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Optimism Prevails for Apartment Industry
Industry News
Apartments Are a Good Investment for Some
Home Properties and National Grid Partnership Promote Energy Conservation
Massachusetts Banks Flock to Multifamily Lending
Phoenix Sees Rise in Apartment and Other Commercial Sales
Caution on Apartment and Other REIT Earnings
Citigroup to Contribute 26,000 Apartments to New Venture
Camden Property Trust Selling Louisville-Area Apartment Communities
FDIC Aims to Shed Some Real-Estate Assets, Including Apartments
Seven Arizona Apartment Communities Are Sold
Legislative/Legal News
Disabilities-Discrimination Settlement Could Affect Thousands of NY Apartments
Delaware Apartment Association to Launch New Program for the Needy
Credit Checks Give Rise to Claims of Discrimination
Atlanta Apartment Residents Can't Fight City Over Water Bills
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Optimism Prevails for Apartment Industry
Digested From "Optimism Prevails for Apartment Industry"
GlobeSt.com (10/21/10) by Sule A. Carranza
Compared with last year's event, the 2010 RealShare Apartments conference boasted a notable increase in optimism from its 1,200-plus attendees. National Apartment Association President Doug Culkin expressed that sense of optimism in his keynote speech, noting market improvements and expectations for steady progress in terms of the economy, job growth and financing. Though the economy has been and will be slow to recover, Culkin pointed out that 2010 was the best year for young adult hiring since 1984. This means there will be more household formation taking place, and the apartment market may see a period of rapid recovery in 2011 and after. Effective rents have already risen by 1.2 percent over the past two years, and overall rents are expected to grow as much as 4.5 percent in the new year. In the seminar following Culkin's address, Greg Willett, vice president of research and analysis for MPF Research, observed that the average national occupancy level has grown by 210 basis points from its year-end 2009 low to 93.9 percent as of the third quarter and that retention rates have been impressive. On the development side, Sharon Dworkin Bell, senior staff vice president for multifamily and 50+ housing for the National Association of Home Builders, said developers have scaled back in response to uncertainties regarding federal legislation. Overall, the whole panel expects the market to be stronger one year from now with very strong rent growth.
Industry News
Apartments Are a Good Investment for Some
Digested From "Apartments Are a Good Investment for Some"
USA Today (10/25/10) by Sarah Clemence
Just as there have been huge price drops for single-family homes in the last three years, analysts and property professionals lament that there have been some corresponding big price declines for apartment communities. Such data would seem to suggest that now is a good time for investors who want to be apartment owners to start buying. Unfortunately for investors, the expected wave of dirt-cheap apartment communities that was to wash over the U.S. market in the last couple of years have largely failed to materialize. That is because the economic distress that led to lower prices was limited to certain places and property types, reports Hessam Nadji, managing director at real estate investment services firm Marcus & Millichap. He notes, "The pain was concentrated where we had gross overbuilding in overall housing: Florida, Phoenix, Las Vegas, Southern California, and to some degree, smaller markets like Tucson, Charlotte, and Atlanta." Marc Solomon, whose Solomon Organization owns 10,000 garden apartments, complains that it is difficult to find opportunities that make good business sense in his target markets. There is opportunity in the apartment sector, despite all the qualifiers, because the timing is so good. Nadji concludes, "I don't think you're going to get fire-sale prices. But you can get that kind of return ahead of the job growth and ahead of the economic recovery."
Home Properties and National Grid Partnership Promote Energy Conservation
Digested From "Home Properties and National Grid Partnership Promote Energy Conservation"
KPTM FOX 42: Omaha News (10/22/10)
Home Properties Inc. has partnered with Boston's National Grid power company to replace current light fixtures in approximately 1,400 apartments and common areas at seven Boston-area apartment communities with energy-conserving compact fluorescent light bulbs (CFLs). This mean more energy-efficient lighting for the various apartment communities at no additional cost to residents. Marc Dykes, senior construction manager for Home Properties, states, "Home Properties' residents appreciate our proactive approach to making their homes 'greener' and they'll also notice a meaningful savings in their electricity bill because these changes will result in lower energy consumption -- a benefit to everyone involved." The CFLs to be installed in each new fixture have a 6,000- to 15,000-hour usage range, a dramatic energy savings from a typical incandescent light bulb with a significantly shorter lifespan. While individual apartments will receive upgraded fixtures and CFL bulbs, Home Properties has also looked into reducing energy consumption in its common areas. To this end, it has requested that National Grid install motion sensors and timers to activate lighting only when these areas are in use. National Grid will begin installing the fixtures and CFL bulbs at these communities starting this week.
