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Apartment REIT Rankings Announced
Industry News
Babcock & Brown's Troubles Hit U.S. Apartment Market
Apartment REIT Investors Tender $291M in 2011, 2013 Notes
Apartment Rents Are on the Decline in San Francisco
AvalonBay CEO Gets $6 Million in 2008 Compensation
Philadelphia's Apartment Market Slightly Softens
Archstone Opens Three New Maryland Apartment Communities
Mid-America Apartment Communities Sets Date of Earnings Release
Now's a Good Time to Investment in Wisconsin Multifamily Housing
CIM Group Angles for San Fran Apartments
Silicon Valley Flight, Home Prices Drive Down Apartment Rents
Legislative/Legal News
New Bill Aims to Improve Recycling at Nevada Apartments
L.A. Apartment Association Weighs in on Utility Refunds
San Antonio Bill Would Add Meth-Lab Disclosure to Leases
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Apartment REIT Rankings Announced
Digested From "Plots & Ploys: REITs' Shrinking Clout"
Wall Street Journal (04/01/09) by Kris Hudson; Nick Timiraous
MMA Financial LLC currently ranks as the largest apartment owner despite unloading 1,700 rental units in 2008. The Minnesota-based housing tax-credit syndicator moved to the No. 1 ranking of the 50 largest apartment owners after previous leader Apartment Investment & Management Co. shed almost 40,000 apartments last year and slipped to third place. Aimco was not the only big seller in '08. UDR Inc. unloaded 22,000 units last year, plunging it from 10th place to 20th place. The shrinking clout of REITs can be partly traced to the real-estate boom, during which private-equity peers aggressively acquired units by taking on more debt. Now, as the credit crisis roils the industry, REITs have been among the first to sell properties to pay down debts.
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Industry News
Babcock & Brown's Troubles Hit U.S. Apartment Market
Digested From "Babcock & Brown's Troubles Down Under Hit U.S. Apt. Market"
CoStar Group (04/01/09) by Mark Heschmeyer
Australia's Babcock and Brown Ltd. was recently placed in voluntary administration, an action that is similar to Chapter 11 bankruptcy protection. The international investment firm is facing a series of challenges ranging from high financial leverage to a complex corporate structure. It is now feeling the pinch from declining investment values and fee income, not to mention constrained access to capital markets, heightened refinancing risk and greater risk of financial covenant breaches. Babcock & Brown's action has also resulted in Standard & Poor's placing the ratings of four commercial mortgage-backed securities (CMBS) on CreditWatch with "negative" implications. The Babcock & Brown CMBS loans are backed by 64 apartment communities in 10 states, totaling more than 18,800 rental units. In total, Babcock & Brown owns and/or manages around 100 U.S. apartment complexes with more than 20,000 units.
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Apartment REIT Investors Tender $291M in 2011, 2013 Notes
Digested From "BRE Investors Tender $291M in 2011, 2013 Notes"
GlobeSt.com (04/02/09) by Brian K. Miller
According to BRE Properties Inc., investors on April 2 tendered 76 percent of the notes associated with a fixed price cash tender offer that expired the previous evening. The San Francisco-based apartment REIT reports that the offer was for $250 million of 7.45 percent Senior Notes due 2011 and $130 million of 7.125 percent Senior Notes due 2013. BRE has agreed to pay all of the principal amount for the 2011 notes and 98 percent of the principal amount for the 2013 notes. BRE Properties owns and manages 21,196 rental units in 72 apartment communities in three states--Arizona, California and Washington. In recent months, the company has been working to concentrate its portfolio in coastal, supply-constrained markets of California and Seattle. Despite that effort, BRE Chief Executive Constance Moore says rents will continue to decline for the rest of 2009 and in 2010. Moore adds, "We believe we are looking at a negative rent curve for the next two years. All eyes are on the proposed government stimulus package. If it is successful helping to create jobs and grease the credit skids, it may soften the magnitude and duration of the pricing compression."
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Apartment Rents Are on the Decline in San Francisco
Digested From "Rents Actually Dropping in San Francisco"
NBC Bay Area (03/30/09) by Jackson West
San Franciscans are leaving the city in droves to look for cheaper digs and job opportunities elsewhere. With few new residents replacing them, many apartment owners are struggling to fill empty units. Janan New, executive director of the San Francisco Apartment Association, states, "We're running a vacancy rate which is unheard of in San Francisco. Rents are dropping by $200 [a month] citywide." That means for those who are staying and still have a job, deals can be made. Many larger apartment communities, especially those that cater to upscale residents, are offering such incentives as free parking or a free month of rent upon signing a lease. Those residents who want to stay put have newfound bargaining power when negotiating a rent reduction from owners. In San Francisco, around 65 percent of the population rents, and while the job market is bad, it's not quite as dire as the rest of the state. "Speaking from experience," the article's author writes, "it might be just enough to tip the scales for anyone with dreams of moving here."
