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Archstone Draws Bids From Big Names
Industry News
Apartment Developers Turn Their Attention to Washington, D.C.
Hartz Mountain Acquires Stake in Roseland Management
Opportunity Knocks in NE Ohio Apartment Sales Market
More People Choosing to Rent Rather Than Buy
Steady Demand for Apartments in Rhode Island
Boston Fed: Local Real Estate Fundamentals Remain Weak
REITs Clock High Growth, Led by Multifamily Housing
Debt Hobbles Older Americans
Bentall Kennedy Ranks High for ESG Performance
Legislative/Legal News
The Future of Light Is the LED
U.S. Job Plan Is Short on Aid for Housing
Salt Lake Apt. Owners Pay Fee If They Lack Rental Training
Fed’s Duke Supports Turning Foreclosed Houses Into Rentals
Proposed Fire Inspection Fee Draws Heat in Long Beach
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Archstone Draws Bids From Big Names
Digested From "Archstone Draws Bids From Big Names"
Wall Street Journal (09/07/11) by Eliot Brown; Robbie Whelan
Four of the real estate industry's biggest names -- private-equity firm Blackstone Group LP, Toronto-based Brookfield Asset Management Inc. and apartment owners Equity Residential and AvalonBay Communities Inc. -- have submitted bids for Archstone. However, the offers reportedly have been deemed not high enough to resolve a dispute among Archstone's three owners about "how and when to unwind the apartment giant." The four heavy hitters submitted offers in recent weeks for all or parts of the company. The specific bids have not been made available, though. A Lehman-led group acquired Archstone in a $22 billion deal four years ago, only to see it plummet in value with the economic downturn. Archstone ranks as one of the country's biggest apartment owners, with interests in nearly 77,000 apartments. Analysts say if it were sold in full, it would be the largest commercial real-estate sale since the downturn by far. Archstone's current owners are indeed threefold -- the estate of Lehman, Bank of America Corp., and Barclays PLC. This trio has been arguing over whether to sell the company outright or to take a longer-term sale strategy by bringing it public. Barclays had especially been hoping the offers would be high enough to convince the others of an outright sale. All three owners must agree to major decisions for the company.
Industry News
Apartment Developers Turn Their Attention to Washington, D.C.
Digested From "Apartment Developers Turn Their Attention to Washington"
Washington Post (09/09/11) by Jonathan O'Connell
An increasing number of apartment developers are pouring investment dollars into the Washington, D.C., metro area's apartment market, buying land and existing communities looking to take advantage of a healthy, local job market and a region that has proven attractive to young professionals. Delta Associates recently described the D.C. area as "the best performing apartment market in the nation," with a vacancy rate of only 3.1 percent as of the end of the second quarter and a long pause in new construction activity. Such conditions have prompted buying sprees of sites where new apartments can be added and of aging buildings in need of upgrading. In Washington alone, Delta expects 1,221 units to be completed in the year ending next June 30, a 47 percent increase from the previous year. In Northern Virginia, the increase is projected at 16 percent. Urban Investment Partners is among the most active, with a string of apartment acquisitions in the Northwest D.C. neighborhoods of Adams Morgan, Columbia Heights, and others. Also being aggressive is Equity Residential, the Chicago-based apartment developer that has been snapping up development sites and existing apartment communities throughout the Washington region. Equity is currently erecting 188 rental units in Arlington, Va., with plans to begin developing another 360 in nearby Alexandria later this fall.
Hartz Mountain Acquires Stake in Roseland Management
Digested From "Hartz Mountain Acquires Stake in Roseland Management"
GlobeSt.com (09/09/11) by Debra Hazel
Hartz Mountain Industries has acquired a minority interest in Roseland Management, which serves as the property management arm of Roseland Property Company, for an undisclosed sum. Hartz then engaged Roseland to manage its more than 1,100 apartments in four New Jersey communities. This ranks as Roseland's largest-ever third-party management assignment. Emanuel Stern, president and COO of Hartz Mountain Industries, states, "This is a strategic partnership that's come out of working with these guys for over a decade. It's a natural progression for Hartz." Roseland is expected to manage other Hartz apartment communities as construction is complete and existing management contracts expire. Hartz presently owns more than 1,600 rental units in three states. The company plans to build and acquire another 3,500 apartments in the next three to five years, as market conditions dictate. In total, Roseland owns and manages more than 8,000 apartments in five states.
