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U.S. Commercial Property Values at Lowest Level in Seven Years
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U.S. Commercial Property Values at Lowest Level in Seven Years
Industry News
AIMCO Rethinks Sale of Four Apartment Communities
Charleston Buying Up Apartment Communities
Recession Alters Migration Patterns in U.S.
AvalonBay to Pay 89.25-Cent Q4 2009 Dividend
Highwoods Properties Secures New Credit Facility
Rental Housing Still an Issue in North Dakota Market
Builders Zero In on New Goal of Energy-Neutral Housing
Legislative/Legal News
El Paso Apartment Association Loses Challenge to Stormwater Utility
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U.S. Commercial Property Values at Lowest Level in Seven Years
Digested From "US Commercial Property Values Now at Lowest for Seven Years, Latest Figures Show"
Property Wire (12/24/2009)
Based on Moody’s/REAL Commercial Property Price indices, U.S. commercial property values sank in October to their lowest level since August 2002 as unemployment curbed demand for everything from apartments to offices and retail space. Prices fell 36 percent from the same month a year ago and are now 44 percent off their October 2007 peak. Matthew Anderson of Foresight Analytics remarked, "The number one issue facing commercial real estate right now is the value declines that we've seen since prices peaked." He noted that an estimated $1.4 trillion of commercial real estate debt is due to mature over the next five years and predicted that delinquencies for commercial property mortgages held by banks could top 8 percent in the new year.
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Industry News
AIMCO Rethinks Sale of Four Apartment Communities
Digested From "AIMCO Rethinks Sale of Four Apartment Complexes"
Indianapolis Business Journal (12/22/09) by Tom Harton
Apartment Investment & Management Co. (AIMCO), which recently sold its largest Indianapolis-area apartment community, has taken its four remaining local properties off the selling block. Earlier this month, the Denver-based REIT closed on the sale of the 1,261-unit Lake Castleton Apartments locally. It was the 16th Indiana community sold by AIMCO in the past year. The apartment owner has been selling off its Midwest portfolio in an effort to raise funds to pay down debt. But AIMCO shelved that strategy when it decided to hang onto the four Indianapolis-area apartment communities. Prices in the market below Class A are depressed due to such factors as a lack of available financing and a softening in occupancy and rents on account of high unemployment. According to Tikijian Associates, average apartment occupancy in the Indianapolis metro area is slightly more than 89 percent -- a decrease from nearly 91 percent in 2008.
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Charleston Buying Up Apartment Communities
Digested From "City Buying Up Apartment Buildings"
Charleston Post and Courier (12/26/09) by David Slade
In South Carolina, the Charleston Housing Authority has been buying up privately owned apartment communities during the economic downtown. The agency is now poised to complete the acquisition of two dozen small apartment communities on Charleston's East Side, adding to its inventory of income-restricted housing. Don Cameron, executive director of the authority, remarks, "Good, decent housing downtown is needed. Our acquisition places them under public stewardship for the future." As with earlier purchases, the apartments that the authority is buying were developed by private investors using federal tax credits. Such developers usually try and sell the properties when the value of the tax credits expire, usually after 15 years. According to Cameron, the authority is able to buy the apartments inexpensively because rent for the various units is capped and residents must meet certain income requirements. The capped rents and fixed expenses limit the appeal of the assets among private buyers. The Housing Authority, though, does not pay property taxes and can make its money on rents. The latest transaction is on pace to close in January.
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Recession Alters Migration Patterns in U.S.
Digested From "Recession Alters Migration Patterns in U.S."
Wall Street Journal (12/24/09) P. A4; by Mark Whitehouse
The latest Census Bureau data shows that the recession has put a damper on migration, with Florida, Nevada, and other states slammed by the housing downturn watching their once expanding populations shrink. Over 31,000 people left Florida and almost 4,000 left Nevada between July 1, 2008, and July 1, 2009, to take up residence in other states. In contrast, Florida gained 141,448 residents and Nevada welcomed 41,640 residents from July 2005 to July 2006. According to Brookings Institution demographer William Frey, "The recession coupled with the mortgage meltdown stopped the dominant migration story of the last decade in its tracks." Job losses and falling home prices are largely responsible for migration out of the Sun Belt, and experts say birth rates will play a bigger role in population expansion in the coming years. The lack of mobility could further weaken the housing market and make economic recovery difficult. "If someone loses a job and can't move to seek a job somewhere else, that can keep the unemployment rate high and also make it hard for employers to find the labor they want when they need it," says Moody's Economy.com economist Steve Cochrane. Additionally, the housing meltdown has deterred many seniors in colder states from moving south for retirement living.
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AvalonBay to Pay 89.25-Cent Q4 2009 Dividend
Digested From "AvalonBay to Pay 89.25-Cent 4Q Dividend"
San Francisco Chronicle (12/22/09)
AvalonBay Communities Inc.'s board of directors declared a Q4 2009 dividend of 89.25 cents per common share, which will be payable Jan. 15 to stockholders of record as of the end of the year. AvalonBay is a Virginia-based owner of apartment communities.
