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Reis Reports Apartment Rents Rise, Vacancies Down
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Reis Reports Apartment Rents Rise, Vacancies Down
Industry News
AIG Sells New Jersey Apartment Portfolio for $241.5 Million
PulteGroup Elects AvalonBay Chairman to Board
Orange County, Calif., Apartment Rents Up
Atlanta-Based Multifamily REIT Puts Itself Up for Sale
Ottesen Named CFO at Riverstone Residential
In NY, Some Farash Residents Seeing Big Rent Hikes
Allen Harrison Co. Plans $70 Million in 2011 Apartment Buys
How to Manage a Sustainable Apartment Community
Legislative/Legal News
N.C. Law Weakens Fayetteville's New Rental Ordinance
Denver Apartment Association Opposes Paid Sick Leave
San Fran Apartment Owners May Have to Rent to Ex-Cons 
Texas City Cracks Down on Crime-Ridden Apartments
Bill Calls for Fannie Mae, Freddie Mac Merger
U.S. Housing Recovery Stymied by Government
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Reis Reports Apartment Rents Rise, Vacancies Down
Digested From "Rents Rise, Vacancies Go Down"
Wall Street Journal (07/07/11) by Wesley Lowery
The nation's apartment owners are currently enjoying declining vacancies and rising rents. Reis Inc. reports that the average effective rent -- the amount paid after discounting -- was $997 in the second quarter of the year. That is an increase from $974 a year ago. Second-quarter rents, meanwhile, climbed in all but two markets. According to Reis, monthly rent levels rose fastest in San Jose, Calif., to $1,501. Apartment vacancies, meanwhile, dipped in 72 of the 82 markets Reis tracked during the April-through-June period, dropping the U.S. vacancy rate to 6 percent. That is the lowest since 2008 and was down from 7.8 percent in 2010's second quarter, notes Reis. Vacancies declined fastest in the markets of Charleston, W.Va.; Greensboro/Winston-Salem, N.C.; and Richmond, Va. BMO Capital Markets analyst Rich Anderson observes, "Rising rents and falling vacancies are the perfect situation for landlords. It's like drinking without the hangover." However, there are some warning signs popping up. For instance, apartment owners and managers filled a net 33,000 rental units in the second quarter, a slowdown from the 45,000 units they filled in the first three months of the year. Around 8,700 new apartments opened during the second quarter, the second-lowest quarterly total for new completions since Reis started collecting data in 1999.
Industry News
AIG Sells New Jersey Apartment Portfolio for $241.5 Million
Digested From "AIG Sells New Jersey Apartment Properties for $241.5 Million"
Bloomberg (07/07/11) by John Gittelsohn
American International Group Inc. (AIG) confirms that it has sold 2,200 apartments in central New Jersey to Vantage Properties LLC and Angelo, Gordon & Co. for $241.5 million. The portfolio consists of a half-dozen apartment communities in such towns as Plainsboro and South River. AIG has been in the headlines as the insurer seeking capital to replace U.S. government bailout funds. It has been looking to take advantage of a U.S. apartment market whose vacancy rate dropped to 6 percent in the second quarter from 7.8 percent a year earlier, as reported by Reis Inc. researchers. Vantage Properties CEO Neil Rubler comments, "The fundamentals on the apartment market are pretty terrific right now. Vacancy rates are as low as we've ever seen them. Where probably the story in 2010 was that concessions were starting to be driven out of the market, the story in 2011 certainly is increasing face rents." The AIG acquisition is the second in the Garden State for Vantage, which owns approximately 10,000 apartments in New York City.
PulteGroup Elects AvalonBay Chairman to Board
Digested From "PulteGroup Elects AvalonBay Chairman to Board"
CNBC News (07/06/11)
AvalonBay Communities Inc. Chairman and CEO Bryce Blair has been elected to PulteGroup Inc.'s board of directors. The 52-year-old will join the company's compensation and management development, and finance committees. AvalonBay, a leading apartment REIT, recently announced that Blair will retire from his role as chief executive at the end of December.