Opportunity Knocks in NE Ohio Apartment Sales Market
Digested From "Opportunity Knocks in Apartment Sales Market"
Crain's Cleveland Business (09/12/11) by Stan Bullard
Analysts report that the volume of apartment sales in Northeast Ohio is up and is likely to continue gaining steam through the remainder of this year. Big sales have already occurred in the first eight months of 2011, and more are on the way if large communities now being marketed are purchased by Dec. 31. Through the end of August, a total of 11 Northeast Ohio apartment communities had changed hands for at least $1 million. In fact, they had a total price tag of $33 million. Buyers appear to be searching for bargains at both ends of the spectrum. Large, institutional owners are on the hunt for prime apartment communities with more than 200 units. Meanwhile, smaller, mom-and-pop investors with cash are looking for smaller properties in their prize range. Vicki Maeder, a vice president in investment sales at CB Richard Ellis' Cleveland office, states, "There is no feeding frenzy like what developed prior to 2008. Formerly, people were intent about outbidding other people just to control the real estate." Improved fundamentals and broader availability of loans for apartments account for much of the apartment sales uptick, reports Wolf Real Estate Group President Michael Shemo. He adds, "Northeast Ohio is seen as a stable market, because we don't have the thousands of apartment units coming out of the ground that you see in other markets such as the Carolinas." The Northeast Ohio Apartment Association estimates that the apartment vacancy rate is only 3.2 percent in the region.
More People Choosing to Rent Rather Than Buy
Digested From "For Many, No Rush to Home Ownership"
Charlotte Observer (NC) (09/03/11) by Kirsten Valle Pittman
Falling house prices, tight credit, rising energy costs, and the fact that houses are no longer viewed as investments have sparked a change in attitude about homeownership as the "American Dream," especially as people find it difficult to sell their houses to move or owe more than their houses are worth. Lina and Jimi Gibson moved into an 850-square-foot apartment in Charlotte, N.C., in 2009, intending to purchase a house after two years but now have decided to stay put. They enjoy amenities like a gym and a pool and do not have to handle maintenance tasks. Lina Gibson says, "I don't want to have a house that's going to be worth nothing or a neighborhood that's going to lose everything. We just want to start off strong, with no debt." Experts say that more people are choosing to rent even if they have the money to buy a house, as they would rather save money or make safer investments. "The American Dream today is job security and being able to afford gasoline to get to work. It's certainly not buying a house," says Metrostudy's Bill Miley. Meanwhile, a Morgan Stanley report says that excluding delinquent borrowers drops the U.S. homeownership rate to under 60 percent and indicates a shift toward a "rentership society."
Steady Demand for Apartments in Rhode Island
Digested From "Steady Demand for Apartments"
Providence Journal (RI) (09/11/11) by Christine Dunn
In Providence and throughout Rhode Island, RentProv Realty owner Jonathan Weinstein says June and September are the two busiest months of the year for apartment move-ins. Weinstein leads a group of young rental agents after having founded his business three years ago. He notes that Providence's large student population has traditionally provided a steady stream of demand for apartments. The region's downturn in home sales has only strengthened the rental apartment market. Marty Saklad, co-owner of Samson Realty, states, "There's definitely a large divergence in the market between rentals and sales. It's a very strong rental market." U.S. Census Bureau data shows that Rhode Island's rental vacancy rate fell to 8.4 percent in this year's second quarter of 2011, under the U.S. average of 9.2 percent. According to Rhode Island Housing officials, a "normal" vacancy rate is still considered to be around 6 percent.