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Highwoods Properties Secures New Credit Facility
Digested From "HIW Secures New Credit Facility"
Zacks Equity Research (12/22/09)
Highwoods Properties Inc. recently obtained a new $400 million unsecured revolving credit facility from a consortium of a dozen banks. The new credit facility, which is scheduled to mature in February 2013, replaces the existing $450 million credit facility that was scheduled to mature this coming May. Highwoods Properties will now have the financial flexibility to utilize available cash on strategic acquisitions and build-to-suit development opportunities. Highwoods Properties is a North Carolina-based company that owns and manages a diverse portfolio of properties, including apartments.
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Rental Housing Still an Issue in North Dakota Market
Digested From "Housing Issue Improving, But Still Lacking"
Minot Daily News (N.D.) (12/24/09) by Whitney Pandil-Eaton
The housing shortage that has troubled Minot, N.D., is showing signs of improvement. Analysts, though, forecast that the shortage will continue well into the new year. With December building permits still being counted, the city has already set a new high for the decade taking into account apartments, condominiums, townhouses and single-family homes. Construction this past year focused on apartment communities and other rental properties thanks to continued demand by oil workers for temporary housing and by Minot Air Force Base personnel facing a shortage of housing on base. Matt Watne, vice president of the North Dakota Apartment Association, concurs that the new apartments being constructed are simply a reflection of the times. Watne further noted that Minot has experienced several growth spurts in the past 10 years. Each one has resulted in increased amenities and a change in building configurations. He adds, "There are different and more amenities and facilities now than there were in the 1970s, like dishwashers and workout facilities. Newer apartments have also seen more 'creature comforts' like bigger space and bigger closets." Finally, Watne reports that the high cost of labor, building materials, land and other necessities of developing an apartment community can now cost developers $100,000 per unit to build -- some of which has to be passed on to residents. Deb Komrosky, vice president of the Magic City Apartment Association, which represents a majority of rental firms in Minot, assures that there are still affordable apartments available locally. She concludes, "There is so much to choose from and all price ranges available that most of the general public will be able to find something they like." Availability is the biggest issue. Although there are more than 4,250 apartment/duplex units within the Minot city limits, November had a 0.9 percent availability in rental properties.
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Builders Zero In on New Goal of Energy-Neutral Housing
Digested From "Builders Zero In on New Goal of Energy-Neutral Housing"
Wall Street Journal (12/23/09) P. A8; by Jim Carlton
With research showing that buildings are responsible for about 40 percent of energy consumption in the United States, there is a push toward "net zero" and "near net zero" development, in which homes, apartments and other housing consume only as much power from the public grid as they generate or save. ZETA Communities Inc. expects to erect a net-zero apartment community with 30 units in Berkeley, Calif., as well as open a factory to produce as many as 500 prefabricated net-zero homes annually. Other such developments are in the works, including Rural Development Inc.'s "near net zero" duplexes in Greenfield, Mass., with eight of 20 already finished. To offset the higher project costs, utility companies are offering financial incentives for such development because it will reduce the number of power plants that must be on line.
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Legislative/Legal News
El Paso Apartment Association Loses Challenge to Stormwater Utility
Digested From "Apartment Association Loses Challenge to Stormwater Utility"
El Paso Times (TX) (12/23/09) by Darren Meritz
U.S. District Court Judge David Briones this past week ruled against the El Paso Apartment Association and about 50 apartment owners who were opposing the constitutionality of the stormwater utility. The federal challenge accuses the utility, controversial since it was created two years ago, of using a costlier fee schedule for multifamily housing than it does for single-family homes. To determine how much per square foot a property owner will pay, the stormwater utility gauges the amount of land at an apartment community that cannot soak up rainwater, such as paved parking lots. For homes, the utility simply assesses a flat rate based on the size of the residence. The El Paso Apartment Association and the apartment owners filed a lawsuit against the city of El Paso and the Public Service Board (PSB) in the spring of 2008, contending that the stormwater utility is discriminatory because a larger percentage of apartment residents are minorities. Consequently, such individuals will be disproportionately affected by a higher rate. Plaintiffs further argued that the stormwater fee is a violation of the Texas Constitution because instead of being a legitimate fee, it is instead a tax that surpasses the cost of regulation. Finally, they charged that the stormwater fee with denying apartment owners and residents equal protection before the law. Jim Martinez, an attorney for the El Paso Apartment Association, states, "This makes a lot of people angry in El Paso for many reasons. The fact is people who live in apartments are disproportionally poor and disproportionally minority." In response, city officials and the PSB insist that rates were set using fair principles and that there is little difference between the minority makeup of apartments and single-family homes in El Paso.
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