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Multifamily Housing Industry to Benefit From Tax Deal
Industry News
Baltimore-Area Apt. Rents Rise as Homeownership Sinks
Seattle Apts Are Red-Hot Despite Cool Market
Outlook Positive for Memphis' Apartment Sector
Navy Contract to Boost Apartment Demand in NE Wisconsin
Walton (Ga.) Communities Raises $1.2 Million
Wood Partners Targets Overlooked Jacksonville Apartments
Day of Reckoning for Commercial Real Estate May Not Come
Providence Realty Acquires $108 Million Portfolio
Milwaukee Multifamily Project Closes on HUD-Backed Loan
Legislative/Legal News
Casper, Wyo., Prepares for New Apartment Inspections
Calif. Officials Freeze Money From Apartment Developer
Saranac Lake, N.Y., Begins Apartment Inspections
Jersey City Mixed-Use Project Awaits Tax-Credit Boost
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Multifamily Housing Industry to Benefit From Tax Deal
Digested From "Multifamily Industry to Benefit from Tax Deal"
Multi-Housing News (12/10) by Dees Stribling
The implications of the tax bill passed by Congress and signed by President Obama in December are still being sorted out. According to the National Apartment Association (NAA) and the National Multi Housing Council (NMHC), though, there were a number of wins for the multifamily housing industry in the bill. Quite possibly the biggest victory for the industry is that there will be no increase in carried interest taxation. Such an increase would have an adverse impact on the incomes of many partnerships, including those commonly used as ownership structures for apartment communities. Carried interest will continue to be taxed at 15 percent capital gains tax rate. However, the NAA and the NMHC believe the idea will be revisited eventually. In a joint statement, the two organizations commented: "NMHC/NAA will remain vigilant on this issue, as the threat of a potential tax increase will continue into the new Congress since there are few significant revenue raisers left to pay for Congressional spending proposals." Another item to be taken up by the next Congress is a possible repeal of the new 1099 reporting requirements enacted in the healthcare reform law. Starting in 2012, businesses will be required to file a 1099 report to every business from which it purchases more than $600 in goods and services.
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Baltimore-Area Apt. Rents Rise as Homeownership Sinks
Digested From "Apartment Rents Rise as Homeownership Sinks"
Baltimore Sun (01/03/11) by Jamie Smith Hopkins
Apartment communities in the Baltimore metro area are raising rents as a muted economic recovery coupled with a foreclosure crisis have discouraged homeownership and added to the rental pool. MPF Research reports that monthly rents climbed more than 6 percent in the Baltimore region last year to about $1,120. Effective rents -- or the monthly tab minus waived application fees and other concessions -- increased even more in the upscale part of the market, Delta Associates confirmed. Indeed, the 7 percent jump in rents for Class A apartments was the largest gain in a decade, pushing the average rent to $1,440 a month. Improved job growth coupled with local home sales having fallen far below levels seen even a decade ago have produced such trends. John Cohan, director of marketing for Southern Management Corp., remarks, "Some of the glamour of buying, of homeownership . . . has been diluted." After rising to 75 percent in early 2006, he notes, the homeownership rate in the Baltimore area plunged to below the 66 percent mark in the spring and summer of 2010. Cohan's firm owns and operates apartments across the Baltimore-Washington, D.C., area.
Seattle Apts Are Red-Hot Despite Cool Market
Digested From "Apartments Are Red-Hot Despite Cool Real-Estate Market"
Seattle Times (12/31/10) by Eric Pryne
Seattle commercial real-estate developers are mustering up the courage to start building again in the new year, and almost all of them have their sights set on new apartment communities. Apartments are red-hot at the moment, and developers are racing to get projects permitted, financed, and under construction. Tom Cain, a principal with research firm Apartment Insights Washington, states, "They're chomping at the bit with the market coming back like it is." The turnaround began a year ago as monthly rents in King and Snohomish counties edged up. With falling vacancy rates, apartment owners cut back on incentives such as free rent. Cain and other analysts say a convergence of cultural, demographic, and economic forces should keep the market stoked well into 2011 and beyond. However, because construction dropped off after the economy went south, relatively few new projects are slated to open this year. By Cain's count, the number of apartments in the early permitting stages in King and Snohomish counties soared 48 percent in the last three months of 2010 alone. Developers, investors, and economists say the apartment boom is partly because homeownership has lost its allure for many. "They are no longer convinced it's an economic benefit for them to buy," said John Orehek, president and CEO of Security Properties, one of the country's biggest apartment companies.