Boston Fed: Local Real Estate Fundamentals Remain Weak
Digested From "Boston Fed: Local Real Estate Fundamentals Remain Weak"
Boston Business Journal (09/08/11) by Eric Convey
The Federal Reserve Bank of Boston does not have a very optimistic outlook for the region's commercial real estate sector, according to its latest Beige Book. The report states: "Investor demand for prime office and apartment buildings in Greater Boston remains strong, raising concern among some contacts that sales prices are moving too high relative to rents and occupancy." The report was based on interviews with business owners and managers conducted throughout the year, ending early last month.
REITs Clock High Growth, Led by Multifamily Housing
Digested From "REITs Clock High Growth YTD"
GlobeSt.com (09/08/11) by Erika Morphy
Year-to-date, REITs' returns have been stellar. On a total return basis, the FTSE NAREIT All Equity REITs Index has gained 5.53 percent. Meanwhile, the FTSE NAREIT All REITs Index rose 4.78 percent during the first eight months of 2011. For the first eight months of 2011, multifamily housing posted a 19.72 percent return for the same time period. Case concludes that these gains are both due to the same source, namely a single-family home market that is still in a state of flux. Brad Case, senior vice president for research and industry information at the National Association of Real Estate Investment Trusts (or NAREIT), observes, "As the economy recovers, I expect REIT earnings will get stronger. REITs have access to capital at a time when there is opportunity to acquire and even start up development pipelines again."
Debt Hobbles Older Americans
Digested From "Debt Hobbles Older Americans"
Wall Street Journal (09/07/11) P. A1; by E.S. Browning
Strategic Business Insights' MacroMonitor indicates that home loans make up much of the debt carried by people aged 60 to 64. Nearly 40 percent of households headed by someone in this demographic had a primary mortgage last year, up from just 22 percent in 1994. Additionally, the housing slump has made it virtually impossible for many older homeowners to sell and downsize or rent, as depreciation has shrunk their equity or put them upside down on their loans, forcing them to delay retirement.
Bentall Kennedy Ranks High for ESG Performance
Digested From "Bentall Kennedy Ranked 1st in Americas and 5th Globally for ESG Performance in Commercial Real Estate"
Sacramento Bee (09/06/11)
Bentall Kennedy has earned the No. 1 ranking in the Global Real Estate Sustainability Benchmark (GRESB) Foundation's latest survey of fund managers in the Americas. Bentall Kennedy also placed fifth on the GRESB's "Global Top Ten" list, which measures the social and environmental performance of listed and private property funds. In total, the firm serves the interests of more than 400 clients across 135 million square feet of apartment, office, hotel, retail, and industrial properties across Canada and the United States.
Legislative/Legal News
The Future of Light Is the LED
Digested From "The Future of Light Is the LED"
Wired (09/01/11) by Dan Koeppel
The provisions of 2007's Energy Independence and Security Act will effectively ban 100-watt incandescents beginning next year. Seventy-five-watt bulbs will be no more in 2013, followed by 40- and 60-watt lamps the following year. The race to find a suitable replacement technology is on, with many wagering that LED lighting will emerge the victor. The article's author writes that LEDs, which are essentially semiconductors, are getting better and cheaper "on a predictable curve." Still, the lighting industry has some fairly significant hurdles to clear before LEDs gain acceptance by the paying public. Beyond the various technical issues -- cooling, costs, light color -- there is consumers' lingering distaste for compact fluorescent lamps. Though still expensive to produce, LEDs are getting cheaper thanks partly to technical advances and partly to economies of scale. In addition, they are getting brighter. This means that manufacturers can use fewer of them per bulb, further slashing costs. Longevity is another major hurdle. LEDs do not simply burn out. Instead, they fade. The current standard, dubbed L70, refers to the point at which an LED is able to generate only 70 percent of the light it initially produced. The L Prize criteria require a minimum of 25,000 hours before L70, which calculates out to around three years of continuous service and more than two decades if the bulb is used for three hours daily.
