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U.S. Apartment Vacancy to Dip to 5 Percent by Year End
Industry News
Equity Pulls Back First $1.3B Offer for Archstone
Bay Area Leads Nation in Rental Price Increases
Private Equity Firm Supports 'REO-to-Rental' Model
Renting Goes Social With SocialRent Facebook App
Chattanooga Ranks No. 3 in Apartment Cost Growth
Housing Starts Fell 4.1 Percent in Dec. as Multifamily Slides
Thurston County (Wash.) Apartment Vacancy Rates Fall
Essex Property Trust and Wisconsin Join $1.2B Plan
New Apartment Development Company Launched on West Coast
Triangle Area (N.C.) Apartments Show Profit in Sale
Fannie Paints Gloomy Refinance Picture
Legislative/Legal News
Northwest PA Apartment Association to Sue City of Erie
U.S. Attorney Settles With Apartment Owners Over Military Moves
Housing Finance Reform Unlikely in 2012
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U.S. Apartment Vacancy to Dip to 5 Percent by Year End
Digested From "National Apartment Vacancy to Dip Down to 5 Percent by Year End"
GlobeSt.com (01/17/12) by Natalie Dolce
The U.S. apartment sector endured last summer's economic doldrums to record robust absorption gains and higher occupancy rates, according to Marcus & Millichap's 2012 National Apartment Report. The report says that metro areas with high barriers to entry are experiencing especially tight supply conditions. "Foreclosures in the single-family market, the inability of most Americans to meet mortgage financing requirements, and households choosing rental housing for lifestyle reasons or employment mobility contributed to a net rise in apartments," the report states. Hessam Nadji, managing director of research and advisory services at the firm, expects demand for rental housing will remain strong this year as demographic trends combine with changing consumer behavior. He further notes that homeownership rates have fallen dramatically since reaching their apex of 69.2 percent in 2004, adding, "The most recent readings place homeownership at 66.3 percent, and this sharp decline has significantly added to rental housing demand. As a result, rental housing will remain a favored choice for the coming year." In the absence of any unforeseen shocks to the global financial markets, a number of lenders will continue to finance apartment developments and acquisitions in 2012 while interest rates remain at historically low levels, forecasts William Hughes, senior vice president and managing director of Marcus & Millichap Capital. He concludes, "Fannie Mae and Freddie Mac will remain the chief suppliers of apartment loans in an increasingly crowded field of providers."
Industry News
Equity Pulls Back First $1.3B Offer for Archstone
Digested From "Equity Pulls Back First $1.3B Offer for Archstone"
GlobeSt.com (01/23/12) by Robert Carr
Equity Residential confirms that it has canceled its initial $1.3 billion bid for a 26.5 percent stake in apartment giant Archstone. The Chicago-based apartment owner, though, has reserved the right to submit an offer for a similar ownership interest. Lehman Bros. exercised a right of first refusal to purchase the interest instead, giving the bankrupt firm a 73.5 percent controlling stake in Archstone. Earlier in January, a Lehman bankruptcy judge ruled that Equity can attempt to buy the stake, and that Lehman may have to become embroiled in a bidding war to keep the shares out of Equity's hands. Archstone currently boasts a portfolio of 48,922 apartment units, including around 14,000 in Germany. Equity, owned by real estate mogul Sam Zell, has stakes in 417 apartment communities in 15 states and the nation's capital.
Bay Area Leads Nation in Rental Price Increases
Digested From "Bay Area Leads Nation in Rental Price Increases"
San Francisco Examiner (01/18/12) by Sarah Gantz
According to a new report by RealFacts, the San Francisco Bay Area topped the country for rising apartment rental prices in 2011. The report found that the San Francisco and San Jose markets have had the greatest appreciation in the nation, with the average rental prices having increased by 10.4 percent and 12.2 percent, respectively. Researchers add that rental prices have gone up 13.7 percent in San Francisco over the past four years, while occupancy has only increased by 1.3 percent. "We've reached a point where there's nothing out there," said Craig Berendt, a broker with Berendt Properties. "People are knocking down my door to get an apartment." The lack of new apartments has created competition among both current and prospective residents, and vacancies are filling up quickly in most apartment communities.
Private Equity Firm Supports 'REO-to-Rental' Model
Digested From "Private Equity Firm Supports 'REO-to-Rental' Model"
National Mortgage News (01/24/12) by Evan Nemeroff
Private equity fund GI Partners has announced that it is investing $250 million in Waypoint Real Estate Group, an Oakland-based firm that purchases foreclosed houses, renovates them, and then leases the properties to residents. Since opening its business three years ago, Waypoint has acquired nearly 1,000 properties throughout California and plans on purchasing and leasing $1 billion worth of additional single-family rental homes over the next couple of years. With the support of GI Partners' investment, Waypoint expects to launch a national expansion program in 2012 into such new geographic markets as Atlanta, Chicago, Las Vegas, and South Florida. All have been hit hard by the mortgage crisis and contain a large number of distressed properties. Colin Wiel, managing director and co-founder of Waypoint Real Estate Group, remarks, "Our approach to buying and renovating distressed homes and leasing to residents who are committed to a path to future home ownership is a viable solution to our nation's housing crisis." Waypoint has specialized in using proprietary technology to identify residential real estate markets that are characterized by strong rental demand that can benefit from its "REO-to-rental" model.