Massachusetts Banks Flock to Multifamily Lending
Digested From "Mass. Banks Flock to Multifamily Lending"
Boston Business Journal (10/22/10) by Craig R. Douglas
Boston-area community banks, still smarting from the high number of soured loans backing everything from office buildings to condominiums, are flocking to rental apartments -- the one and seemingly only healthy segment within the U.S. real estate market. Although total lending among Massachusetts-chartered banks fell during the year ended June 30, loans backing apartment communities and multi-unit rental properties increased 9 percent over that same time span. This increase equated to a $264 million increase in multifamily loans for the one-year period studied, a substantial gain considering that total lending among that same collection of banks decreased by almost $2 billion during the same span. At East Boston Savings Bank, loans to apartment owners and multifamily housing developers more than doubled to $127 million in the 12 months ended June 30. Belmont Savings Bank, meanwhile, doubled its multifamily portfolio over the same period. Such other lenders as South Shore Savings Bank of Weymouth, Cape Ann Savings Bank in Gloucester, and Hampden Bank in Springfield all saw their apartment portfolios increase twofold from June 2009 to June of this year. As of the end of the second quarter, year-over-year increases in multifamily lending were logged by 47 Massachusetts banks with at least $200 million in loans outstanding.
Phoenix Sees Rise in Apartment and Other Commercial Sales
Digested From "Phoenix Sees Rise in Commercial Real Estate Sales"
KSWT-TV (Phoenix) (10/21/10)
Phoenix-area commercial property executives say they have seen a rise in office and industrial building sales locally since Jan. 1. In addition, apartment communities and some retail properties have begun to change hands -- a stark contract from a year ago when there were virtually no sales. The increase is driven primarily by rising commercial foreclosures as more and more lenders look to clear non-performing loans off their books.
Caution on Apartment and Other REIT Earnings
Digested From "Caution on REIT Earnings"
Wall Street Journal (10/20/10) by A.D. Pruitt
Analysts are cautioning that the upcoming REIT earnings season may not be a pretty one. Apartment and hotel companies will likely be the strongest performers given a growing population of renters and an increase in corporate and leisure travel. Mike Kirby, director of research for Green Street Advisors, remarks, "I think earnings will be weak. The idea we're going to have robust earnings is just not going to happen in most property sectors." He adds that the tepid earnings represent a curious disconnect from the performance of REIT stocks this year, which have outperformed the broader market. Indeed, The Dow Jones All Equity REIT index climbed 12.8 percent in the third quarter compared with returns of around 10 percent for the Standard & Poor's 500-stock index and the Dow Jones Industrial Average. Analysts say the main reason is that investors are looking past the current weak fundamentals and into 2011 when a more solid recovery is expected to take root.
Citigroup to Contribute 26,000 Apartments to New Venture
Digested From "Citi Goes All In, Again"
Wall Street Journal (10/20/10) by Maura Webber Sadovi
Citigroup Inc. has come up with a plan for a portfolio of 26,000 apartments in 34 states and Puerto Rico that it got saddled with when it financed an affordable-housing deal during the boom. Indeed, in 2008, Citigroup made a $100 million loan to a venture of Michael Costa and Victor MacFarlane to finance the purchase of the apartment communities, which are more upscale than standard affordable housing due to such amenities as swimming pools and clubhouses. The venture's plan was to resell the units to other investors, but then the market collapsed. Now, Citigroup is contributing the properties to a new venture called Highridge Costa Housing Partners, run by Michael Costa. While the transaction has yet to close, the move makes good business sense. Steven Fayne, a managing director for Citigroup's community development lending and investing arm, says it protects the bank's investment and keeps approximately 80,000 residents in their affordably priced apartments. In addition, the portfolio helps the bank meet its requirements under the Community Reinvestment Act. The federal law encourages banks to make loans in low- and middle-income neighborhoods.
Camden Property Trust Selling Louisville-Area Apartment Communities
Digested From "Camden Property Trust Selling Four Area Apartment Communities"
Business First (10/21/10) by Ed Green
Camden Property Trust plans to sell four large apartment communities in a move to exit the Louisville, Ky., multifamily housing market. The planned sales includes all of the company's holdings in Louisville -- more than 1,200 units -- and nearly 2,000 units in Missouri. The average occupancy rates of the four communities have ranged from 93 percent to 96 percent during the past year, with average rents between $655 per month and $832 per month. The assets will be offered as a portfolio or on an individual or pool basis.
FDIC Aims to Shed Some Real-Estate Assets, Including Apartments
Digested From "FDIC Aims to Shed Some Real-Estate Assets"
Wall Street Journal (10/20/10) by Lingling Wei
The FDIC is devising a new way to sell failed banks' hard-to-value property assets back to the private sector, with more banks collapsing because of commercial real-estate lending. As the volume of property loans mount, the agency is now looking to bundle and sell some of them as commercial mortgage-backed securities (CMBS). This comes as the CMBS market is starting to rebound after grinding to a virtual standstill during the downturn. Since the start of the financial crisis in 2007, there have been nearly 300 bank failures that wiped out the deposit-insurance fund in 2009's July-through-September period. Problems at many of these banks were partly caused by overaggressive lending to owners of apartment communities, office properties, shopping centers, and other commercial real estate. The FDIC currently has around $34.1 billion in assets, including those tied to real estate held by failed banks, that are available for sale. The FDIC is expected to launch its first CMBS deal by the end of this year or in January at the latest.
