NAA Industry Insider: How Are Millennials Having an Effect on Apartments?

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TWCFEB13
How Are Millennials Having an Effect on Apartments?
Digested From "'Millennial Effect' Driving Surge in Apartment Construction"
WDAY (03/13/14) Romans, Christine

New apartment construction is the fastest growing segment of the housing market. In fact, studies have shown that they are now the biggest share of total new home construction since the 1970s. New rental apartment communities soared 56 percent in 2011, 36 percent the year after, and 25 percent in 2013. They are on pace to increase 9 percent this year, but experts are now calling for an end to the boom due to housing's so-called "Millennial effect." Unemployment remains high for younger Americans, and many are already saddled with tens of thousands of dollars in student loan debt and have to deal with a tight credit market. When many Millennials finally do find a job, they just want to be able to put a roof over their head and not a mortgage. Millennials have also come to value mobility, especially in such a tight job market, and most urban areas offer greater conveniences. This demand has pushed up rent prices nationwide. Rent is up 3 percent over the last year and almost double that in such "renter-heavy" cities as Boston, San Francisco, and Seattle.

Market Trend Insights


RealPageMarch14
Fed Inflation Goal Is Elusive as U.S. Rents Stabilize
Digested From "Fed Inflation Goal Is Elusive as U.S. Rents Stabilize: Economy"
Bloomberg (03/12/14) Jamrisko, Michelle; Kolet, Ilan

Federal Reserve efforts to nurture a more robust rate of inflation this year are likely to fall short primarily because the biggest gains in rents are likely over. The costs to lease residential real estate, which ranks as the second-biggest component of the price measure tracked by U.S. central bankers, helped put a floor under inflation in the last couple of years with most other components decelerating. Now, with developers erecting a record amount of multifamily housing and the job market still an issue, the outlook for rents is the bleakest it has been in years. In January, a quarterly measure of conditions in the market for apartments slumped to 41 in January -- the weakest reading since the same month four years earlier, according to the National Multifamily Housing Council. Any figures lower than 50 indicates the rental housing market is loosening. Over the past 10 years or so, the index has correctly predicted changes in the housing components of the Department of Commerce's personal consumption expenditures price gauge, the Federal Reserve's favorite, about a year in advance. CB Richard Ellis Inc. says the number of residential buildings containing five or more rental units completed in the last three months of 2013 reached a 60,793 annualized pace, the most in data going back to 2000. Reis Inc., meanwhile, forecasts that completions will increase 28 percent this year from 2013 as supply is due to exceed demand for the first time since 2009. Excess supply pushed rent hikes down to 3.2 percent last year from 3.9 percent the year before. Reis researchers are forecasting stabilization at 3.2 percent in 2014, then slowing to 3 percent in 2015 -- a trend that does not bode well for already-low inflation readings.
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Boulder State's Apartment Sector Rocks On
Digested From "Demand for Apartments in Colo. Increases"
9News (CO) (03/14/14) King, Ann

Demand for apartments in Colorado has increased, and which means that monthly rents have gone up, too. According to the Colorado Division of Housing, the average rent in the state is now $992 a month -- a 5.2 percent increase. However, rental rates statewide are uneven, with some areas experiencing growth and others showing a slight decline. Average rents in all metro areas measured for the last three months of 2013 were Colorado Springs, $799; Ft. Collins/Loveland, $995; Grand Junction, $561; Greeley, $756; and Pueblo, $594. Nancy Burke from the Apartment Association of Metro Denver states that completed development of apartment communities in the Denver metro area will help stabilize the market in the next year to 18 months. Nancy further stated that although apartments appear to be very costly in various parts of Colorado, the quality of amenities has increased. Now, it is not uncommon to find communities offering everything from dog washes to fitness facilities and bike repair shops.
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Who Are the 'Refinancables' and Why Are They Declining?
Digested From "New Report Finds Decline in U.S. 'Refinancible' Population"
National Mortgage Professional Magazine (03/05/14)

