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A Beneficiary of the Housing Bust: Apartment REITs
Industry News
The Case Against Homeownership
Mobile Maps Make Apartment-Hunting Easier
Mark-Taylor Enters Las Vegas, Welcomes 6 Communities to Portfolio
Austin Apartment Vacancy Rate Falling, Rents Rise
Renting Is Expected to Be a Popular Alternative to Buying for Years to Come
Savannah Apartment Market May Be Poised for Swing
Home Properties Named to 'Most Trustworthy Companies' List
Apartment Residents Strategize as Negotiating Rent Gets Tougher
California Firm Buys Seven Apartment Communities in Arizona
Grubb & Ellis Apartment REIT Looking to Buy 15 Communities
Phoenix Apartments at the Center of Lenders' Stepped-Up Efforts on Bad Loans
Apartment Construction Begins in Burke County, N.C.
Brad Brown Joins Cortland Partners as Chief Acquisitions Officer
Long Island Apartment Portfolio Sells for $229.8M
Legislative/Legal News
Huntsville Apartment Communities May Have to Provide Parking for Bikes
Arizona City Launches New Effort to Fight Apartment Crime
Texas Town Looks at Water Meters for Apartments
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A Beneficiary of the Housing Bust: Apartment REITs
Digested From "A Beneficiary of the Housing Bust: Apartment REITs"
Time (08/26/10) by Janet Morrissey
Apartment REITs have been quietly and steadily posting high returns to investors despite the meltdown in the housing market, rising foreclosures and the economy's weak recovery. They have delivered total returns of 25.5 percent, far outpacing the S&P 500, the Dow Jones Industrial Average, Nasdaq, and the Russell 2000. Rising foreclosures, tough lending standards, and uncertainty over how much further housing prices will fall are decimating the housing sector but spurring activity in the rental market. According to Richard Anderson, a managing director at BMO Capital Markets, "For every 1 percent decline in the homeownership rate, you get over a million potential new renters," and most apartment residents appear content to wait until the housing market finds a definitive bottom before buying. Thus, the demand for apartments has increased, and the rent-to-own cycle is expected to continue. Apartment REIT management teams have been raising their earnings outlook in light of surging demand and corresponding rent increases in recent months. Most industry experts are bullish about the sector's growth through the second half of 2010.
Industry News
The Case Against Homeownership
Digested From "The Case Against Homeownership"
Time (09/06/10) by Barbara Kiviat
For decades, government officials, lenders, Realtors, and many others have idealized the act of buying a home to the point where so many of the downsides have been ignored. This overarching mentality caused lending standards to slip dramatically during the bubble years, allowing many Americans to put far too much of their income into paying for their housing. At the same time, the homeownership craze contributed to the hollowing out of cities, fed America's overuse of energy and oil, and kept renters out of the best neighborhoods. Case in point, of the 186 towns and cities within 50 miles of Boston, 34 currently prohibit apartment communities and other forms of multifamily housing. Another 81 allow them on less than 10 percent of the available land. Now, as the nation labors to rebound from the worst housing bust since the Great Depression, TIME magazine reports that the time has come for America to rethink how realistic the expectations of homeownership are. {It should be noted that the Web link provided is to an abridged version of TIME's cover story for its Sept. 6 issue. The publication does not provide an e-version of the entire article until the week of Sept 13 for proprietary reasons. An e-link to it will be included in the Sept 14 issue of Industry Insider, for those NAA readers who are interested.}
Mobile Maps Make Apartment-Hunting Easier
Digested From "Mobile Maps Make Apartment-Hunting Easier"
CNN (08/25/10) by Amy Gahran
CNN reporter Amy Gahran writes: "Hunting for apartments can be exhausting and confusing, but you can make it a bit easier with the help of Google Maps on your smartphone." Grahan is currently in the process of looking for a new apartment. One problem she encountered recently was that several of the communities she is interested in were holding open houses during the same three-hour window on the same evening. "These places are in the same part of town," she remarked, "but hitting them all in the allotted time frame could require a lot of running around and navigating." What she did to remedy the situation was take a few minutes to build a custom "my map" in Google Maps on her laptop. She mapped out the route -- complete with addresses, listed rent, apartment type and a link to the online rental listing -- and put the listings in the order she planned to visit them. She was able to view this custom map as a layer in the Google Maps app on her Android phone. Prior the big evening, she noted, "It'll tell me where I need to go next, by what time and how to get there. If I have trouble finding a building, I can pop into street view to check what my destination building looks like. And if I want a quick refresher on the rent, deposit, and other details before viewing a rental, I can jump right into the Craigslist listing for that property."