Renting Goes Social With SocialRent Facebook App
Digested From "Renting Goes Social With SocialRent Facebook App"
AGBeat (01/20/12) by Charlene Jimenez
A group of Boston University students have created the SocialRent Facebook app, which fosters collaboration among roommates. The app allows each apartment renter to input what they are looking for in a living situation and then each roommate can edit, adjust, and add to it. To determine the best apartment, users can specifically outline how many bedrooms and bathrooms, price, and location. Once each roommate is in agreement, they can forward the information to the SocialRent team, which searches for an apartment that matches those criteria. Once results are found that are closest to the criteria, the information is sent to the submitter with viewing times for each apartment. This will allow each roommate to check out the apartment before the final decision is made. The goal of the app is to help users locate the best apartment at the best price. Designers say the app could eventually be expanded to match roommates.
Chattanooga Ranks No. 3 in Apartment Cost Growth
Digested From "Chattanooga Ranks No. 3 in Apartment Cost Growth"
Chattanooga Times Free Press (TN) (01/19/12) by Mike Pare
Reis Inc. reports that Chattanooga, Tenn., ranked up there with such major metropolitan areas as San Francisco, San Jose, and New York City in terms of apartment rent increases in 2011. Brad Doremus of Reis notes that Chattanooga placed No. 3 nationally last year in rent growth. He said that "different plants . . . distribution centers are definitely giving the town a boost. That's definitely reflected in apartment demand." Reis researchers determined that so-called "effective rents" in Chattanooga rose by 3.8 percent for the year versus 2.3 percent nationwide. Former Chattanooga Apartment Association President Becky Brooks also cited new industry moving into the area, specifically such major brands as Amazon and Volkswagen, that has caused some real dollars to flow into the economy from their various projects. According to Reis, the average effective rent in Chattanooga for 2011 was $625 a month compared to $1,009 a month nationally. New York was found to have the highest effective rent at $2,876 a month.
Housing Starts Fell 4.1 Percent in Dec. as Multifamily Slides
Digested From "Housing Starts Fell 4.1 Percent in December"
St. Louis Post-Dispatch (01/20/12) by Greg Robb
Housing starts retreated 4.1 percent in December to an annualized rate of 679,000, as a 4.4 percent rise in single-family construction was offset by a 20.4 percent slide in the multifamily sector. The Commerce Department also reported that building permits dipped 0.1 percent last month to a seasonally adjusted annual rate of 679,000, but single-family permits gained 1.8 percent. For all of 2011, housing starts were up 3.4 percent from the year before as multifamily starts surged 55 percent; but single-family building declined 9 percent to a record low 428,600 units.
Thurston County (Wash.) Apartment Vacancy Rates Fall
Digested From "Thurston County Apartment Vacancy Rates Fall to 6.56 Percent"
Olympian (WA) (01/18/12) by Rolf Boone
Apartment Insights of Seattle's latest survey shows that apartment vacancy rates in Thurston County, Wash., tightened in 2011's fourth quarter, falling to 6.56 percent from 7.64 percent in the July-through-September period. Rates declined due to increased demand from U.S. military personnel returning to the region, researchers note. Of the county's three biggest cities, Lacey had a vacancy rate of 6.07 percent and Olympia and Tumwater stood at around 7 percent as of Dec. 31. Although vacancy rates fell throughout Thurston County, average rents also dipped to $838 a month in the fourth quarter -- down $2 from the previous three-month period. Elsewhere in the region, Pierce County's apartment vacancy rates climbed from 6.07 percent in the third quarter to 6.43 percent in the fourth quarter. Lakewood ranked as the weakest submarket at 8.86 percent.
Essex Property Trust and Wisconsin Join $1.2B Plan
Digested From "Essex and Wisconsin Join $1.2B Parkmerced Plan"
GlobeSt.com (01/19/12) by Robert Carr
Essex Property Trust Inc. has joined with the State of Wisconsin Investment Board to provide $175 million as an equity investment into the $1.2 billion redevelopment of the Parkmerced apartment community in San Francisco. The 3,221-unit property is majority owned by New York City-based Fortress Investment Group LLC and is on track to expand to approximately 7,200 apartments by 2040 under a plan designed by Skidmore, Owings and Merrill. Lee & Associates-LA North/Venture Team arranged the seven-year equity plan for Wesco II, a joint venture of Essex and the state. Michael Schall, president and CEO of the California-based multifamily REIT, describes the venture as a unique opportunity to take part in the recapitalization of a property in one of the strongest apartment markets in the nation. Essex's portion of the investment was funded with the issuance of common shares. It is expected to impact 2012 earnings per share and funds from operations by 12 cents per share. Essex Property Trust currently has ownership stakes in 155 West Coast apartment communities.
