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Apartment Sector Riding High
Industry News
REITs Seen Posting Strong Q2 Earnings Led by Apartments
High Occupancies Affect Apartment Hunting in Odessa
AvalonBay Names Buckelew as Independent Director
Apartment Developers Bypass Suburbs and Target Cities
Bascom Group Tops $500 Million in Apartment Renovations
Denver Real Estate Poised for Rebound, With Apts Leading Way
Multitasking: More Work, Less Productivity
Legislative/Legal News
Targeted Reforms of Fannie and Freddie Pass Subcommittee
N.J. Leaders Debate Decreasing Municipal Oversight of Apartments
Grayco to Help Residents in Aging Austin Apartments Relocate
U.S. Tackles Housing Slump
Grants Awarded to Encourage Smoke-Free Apartments in Chicago
Houston Apartment Association Exec on Multifamily's Capital Needs
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Apartment Sector Riding High
Digested From "Commercial Real Estate Show: Multifamily Market Riding High"
Citybizlist Baltimore (07/17/11)
The nation's apartment sector recorded revenue growth of 2.4 percent in the second quarter, with effective rents rising 1.7 percent and occupancy climbing to 94.2 percent. The positive numbers surfaced this past week when the Commercial Real Estate Show interviewed a number of multifamily housing experts, including MPF Research Inc. Vice President Greg Willett. He stated, "Pricing can go to new highs as long as the occupancy is there to support the increases. At this point, it is starting to look like that is the case." New residents from the 20- to 34-year-old demographic and fewer exits to single-family housing continue to drive demand for rental units. Looking at the supply side, what few construction projects there are in the pipeline are not likely to hit until the fourth quarter of next year or early 2013. National Apartment Association (NAA) President Doug Culkin remarked, "Because of lack of availability, vacancies continue to shrink, so our members are having a great market." Other guests during the segment ranged from Ernie Eden, senior vice president of the Apartment Group at Bull Realty, to Jerry Wilkinson, 2011 chairman-elect of the NAA.
Industry News
REITs Seen Posting Strong Q2 Earnings Led by Apartments
Digested From "REITs Seen Posting Strong 2Q Earnings on Ability to Raise Rents"
Wall Street Journal (07/12/11) by A.D. Pruitt
Real-estate firms are expected to deliver robust second-quarter profits as apartment, office, and property owners were able to raise rents and fill available space. For the most part, REIT stocks operating in these sectors have outpaced broader equities because the stocks are viewed as a safe haven from global turmoil. AvalonBay Communities Inc., America's second-biggest publicly held apartment owner, is expected to record earnings of 64 cents per share compared to 61 cents last year and an 11 percent increase in revenue to $242 million. The nation's apartment owners and managers have benefited from a surging pool of potential residents. Haendel St. Juste, an analyst at Keefe, Bruyette & Woods, expects earnings for many apartment operators will beat targets. St. Juste adds that many such owners were likely too conservative with their earnings projections earlier in the year. In addition, demand for apartments continued at a healthy clip because people in the 21 to 34 target age group benefited from 800,000 jobs created over the last year. St. Juste notes, "That age group has the highest propensity to rent." Warning signs remain, though. Hessam Nadji, managing director of research and advisory services for Marcus & Millichap, notes that future earnings could be clipped if hiring does not pick up. He adds, "I think if we get another month of lackluster jobs numbers, I wouldn't be surprised to see some [REITs] revise their third-quarter estimates down."
High Occupancies Affect Apartment Hunting in Odessa
Digested From "High Occupancy Rates Make Apartment Hunting Harder"
Odessa American (TX) (07/14/11) by Lyxan Toledanes
According to a recent apartment survey presented by the Odessa Chamber of Commerce, finding an apartment in Odessa, Texas, is getting harder. Odessa's multifamily housing sector currently has a 97 percent occupancy rate, up 5 percent from the last apartment survey conducted in September 2010. Guy Andrews, the local Chamber of Commerce's economic development director, says the rate of increase is particularly concerning, particularly as the area prepares for an influx of workers for the Summit Texas Clean Energy project. Odessa Development Corporation Secretary Charles Carlson adds that people moving to Odessa for employment reasons will probably be opting to live in an apartment before they consider buying a house.
AvalonBay Names Buckelew as Independent Director
Digested From "AvalonBay Communities, Inc. Announces Appointment of Alan B. Buckelew as New Independent Director"
BusinessWire (07/12/11)
AvalonBay Communities Inc. has appointed Alan B. Buckelew to its board of directors, effective Sept. 13. Buckelew, who currently served as President and CEO of Princess Cruises Inc., will serve as an independent director of the apartment REIT. AvalonBay Chairman and CEO Bryce Blair remarks, "Alan has significant experience as a chief executive in an industry that, like multifamily apartment communities, is capital intensive and consumer-driven. We look forward to benefiting from his counsel and experience on a variety of matters, including strategic matters, customer segmentation, and brand management."
