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More Than 500 Cities See More Homes Become Rentals
Industry News
AvalonBay Communities Names New CEO
Camden Property Cuts Year Forecast For Charge On Repaid Loan
Apartment Vacancies in Reno-Sparks Approach Stabilized Levels
AvalonBay Boosts Outlook On Improving Portfolio Trends
Ratner Seeking $100 Million for Apartment Tower at Atlantic Yards
Student-Housing Developments Gain Respect
Mike Lipson Joins Freddie Mac as Head of Asset Management
Camden Property Sells $500M in Bonds
New Jersey Apartment Auction Nets $16 Million
Memphis Occupancy Rates, Rents Trending Higher
New CFO Could Mean Lost Momentum for Apartment REIT
Apartments and Apartment Firms Thrive in Down Housing Market
Vegas Property Auction Brings $340 Million, Including Apartments
Legislative/Legal News
Raleigh Fights to Save Landlord Registry
NAA Recommends Due Diligence When Subletting 
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More Than 500 Cities See More Homes Become Rentals
Digested From "More Than 500 Cities See More Homes Become Rentals"
USA Today (05/31/11) P. 1A; by Julie Schmit; Barbara Hansen
A USA Today analysis of Census data shows that more than 500 midsize and large cities have seen an increase in the percentage of homes that are rented rather than owned. A total of 25 cities -- including Baltimore; La Crosse, Wis.; Minneapolis; and Sacramento -- shifted from having more than 50 percent homeowners in 2000 to majorities of renters this past year. Nationwide, 34.9 percent of occupied homes were rented in 2010, an increase from 33.8 percent a decade earlier.
Industry News
AvalonBay Communities Names New CEO
Digested From "AvalonBay Communities Names New CEO"
Reuters (06/06/11) by Vaishnavi Bala
AvalonBay Communities Inc. is set to tap President Timothy Naughton to succeed Bryce Blair as its CEO. Blair has announced that he will retire by the end of the year, but he will remain as chairman of the board through 2012 and focus on apartment development and construction opportunities. Naughton joined the Virginia-based apartment owner in 1989. He has served as president and a director of the firm since 2005. For his part, Blair was named CEO in February 2001.
Camden Property Cuts Year Forecast For Charge On Repaid Loan
Digested From "Camden Property Cuts Year Forecast For Charge On Repaid Loan"
Wall Street Journal (06/06/11) by Melodie Warner
Camden Property Trust has lowered its full-year forecast to reflect a charge from the repayment of its $500 million term loan. The apartment REIT has de-designated an interest-rate swap associated with the term loan. The move has resulted in a $30 million noncash charge. In addition, Camden will book a $500,000 noncash charge to write off associated unamortized loan origination costs. The REIT is currently forecasting 2011 earnings of break-even to 20 cents a share with funds from operations (FFO) ranging from $2.52 and $2.72 a share. Earlier this spring, the company projected per-share earnings of 39 cents to 59 cents and FFO of $2.90 to $3.10 a share. Camden has also lowered its second-quarter guidance for FFO to 36 cents to 40 cents a share from 76 cents to 80 cents a share.
