularly police calls at apartment communities known to be bastions of violence and drug activity. Apartment owners who sign up for the program would agree to conduct background checks and refuse keys to anyone with criminal records. In addition, they would launch an immediate eviction process for residents who become a nuisance. Owners would also agree to keep their communities in compliance with city codes. According to Smith, suburban West Valley City has managed to reduce crime by 30 percent since implementing the program. Ogden, South Salt Lake, Clearfield and Washington Terrace also use the UAA program.
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GSEs' Homeownership Mission Vulnerable After Rescue
Digested From "Homeownership Mission Vulnerable After Rescue"
Washington Post (09/10/08) P. D1; by Binyamin Appelbaum; Renae Merle
The long-standing mission of Fannie Mae and Freddie Mac could be in jeopardy as the federal government looks to return the mortgage finance companies to profitability. The firms were created to facilitate homeownership for low-income families. However, the government no longer has to spend taxpayer money on affordable housing, as a result of their suspension as private enterprises. In discussing his plan for Fannie Mae and Freddie Mac, James Lockhart III--director of the Federal Housing Finance Agency--stressed a focus on having the companies support the whole mortgage market. The Treasury Department is already writing checks for some refinances of distressed home loans, but Fannie Mae and Freddie Mac no longer will be responsible for those costs. Moreover, the government could reverse course on some previous spending decisions, such as having the companies contribute money for an affordable housing trust fund.
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California County Offers Kits to Create More Smoke-Free Apartments
Digested From "County Offers Kits to Help Create More Smoke-Free Apartments"
Vallejo Times Herald (CA) (09/14/08)
In California, the Solano County Tobacco Prevention and Education Program is offering free "how-to kits" to apartment owners and managers to help create more smoke-free apartments for the county's large apartment resident population. The "Making Smoke-Free Housing Work" kits contain information on the economic savings, health reasons and legal precedents for making apartments smoke-free. In addition, the kits contain a step-by-step guide to establish smoke-free apartments, including a sample resident survey and lease addendum. Felicia Flores-Workman, county project director, states, "The lack of smoke-free apartments, especially for families with children and those with respiratory conditions, is a serious public health problem."
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