Mark-Taylor Enters Las Vegas, Welcomes 6 Communities to Portfolio
Digested From "Mark-Taylor Enters Las Vegas, Welcomes 6 Communities to Portfolio"
Bradenton Herald (FL) (08/26/10)
Mark-Taylor Residential recently expanded into Las Vegas, boosting its total portfolio to 50 luxury apartment communities in four U.S. markets -- Phoenix, Portland, Seattle, and Vegas. The growth comes mainly as a result of adding five such communities -- two in Las Vegas and three in the Phoenix metro area -- owned by BRIO Investment Group of San Diego. Mark-Taylor has recorded exponential growth in the last three years, almost tripling its third-party apartment property management business. In fact, its business is now 99 percent fee-based. Systemwide, Mark-Taylor currently manages 13,500 rental apartments.
Austin Apartment Vacancy Rate Falling, Rents Rise
Digested From "Austin Apartment Vacancy Rate Falling, Rents Rise"
Austin Business Journal (08/26/10)
According to the latest market data from Marcus & Millichap Real Estate Investment Brokerage Co., a glut in Austin's apartment supply is slowly leveling out this year and analysts expect vacancy rates to fall an estimated 9 percent. The property investment firm forecasts that the city will add 19,100 jobs this year, prompting a rush of new residents and an almost certain rise in the demand for rental housing. At the same time, the local apartment development pipeline has drastically thinned out. Only 2,860 new apartments are expected this year, a steep drop from 10,340 in 2009. All of these factors will put upward pressure on pricing, Marcus & Millichap predicts. Average monthly rent is expected to climb 2.4 percent to $864 a month after sliding 3 percent in 2009.
Renting Is Expected to Be a Popular Alternative to Buying for Years to Come
Digested From "The Renting Alternative Will Undermine The Housing Market For Years"
Business Insider (08/23/10) by Keith Jurow
A survey conducted for the National Apartment Association in May 2010 found that 76 percent of those surveyed believe renting is a better option than buying in the current real estate market, an especially sobering result given that 78 percent of those surveyed were homeowners. Beginning in the summer of 2005, a slowdown in speculative buying flooded the rental market with investor-owned homes, and the average rent for these homes dropped by about 10 percent in many areas while 1.34 million single-family home rentals remained vacant. As foreclosures soared, these homes attracted displaced homeowners who preferred them to apartments. More and more people, however, are recognizing the virtues of apartment living. The major pluses range from easily accessible amenities to minimal maintenance responsibilities to the freedom to relocate easily. As a result, renting will likely be a popular alternative to buying for years because of the change in attitude brought about by the housing bubble and subsequent collapse in house prices.
Savannah Apartment Market May Be Poised for Swing
Digested From "Residential Rental Market Poised for Swing, Statistics Hint"
Savannah Morning News (Ga.) (08/24/10) by Adam Van Brimmer
Real Data statistics show Savannah's apartment vacancy rates remain high (12 percent) and average rents low ($778 per month) at area apartment communities. The report, though, also notes a slowdown in new apartment development that could lead to a shift in the market should there be an in-migration of apartment residents to the area. Three is currently just one apartment community under construction in all of Chatham County. The 222-unit Waverly Station at the Highlands is set to open next month. Three others are in the planning stages, but have yet to move out of the pre-construction phase. Real Data analyst Kelly Reddecliff states, "The lack of new development will allow the vacancy rate to continue to improve in the coming year. However, long-term recovery will be dependent on how quickly the overall economy rebounds from the economic downturn." Unemployment has traditionally impacted apartment vacancies here and elsewhere. The city's unemployment rate has hovered around 9 percent since the recession began. Year over year, Savannah's apartment vacancy rate is down 1.7 percent amid rising demand. Since July 2008, communities have seen an average rental price decline of nearly 3.5 percent.
Home Properties Named to 'Most Trustworthy Companies' List
Digested From "Home Properties Named to 'Most Trustworthy Companies' List"
Rochester Democrat & Chronicle (NY) (08/26/10) by Emily Shearing
Home Properties Inc. has been named one of the country's "most trustworthy companies" by Forbes magazine. The Rochester, N.Y.-based apartment owner ranked sixth in the REIT industry. The list measured more than 100 factors in assessing the quality of corporate accounting and management practices. Home Properties President and CEO Edward J. Pettinella remarks, "Home Properties' philosophy always has been to employ conservative financial and management practices and be fully transparent in our financial disclosure." The REIT currently owns and operates 113 apartment communities throughout the Northeast and Mid-Atlantic regions.
