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Apartment Investors Turn to Class B Communities
Industry News
The Changing American Dream Has More Renting 
Pantzer, Dune Buy D.C. Apartment Portfolio for $460M
CMBS Delinquency Rate Hits Record, Apartments Disappoint
Crescent Resources Enters Student Housing Arena
More Than $70M Worth of Triangle (N.C.) Apartments Sold
UDR Takes First Big Step Into NYC
QR Codes Keep Pace as Mobile Proliferates
BRE Announces Annual Meeting and Record Dates
Property Deals Could Double As Apartments Ride the Wave
Forbes Ranks Memphis as Third Emptiest U.S. City
Fewer in U.S. Deem Homeownership a Safe Investment
Killam Properties Q4 Results Get Acquisition Boost
Legislative/Legal News
Smoke Alarm Codes Come Under Scrutiny in Montana
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Apartment Investors Turn to Class B Communities
Digested From "Apartment Investors in U.S. Not Scared by Vinyl Siding in Search for Yield"
Bloomberg (03/04/11) by Oshrat Carmiel
Apartment investors are now looking beyond Class A communities to Class B sites with higher vacancies or those that need upgrades as demand for rental housing rises. Real Capital Analytics Inc. reports that sales of apartments increased 96 percent to $33.7 billion in 2010. Real Capital chief rconomist Sam Chandan notes that of the sales recorded in the fourth quarter of 2010, 33 percent were for Class B and distressed apartments -- an increase from 25 percent the year prior. These value-add apartments often require renovation or upgrades. Axiometrics Inc. projects a 6 percent increase in rental revenue this year as more people turn to renting. Experts agree that demand for apartments is on its way up as the job market shows signs of improvement and children of Baby Boomers seek their own accommodations. Chandan and Savills LLC managing director Jeffrey Baker agree that the multifamily housing market has improving fundamentals. Chandan notes, "Those improving fundamentals are driving the willingness of investors to explore value-add opportunities as opposed to paying premium prices for core properties." A number of apartment owners are looking into Class B rental units, most notably AvalonBay and Equity Residential. Meanwhile, Axiometrics estimates that effective rents on Class A and B apartment communities will rise 5.3 percent. Furthermore, by the final quarter of 2011, Class B effective rent growth could reach 5 percent versus 4.8 percent for Class A stock.
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The Changing American Dream Has More Renting
Digested From "The Changing American Dream"
MarketWatch (03/03/11) by Dawn Wotapka
The housing bust has resulted in more Americans turning to the rental apartment market. Rent.com President Peggy Abkemeier-Alford says people still want that age-old dream of owning a home "with a white picket fence." Now, though, she says, "Sometimes it's OK to rent that fence instead of owning it." She observes that while a lot of Americans are still pairing up with roommates to make rent, there is also a "de-consolidation" trend happening as the job market shows signs of improvement. Consequently, some markets are dealing with a lack of one-bedroom apartments available. Concessions are also disappearing, but markets like Phoenix and Las Vegas with a lot of inventory still offer attractive deals. Abkemeier-Alford adds that those apartments with better amenities such as hardwood floors and updated appliances remain in the highest demand.
Pantzer, Dune Buy D.C. Apartment Portfolio for $460M
Digested From "Pantzer, Dune Take DC Multifamily Portfolio for $460M"
GlobeSt.com (03/04/11) by Erika Morphy
Dune Real Estate Partners has partnered with Pantzer Properties to acquire eight apartment communities in the Washington, D.C., metro area for $460 million. Jones Lang LaSalle figures rank this as the largest multifamily housing transaction in the country outside of New York since 2008. Magazine Holdings LLC was the seller. Pantzer Properties continues to expand its presence in the Washington market thanks to the region's fundamentals and high barriers for entry for development. The new D.C.-area portfolio acquisition is 95 percent occupied. Jason Pantzer of Pantzer Properties remarks, "Our management affiliate will be managing all eight properties and re-branding them under our regional brand know as the Point."
CMBS Delinquency Rate Hits Record, Apartments Disappoint
Digested From "Delinquency Rate for CMBS Hits a Record"
Wall Street Journal (03/02/11) by Eliot Brown
Trepp reports that the delinquency rate for commercial mortgage-backed securities reached a record 9.39 percent last month, as property deals made during the market's peak in 2006 and 2007 continued to struggle. Apartments ranked as the worst-performing sector, with 16.61 percent of loans delinquent in February. One of the bigger gains was in office properties, with 7.1 percent of loans delinquent.