Outlook Positive for Memphis' Apartment Sector
Digested From "Apartment Optimism"
Memphis Daily News (12/30/10) by Michael Waddell
Apartment owners and managers in the Memphis market are forecasting positive things in the new year. The local multifamily housing sector will be boosted by continued weak homebuying activity and a lack of new apartments coming online in the months to come. Blake Pera, senior vice president of CB Richard Ellis Memphis' multifamily division, states, "2010 was certainly an improvement for the multifamily sector -- both in operations and in sales -- over 2009, and we expect to see more of the same next year. Most operators experienced comfortable revenue growth throughout the year, and there is some positive momentum in continued stable occupancy and concession burn-off next year with the lack of new supply hitting the market." After averaging nearly 1,600 deliveries per year since the early 1990s, new construction of Memphis apartments hit a 17-year low this past year. Only 357 new units were added to the local stock in 2010. Approximately 467 total rental units are expected to be constructed in 2011, and as many as 500 new apartments could hit the market the following year.
Navy Contract to Boost Apartment Demand in NE Wisconsin
Digested From "LCS Contract Could Mean Real Estate Boom Around Marinette"
WBAY-TV (Green Bay, WI) (12/27/10) by Taky Ono
The new Navy littoral combat ship contract with Marinette Marine could create as many as 5,000 jobs in Northeast Wisconsin and the Upper Peninsula. Many of those workers will need a place to live, which means the Marinette-Menominee area appears poised to go through what some believe will be the biggest growth period since World War II. With that kind of growth, though, Realtors are concerned that the region's housing market will not be able to keep up as there simply are not enough homes to house all the new workers. Realtors note that a huge push for apartments has ensued, even though most of the local rental stock is already occupied. Mike Kunesh of Place Perfect Realty laments, "There are very few apartments and rentals available in the cities. What is available now has been taken, and what's left is marginal at best." Real estate agents conclude that this means there will almost certainly be more new houses built and longer commutes -- some traveling from as far away as Green Bay. Kunesh points out, "You're seeing a huge demand in upscale housing, if you will, white-collar housing. But that isn't generally available in the area." Jim LaCrosse of Marinette Marine agrees. He adds, "If we are adding jobs to the workforce here at Marinette and adding people to the community, naturally they're going to be competing for the same housing that's available today."
Walton (Ga.) Communities Raises $1.2 Million
Digested From "Walton Communities Raises $1.2M"
Citybizlist Atlanta (12/27/10)
SEC filings show that Walton Communities has raised a combined $1.21 million from a trio of recent offerings. The financing rounds all consist of limited liability company membership interests. The Georgia-based company develops, owns, and operates apartment communities throughout the Atlanta metropolitan area.
Wood Partners Targets Overlooked Jacksonville Apartments
Digested From "Wood Partners Targets Overlooked Jax Multifamily"
GlobeSt.com (12/30/10) by Jennifer LeClaire
Wood Partners has acquired Magnolia Village Apartments, a class A apartment community in in Jacksonville's Southside neighborhood. Magnolia Village offers a half-dozen buildings with 168 rental units on an 8.44-acre site. The property was purchased on a short sale at a "significant discount to replacement costs," though complete terms of the deal were not disclosed. Curtis Walker, Wood Partners' acquisition officer, concedes that Jacksonville has been overlooked by some national institutional investors. However, he adds, "Our ability to selectively target out-of-favor, but high-performing primary markets, gives us an advantage. As these markets continue to improve macro-economically and their associated research reflects this, we forecast a significant improvement in asset values relative to our acquisition basis."
Day of Reckoning for Commercial Real Estate May Not Come
Digested From "Floor Under Offices?"
New York Times (12/27/10) P. B2; by Richard Beales; Rob Cox; Agnes T. Crane
This past year, such major markets as New York, Los Angeles, and the District of Columbia have paved the way for a broader market recovery that is now starting to see money flow into second-tier markets like Houston and Seattle. REITs and private equity will likely continue to drive the activity in the new year, when a growing economy should help reduce vacancy rates and increase cash flow. National valuations climbed during October for the second straight month, reports Moody's Investors Service. However, they were still almost 42 percent off their peak. Owners and lenders that signed deals during the boom will be competing for refinancing in 2014 through 2017 from lenders that probably will tighten their underwriting criteria. Amherst Securities calculates that almost $430 billion of loans pooled into securities will mature in that period. The total amount of maturing debt, though, will be substantially higher. Ultimately, researchers say the economy and job creation will dictate demand for apartments, offices, and retail space.
Providence Realty Acquires $108 Million Portfolio
Digested From "Providence Realty Affiliate Acquires $108 Million Apartment Portfolio"
REBusinessOnline.com (12/22/10)
Providence Realty Investment has entered the Massachusetts apartment market with its acquisition of a 10-property affordable housing portfolio from Equity Residential. The total purchase price was $108 million. All 10 communities are located in Massachusetts within an hour's drive of each other. Providence made the purchase via its Rhode Island Homes affiliate. Cushman & Wakefield represented the seller and procured the buyer.