Apartment Residents Strategize as Negotiating Rent Gets Tougher
Digested From "Negotiating Rent Gets Tougher"
SmartMoney (08/26/10) by Kelli B. Grant
Those hoping to negotiate a more favorable rent on an apartment are finding property managers less willing to offer breaks. According to Hessam Nadji, managing director for research and advisory services at Marcus & Millichap, "The recovery of and increase in [rental] demand happened a lot sooner and was more dramatic than we expected." Apartment vacancy rates are currently at 7.8 percent. Rent.com reports that only 31 percent of apartment managers reported lowering their monthly rents this year, compared with 69 percent last year. SmartMoney proposes six strategies residents should consider when looking to get the best deal. Among them are: consider signing a longer-term lease, which can often lead to more attractive pricing and smaller annual rent increases; focus on a market's newer communities as they are more likely than others to offer promotions such as a month or more of free rent; and look beyond rent for other costs that can be reduced or even eliminated such as utilities and pet security deposits.
California Firm Buys Seven Apartment Communities in Arizona
Digested From "SF Firm Buys Seven Apartment Complexes"
Arizona Daily Star (08/26/10) by Dale Quinn
Hamilton Zanze & Co. has acquired a half-dozen Tucson apartment communities and one in nearby Sierra Vista for $46.5 million. The San Francisco-based real estate investment firm's purchase of the 1,566-unit portfolio marks the company's official entry into Southern Arizona, a region it had been eyeing for the past six years. Soaring prices had kept the company out. Kurt Houtkooper, principal and chief investment officer, states, "We're buying below replacement cost on assets that have been fully improved." The properties, at one time owned by Bascom Arizona Ventures LLC, had gone back to lender General Electric Credit Equities Inc. Hamilton Zanze operates 61 apartment properties in eight Western states. As the jobless rate increased during the recession, Tucson apartment communities have struggled to fill units and vacancy rates grew higher than 10 percent. There are some signs multifamily housing is on the upswing in Tucson, with fewer apartment owners offering incentives like free rent.
Grubb & Ellis Apartment REIT Looking to Buy 15 Communities
Digested From "Plots & Ploys: Apartment Deal Appears Close"
Wall Street Journal (08/25/10) by Maura Webber Sadovi
The Grubb & Ellis Apartment REIT is negotiating with Virginia-based Mission Residential Management and an affiliate to purchase as many as 15 apartment properties in three states -- Tennessee, Texas, and North Carolina -- in a deal valued at roughly $276 million. That includes nearly $206.8 million in debt, $63.9 million in shares, and $5.8 million in cash. An agreement could nearly double the number of apartment communities currently in the REIT's portfolio. However, a deal could be complicated by the need for the consent of investors who hold the "tenant-in-common" interests in a half-dozen of the communities. Reaching an accord among such small investors could prove challenging.
Phoenix Apartments at the Center of Lenders' Stepped-Up Efforts on Bad Loans
Digested From "Lenders Increase Efforts on Bad Loans"
Arizona Republic (08/29/10) by J. Craig Anderson
Phoenix-area real-estate analysts report that a number of commercial real-estate lenders have stepped up their efforts to dispose of poorly performing mortgage loans after months of relative inaction. Foreclosures can occur in one of two ways in Arizona. One, the lender can take the borrower to court via foreclosure. Two, the lender can bypass the court system altogether and call for a trustee's sale. The latter option is quicker and less expensive, but it requires the lender to waive certain legal rights. Generally, lenders would like to negotiate a sale to a third party. In fact, apartment communities are one type of commercial real estate that has seen a substantial uptick in such sales. Just a week ago, Weidner Apartment Homes acquired the 272-unit Ocotillo Springs Apartments in suburban Chandler for $24.7 million from a Boston-based company. Weidner is one of several investment firms that have entered the Phoenix metro area this year. The Kirkland, Wash.-based firm has acquired nearly 2,500 apartments in the state since the first of the year. Overall, local property professionals report that actual commercial foreclosures remain rare and have occurred primarily with small, single-occupant office and retail properties.
Apartment Construction Begins in Burke County, N.C.
Digested From "Apartment Complex Construction Begins"
The News Herald (08/10/10) by Sharon McBrayer
Greenway Development Co.'s Glenwood Hills apartment community in Morganton, N.C., was planned before the economy took a nosedive, but local observers say the company's decision to stay the course and go ahead with construction is a good sign that things are looking up. The project's total estimated cost is $7 million, and it will include 12 one-bedroom units, 36 two-bedroom units, and 12 three-bedroom units, all ranging in size from 750 square feet to 1,150 square feet. Earthmoving has been under way and some foundations are already being poured. Morganton was chosen because market analysts at Greenway said it was a growing city. Additionally, Burke County has the second-largest number of state employees in North Carolina, so many suspect the area will be able to support the new complex despite high local unemployment. In connection with the project, Burke received a $250,000 Community Development Block Grant, which will be used for sewer installation and inspection services.