U.S. Job Plan Is Short on Aid for Housing
Digested From "U.S. Job Plan Is Short on Aid for Housing"
Los Angeles Times (09/12/11) P. A1; by Don Lee
Many economists view housing as the missing ingredient to President Obama's new jobs-creation plan. The proposed $447-billion package of tax cuts and infrastructure spending would help "responsible homeowners" refinance their mortgages, but it offers no new measures for millions of borrowers in foreclosure or seriously behind on their loans. In addition, it does not mention any broad plans to convert empty homes into rentals or offer principal reductions.
Salt Lake Apt. Owners Pay Fee If They Lack Rental Training
Digested From "Salt Lake Landlords Pay Steep Fee If They Don't Get Rental Training"
Salt Lake Tribune (UT) (09/07/11) by Katie Drake
Salt Lake City's new Landlord/Tenant Initiative kicks off in September, requiring all apartment owners to receive a business license and encouraging them to take part in an education program. The goal is to reduce crime in Salt Lake City's various apartment communities. Previously, only owners with three or more apartments were required to license. Owners pay a reduced license fee of $20 per rental unit if they participate in the program. However, if they decline to participate, they must obtain a license at a cost of $342 per unit. That high price is an incentive to get more owners to become participants, though the program remains voluntary. Those who do enroll in the program receive training from the Utah Apartment Association (UAA) and learn how to properly screen prospective residents, when to handle issues on their own, and when to get police involved. UAA Executive Director Paul Smith notes that code enforcement is generally a big problem for cities, and apartment owners enrolled in the program learn how to monitor their residents and communities to ensure they comply with code. A similar program in Ogden, Utah, has helped reduce crime there by 31 percent. Mary Beth Thompson, revenue manager with Salt Lake City, concludes, "The better renters we get in, the higher our property values are and the safer our neighborhoods are."
Fed’s Duke Supports Turning Foreclosed Houses Into Rentals
Digested From "Fed’s Duke Says U.S. Should Promote Foreclosed Home Rentals to Aid Economy"
Bloomberg (09/01/11) by Joshua Zumbrun
U.S. Federal Reserve Governor Elizabeth Duke recently stated that renting foreclosed houses could spur U.S. housing market recovery and clear the backlog of properties. "We, as a nation, currently have a housing market that is so severely out of balance that it is hampering our economic recovery," she said in a recent speech. Duke issued support for a proposal to have Fannie Mae, Freddie Mac, and the Federal Housing Administration transform a portion of their foreclosed houses into rental properties. "The weak demand in the owner-occupied housing market and the relatively high demand in the rental housing market suggest that transitioning some REO (real estate owned) properties to rental housing might benefit both markets," she said. At the housing conference sponsored by the Fed Board of Governors, Duke indicated, "In many markets, house prices have fallen to such an extent that better recoveries may result from renting properties rather than selling them. In other markets, converting REO properties to rentals may not be in the narrow best interest of financial institutions or mortgage investors but may be in the best interest of local communities. For these markets, it may be useful to consider the possible role of new incentives and, if so, what form those incentives might take."
Proposed Fire Inspection Fee Draws Heat in Long Beach
Digested From "Proposed Fire Inspection Fee Draws Heat in Long Beach"
Long Beach Press-Telegram (CA) (09/03/11) by Eric Bradley
In Long Beach, Calif., a city proposal to charge non-high-rise, multi-unit apartment owners fees for annual fire inspections is facing stiff resistance. The fee may seem small -- $47 to $465 per property. Critics, however, say the external check for fire hazards is redundant when owners undergo scrutiny for fire insurance and other mandatory regulatory reviews. Additionally, taxpayers already fund the Fire Department, states Nancy Ahlswede, executive director of the Apartment Association of California Southern Cities. She adds, "To now go back and assign an inspection fee seems like double dipping." Ahlswede also noted that in the current shaky market with apartment vacancy rates that are around 8 percent to 10 percent in some areas of Long Beach, there would be little room for owners and managers to recover the charge by hiking monthly rents. It remains uncertain how much support the measure will gain in the City Council. Long Beach Councilman Gary DeLong said the issue originated last year in the Economic Development Finance Committee as the city searched for ways to recover various costs amidst a string of deficit budgets that is estimated at $20.3 million in fiscal 2012.
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