Seven Arizona Apartment Communities Are Sold
Digested From "7 Valley Apartment Properties Are Sold"
Arizona Republic (AZ) (10/19/10) by J. Craig Anderson
Standard Portfolios II LLC, a Delaware-based subsidiary of a Chinese investment firm, has acquired seven Arizona apartment communities abandoned in the fourth quarter of 2008 by the California-based Bethany Group. The $133.1 million transaction is the largest commercial property deal in the state so far this year, reports commercial-real-estate firm Hendricks & Partners in Phoenix. Hendricks broker Ric Holway, who worked on the deal with colleague Mark Forrester for over a year, described the transaction as a complicated one that involved restructuring the original debt on each of the seven communities. All seven were part of a group of 13 apartment communities Bethany Group had owned and operated in the Phoenix metro area.
Legislative/Legal News
Disabilities-Discrimination Settlement Could Affect Thousands of NY Apartments
Digested From "Landlords Fear Bias Deal"
Wall Street Journal (10/22/10) by Craig Karmin
A settlement between AvalonBay Communities and the federal government has apartment owners and developers throughout New York City worried that they will be forced to make changes at tens of thousands of apartments in order to comply with federal law preventing discrimination against the disabled. Real-estate officials contend that upgrading kitchens, bathrooms, and common areas to comply with the Fair Housing Act could run tens of millions of dollars. That is if all rental apartments built since the law took effect in 1991 are made to comply. Until recently, New York apartment owners felt they were meeting the federal law by complying with a 1987 city ordinance that they felt was tougher. In 2008, though, the U.S. Attorney's office in Manhattan sued AvalonBay and sent notices to 10 others cautioning that their buildings were not sufficiently accessible to wheelchairs under federal law. Now the government has settled with AvalonBay, leaving other owners concerned. The 10 other developers that got notices are negotiating with the government, including such major players as Related Cos. and Silverstein Properties. A couple of other developers, Friedland Properties and Larkspur LLC, are reportedly close to an agreement. The settlement with AvalonBay will affect seven New York properties with a total of 2,557 apartments.
Delaware Apartment Association to Launch New Program for the Needy
Digested From "Apartment Angels Offers Free Rent to Needy Delawareans"
Brandywine East Community News (10/21/10) by Andre Lamar
Beginning this December, the Delaware Apartment Association is set to launch a new program that will provide needy families and individuals with six months of free rent at a New Castle County apartment community. The nonprofit program, dubbed Apartment Angels THP (transitional housing program), is designed to offer free rental housing to those who have fallen on tough times, allowing people the chance to reposition themselves financially. Five families or individuals have already been chosen for temporary housing. Apartment managers have reportedly jumped at the chance to help. Kevin Wolfgang, president of the Delaware Apartment Association, hopes the program will give the various families and individuals a chance to build credit and equity by purchasing furniture and paying a security deposit.
Credit Checks Give Rise to Claims of Discrimination
Digested From "Credit Checks Give Rise to Claims of Discrimination"
Wall Street Journal (10/21/10) by Nathan Koppel
The practice of checking the credit histories of job applicants is being scrutinized, with opponents charging the practice discriminates against African-Americans and Latinos who tend to have lower credit scores. A total of four states have passed laws limiting credit checks. Similar bills have been introduced in at least 20 other states and Congress. Employers, though, counter that credit checks help them evaluate job candidates and protect against fraud. Recent Society for Human Resource Management research shows that 60 percent of employers use credit checks to vet job candidates. Of those, 13 percent have used them for all candidates.
Atlanta Apartment Residents Can't Fight City Over Water Bills
Digested From "Apartment Dwellers Can't Fight City Hall Over Water Bills"
Atlanta Journal-Constitution (10/15/10) by Leon Stafford
Unlike Atlanta-area homeowners who can go directly to City Hall to challenge the recent spikes in their water bills, apartment residents must appeal to their community's management. Operators are finding themselves with vastly larger bills, making increased water prices an issue across the city. According to Bob Love, a board member and past president of the Atlanta Apartment Association and the Georgia Apartment Association, apartment owners can only pass on the charges that they get from a municipality and are prohibited by law from padding bills or making profit. He further explained that how much residents are being charged is changing as communities update their metering processes from single-meter systems to sub-meters. The resulting precision may cause some customers to see drastic changes in their bills. Janet Ward, a spokeswoman for the Atlanta Department of Watershed Management, said the city hears from apartment residents often but can only direct them back to their community's management.
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