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AvalonBay CEO Gets $6 Million in 2008 Compensation
Digested From "AvalonBay CEO Gets $6 Million in 2008 Compensation"
Associated Press (04/03/09)
AvalonBay Communities Inc. Chairman and CEO Bryce Blair received compensation valued at more than $6 million last year, with the lion's share of that coming in grants of stock options and restricted stock. Blair received a salary of $816,060 and a performance-based bonus of $991,003, documents filed with the Securities and Exchange Commission show. The 50-year-old received additional compensation of $213,753, including $123,976 in dividends paid on unvested shares of restricted stock and $58,509 in life insurance premium payments. Finally, Blair received stock options and restricted stock valued at just over $4 million when they were granted. AvalonBay is a Virginia-based REIT that specializes in developing and managing apartment communities.
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Philadelphia's Apartment Market Slightly Softens
Digested From "Philadelphia's Apartment Market Slightly Softens"
KYW Newsradio 1060 (Philadelphia) (04/01/09) by John Ostapkovich
Although the recession has brought about a number of changes in Philadelphia's apartment market, area residents have yet to realize the huge discounts seen elsewhere. Michael Woodward, president of the Apartment Association of Greater Philadelphia, remarks, "The market is a little bit softer and occupancies have decreased slightly, maybe a percentage or two, but in general, we're weathering this pretty good." Woodward adds that with few people making the leap to homeownership, many are simply staying put. At the same time, those who losing their houses to foreclosure are moving back into rental housing. Looking ahead, Woodward forecasts that prospective apartment residents will find more choices in the Philadelphia market, with the most important factor remaining location.
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Archstone Opens Three New Maryland Apartment Communities
Digested From "Archstone Opens Three New Maryland Apartment Communities"
Business Wire (04/01/09)
Archstone has opened three new apartment communities in Maryland this year. The first is dubbed the Westchester at the Pavilions, a 30-acre community in Charles County that offers such resort-style amenities as two fitness facilities; three swimming pools; an expansive sun deck; and a pool pavilion featuring foosball, shuffleboard, ping pong and chess tables. The second is Archstone Wisconsin Place, located just outside of Washington, D.C., in Chevy Chase, Md. On-site amenities range from a private screening room to a rooftop pool with sun terrace. The third new Archstone community in Maryland is the Westchester at Rockville Station in Rockville. It features European-styled kitchens and other amenities. As of the end of last year, Archstone had ownership stakes in 428 apartment communities spread throughout the United States and Europe, comprised of more than 84,000 rental units.
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Mid-America Apartment Communities Sets Date of Earnings Release
Digested From "Mid-America Apartment Communities Announces Date of First Quarter Earnings Release, Conference Call"
PRNewswire (04/01/09)
Mid-America Apartment Communities Inc. will release its 1Q 2009 results on May 7 and will hold its quarterly conference call the following morning. During the call, company executives will review the Memphis-based REIT's January-through-March performance and conduct a question-and-answer period for investors. Mid-America Apartment Communities has ownership stakes in 42,252 apartments spread across the nation's Sunbelt region.
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Now's a Good Time to Investment in Wisconsin Multifamily Housing
Digested From "Real Estate Multi-Tasking: Investors Find a Rare Bright Spot in the Recession With the Decline of Multifamily Housing Prices"
Wisconsin State Journal (03/29/09)
Dan Miller, an agent with Keller Williams Realty, says now is the best time in perhaps the last 10 years to invest in Dane County, Wis., multifamily housing. Miller, who tracks real estate listings on DaneCountyMarket.com, remarks, "There's definitely a lot of motivated sellers right now. Buyers can get a very good price, and they have a lot more alternatives." Miller's research shows that the average price per sold unit in the multifamily housing market--which consists of every rental property with two or more units for sale, from the smallest duplex to the largest apartment community--declined more than 13 percent in each of the last two years versus a 62 percent gain in selling prices from 2000 to 2006. Other factors that may be contributing to a buyer's advantage include high occupancy rates and fewer sales of such properties on first listing. Nancy Jensen, executive director of the Apartment Association of South Central Wisconsin, describes Dane County multifamily housing values as strong except for cases in which communities are not well-maintained. In addition, the steep drop in listing success for Dane multifamily housing may not necessarily mean those properties can be obtained more cheaply. Jensen comments, "What's been happening in the last 12 months and continuing now is that financing has been very difficult to obtain. The owners [in those cases] can just hold onto their property, unless they have some serious reason they have to sell."
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CIM Group Angles for San Fran Apartments
Digested From "CIM Group Goes for Lembi Buildings"
San Francisco Business Times (03/30/09) by J.K. Dineen
A CIM Group affiliate is seeking to foreclose on 23 San Francisco apartment communities owned by the troubled Lembi family real estate empire. The CIM affiliate, which acquired $121 million of distressed Lembi debt from Column Financial this past December, alleges the Lembis' Trophy Properties subsidiary has been in default on payments since Feb. 10 on two loans. Interest on the unpaid balance is reportedly accruing at a rate of $50,600 a day, or about $18.4 million a year--more than twice the approximate $8 million the 23 communities generate in rents. According to brokers, the CIM affiliate bought the Lembi debt at a discount.