New Apartment Development Company Launched on West Coast
Digested From "Construction Industry Veterans Launch Apartment Development Company in Solana Beach"
Del Mar Times (01/17/12)
The Morgan Group veterans Ronnie Morgan, Louis Kuntz, and Ric Schwisberg have formed a partnership to launch a new apartment development company in Solana Beach, Calif. Dubbed MKS Residential, the new firm will specialize in developing Class A apartments with a regional construction and development office in Denver. Among the first projects will be the 3100 Pearl development in Boulder. Morgan remarks, "Our team has a decade of experience working together, having built more than 3,500 apartment units in Southern California since 1997."
Triangle Area (N.C.) Apartments Show Profit in Sale
Digested From "Triangle Apartments Show Profit in Sale"
News Observer (NC) (01/17/12) by David Bracken
Chicago-based Westdale Investment Partners has purchased the Lenox at Patterson Place apartment community in Durham, N.C., for $28.8 million. The deal illustrates the strong performance of the local multifamily housing sector over the past few years, especially for newer apartment communities in good locations. Many companies who purchased apartments in 2008 and 2009 are now finding that their assets have gone up significantly in value. According to statistics from the Triangle Apartment Association and Karnes Research, the apartment vacancy rate in the Durham area was 6 percent in September, the lowest its been in over a decade.
Fannie Paints Gloomy Refinance Picture
Digested From "Fannie Paints Gloomy Refinance Picture"
Financial Times (01/15/12) by Shahien Nasiripour; Nicole Bullock
Fannie Mae expects mortgage refinancings to shrink 40 percent to a volume of about $540 billion in 2012. It also forecasts that new 30-year home loans will bear an average interest rate of 4 percent; that housing starts will rise about 16 percent; and that new- and existing-home sales will rise by just 3.5 percent. The outlook notes that policy and regulatory changes, as well as questions about the fate of Fannie Mae and Freddie Mac, are likely to slow economic and housing recovery.
Legislative/Legal News
Northwest PA Apartment Association to Sue City of Erie
Digested From "Northwest PA Apartment Association to Sue City of Erie"
GoErie.com gyrt (01/23/2012) by Erica Erwin
The Apartment Association of Northwestern Pennsylvania is suing the city of Erie's rental inspection program. In the suit, which will be filed in Erie County Court this Wednesday, the association charges that the city has overcharged apartment owners for inspections. In addition, association management alleges that Erie has improperly allocated funds generated from those inspections and has violated constitutional rights by imposing the rental inspections only on certain groups of apartment owners.
U.S. Attorney Settles With Apartment Owners Over Military Moves
Digested From "U.S. Attorney Settles With Apartment Owners Over Treatment of Military Families"
Los Angeles Times (01/13/12) by Tony Perry
According to the U.S. attorney's office, the owners of three apartment communities close to Camp Pendleton in Southern California have been illegally charging fees when military families have to move due to deployment orders. Under a settlement agreement, the owners have agreed to begin complying with the Servicemembers Civil Relief Act, designed to protect military personnel. The law allows military families to break leases when the service member is either deployed or reassigned. The settlement includes apartment communities in Oceanside and San Marcos, Calif.
Housing Finance Reform Unlikely in 2012
Digested From "Fannie, Freddie Overhaul Unlikely"
The Hill (01/14/12) by Vicki Needham
Despite a call from Republicans, some Democrats, and even presidential candidate Newt Gingrich, the overhaul of Fannie Mae and Freddie Mac is unlikely to happen again in 2012 as the U.S. Senate remains in "oversight" mode this election season. Some suggest that the U.S. House of Representatives could pass several pieces of legislative reform for the mortgage giants, but that without broad-based legislation on housing finance, changes are unlikely. The continued sluggish recovery of the housing market has hampered efforts to modify Fannie and Freddie and will continue to prohibit a hand off of obligations between the government and private sector. The U.S. House Financial Services Committee already has approved 14 bills to reform the mortgage giants. One possible measure from U.S. Reps. John Campbell (R-Calif.) and Gary Peters (D-Mich.) and another by U.S. Reps. Gary Miller (R-Calif.) and Carolyn Maloney (D-N.Y) would wind down Fannie and Freddie and create a new system of privately financed organizations to support the mortgage market. U.S. Sen. Bob Corker (R-Tenn.) has proposed a measure that includes a 10-year unwinding of federal support for the government sponsored enterprises, allowing the private market to absorb more responsibility.
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