The overall "refinancible" population of both traditional and HARP-eligible borrowers has shriveled, according to Black Knight Financial Services. Originations fell almost 60 percent year over year, and HARP volumes were down 70 percent over the same period. "In January, we saw origination volume continue to decline to its lowest point since 2008, with prepayment speeds pointing to further drops in refinance-related originations," explained Black Knight's Herb Blecher. The report, which looks at data as of the end of January 2014, attributes the decline to rising mortgage interest rates and also notes that a majority of people who could refinance at historically low rates in recent years have already done so. Florida and Nevada have the highest percentage of HARP eligibility, along with the Midwestern states of Illinois, Michigan, Missouri, and Ohio.
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Baby It's Cold Outside ... for a Mortgage!
Digested From "Mortgage Lending Declines Due to Harsh Winter"
American Banker (03/06/14) Borak, Donna

Bankers in New York, Richmond, St. Louis, and Kansas City said demand for new mortgages fell in the first quarter due mainly to inclement weather, according to the Federal Reserve's Beige Book survey. Demand also softened in other markets like Philadelphia and Dallas. Cleveland and Atlanta reported an increase in purchase mortgages, but home refinancing fell in four other Federal Reserve districts. Bankers in Atlanta also expressed concern about the Qualified Mortgage rule -- which took effect in January -- with some community bankers reporting that they were leaving the residential mortgage business altogether due to increasing regulatory burdens. "Overall, most bankers remained optimistic for continued slow, steady growth and for some pickup from pent-up demand for housing," said the survey.
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Deals and Transactions


LowesAug2013
Apartment Buyer Goes Walking in Memphis
Digested From "New York Firm Buys Memphis Apartment Complexes for $17.3M"
Memphis Business Journal (03/13/14) Poe, Ryan

A couple of apartment communities, one in East Memphis and the other in suburban Hickory Hill, have been sold in a $17.3 million deal between private equity firms in Indiana and New York. Affiliates of New York-based Hyde Capital LLC paid $8.7 million for the 272-unit Briar Club Apartments and $8.6 million for the 208-unit Cinnamon Trails community. The sellers were affiliates of Indiana-based Equity Investment Group Inc. The acquisitions are the second and third in Memphis for Hyde Capital, which added the 324-unit Autumnwood Apartments to its portfolio two years ago for $13.5 million.
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NY Firm Messes With Texas in Latest Apartment Buy
Digested From "New York Real Estate Firm Buys 20 Midland, Odessa Apartments"
Odessa American (TX) (03/14/14) Ottens, Cale

Related Cos. on Thursday purchased 20 apartment communities in Midland and Odessa, Texas. The New York-based company purchased every property that was previously owned by Orion Residential -- 14 in the former and a half-dozen in the latter. Neither company has disclosed the final sale price. Related will own and manage all 20 communities, according to Related Vice President Paul Izzo. The company's plan moving forward will be to upgrade each of the apartment communities. The level of renovation work will vary from property to property based on need. Izzo states, "Some of these properties are really nice; some of them are not as nice." He estimate Related will invest more than $20 million on upgrades and renovations over the next few years, with construction work to begin within the next six months. The renovations will range anywhere from updating the landscape to adding entirely new amenities. Related officials say the renovations will not impact current residents in that the upgrades will be done when individual apartments open up. Related mainly owns and operates luxury apartments in such major cities as Boston, Chicago, Los Angeles, and Miami. In the past several years, the company has acquired between 15,000 and 20,000 rental units. The Midland and Odessa purchase includes almost 3,000 total apartments.
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Oklahoma City Apartments Change Hands in $65 Million Deal
Digested From "Oklahoma City Apartments Change Hands in $65 Million Deal"
NewsOK (03/15/2014) Mize, Richard

Five apartment communities in the Oklahoma City metro area have changed hands in a portfolio deal valued at $65 million. IRT OKC Portfolio Owner LLC, a subsidiary of Philadelphia-based Independence Realty Trust Inc., bought the five assets from New Jersey-based Kola Investments LLC. Together, these communities total 1,658 apartments. Kola Investments acquired the properties 16 years ago and had spent $12 million to improve them since 2010. These improvements range from new roofs and siding to parking lot upgrades and the replacement of HVAC units. Apartment broker Mike Buhl, owner of Commercial Realty Resources Co., notes that the buyer got the portfolio at a "really, really good price, less than the market commands right now."
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Industry Buzz


