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The Coming Rental Housing Wave
Industry News
San Francisco Apartment Vacancies Decline Further
Metro Denver Apartment Vacancy Rate Up Slightly
U.S. Commercial-Property Lending Rises to Highest Since 2007
Investors Bancorp Shifts Focus to Apartment Owners
FHA Serves Up New Multifamily Guide
Pantzer, Dune Refinance $328 Million Apartment Portfolio
NAR Adds Apartments to Online Listings
Distressed Debt Is Big Business in Commercial Real Estate
Legislative/Legal News
Freddie Mac Calls for $100 Billion in Annual Multifamily Investment
San Diego Apartments Improve Safety With Partnership
Apartment Recycling in Fayetteville Off to Slow Start
Indiana City Council Alters Fees for Apartment Owners
FHFA Director DeMarco Rebuts Criticism of Fannie, Freddie
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The Coming Rental Housing Wave
Digested From "The Coming Rental Housing Wave"
CoStar Group (11/02/11) by Mark Heschmeyer
With widespread recovery still elusive in the housing sector, the apartment market has become one of the real estate industry's -- and the broader economy's -- bright spots with strong property values drawing keen investor interest. Apartment owners and managers are benefiting from shifting demographics and consumer attitudes toward renting stemming from the growing number of households that are struggling financially. Over the past several years, much of the uptick is due to young and newly established households that have opted to postpone or even reject homeownership in favor of the lower debt and flexibility afforded by renting. "It's an exciting time to be in this growing sector where it is projected that $1 trillion in capital and 10 million additional apartment units are needed in the next 10 years as more individuals turn to apartment living," said Freddie Mac Multifamily Senior Vice President David Brickman. "The bottom line is that the multifamily market is poised for growth due to strong demand, healthy fundamentals, and limited supply."
Industry News
San Francisco Apartment Vacancies Decline Further
Digested From "San Francisco Apartment Vacancies Sink to 3.2 Percent"
San Francisco Business Times (11/04/11) by J.K. Dineen
A new Cassidy Turley report shows that the San Francisco Bay Area's apartment market is the tightest it has been since the height of the dot-com bubble in 1999. Researchers studied 1,253 major Bay Area apartment communities containing approximately 220,000 rental units found that vacancy rates have dipped to 3.7 percent from 5.9 percent during the first quarter of 2009. In San Francisco proper, the vacancy rate is even lower at 3.2 percent. Demand, meanwhile, has pushed monthly rents up 9 percent in the last year to an average of $2,568. The climbing rental market is being fueled by two factors: one, population growth; and, two, the fact that the Bay Area has added very little housing in recent years. Indeed, between 2000 and last year, the nine Bay Area counties saw their populations increase by around 367,000. Cassidy Turley notes that some relief may be on the way for area apartment residents. Nearly 9,000 units are currently in the development pipeline in and around San Francisco, and many of them will be coming onto the market in 2013 and the following year.
Metro Denver Apartment Vacancy Rate Up Slightly
Digested From "Metro Denver Apartment-Vacancy Rate Up Slightly"
Denver Post (CO) (11/04/11)
According to a new report released by the Apartment Association of Metro Denver, the Denver metro area's apartment vacancy rate inched slightly higher in this year's July-through-September period after dipping to a 10-year low during the previous three months. However, the rental apartment market is still much tighter when compared with the third quarter of a year ago. The metro area's vacancy rate was 4.9 percent in the third quarter versus 4.8 percent in the April-through-June stretch but down from 5.3 percent during 2010's third quarter. The report reads: "Given the limited number of new additions to the inventory in the last two years -- and especially during the last year -- a somewhat lowering of the high unemployment rate, continued immigration, increase in metro-area natural population, the very similar vacancy rate this quarter was expected." Researchers further determined that average rent increased to $936.46 a month from $915.08 during the second quarter and $912.68 in the same period a year ago.
U.S. Commercial-Property Lending Rises to Highest Since 2007
Digested From "U.S. Commercial-Property Lending Rises to Highest Since 2007"
Business Week (11/04/11) by John Gittelsohn
The Mortgage Bankers Association (MBA) confirms that U.S. commercial-property loan originations climbed to their highest since 2007 in this year's third quarter as banks, insurance firms, and government-backed finance companies boosted their lending. New loans for commercial and multifamily mortgages soared 98 percent from a year ago and 10 percent from this year's second quarter, shows an index compiled by the Washington-based MBA. Barclays Capital Inc. analysts Julia Tcherkassova and Keerthi Raghavan concluded in a recent note: "The survey numbers support our view that originations will continue to increase in the near term, though growth will be sluggish and concentrated outside the CMBS conduit space."