Crescent Resources Enters Student Housing Arena
Digested From "Crescent Resources Enters Student Housing Arena"
GlobeSt.com (03/03/11) by Jennifer Duell Popovec
Charlotte, N.C.-based developer Crescent Resources LLC has entered the student housing arena with a 167-unit project near the University of Texas. All Crescent Resources apartment communities are branded under the "Circle" name. Its first student housing project, dubbed Circle West Campus, will feature the same hallmarks of the Circle brand including environmentally conscious design and materials and such upscale amenities as a resort-style swimming pool and tanning beds. The new community will also meet the requirements of the Austin Energy Green Building Multifamily rating. Crescent Resources plans to break ground this month, with the first units available as early as the summer of 2012. Circle West Campus was financed via a combination of equity, mezzanine debt, and a construction loan.
More Than $70M Worth of Triangle (N.C.) Apartments Sold
Digested From "More Than $70M Worth of Triangle Apartments Sold"
Triangle Business Journal (03/04/11) by Amanda Hoyle
Local and national real estate investors are jumping into the sales frenzy that has taken a hold of North Carolina's Triangle-area apartment market, with more than $70.5 million in sales transactions recorded since Feb. 1. Northwest Mutual Life Insurance Co.'s $24.5 million acquisition of the 129-unit Cosgrove Hill Apartments in Chapel Hill has been among the biggest deals, equaling out to nearly $190,000 per unit. The Preiss Co., which specializes in owning and operating apartments near university campuses, also recently purchased its first community near Elon University in Alamance County. The Raleigh-based firm paid $2.6 million for the Crest at Elon apartment community. Some of the properties that have changed hands in recent months have been considered "distressed" because their owners were having trouble keeping up with mortgage payments. Most, though, are regarded as strong market deals. The thing that has really caught investors' attention is that apartment occupancy levels throughout the Triangle continue to improve at a pretty rapid clip. Indeed, the apartment vacancy in the Triangle region fell to 7.1 percent in January from 8.7 percent in July. A year earlier, the vacancy rate stood at 9.9 percent, reports apartment research firm Real Data of Charlotte.
UDR Takes First Big Step Into NYC
Digested From "Denver REIT Takes Big First Step Into NYC"
Crain's New York Business (NY) (03/02/11) by Marine Cole
UDR's planned $261 million acquisition of 10 Hanover Square in New York City represents the Denver-based apartment REIT's first foray into the Manhattan market. But it probably won't be its last. UDR has entered into a definitive pact with the Witkoff Group to buy the 493-unit residential property, with plans to take over the existing $192 million fixed-rate mortgage on the property. The deal is on track to close following the assumption of the mortgage, which has a 5.93 percent rate. It requires interest-only payments through the end of next year and matures in December 2015. UDR Chief Financial Officer David Messenger remarks, "This acquisition is consistent with our strategy of owning apartment homes in high-barrier-to-entry markets that have low home-affordability, great job bases and a high propensity to rent." UDR has been scouting the Manhattan market for the past 18 to 24 months and still has its antennas up. Messenger adds, "We have said for two years that we want New York to be a core market for UDR. One asset is not enough for us."
QR Codes Keep Pace as Mobile Proliferates
Digested From "QR Codes Keep Pace as Mobile Proliferates"
Ragan.com (03/04/11) by Matt Wilson
In the last year or so, bar-code-style squares have been popping up more and more on ads and elsewhere. They are "quick response," or QR, codes. Communication strategist Linda Pophal states, "They've been around for quite a long time. . . . But they've been seeing somewhat of a resurgence recently, primarily because of the emergence of mobile phone technology." How do they work? A smartphone owner can download an app to scan the codes. Once scanned, the code directs the phone's Web browser to a URL that is likely to lead to a website, some kind of video, personalized message, and/or audio. QR codes are being increasingly featured in advertisements to send marketing messages to consumers. Another good use is to put a QR code on your business card. In such instances, the QR code could lead to a file that would download all your contact information into someone's phone.
BRE Announces Annual Meeting and Record Dates
Digested From "BRE Properties Announces Annual Meeting and Record Dates"
Business Wire (03/03/11)
BRE Properties Inc.'s 41st annual shareholders meeting will be held on May 24 at the Mandarin Oriental Hotel in San Francisco. Class A shareholders of record as of March 24 will be eligible to vote at the meeting. The San Francisco-based apartment REIT will provide proxy materials to its shareholders via the Internet under the SEC's Notice and Access Rule. BRE Properties directly owns and manages 75 apartment communities in three states -- California, Arizona and Washington. Together, these developments contain a total of 21,318 rental units. In addition, it presently has six communities in various stages of development, containing 1,742 apartments.