Apartment Developers Bypass Suburbs and Target Cities
Digested From "Apartment Developers Bypass Suburbs, Target Seattle"
Seattle Times (07/09/11) by Eric Pryne
Seattle is among the cities experiencing an apartment boom, with three communities containing more than 470 units going up along one mile of Madison Street. Unlike previous apartment booms, developers these days are moving away from the suburbs and setting their sights on cities. Of all the units under construction in King and Snohomish counties in Washington, 85 percent are being built in Seattle versus 43 percent from 1996 to 2010. The upswing in apartment construction is being attributed to rising rents and declining vacancy rates as the economy recovers to the point where young adults can move out on their own, foreclosed homeowners become apartment residents, and more people become disillusioned with homeownership. The recession put a damper on apartment construction, and now developers must rush to meet a jump in demand. Tom Parsons of Vancouver, Wash.-based Holland Partner Group says the apartment boom is focused on cities because that is where the new jobs are, and people want to live close to work and near the action. Mike Scott, a principal at Dupre + Scott Apartment Advisors, says that people in their 20s and early 30s have typically been apartment resdients, and their numbers are rising. "It's the biggest surge of young people we've seen since the Baby Boom," he says. Seattle land-use economist Matthew Gardner, who believes in-city apartments with higher projected rents offer the best potential returns, says, "Apartments, in my opinion, are the only feasible development form for now."
Bascom Group Tops $500 Million in Apartment Renovations
Digested From "The Bascom Group Exceeds $500 Million in Renovations"
Sacramento Bee (07/15/11)
The Bascom Group LLC confirms that it has completed $566 million in renovations on 206 apartment communities since 1996. In total, the actual completed renovation costs for the multifamily housing portfolio are below their original projected and allocated budgets. These renovations have included both interior and exterior upgrades ranging from facade enhancements to single fixture replacements to correcting deferred maintenance issues. David Kim, managing partner for Bascom, comments, "This milestone is a testament to the team's experience and knowledge of renovations. We have also developed excellent working relationships with third party construction management, property management, and design firms skilled in value-added apartment renovations." Bascom Group is a leading national apartment investment firm and has been an active buyer of value-added and distressed apartments in receivership, foreclosure, and bankruptcy. Target markets have included nine mostly Western states, including: Arizona, California, Hawaii, Nevada, and Utah.
Denver Real Estate Poised for Rebound, With Apts Leading Way
Digested From "Panel: Denver Commercial Real Estate Poised for Rebound"
Denver Business Journal (07/12/11) by Dennis Huspeni
This past Tuesday, a panel of experts at the Colorado chapter of the NAIOP Commercial Real Estate Development Association's annual mid-year forecast event reported that all three commercial real estate sectors in metro Denver stand poised for a rebound. Some will recover quicker than others. Douglas Wulf, senior vice president of Cassidy Turley Fuller Real Estate (CTF), noted, "This is the first time Denver is on the cutting edge of a recovery." On the residential land side, CTF senior vice president Mike Kboudi forecasts that land values to average 70 to 80 percent of the pre-recession highs. He further expects only 1,670 new apartment units to hit the market in 2011 on top of historic low vacancy rates and rent increases. Looking at the local retail and office sectors, CTF senior VP Jim Capecelatro said there were 46 transactions totaling $48 million in this year's first and second quarters. That is compared to the first half of 2007, when there were 151 transactions totaling nearly $200 million in sales. This shows the market is "absolutely still way off, he concludes.
Multitasking: More Work, Less Productivity
Digested From "Multitasking: More Work, Less Productivity"
MarketWatch (07/12/11) by Ruth Mantell
There is mounting proof that multitasking may be hurting productivity and actually making employees worse thinkers. As a result, businesses need to re-examine goals in this area. Thanks to the ubiquity of mobile devices and other communications technology, more and more workers are expected to multitask. Clifford Nass, director of the Communication Between Humans and Interactive Media Lab at Stanford University, warns, "The human brain just really isn't built to switch rapidly from one task to another. Workers who constantly multitask are hurting their ability to get work done, even when they are not multitasking. People become much more distracted, can't manage their memory very well." As a result, companies that demand multitasking may actually be damaging productivity. In a 2009 study, Nass and his research team found that heavy media multitaskers are "more susceptible to interference from irrelevant environmental stimuli,: and were actually worse at switching between tasks. Nass concludes, "Slowly, you are starting to see companies starting to change from everything having to be answered immediately."
Legislative/Legal News
Targeted Reforms of Fannie and Freddie Pass Subcommittee
Digested From "Targeted Reforms of Mortgage Giants Pass Subcommittee"
American Banker (07/13/11) by Kevin Wack
The House Financial Services Committee's subcommittee on capital markets and government-sponsored enterprises (GSEs) approved six bills on July 12 that would curb Fannie Mae and Freddie Mac. One such bill would end a trust fund supported by the two GSEs for affordable-housing projects, while another would require Fannie and Freddie to sell assets that are not essential to their housing missions. Other bills would require Fannie and Freddie to comply with the Freedom of Information Act while they are under federal conservatorship, place limits on the amount of assistance the government could give the two firms, and revoke the GSEs' federally backed charters. It remains unclear if any of the bills will pass Congress and be signed into law by President Obama. Although the subcommittee passed eight bills this spring that would reform Fannie and Freddie, House Republicans have yet to propose a comprehensive reform plan.