Orange County, Calif., Apartment Rents Up
Digested From "O.C. Apartment Rents Up $40 a Month"
Orange County Register (CA) (07/08/11) by Jeff Collins
New MPF Research research shows that residents in large Orange County, Calif., apartment communities are paying an average of 2.7 percent more in rent than they were a year earlier. The local rental market is growing so tight that the Dallas-based research group says it is possible that Orange County apartment rents could rise as much as 5 percent -- or $73 a month -- by the end of December. While Southern California's apartment sector is lagging the country as a whole, MPF's vice president of research and analysis Greg Willett says, "Orange County probably has the most upside potential in the region. Near-term rent growth at or even a bit above the national norm certainly isn’t out of the question for Orange County." Specifically, MPF reports that the average monthly apartment rent in a large Orange County community totaled $1,503 as of June 30. Furthermore, only 4.6 percent of the apartments in large Orange County apartment communities were vacant as of the end of the second quarter -- the second-lowest vacancy rate in the region. Willett concludes, "The metro's performance to date has been held back a little bit because some recent completions have been in the initial lease-up stage. Getting those properties full could lead to more aggressive pricing right at the top of the market."
Atlanta-Based Multifamily REIT Puts Itself Up for Sale
Digested From "Atlanta-Based REIT Puts Itself Up for Sale"
CoStar Group (07/06/11) by Mark Heschmeyer
Roberts Realty Investors Inc. has retained Sandler O'Neill + Partners to explore potential strategic alternatives, including the possible sale of the business. The Atlanta-based REIT is focused on owning, managing, and developing multifamily housing. Roberts Realty Chairman and CEO Charles Roberts states, "We believe there are many ways we can improve our value with the help of the professionals at Sandler O'Neill. These alternatives could include a sale, merger or other business combination." Roberts Realty currently owns and manages five tracts of land that are zoned for more than 1,230 apartments. A week ago, the REIT inked a deal to sell an 11-acre parcel in Sandy Springs, Ga., for $5.36 million, or $24,381 per apartment unit.
Ottesen Named CFO at Riverstone Residential
Digested From "Ottesen Named CFO at Riverstone Residential"
Dallas Business Journal (07/07/11) by Lance Murray
Pal Ottesen this past week was promoted to CFO of Dallas-based Riverstone Residential Group, one of the country's biggest privately-owned, third-party apartment management firms. Ottesen had been serving as the company's interim CFO. Moving forward, he will combine the duties and responsibilities of this new job with his existing role as chief administrative officer. More specifically, he will be in charge of investor relations, accounting, and treasury functions across all Riverstone Residential Group and CAS Partners business lines and subsidiaries. The company currently manages a portfolio of 650 apartment communities valued at over $15 billion. Most are located in major U.S. metro markets.
In NY, Some Farash Residents Seeing Big Rent Hikes
Digested From "Some Farash Tenants Seeing Big Rent Hikes"
Rochester Democrat & Chronicle (NY) (07/05/11) by Steve Orr
In and around Rochester, N.Y., some residents in former Farash Corp. apartment communities are complaining about rent hikes of 10 percent or more. Real estate magnate Max Farash developed and managed nearly 4,000 rental apartments in 16 communities spread out over the Rochester metro area. Farash passed away early last year, and title to most of those apartments passed six months ago to the charitable foundation created by him and his late wife, Marian. In recent weeks, residents in some of these communities have been informed of significant rent increases. Ralph Jones, who has lived at Farash's Elmwood Court in Brighton for the past nine years, laments, "It galls me. They've been donating things to charity, and all of a sudden they're giving people higher rent?" He complains that the monthly rent on his one-bedroom apartment is set to rise from $710 to $810. Farash Foundation Board Chairman Nathan Robfogel says the rent hikes are just in keeping with current market conditions. J. Michael Smith, chief executive of the Cabot Group, which manages the apartments for the foundation, also notes that not all Farash residents have had large increases imposed on them. In fact, some have seen no increase at all.