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Silicon Valley Flight, Home Prices Drive Down Apartment Rents
Digested From "Silicon Valley Flight, Attractive Home Prices Drive Down Rents"
Silicon Valley/San Jose Business Journal (03/27/09) by Mary Duan
Occupancy rates at Silicon Valley apartment communities continue to decline as a wave of layoffs have led some to leave the region. At the same time, more and more apartment residents with secure jobs, stellar credit and enough money for a down payment are seriously considering making the leap to homeownership as house prices are on the decline and interest rates remain favorable. Many area apartment owners say it's normal for vacancies to be off slightly in late winter and early spring, but most concede that such rates are a little more off than usual. For instance, ACCO Management President Regan Avery notes that apartment occupancy rates in his firm's communities have dipped from around 96 percent six months ago to about 93 percent currently. This has prompted many of them to offer such concessions as reduced rent or free rent depending on the terms of a lease. RealFacts reports that the rate of annual average rent increases slowed to 1.1 percent in last year's October-through-December period compared to 6.2 percent a year earlier. The average monthly rent in Silicon Valley at the end of this past December was $1,091.
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Legislative/Legal News
New Bill Aims to Improve Recycling at Nevada Apartments
Digested From "A Complex Problem"
Las Vegas Weekly (04/02/09) by Stacy J. Willis
Nevada legislators are addressing the issue of recycling at apartment communities. As a state, Nevada recycles about 22 percent of its solid waste versus the U.S. average of 32 percent. Southern Nevada, meanwhile, recycles only 19 percent, with just 2 percent coming from residences. Senate Bill 137 would require the state's Environmental Commission to set minimum standards for recycling in apartment communities--a measure the Southern Nevada Multi-Housing Association (SNMA) opposes. Association leaders contend that with parking spaces at a premium in most communities, there is often not enough space to put a new recycling bin. There is also the concern that some residents would throw trash into the recycling bin and contaminate the recyclables. Michael Fazio, executive director of the SNMA, says that the association supports the idea of recycling, but remains against a mandate to have bins without some caveats. Some states have mandatory recycling laws that do not exclude apartment complexes. Wisconsin, for instance, requires apartments to provide adequate recycling facilities and notify residents of the requirements. Still, other communities have trouble with their apartment residents mixing trash and recyclables. San Jose recently had to contract with a sorting company at an annual cost of $1.5 million to sort apartment community waste, despite the fact that there are separate bins for apartment residents. The cost has been tacked on as a 4 percent garbage-collection rate increase for apartment residents.
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L.A. Apartment Association Weighs in on Utility Refunds
Digested From "DWP May Issue Refunds to L.A. Customers"
KABC-TV (Los Angeles) (04/03/09)
Last week, a Superior Court judge issued a tentative ruling ordering the Los Angeles Department of Water and Power (DWP) to repay its customers nearly $30 million that city officials had hoped to spend on other services. The ruling said the DWP's practice of transferring money from its water fund into the city's general fund -- which pays for such everything from police and fire protection to libraries and street upkeep--violates provisions of the anti-tax measure Proposition 218. The Apartment Association of Greater Los Angeles is among the opponents of the transfer. The tentative ruling calls on the city to recalculate its water rates for the 2006- 07 fiscal year--when the money was collected--and give customers either refunds or credits on future bills. Since the money has been collected over a period of three years, more than $100 million could be due to ratepayers by the time the litigation is resolved.
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San Antonio Bill Would Add Meth-Lab Disclosure to Leases
Digested From "Bill Would Add Meth-Lab Disclosure to Leases"
San Antonio Express-News (TX) (04/02/09) by Elizabeth Allen
Along with the language about security deposits and 30 days' notice, apartment owners in San Antonio may soon be required to add a disclosure clause to rental agreements if a unit in their community has ever been used as a meth lab. Advocates of the new say contamination by the chemicals involved in making methamphetamine poses hazards for those who go on to live in the unit. It remains uncertain how long those effects could linger, sickening future residents. The bill before the Legislature filed by Rep. David Liebowitz (D-San Antonio) adds to current law that requires disclosure to homebuyers. It calls for apartment owners to reveal, before a prospective resident signs a lease, if they know that a unit was previously used to manufacture methamphetamine and whether the owner cleaned up the place. If the owner does not tell the truth in such a matter, residents would have the right to terminate the lease and get a full refund of all rent paid. David Mintz, a lobbyist for the Texas Apartment Association, says that is a bit too open-ended for his organization's members. Under the bill's current language, the owner would be forever required to tell future residents that there once was a meth lab on premises. He points to the laws governing what owners must do for lead and asbestos as being more clear, "and we'd like to see the same kind of clarification within this legislation."
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