2014 Feb. Mission Sponsors
The Do's and Don'ts of Combating Crazy Ants
Digested From "The Rise of Crazy Ants and How to Fight Back"
Property Management Insider (03/13/14) Blackwell, Tim

The rise and proliferation of Tawny crazy ants not only poses a challenge for humans, in general, but to the apartment industry specifically. Owners and managers are concerned that they could be just as difficult to get rid of as bed bugs and more destructive. This miniscule pest have been known to multiply in droves and are resistant to most commercial ant killers. The only positive is that they have a highly potent venom that enables them to defeat fire ants. Researchers note that colonies of the Nylanderia fulva -- also known as the Caribbean crazy ant, the hairy crazy ant, and the Raspberry crazy ant -- are showing up more and more in markets such as Texas to Florida where warm, humid temperatures and mild winters are providing a haven. The ants typically congregate in electrical equipment, causing short circuits and clogging switching mechanisms that result in equipment failure. The damage ultimately can ultimately create an electrical short or even a fire. According to researchers, in one year in Texas, the ants damaged more than $146.5 million in electrical equipment.

Dr. Danny McDonald, a research scientist at Sam Houston State University, says scientists are closer to management strategies for crazy ants. However, eradication treatments have so far proven to be short lived. When colonies are destroyed, new ones surface about a month or so later behind an army of queens that is far greater in numbers than other ant species. As a result, effective treatment can be laborious process. Researchers recommend that a tawny crazy ant management program begin one year before the population has a chance to explode. The best advice is to hire a qualified pest professional. After an infestation has been discovered, such a specialist may visit three or four times over several months to get a handle on the situation. The key to controlling tawny crazy ants is controlling cultural methods -- i.e. removing fallen limbs, rocks, leaf litter, and other clutter on the ground. Eliminating constantly wet conditions is essential, because the ants thrive in moisture. Consequently, repairing leaks inside and outside apartments in essential, as is improving drainage.
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Apt. Owners, Managers Ain't Singin' the Blues in Music City
Digested From "Apartment Boom Puts Nashville on the Map"
Tennessean (03/11/14) Ward, Getahn

According to a new study by SpareFoot, a Texas-based online marketplace for self-storage facilities, healthy job growth and millions in new investment dollars have combined to make Nashville one of the country's top apartment boom towns. Unfortunately, all that growth has yet to make a significant impact on the city's near record-high rental rates. The analysis covered data for the 100 most populous U.S. metro areas from 2009 through last year. Nashville's No. 5 ranking comes as the metro continues to draw apartment developers and investors. Approximately 3,000 new rental units were completed in 2013, while an additional 7,777 were under construction as of Dec. 31. Meanwhile, 6,000 more apartments are planned, although permits and financing still remain as hurdles for the newest communities, reports data from the Greater Nashville Apartment Association. San Jose placed first overall among America's Top 15 Apartment Boom Towns, followed by the Texas cities of Austin and Houston and Grand Rapids, Mich. In specific categories, Nashville was sixth for average per capita GDP growth, 13th for average growth in per capita personal income, 17th for average population growth, and 28th for average growth in per capita construction permits for new rental units. Furthermore, it was No. 56 for apartments per person — 124,000 units for a population of 1.73 million.
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How Will AvalonBay Celebrate Turning 20?
Digested From "AvalonBay Focused on Strengthening Brands Through Expansion, Redevelopment"
REIT.com (03/11/14)

AvalonBay Communities, Inc. is looking to achieve greater density and more scale via a targeted strategy of development and reinvestment. This month, the apartment REIT is celebrating its 20th anniversary of its initial public offering this month. Its focus has been on apartment communities in high barrier-to-entry markets located across the Northeast, Mid-Atlantic, Pacific Northwest, and northern and southern California. Last year was an especially busy one for AvalonBay, marked by the 2013 closing of its deal to buy a 40 percent ownership stake in Archstone Enterprise LP for $6.5 billion. The REIT's total development pipeline currently stands at around $6.6 billion. AvalonBay President and CEO Timothy Naughton comments, "Development continues to provide attractive economics and we believe supports aggressive investment in what we think will be a prolonged apartment cycle." At the same time, the company is aggressively investing in its existing portfolio, either to safeguard an asset's existing position in its competitive submarket or to potentially reposition it. Naughton adds, "The economics of that business continue to be quite compelling, as well. "We're going to continue to recycle assets and prune the portfolio . . . and continue to look to reinvest into higher-return opportunities, whether its new development or submarkets that have a better growth profile." He concluded by stressing that AvalonBay will stay within its existing geographic markets.
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Apartment REIT Sets Terms for $50 million IPO
Digested From "Apartment REIT Bluerock Residential REIT Sets Terms for $50 million IPO"
NASDAQ (03/13/14)