Property Deals Could Double As Apartments Ride the Wave
Digested From "Commercial Property Deals May Double in U.S. as Blackstone Bets on Rebound"
Bloomberg (03/01/11) by Brian Louis
Dan Fasulo, managing director of Real Capital Analytics, said he "wouldn't be surprised" if U.S. commercial real estate purchases double in 2011 from nearly $140 billion last year as confidence builds among investors with access to credit. Transactions have surged over the past year as low interest rates made it cheaper for REITs and various private-equity buyers to buy up apartment communities, office buildings, retail space, industrial facilities, and health-care properties. In addition to near record-low interest rates, a resurgent debt-securitization market is also driving the recovery. Commercial mortgage-backed securities issuance in the U.S. climbed from $2.1 billion in 2009 to $10.9 billion in 2010, notes Jones Lang LaSalle (JLL). Issuance is estimated to be more than $40 billion in 2011, "providing added liquidity to owners with maturing loans to refinance," the JLL report states.
Forbes Ranks Memphis as Third Emptiest U.S. City
Digested From "Memphis is Nation’s Third Emptiest City"
Memphis Business Journal (03/02/11)
Memphis, Tenn., is the nation's third emptiest city, according to a new Forbes ranking. Forbes ranked its cities by averaging apartment and single-family housing vacancy rates of all four quarters of 2010. Orlando and Las Vegas ranked first and second, respectively. Data from the Census Department showed that the apartment vacancy rate in Memphis was 16.1 percent in fourth quarter of last year, down from 21 percent at mid-year. The single-family home vacancy rate, meanwhile, was 4.7 percent at the end of the year. Mark Fogelman of Memphis-based Fogelman Management Group says the vacancy rate is exaggerated by "several pockets of blight around the city," and that most of the city's submarkets have a vacancy rate between 7 percent and 8 percent.
Fewer in U.S. Deem Homeownership a Safe Investment
Digested From "Fewer in US Deem Homeownership a Safe Investment"
Reuters (02/28/11) by Corbett Daly
The National Housing Quarterly Survey reveals that the number of Americans believing that owning a house is a safe investment fell from 83 percent in 2003 to 64 percent as of Feb. 28. Homeownership is no longer the "rock-solid" foundation of the American Dream that it once was, and as a result some experts predict that rents will rise as Americans opt to rent an apartment rather than buy a house. Fannie Mae Chief Economist Doug Duncan notes, "The public is aware that the demand side increase is going to be in the rental market, not the housing (purchase) market." The rental vacancy rate fell to 9.4 percent in the final quarter of 2010, and some experts indicate that rental property demand will grow and life underlying U.S. inflation gauges. About 40 percent of the consumer price index is related to rental costs, which increased 0.8 percent in December 2010.
Killam Properties Q4 Results Get Acquisition Boost
Digested From "Killam Properties Q4 Results Get Acquisition Boost"
Reuters (03/01/11) by Amruta Sabnis; Anne Pallivathuckal
Killam Properties Inc.'s fourth-quarter funds from operations climbed nearly 13 percent to C$7.2 million, helped by acquisitions. The Canadian real estate company specializes in acquiring and managing apartment and manufactured home communities. It completed acquisitions worth C$115.1 million last year. A company statement read: "With our current deal flow, we expect to continue to grow our real estate portfolio in 2011 with C$100-$150 million in acquisitions."
Legislative/Legal News
Smoke Alarm Codes Come Under Scrutiny in Montana
Digested From "Apartment Bedrooms Lacked Smoke Alarms"
Bozeman Daily Chronicle (MT) (03/03/11) by Amanda Ricker
In Bozeman, Mont., several of the rooms in a third-floor apartment destroyed by a fire March 1 did not have smoke alarms, including a room where two men were found dead. Bozeman Fire Chief Jason Shrauger said the building, built before 1983 when codes were updated, was not required to have smoke detectors in each room. Indeed, apartment communities built before 1991 in Montana are only required to have one fire alarm per apartment, installed in a centrally located area. Apartment communities constructed today are required to have alarms in each sleeping area, firewalls, and adequately sized windows to escape a fire. However, they do not have to have sprinkler systems. These new rules apply only to new construction and remodels. Montana's Landlord-Tenant Act states that apartment owners should provide smoke detectors, but that residents are responsible for keeping them in working order. Shrauger recommends that residents should take care to check the batteries on their smoke alarm at least twice a year.
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