Allen Harrison Co. Plans $70 Million in 2011 Apartment Buys
Digested From "Allen Harrison Company Plans $70M in MF Buys"
GlobeSt.com (07/06/11) by Jennifer Duell Popovec
Allen Harrison Company LLC plans to close $70 million worth of apartment acquisitions in 2011, reports partner Will Harper. The firm, which launched in the first quarter of last year, is actively executing its strategy to acquire value-added apartment communities throughout Texas specifically. Former Hanover Company executives Harper and Paul Forbes teamed to build the company. The former remarks, "We felt we were in the midst of a very rare opportunity to acquire real estate. We felt we were going to get five years down the road and say that 2010 to 2012 were very obvious times in the cycle to acquire apartments." Allen Harrison closed on its first three apartment investments last fall. Since the first of this year, it has acquired three apartment communities totaling $30 million. All three are situated in the Houston metro area. Their addition brings Allen Harrison's total portfolio to 1,397 rental units. Allen Harrison plans to buy at least two more apartment communities in Texas before year's end. Harper concludes, "We look at a lot of deals. We have offers out on 6,000 units at any given time."
How to Manage a Sustainable Apartment Community
Digested From "Managing Multifamily Developments"
Sustainable Facility (06/11) Vol. 36, No. 4, P. 31; by Tommy Linstroth
Trident Sustainability Group principal Tommy Linstroth writes that the first step in managing a sustainable apartment community is creating a green property management and unit turnover plan. "If it is new construction, it is ideal to craft such plans a few months before move-in dates, while you still have all the spec sheets from construction available, design team members are still talking to you and the general contractor is at the site," Linstroth recommends. He also says that "there are owners of millions of units of multifamily housing out there who might want to start managing their properties in a more sustainable fashion and can still create a comprehensive green property management plan. It just sometimes takes a bit longer to compile the appropriate specifications, matching products, etc. if you don't have that information already handy." Among the ongoing operational elements that Linstroth says go into a green apartment management and unit turnover plan are monthly replacement of air filters with MERV 8 filters, the provision of centralized fluorescent light bulb recycling opportunities, deployment of a green cleaning program, implementation of sustainable procurement policies, and arrangement of a community-wide recycling program. Unit turnover practices that Linstroth recommends include repainting with low-VOC paints, replacement of carpet with CRO Green Label Plus carpet, unit cleaning with Green Seal cleaning products, and utilization of low-flow plumbing fixtures.
Legislative/Legal News
N.C. Law Weakens Fayetteville's New Rental Ordinance
Digested From "North Carolina Law Weakens Fayetteville's New Rental Ordinance"
Fayetteville Observer (NC) (07/11/11)
In North Carolina, a state law passed last month has forced Fayetteville to postpone the enforcement of new rules meant to crack down on problem apartment communities. City officials struggled for three years to develop regulations that would target crime-ridden, dilapidated properties while not punishing responsible owners. The Fayetteville City Council approved the regulations earlier this spring and planned to enforce them starting July 1. However, the state legislation took "most of the teeth out" of the city's ordinance. Indeed, Senate Bill 683 imposes strict limits on how a city can regulate rental housing. Despite the setback, Assistant City Manager Doug Hewett says "there is still strong desire for us to develop a program that addresses the repeated problem rental residential programs in our community." Organizations representing the apartment industry have lobbied the legislature to rein in rental property regulations statewide after Raleigh and other communities imposed rules that owners and managers opposed. Raleigh's ordinance drew complaints because it levied a yearly fee on all owners of rental units. Meanwhile, a Greensboro ordinance upset apartment owners because it allowed random inspections of all rental housing, regardless of whether the community had a history of problems. Fayetteville's ordinance was designed to make only problem apartment owners be subject to fees and fines. Hewett laments that the new state law will make it much more difficult for Fayetteville to put apartment communities into probation, as it would force the city to wait for an owner to break the rules three times in a calendar year before the city could take action.
Denver Apartment Association Opposes Paid Sick Leave
Digested From "Petitions Could Put Mandatory Paid Sick Leave on Denver Ballot"
Denver Post (CO) (07/06/11) by Steve Raabe
The Apartment Association of Metro Denver is among numerous business and trade groups opposing a measure that would require employers citywide to grant nine days a year of paid sick time to full-time employees. In addition to the apartment association, other opponents include the Denver Metro Chamber of Commerce, the Colorado Retail Council, and the Colorado Restaurant Association. Despite their efforts, the bill is gaining momentum. This past Tuesday, proponents submitted petitions with enough signatures to get mandatory paid sick leave on the November ballot. These supporters range from organized labor to public health agencies to local clergy. Opponents counter that the proposal is an "unneeded mandate" and would put Denver at a competitive disadvantage compared with other Colorado cities that do not currently have such a requirement.