Bluerock Residential Growth REIT, owner of nine apartment communities in the Southeastern United States, announced terms for its IPO late last week. The New York-based real estate investment trust plans to raise $50 million by offering 3.3 million shares at $15 per share. Founded in 2008, Bluerock plans to list on the New York Stock Exchange under the symbol "BRG." Serving as the sole bookrunner on the deal is Wunderlich Securities.
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Legal/Legislative Did You Know


2014 Feb. Partner Sponsors
How Is CRI Trying to Help Conn. Apartments Reduce Energy Usage?
Digested From "Group Aims to Help Building Owners Reduce Energy Usage"
The Day (CT) (03/15/14)

Competitive Resources Inc. (CRI) is working with apartment owners and managers to reduce their energy bills via Energize Connecticut's various energy efficiency programs. CRI is offering energy efficiency services statewide to customers of Connecticut Light and Power Co., The United Illuminating Co., and municipal electric companies. Eligible properties include apartment communities, high-rise apartment buildings, condominiums, and college dormitories. As part of the Energize Connecticut initiative, technicians will make such energy-saving improvements as sealing air leaks; identifying inefficient appliances; installing energy-efficient bulbs and water-saving devices; and providing information on utility incentives and tax credits.
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It May Not Have Been Sage to Charge These Folks Late Fees
Digested From "Class Action Lawsuit Alleges Sage Management Charged Illegal Fees"
Baltimore Sun (03/09/14) Wenger, Yvonne

Earlier this month, residents at Sage Management apartments in Baltimore filed a class action lawsuit against the property management company for allegedly charging illegal late fees. The 29-page lawsuit claims the company routinely charges residents who are late on their rent a 5 percent penalty along with agent, court, and eviction fees that trap the households in a cycle of debt. Sage Management has so far refused comment on the matter. According to its website, it owns nine multifamily housing communities in the Baltimore area and specializes in affordable housing for families with Section 8 vouchers. The lawsuit seeks $75,000 and a court action to stop Sage's allegedly illegal billing and collection practices. It claims when a resident pays rent after the fifth of the month, the company legally assesses a 5 percent late fee. By the 15th of the month, it files court action against the resident and adds court and agent fees of $38 to the balance, even if no agent fee was incurred. In some instances, Sage also allegedly adds an "eviction and agent fee" on residents' accounts that are more than the company's court costs. According to housing advocates, Sage routinely sues at least 200 of its residents in Baltimore's housing court each month.
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NAA Announcements


2014 Diamond Sponsors
Don’t Miss A Moment of Career Enhancing Education from the 2014 NAA Student Housing Conference & Exposition

Professionals in the student housing industry seeking to enhance their careers and better prepare for housing the next generation of residents should act now to take advantage of the top-level insight delivered during the 2014 NAA Student Housing Conference & Exposition.

NAAEI invites you to enjoy actionable intelligence and turnkey solutions perfect for helping you achieve your personal and professional goals—and earn continuing education credits while you’re at it—with REWIND’s 11 PowerPoint-synced audio sessions from the 2014 NAA Student Housing Conference & Exposition.

Take advantage of thought-provoking sessions on critical student housing issues—from better understanding student residents to achieving a firmer grasp on the technology on which they rely, to name just a few—and make sure to stay tuned for more on the REWIND Program and other strategic takeaways from the 2014 NAA Student Housing Conference & Exposition.
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Only 91 Days Until the 2014 NAA Education Conference & Exposition

Do you hear that? It’s the buzz building as the multifamily housing industry readies itself for the largest event of the year: the 2014 NAA Education Conference & Exposition, June 18-21 in Denver.