Milwaukee Multifamily Project Closes on HUD-Backed Loan
Digested From "The Moderne Closes on HUD-Backed Loan, City Loan Closing Today"
Milwaukee Small Business Times (12/22/10)
A $42 million loan from the AFL-CIO Investment Trust and backed by HUD has been finalized for The Moderne, a 30-story building that will be built in the Park East corridor of downtown Milwaukee. Once finished, it will offer 203 apartments, 14 condominiums, and first-floor retail space. The loan is guaranteed by HUD's 221(d)4 program. The $55 million project also received a $9.3 million loan from the city. Serving as the general contractor is J.H. Findorff & Son Inc., while Milwaukee-based Rinka Chung Architecture Inc. is listed as the architect. Construction work is slated to begin sometime after the first of the year, notes Eric Wynn, Findorff senior project manager. The capital markets for real estate development have been extremely tight for months now, meaning that HUD has been swamped by developers seeking financing help. Consequently, the approval for The Moderne's loan guarantee took longer than initially expected.
Legislative/Legal News
Casper, Wyo., Prepares for New Apartment Inspections
Digested From "Casper Prepares for New Apartment Inspections"
Billings Gazette (MT) (01/01/11)
Building inspectors in Casper, Wyo., will be checking on apartment communities more often in the new year. City officials are planning to step up inspections of more than 450 local multifamily residences, looking for such possible fire hazards such as bad wiring. By June, code enforcers and fire fighters will prioritize apartments that need repairs. The stepped-up inspections were prompted by the recent closure of the former KC Apartments, whose residents were evicted because of fire dangers.
Calif. Officials Freeze Money From Apartment Developer
Digested From "Calif Officials Freeze Money From Firm in Probe"
San Francisco Chronicle (12/30/10)
Last week, two top California officials -- state Treasurer Bill Lockyer and Controller John Chiang -- froze nearly $150,000 of campaign contributions given to them from an apartment developer accused of defrauding government agencies. Lockyer and Chiang set the cash aside as a federal probe is carried out into Advanced Development and Investment Inc., which has built dozens of taxpayer-funded apartment communities in the state. The firm allegedly submitted fraudulent statements and may have built substandard housing. Both officials sit on a panel that awarded millions of dollars in tax credits to the company. Advanced Development's legal team insists the firm is innocent of any and all wrongdoing.
Saranac Lake, N.Y., Begins Apartment Inspections
Digested From "Village Begins Apartment Inspections"
Adirondack Daily Enterprise (12/30/10) by Chris Knight
The village of Saranac Lake, N.Y., has begun mandated inspections of local apartment communities and expects to finish all of them within the three years allotted to complete the task. Code Enforcement Officer Tom Worthington says the response so far from apartment owners and managers has been "pretty good," according to Village Community Development Director Jeremy Evans. Worthington has not uncovered any significant violations and said the village will be "ramping up to do a lot more inspections throughout the winter." Earlier this year, Evans had proposed a more rigorous rental housing inspection program that would have applied to all non-owner-occupied single-family residences, and duplexes. It would have required owners to get a permit from the village and pay registration and per-unit inspection fees, but the village scrapped the proposal and opted to only move forward with apartment inspections.
Jersey City Mixed-Use Project Awaits Tax-Credit Boost
Digested From "Jersey City Complex Awaits Tax-Credit Boost"
Wall Street Journal (12/30/10) by Shelly Banjo
Developer George Filopoulos is hoping a January vote by the New Jersey Senate will help him continue his high-profile redevelopment of the old, 10-building Jersey City Medical Center into a 14-acre mixed-use project. He has already converted two of the buildings to luxury apartments and added such prime amenities as a swimming pool and fitness center. Over the next five years, he hopes to add an additional 1,000 rental units at the sprawling development known as the Beacon. A proposed bill would enable New Jersey to join over 30 other states in providing property-tax incentives to developers working on historic structures. The proposal has already been approved by the state's Assembly and backers say it is expected to pass the Senate. If signed by Gov. Chris Christie, the conversion of the medical complex erected mostly in the 1930s could qualify for up to $87 million in tax credits. Filopoulos, who has been working on the project since 2003, states, "Especially today, anything we can do to reduce the amount we have to borrow from the bank is essential." Filopoulos' company, Metrovest Equities, also awaits a separate $15 million federal tax credit that has been tied up for months on Capitol Hill. Designed to stimulate development in underserved communities, the tax-credit program was only recently renewed.
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