Investors Bancorp Shifts Focus to Apartment Owners
Digested From "Investors Bancorp Turned Lending Focus to Apartment Market Owners"
NorthJersey.com (11/07/11) by Richard Newman
Investors Bancorp has been taking advantage of the shift in housing preferences. Its loans secured by apartment communities throughout New Jersey and New York have increased from $44 million in the summer of 2008 to $1.6 billion as of the end of this year's third quarter. Borrowers include apartment community purchasers and current owners looking to refinance their debt at current low rates. Investors Bancorp CEO Kevin Cummings states, "Multifamily is a very hot asset class right now. Every year, kids graduate from college, they move out of their parents' house, and there are more people seeking apartments." He adds that multifamily housing lending is low-risk compared to other commercial real estate lending. He reasons, "If you have a residential loan, you have to worry about one person losing their job and not making a payment. If you have a 40-unit or 50-unit apartment building and one person loses a job and stops paying the rent, you still have enough cash flow to keep the loan current." Investors Bancorp currently has only two multifamily loans on its books that are more than 90 days delinquent.
FHA Serves Up New Multifamily Guide
Digested From "Inside the Guide: FHA Serves Up a New MAP Guide"
Affordable Housing Finance (10/11) by Jerry Ascierto
The Federal Housing Administration has released a highly anticipated new version of its Multifamily Accelerated Processing (MAP) guide, which consolidates all of the agency's multifamily housing program changes and guidance into one place. The new guide offers a single point of reference, is designed to help improve the FHA's notoriously long processing times, and aims to provide clarity around affordable housing deals. Phil Melton, director of affordable housing debt at Centerline Capital Group, remarks, "In the long run, the new guide is positioning FHA to be a more relevant player in the affordable housing space."
Pantzer, Dune Refinance $328 Million Apartment Portfolio
Digested From "Pantzer, Dune Refinance $328 Million Apartment Portfolio "
Washington Business Journal (11/02/2011) by Jeff Clabaugh
DP Portfolio Investors have completed a $328 million refinancing of their Point DC Portfolio. The joint venture between Pantzer Properties and Dune Real Estate Partners received funding on the deal from Centerline Capital Group. The portfolio includes eight apartment communities in the Virginia suburbs of Alexandra, Ashburn, Herndon, Leesburg, and Manassas and in suburban Gaithersburg and Germanton, Md. Together, these communities contain 2,580 rental units.
NAR Adds Apartments to Online Listings
Digested From "NAR Adds Multifamily to Online Listings"
Housing Wire (10/28/11) by Justin T. Hilley
A top real estate Web site is taking advantage of the resurgence of rental housing by adding apartment communities to its online listings. The single-family residential rebound is still far off. In the interim, the National Association of Realtors is giving more practical options to people who are unsure whether to rent or buy in this tumultuous housing environment. NAR's site, Realtor.com, will soon include apartment listings from Move.com to its lists of properties for sale or rent. "It's an opportunity to connect millions of people interested in the convenience apartment communities offer, while providing tools like the 'rent vs. buy' calculator, local homes for sale and connections to real estate professionals," said Move.com Vice President Eric Gramberg. Homeownership is at its lowest point in 13 years, and the addition of apartment communities to Realtor.com is another example of a company recognizing the national transition from ownership to renting.
Distressed Debt Is Big Business in Commercial Real Estate
Digested From "Distressed Debt Is Big Business in Commercial Real Estate"
Kansas City Star (MO) (11/03/11) by Elaine Walker
Purchasing distressed commercial real estate debt and distressed properties continues to gain in popularity. Investments span all the asset classes from apartments to offices to retail space. However, those involved warn that it is not a game for inexperienced investors. Ezra Katz, chief executive of the Miami-based Aztec Group, states, "A lot of people don't understand the details. They smell a bargain and they take a risk. Unless you really know what you're doing, stay out." To be sure, most investors are purchasing debt as a means of gaining control of a piece of real estate. But the debt buyer could remain the lender. In addition, gaining control of an asset requires foreclosure, and that can be a costly and lengthy process. Katz says the key is identifying quality assets that are underwater because they were overleveraged during the boom instead of underlying flaws in the property.