Take advantage of the opportunity to launch your company and career to new heights as you join more than 7,000 of your closest friends for insight from world-class speakers, including celebrated international film and TV star Michael J. Fox; Daymond John and Barbara Corcoran, stars of ABC’s “Shark Tank;” Alex Sheen, Founder of because I said I would; Travelocity Founder Terry Jones; Seth Mattison, Founder and Chief Movement Officer of FutureSight Labs (whose session, “When Generations Connect,” was met with rave reviews at the 2014 NAA Student Housing Conference & Exposition); Susan Packard, Co-founder and Former Chief Operating Officer of HGTV; and Bill Rancic, Host of “America Now” and Co-Executive Producer of “Giuliana and Bill.”

The benefits of attendance don’t end there—awaiting you in San Diego are practical, take-home tactics from the more than 40 breakout sessions, as well as the opportunity to engage like-minded professionals during the plethora of networking events NAA has scheduled. Last, but certainly not least, sample the latest and greatest from more than 900 multifamily supplier partners during the NAA Exposition.

Invest in your company and your career today. Register now and remember that the largest discounts go to those who sign-up early. Have four friends? Register as a group to take advantage of even more savings!
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Get Your Tool Belts and Work Orders Ready: Maintenance Mania® National Championship To Be Held During the 2014 NAA Education Conference & Exposition

Maintenance Mania®, the national program offered by NAA and presented by HD Supply, will host its National Championship from 12:30 p.m. to 1:45 p.m. on Friday, June 20, during the 2014 NAA Education Conference & Exposition, June 18-21 in Denver

Throughout the year, NAA affiliates host Maintenance Mania® events across the country to recognize the skill and speed with which apartment maintenance technicians keep their communities running smooth. Winners from each local event then get a chance to qualify for a spot at the National Championship.

The championship will feature games developed from standard events, and the quickest competitors from each of the 10 NAA regions, as well as wild-card competitors with the top times nationally, will compete to see who will be crowned 2014’s Maintenance Mania® Champion.

See what Maintenance Mania® is all about — then make plans to come cheer on your favorite competitors. While in Denver, make sure to stay for the world-class education, second-to-none networking and all the latest and greatest products and services offered by multifamily housing supplier partners on the trade show floor at the 2014 NAA Education Conference & Exposition.

Invest in your company and your career today. Register now and remember that the largest discounts go to those who sign-up early. Have four friends? Register as a group to take advantage of even more savings!
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Take Advantage of Online Learning with Webinar Wednesdays

Join NAAEI, Apartment All Stars and Multifamily Insiders for Webinar Wednesdays, the largest premium webinar series in the industry to provide state and local association members with access to industry thought leaders to discuss innovative ideas, best practices and emerging industry trends. These webinars will give participants the tools they need to become industry superstars in their own right.

Upcoming Events:

March 26, 2014
The Five Keys to Increasing Sales with Tech-Savvy Prospects
Presenter: Donald Davidoff

April 9, 2014
Think You Know Fair Housing? Guess Again!
Presenter: Anne Sadovsky

Register today!
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2013 Income & Expenses Survey Available in NAA Bookstore

The 2013 NAA Survey of Income & Expenses is now available. The survey provides some of the most valuable industry trend information.

The survey includes an executive summary, detailed market analysis, reports and charts about rental communities, as well as national economic analysis. A total of 4,500 properties containing over 1 million units from 45 U.S. states are represented in this year’s report. Data was reported from more than 4,100 market rent properties and 400 subsidized properties. To order, please visit the NAA Store, click on the link for Income & Expense Surveys.
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NAAEI Designation Courses Offered Near You!

CAM:

Apartment Association of Greater Omaha & Lincoln
March – April, 2014

Connecticut Apartment Association
March, 2014

CAM Online

CAS:

Apartment Association of Greater Omaha & Lincoln
March – April, 2014

CAMT:

Austin Apartment Association
February – March, 2014

Rental Housing Association of Boston
April – May, 2014

Chicagoland Apartment Association
May – June, 2014

Apartment Association of Southeast Texas
May – June, 2014

CAPS:

Chicagoland Apartment Association
July, 2014

NALP:

Apartment and Office Building Association of Metropolitan Washington
February, 2014

NALP Online

Find more courses in your area on the NAA website.

For more information about any of the classes listed, please contact Kimberly McCrossen at 703/518-6141 ext. 121.
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March 18, 2014

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