Apartment Vacancies in Reno-Sparks Approach Stabilized Levels
Digested From "Despite Tighter Vacancies, Apartment Rents Don't Move"
Northern Nevada Business Weekly (06/06/11) by Rob Sabo
Apartment vacancy rates in the Reno-Sparks, Nev., area fell in six of the last seven quarters and are now approaching stabilized levels. Apartment owners, though, have yet to see any increases in rental rates -- a trend that is keeping property values in check. The quarterly apartment survey by Johnson Perkins and Associates shows that the overall vacancy rate in Reno and Sparks stood at 5.64 percent as of March 31. In the fourth quarter of 2010, the overall vacancy rate in the region was at 7.16 percent. The real estate appraisal firm tracks 74 apartment communities with 80 or more units. Despite the improvements in the region’s overall vacancy rate, rents remain stagnant or are dropping across the region. Indeed, the average monthly rent for this year's first quarter was $821 versus $824 in the fourth quarter. Vacancies, meanwhile, declined in each of the 10 submarkets tracked by Johnson Perkins. Northeast Reno was tops, falling from 9.5 percent in the fourth quarter of 2010 to 6.3 percent. West Sparks/North Valleys, meanwhile, registered the lowest vacancy rate at 3.9 percent. Len Ramos, first vice president with the multi-housing group at CB Richard Ellis, remarks, "An apartment rental today is a good deal. Class A and well-located Class-B properties are experiencing heavier activity, probably at the sacrifice of lower-class properties because of the deals being given by the nicer properties. [Residents] are looking for more room, nicer amenities, better location. They are moving up."
AvalonBay Boosts Outlook On Improving Portfolio Trends
Digested From "AvalonBay Boosts Outlook On Improving Portfolio Trends"
Wall Street Journal (06/02/11) by Joan E. Solsman
AvalonBay Communities Inc. this past week raised its profitability projections for the current quarter and the full year because portfolio trends are better than it anticipated. The apartment REIT cited job growth among younger people coupled with a continued decline in home ownership as two of the biggest drivers. A record low level of new residential supply is also factoring in. AvalonBay projected current-quarter funds from operations of $1.09 to $1.12 a share, above April's downbeat outlook for $1.06 to $1.10 a share. For the year, the REIT now expects FFO in the $4.70 to $4.85 range. However, that projection excludes one-time transaction costs from acquisitions that may occur in the coming quarters.
Ratner Seeking $100 Million for Apartment Tower at Atlantic Yards
Digested From "Ratner Seeking $100 Million for Apartment Tower at Atlantic Yards Site"
Bloomberg (06/01/11) by David M. Levitt; Betty Liu
Forest City Ratner Cos. Chairman and CEO Bruce Ratner, the developer of the Atlantic Yards project in downtown Brooklyn, is looking to borrow nearly $100 million to construct an apartment tower near the basketball arena. Work should start on the apartment component of the project by the end of this year or in early January. The multifamily housing would join the Barclays Center sports arena as the second structure at the $4.9 billion, 22-acre project. Ratner comments, "We've already talked to banks, and we will be able to get a loan. That's appropriate. Pre-recession, that's about what we would have gotten, and I think we should get that again." The master plan for Atlantic Yards calls for approximately 6,400 units of housing, 30 percent of which would be reserved for low- and middle-income residents. Ratner is now considering plans for a 34-story tower that boast nearly 400 apartments. Furthermore, his company is exploring modular construction techniques as a way of saving time and money.
Student-Housing Developments Gain Respect
Digested From "Student-Housing Developments Gain Respect"
Wall Street Journal (06/01/11) by Dawn Wotapka
The student-housing sector has been gaining more and more respect within the apartment sector. With enrollment in colleges rising and traditional apartment owners hiking rents, returns of REITs that own student housing are starting to approach those that focus on more conventional rental apartments. New development and sales of the properties are on the rise. American Campus Communities Inc. ranks as the country's biggest student-housing REIT, owning and managing 137 properties. It has posted a return topping 30 percent in the past 12 months through May 31. No. 2 Education Realty Trust Inc., which has a portfolio of 57 properties, has had a gain topping 35 percent for that same time span. UBS Investment Bank recently upgraded both companies from "neutral" to "buy," adding they are poised "to generate double-digit funds-from-operations growth in 2012 and 2013." By contrast, Equity Residential -- the nation's largest apartment REIT in terms of market capitalization -- gained 37 percent in the past 12 months. Economic forces also are buoying student-housing communities. With colleges cutting capital budgets, little new supply has been added in recent years.