San Fran Apartment Owners May Have to Rent to Ex-Cons
Digested From "SF Landlords Might Be Forced to Rent to Ex-Cons"
KGO-TV (San Francisco) (07/07/11) by Carolyn Tyler
Some San Francisco apartment owners have expressed concern about a proposal they say would force them to rent to ex-cons. The city's Human Rights Commission is pushing to change local codes as a way to keep former offenders on the right track. Recently paroled Lafayette Thomas was released from San Francisco's San Bruno Jail in January and now desperately needs housing, but says no one will rent to him. He remarks, "They want to do a credit report and a police report and it's just hard to get housing. They see you have a felony . . . and you never get a call back." In response, San Francisco's Human Rights Commission is hoping to add people with arrest or conviction records to such categories as race, religion, and sexual orientation when it comes to prohibiting housing discrimination. While the new proposal has the support of the Sheriff's Department, District Attorney, and others, apartment owners are considering possible legal action. Janan New, executive director of the SF Apartment Association, cites federal law in countering: "The city of San Francisco is again trying to legislate in an arena that's controlled by the federal government. You cannot discriminate against people when they come to rent an apartment under the current federal fair housing laws. In my opinion, it would make it a moot point."
Texas City Cracks Down on Crime-Ridden Apartments
Digested From "Carrollton Cracks Down on Crime-Ridden Apartments"
NBC Dallas Fort Worth (07/06/11)
In Texas, Carrollton city leaders recently approved an ordinance to set rules and guidelines for apartment communities to help reeduce crime. The ordinance is one of Mayor Matthew Marchant's major campaign initiatives, which calculates a crime ratio for each apartment community. To get the ratio, researchers take the number of service calls that come from a specific community, add the number of residents in that community who have an arrest record, and then divide that number by the number of apartments. Marchant remarks, "Depending on what the number is, if the complex is over a certain threshold, the complex will get entered into the crime reduction program. The threshold for a complex is 1.25 times the average number that is yielded for all apartments." So if the average number for apartments is 17, if a given apartment community is 1.25 times above 17 it gets entered into the program. According to Marchant, apartment communities must comply with certain criteria. Specifically, they must post a notice saying the apartment community is in a high-crime area. Additionally, depending on how serious the crime rate is, they will have to hold regular crime watch meetings, conduct background checks, and take other safety precautions. Finally, apartment communities with questionable histories will have six months to get their proverbial houses in order before they will be entered into the program.
Bill Calls for Fannie Mae, Freddie Mac Merger
Digested From "Bill Calls for Fannie, Freddie Merger"
Wall Street Journal (07/06/11) by Nick Timiraos
Rep. Gary Miller (R-Calif.) plans to introduce legislation that would consolidate Fannie Mae and Freddie Mac to form a new utility-like entity for buying mortgages and selling them to investors as government-backed securities. The government-held corporation would be privately capitalized but would not be operated for making a profit and would not have shareholders. Miller expects the real estate industry and bond investors to support the bill.
U.S. Housing Recovery Stymied by Government
Digested From "U.S. Housing Recovery Stymied by Government"
Bloomberg (07/06/11) by Kathleen Howley
While a record share of Americans want to buy homes, U.S. policies, often working at cross-purposes, are making it more difficult. Fannie Mae and Freddie Mac have boosted standards so high that some people previously considered prime borrowers no longer qualify, limiting a real estate rebound that also has been damped by a state attorneys general probe into foreclosure practices and an Obama administration loan-modification program that has fallen short of expectations. "It's very important for a robust recovery that we get the right credit standards," says Joseph Stiglitz, a Nobel-prize winning economist and professor at Columbia University in New York. "Giving out unsupportable mortgages was a disaster, and now the danger is overreacting and making the standards excessively high." The restrictions come after the government handed out $16.2 billion in homebuyer tax credits to pump up demand and the Federal Reserve bought more than $1 trillion of mortgage bonds to lower borrowing costs. "The government is working at cross-purposes," says Doug Bandow, a senior fellow at the Cato Institute, a libertarian policy-research center in Washington. "There's been a desperate attempt to reinflate housing by throwing money at the problem. The worst time to tighten lending is after doing that."
Abstract News © Copyright 2011 INFORMATION, INC.
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