Brad Brown Joins Cortland Partners as Chief Acquisitions Officer
Digested From "Brad Brown Joins Cortland Partners as Chief Acquisitions Officer"
dBusinessNews (08/27/10)
Cortland Partners has hired Brad Brown to serve as its new chief acquisitions officer. The Atlanta-based firm specializes in acquiring and developing multifamily housing, taking an investment-management approach to its various communities. Cortland Partners President Steven DeFrancis comments, "Brad has more than 20 years direct experience in multifamily acquisitions and dispositions, handling more than $1.2 billion worth of transactions involving more than 200 rental communities. He has the skills we need as we aggressively pursue new deals." Prior to joining Cortland Partners, Brown headed Southeast Capital's real estate investment division where he was a senior partner. Separately, Cortland Partners has acquired and is renovating two apartment communities in metro Atlanta -- Avalon on Montreal apartments in DeKalb County and Northchase Apartments in Dunwoody.
Long Island Apartment Portfolio Sells for $229.8M
Digested From "Long Island Apartment Portfolio Sells for $229.8M"
CoStar Group (08/09/10) by Esmerelda McKie
In New York, Eagle Rock Management LLC recently completed Long Island's biggest multifamily housing transaction this year when it acquired seven apartment communities totaling 1,666 units in Carle Place, Hicksville, Mineola, Nesconset and Woodbury. Together, the seven communities fetched $229.75 million, or about $137,900 per unit, and were in escrow for 145 days. There was $1.5 million in deferred maintenance, which equates to around $900 per apartment. The seller was Fairhaven Properties Inc. Eagle Rock Management was represented by John Thomas of Select Investment Realty Advisors.
Legislative/Legal News
Huntsville Apartment Communities May Have to Provide Parking for Bikes
Digested From "Huntsville's Parking Lots Aren't Just for Cars Anymore"
Huntsville Times (AL) (08/27/10) by Steve Doyle
In Huntsville, Ala., a divided City Council this past week approved new rules that will force many future businesses and apartment communities to provide separate parking for bicycles. Specifically, the ordinance requires any new business with 20 or more parking spaces to provide bike racks near the entrance. By those calculations, big-box retail stores with huge parking lots could have to make room for as many as 30 bicycles. Future apartment communities and other multifamily housing, meanwhile, will need to provide one bike space for every five residences. Current businesses are grandfathered, meaning they do not have to accommodate cyclists unless they expand their parking lots.
Arizona City Launches New Effort to Fight Apartment Crime
Digested From "Mesa Launches New Effort to Fight Apartment Crime"
Arizona Republic (08/28/10) by Gary Nelson
In the early 1990s, the Arizona city of Mesa became a worldwide model for fighting crime in apartment communities with the launch of the Crime Free Multi-Housing program. The initiative -- which has since been adopted by nearly 2,000 cities -- relies on intensive training of apartment managers, physical improvements to the apartment community, and resident buy-in to keep criminal activity away. Now, faced with lagging participation, Mesa is taking steps to tweak the program. Local law enforcement laid out the new plan last week to the City Council's public safety committee. If the results warrant it six months from now, a pilot program now limited to some parts of town will go citywide. More than 300 Mesa-area apartment communities take part in some aspect of the old program. However, of those, only 56 are fully certified as "crime-free" communities. Police Chief Frank Milstead laments that participation in the current program "is less than 20 percent of what we have out there, and they are taking up a significant amount of our time." The new "Tri-Star" program will make it easier for apartment owners and managers to participate. For one, the new program will offer a Web-based course that can be completed in as little as an hour. The old program requires communities to host open houses where cops can share crime-fighting ideas with residents. The new requirement is for apartment personnel to communicate with residents four times a year either via a newsletter, Web site, or public postings with the Mesa Police Department providing information all concerned can use.
Texas Town Looks at Water Meters for Apartments
Digested From "San Benito Looks at Water Meters for Apartments"
Brownsville Herald (TX) (08/26/10)
City officials in San Benito, Texas, are considering a plan to charge apartment communities for water used by individual units. The proposal comes as officials seek new revenue sources to cut a $1.8 million budget shortfall. The city estimates $243,000 in revenue from individual water meters that would require such residents to pay for the actual amount of water they use. The city annually collects $24,109 for water used by apartments and has been charging apartment communities and mobile home parks a flat monthly fee. City Commissioner Bill Elliott states, "As a result, our current water rate structure does not equally distribute the burden of paying the cost of producing and delivering water among all the households of the city. It is incumbent upon the city to revisit our rate structure and distribute this cost fairly among all households."
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