N.J. Leaders Debate Decreasing Municipal Oversight of Apartments
Digested From "N.J. Leaders Clash Over Bill That Would Decrease Municipal Oversight of Apartment Buildings"
Newark Star-Ledger (NJ) (07/18/11)
Apartment owners throughout New Jersey stand to reap substantial financial savings and face significantly less scrutiny under a bill that would take municipalities out of the business of inspecting apartment communities. The measure's advocates say it would eliminate redundancies and unnecessary costs. Municipal leaders, though, contend that halting local inspections would provide a giveaway to owners who wield influence in the state capitol and leave apartment residents vulnerable to substandard living conditions. Bill Bray, spokesman for the city of New Brunswick, stated, "This is a life-and-death issue. Having inspectors on the ground abating issues has saved lives." Currently, the state inspects all apartment communities with three or more units once every five years. In addition, it requires apartment owners to register with the Department of Community Affairs. Also, many cities like New Brunswick have established their own inspection programs by assessing owners to help pay for inspections and greater oversight. Supporters say the added vigilance is essential to scrutinize absentee owners and troublesome apartment communities.
Grayco to Help Residents in Aging Austin Apartments Relocate
Digested From "Developer to Pay Extra $20,000 to Help Tenants in Aging Apartments Relocate"
Austin American-Statesman (07/14/11) by Sarah Coppola
Houston-based Grayco Partners has agreed to pay an extra $20,000 to help find new homes for low-income residents it will displace by building a $200 million apartment community and retail project in Southeast Austin. The developer had already offered households that remain at Shoreline and Brookhollow apartment communities $485 moving stipends, and it will now also pay a Realtor $20,000 to help the displaced find other housing. Still, a lawyer representing the residents said the concessions Grayco has made are not nearly enough. In exchange for being allowed to build apartment towers that are taller and larger than city rules normally allow, Grayco promised to provide so-called community benefits that included at least $90,000 in relocation assistance for those who would be displaced. The developer was expected to submit a a "relocation plan" to the city before notifying residents that they would need to move out. However, the city only recently received those plans. Austin officials have approved Grayco's selection of Casa Blanca Realty to help residents relocate. Steve Drenner, an attorney for Grayco, adds that his firm has "always intended to honor their commitments under [the 2009 agreement with the city] and they've done that [and], in fact, gone far beyond that."
U.S. Tackles Housing Slump
Digested From "U.S. Tackles Housing Slump"
Wall Street Journal (07/12/11) P. A3; by Nick Timiraos
The White House is turning its attention to bolstering the housing market, which continues to weigh on the economy as foreclosures mount and millions remain at risk of default. Policy ideas range from having Fannie Mae and Freddie Mac relax their rules for loans to investors -- as a way to whittle down the excess housing supply -- or rent, instead of sell, their vast inventory of foreclosures. Another possibility is sweetening incentives for banks in order to lower loan balances for borrowers who are upside down on their mortgages.
Grants Awarded to Encourage Smoke-Free Apartments in Chicago
Digested From "Grants Awarded to Encourage Smoke-Free Apartments"
NECN.com (07/12/11)
The Chicago Tobacco Prevention Project is working to increase the number of smoke-free apartment and condominium communities in Chicago. The anti-tobacco advocacy group is in the process of awarding thousands of dollars in grants to several housing groups to achieve this goal. So far, the groups have included the Institute of Cultural Affairs, Lakeside Community Development Corp., and Claretian Associates. Others grants are expected early this fall. The project is being overseen by the Respiratory Health Association of Metropolitan Chicago. According to Association President Joel Africk, most of the air in multifamily housing comes from common areas and other units. So if a neighbor smokes, those living next door, upstairs, or nearby end up breathing in their smoke.
Houston Apartment Association Exec on Multifamily's Capital Needs
Digested From "The American Housing Finance System"
Houston Examiner (07/11/2011) by Diana Benitez
Kim Small, president of the Houston Apartment Association, says the multifamily housing sector's capital needs make a continued federal credit backstop crucial given that private capital has shown little interest in workforce housing or smaller markets. About 90 percent of apartments financed by Fannie Mae and Freddie Mac over the last 15 years were affordable to low-income families, and a private-only solution could not meet the needs of these households. Small emphasizes, "Fannie and Freddie's multifamily rental programs were not part of the housing finance meltdown. . . . Given their successful track record and lack of private-sector capital to finance workforce housing, it is critical that policymakers not eliminate federal credit support for the multifamily rental sector until they can conclusively prove that this action will not jeopardize shelter currently relied on by 17 million U.S. households. The costs of doing so are too high given the rising demand for apartments." She says demand for rental units will remain high for years in response to the meltdown of the single-family housing market.
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