Legislative/Legal News
Freddie Mac Calls for $100 Billion in Annual Multifamily Investment
Digested From "Freddie Mac Calls for $100 Billion in Annual Multifamily Investment"
Housing Wire (10/31/11) by Jacob Gaffney
David Brickman, senior vice president of Freddie Mac's multifamily arm, estimates that the asset class needs $100 billion annually for the next 10 years to build 10 million additional apartment units. He expects more financially strapped households to be forced into rental situations over the next decade, placing them in direct competition with new households skittish about homeownership. Brickman adds that too few new apartment communities have been built over the past two years; and the median age of existing apartments is about 40 years, clearly showing a need for new stock.
San Diego Apartments Improve Safety With Partnership
Digested From "Apartments Improve Safety With Partnership"
Sign-on San Diego (11/06/11) by Michelle Breier
A decade ago, a string of laundry room burglaries in apartment communities in Escondido, Calif., sparked a crime-prevention effort that today counts dozens of participants. Indeed, nearly 80 managers from some of the city's more than 200 apartment communities take part in the Escondido Police Department's Safe Apartments For Everyone program. Apartment managers and some owners meet once a month for everything from training to information to and support. Lt. Greg Ellis, the department's first SAFE coordinator, remarks, "Through this small collection of people, the Police Department [has been] able to touch thousands in a positive, proactive way." The monthly meetings are at rotating locations, with a guest speaker always scheduled to discuss featured topics for the month. Past themes have included tenants rights, graffiti, fire prevention, and code enforcement.
Apartment Recycling in Fayetteville Off to Slow Start
Digested From "Multifamily Recycling in Fayetteville Off to Slow Start"
Fayetteville Observer (NC) (11/01/11) by Andrew Barksdale
A recycling program for Fayetteville, N.C., apartment communities is off to a slow start, reports a new city survey. Earlier this year, the city started requiring communities with eight or more rental units to provide recycling services for their residents. The apartment owners are required to pay the cost of the new service. Two months after the ordinance went into effect on Aug. 28, an estimated 100 apartment communities citywide are recycling -- only about 35 percent of the properties that are required to do so. Fayetteville officials continue to forecast that it will take several months for all local apartment communities to establish their recycling programs. Jackie Tuckey, a spokeswoman for the city's Environmental Services Department, remarks, "We think the participation is pretty good at this point. We continue to work with the major haulers to encourage them to do recycling." Tuckey said reminder letters will be sent in December to apartment owners who have yet to embrace recycling. Some say the cost and timing of the new service are partly to blame for the low participation to date. Kim Shoults, president-elect of the Cumberland County Apartment Association, concludes, "Nobody got any notification until it was implemented. . . . It completely took the apartments by surprise." She adds that a Jan. 1 start date would have been better.
Indiana City Council Alters Fees for Apartment Owners
Digested From "Cal City Council Alters Fees for Precious Metals and Pawn Shops, Apartment Owners"
Northwest Indiana Times (10/28/11) by Gregory Tejeda
In Indiana, the Calumet City Council recently approved a measure that alters the fee schedule for the Crime Free Residential Rental License program. The program was designed two years ago to encourage apartment owners to try and reduce the amount of crime that occurs on their premises. The fee schedule, expected to start next year, requires owners of large apartment communities to pay more than owners of small apartment communities. Owners with more than 50 units will be charged a flat fee of $1,500 per year, while single-unit rental property owners will only pay $50 per year. The council approved the change after hearing from small owners who were complaining about having to pay the same licensing fee as owners of large-scale apartment communities.
FHFA Director DeMarco Rebuts Criticism of Fannie, Freddie
Digested From "FHFA Director Edward DeMarco Rebuts Criticism Of Fannie Mae, Freddie Mac"
Huffington Post (10/30/11) by Margaret Chadbourn
Federal Housing Finance Agency (FHFA) acting director Edward DeMarco recently denied that he is hurting housing recovery efforts by taking too narrow a view of his mission to safeguard the financial well-being of Fannie Mae and Freddie Mac. He argued that the $141 billion in taxpayer funds the government-sponsored enterprises have received since their seizure by the U.S. government three years ago were intended not to provide "broad relief" to the housing market but to get the GSEs back on solid ground.
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