Mike Lipson Joins Freddie Mac as Head of Asset Management
Digested From "Mike Lipson Joins Freddie Mac as Head of Asset Management"
Commercial Real Estate Direct (05/20/11)
Former Berkadia Commercial Mortgage President and CEO Michael Lipson has agreed to join Freddie Mac as head of asset management. In this new position, Lipson will oversee the management of the housing-finance agency's $110 billion apartment loan portfolio. He will work closely with Patti Saylor, vice president of multifamily asset management, who currently focuses on the government-sponsored enterprise's low-risk loans. Lipson joined GMAC Commercial Mortgage, a Berkadia predecessor, in 1996 when the lender bought a company he had founded, Lexington Mortgage Co. He began his career at GMAC as head of its hospitality lending division before taking over its servicing operation. GMAC was subsequently renamed Capmark Financial Group. In 2009, the company sold its servicing and lending business to a venture of Berkshire Hathaway Inc. and Leucadia National Corp. and was renamed Berkadia Commercial. Lipson stepped down a year ago this month.
Camden Property Sells $500M in Bonds
Digested From "Camden REIT Sells $500M in Bonds"
Emii.com (06/01/11)
Camden Property Trust confirms that it has raised $500 million in a sale of bonds. The $250 million notes sold in the first tranche carry a coupon rate of 4.625 percent and are due to mature in 2021. The remaining $250 million notes carry a coupon rate of 4.875 percent and will mature two years later. Leading the bond sale were Bank of America Merrill Lynch, Deutsche Bank, and JP Morgan Chase, with support from Credit Suisse, Morgan Stanley, and Wells Fargo. The Houston-based apartment REIT plans to use the proceeds to pay down a outstanding $500 million term loan.
New Jersey Apartment Auction Nets $16 Million
Digested From "Connolly Apartment Auction Nets $16M"
MyCentralJersey.com (05/31/11) by Mark Spivey
Nine Plainfield, N.J., apartment communities on which a $17 million loan was taken out four years ago were sold at auction late last month for just under $16 million. Totaling nearly 300 rental units, the nine auctioned communities were sold to five different buyers. All nine were formerly were managed by Connolly Properties Inc., a property firm that once oversaw nearly 60 apartment communities in five municipalities. Nearly all of those assets have either been sold or lost in bankruptcy or foreclosure. A representative for the New York-based auctioneer Sheldon Good & Company remarks: "Based on the marketing, we feel confident we have achieved . . . the highest net realizable value for the creditors."
Memphis Occupancy Rates, Rents Trending Higher
Digested From "Memphis Occupancy Rates, Rents Trending Higher, Say Apartment Managers"
Commercial Appeal (TN) (05/29/11) by Tom Bailey
Mark Fogelman, president of Fogelman Management Group, says apartment communities in the Memphis metro area are excelling as a result of declining homeownership rates and a lack of new construction of competing apartments. The rent Fogelman-managed apartments ask has risen 3 percent to 5 percent, and Fogelman's units in the Memphis market have averaged 96 percent occupancy over the past three months. The strongest rebounds have been recorded in the Southeast Memphis submarket, which had been the worst-performing area the past five years. The conditions across the region may seem ripe to stimulate construction of new apartments. New developments, though, take two to three years to complete. Three quarters have passed since new rental units have been built and added to the market, but 851 apartments are scheduled to be completed by year's end.
New CFO Could Mean Lost Momentum for Apartment REIT
Digested From "Analyst Says New CFO Means Some Lost Momentum for Apartment REIT"
National Post (Canada) (05/31/11) by Garry Marr
Toronto-based Canadian Apartment Properties Real Estate Investment Trust has replaced current CFO Richard Smith with Scott Cryer, the company's vice president of financial reporting. Scotia Capital analyst Mario Saric cautions that the move could slow the REIT's momentum. Saric remarks, "We believe Mr. Smith made solid improvements to CAP's disclosure during his 20-month tenure and had gained traction with investors." On the positive side, the two executives had been working close together, which should ease the transition. The REIT is also getting some good news with regards to rent, as apartment analysts this week suggested the guideline for allowable rent increases in Ontario could climb to 3 percent in 2012 from 0.7 percent currently. According to Saric, this increase could result in rent growth for CAP REIT.
Apartments and Apartment Firms Thrive in Down Housing Market
Digested From "Rentals Are a Bright Spot in the Housing Market"
Democrat and Chronicle (05/28/2011) by Matthew Daneman
Though the nation's housing market it floundering, the apartment sector is looking stronger according to a plethora of metrics in the most recent financial statements of some of the nation's biggest publicly traded apartment companies. For the first three months of 2011, Rochester-based Home Properties Inc. saw its same-store occupancy rates up about half a percentage point, to 95.3 percent. AvalonBay Communities Inc., meanwhile, saw rents increase about 4 percent with occupancy rates around 96 percent. Memphis-based Mid-America Apartment Communities Inc. saw an occupancy rate of 96 percent with historically low turnover levels. Still, there are some warning signs that not all is well, including rising numbers of people who are moving out as a result of evictions.
Vegas Property Auction Brings $340 Million, Including Apartments
Digested From "Las Vegas Real Estate Auction Brings $340 Million"
Las Vegas Review-Journal (05/28/11) by Hubble Smith
Auction.com confirms that approximately $340 million in bank-owned commercial real estate properties and delinquent loans were sold during a recent three-day auction in Las Vegas. In fact, 84 percent of the advertised $1 billion in listings sold, including 50 of the 60 nonperforming notes and nine of the 10 bank-owned properties. The online auction featured a number of high-balance commercial loans that were offered individually and traded at substantial prices, especially multifamily notes. The website reported 15 of 16 office assets sold; 19 of 25 retail properties sold, and all nine apartment communities. Auction.com CEO Jeff Frieden observes that investor interest in Las Vegas-area commercial properties is extraordinarily high at the moment, adding, "The timing and size of this unique offering meshed well with current market and investor dynamics."
Legislative/Legal News
Raleigh Fights to Save Landlord Registry
Digested From "Raleigh Fights to Save Landlord Registry"
News Observer (NC) (06/03/11) by Matt Garfield
Raleigh, N.C., developed a system three years ago to keep closer tabs on apartment managers who fail to tend to their communities and hold them accountable for problems such as messy grounds, loud parties, and too many residents living in single units. Now, a bill in the state Senate could weaken the program by barring cities from charging annual registration fees. State Sen. Neal Hunt, the bill's primary sponsor, says apartment owners should not have to pay for a system aimed at policing bad managers. However, if the bill passes, Raleigh warns it will not have sufficient funds to maintain a database of the more than 70,000 rental units citywide. The Triangle Apartment Association says its members will pay an estimated $457,120 to the city this year in rental registration fees. Ken Szymanski, director of the Apartment Association of North Carolina says creating a new database from scratch rather than using the Register of Deeds and Wake County tax office to look up property managers is unreasonable. Raleigh's City Council passed a resolution opposing a version of the bill in the state House, saying it "interferes with the ability of local governments to . . . deal with unsafe, unsanitary and hazardous conditions." Open to compromise, Hunt says he is willing to reduce fees while stiffening fines for repeat offenders.
NAA Recommends Due Diligence When Subletting
Digested From "Do Homework on Subletting Apartments"
WIVBTV4 (NY) (06/03/11)
The summer is one of the best times of the year for subletting apartments, but there are risks for those on both sides of the sublet agreement. The National Apartment Association offers some tips to do it right, starting with making sure that subletting agreements are permitted in the lease. Additionally, NAA officials urge subletters to have an agreement in writing before keys are exchanged. This agreement should outline terms regarding the deposit, any damage incurred, and rules regarding everything from pets to noise to paying utilities. It also is important to choose people carefully when subleasing a rental unit, because the long-term resident on the lease is typically responsible for obligations.
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