Essex Property Trust and BRE Combine to Form $11B Company
Digested From "Essex Property Trust and BRE Properties Combine to Form $11B Company"
Silicon Valley Business Journal (04/01/14) Torres, Blanca
Essex Property Trust Inc. last week closed on its purchase of BRE Properties Inc. to create a combined, $11.1 billion company, ranking as the largest REIT on the West Coast. The new company will operate under the Essex name, with Essex President and CEO Michael Schall heading up the new firm. Worth $6.2 billion of stock and cash, the deal unites two of the San Francisco Bay Area's largest real estate companies that have both focused on building and owning apartment communities in supply-constrained markets. Schall remarks, "We are excited to consummate the merger and move forward to combine these two great organizations to form the leading West Coast multifamily REIT. The integration effort is proceeding as planned, which we believe will result in a stronger platform for sustainable growth, superior service for our residents, and expanded career opportunities for our employees." As of April 1, the new Essex owns 233 apartment communities with 15 more in various stages of development. Both firms held shareholder votes late last week to approve the deal. BRE Chief Executive Connie Moore remarks, "The combined portfolio of Essex and BRE will provide substantial value for our stockholders through enhanced operations, improvements in the costs of capital and synergistic opportunities." The two companies announced late last year they were exploring a merger.
Market Trend Insights
U.S. Apartment Rents Rose 3.2 Percent as Occupancies Rose
Digested From "U.S. Apartment Rents Rose 3.2 Percent as Occupancies Climbed"
Bloomberg (04/02/14) Yu, Hui-yong
In a new report, Reis Inc. said U.S. apartment rents rose 3.2 percent in the first quarter as occupancies climbed and newly constructed communities commanded higher leasing costs, softening the impact of an increasing supply. Reis researchers said effective rents averaged $1,089 a month from January through March, up from $1,055 a year earlier. Additionally, the vacancy rate fell to 4 percent from 4.4 percent over that same time span. Builders completed 131,450 new rental units in 2013, a 66 percent jump from the previous year and more than triple the 42,491 units added in 2011. "Still-low vacancy, an improving economy and labor market, and lots of newly completed Class A properties coming online with rents higher than the market average will all conspire to push asking and effective rents up by roughly 3.3 percent this year," said Ryan Severino, senior economist at the New York-based research firm. He added that 71 of the 79 largest U.S. markets had effective-rent growth last quarter, "indicating the pervasiveness of the recovery in the apartment market."
Why Has Seattle Become Such a Pricey Place to Rent?
Digested From "Rising Rents, Rising Towers Push Out Tenants of Modest Means"
Seattle Times (04/06/14) Bhatt, Sanjay
The Seattle metropolitan area is witnessing a historic boom in new apartment construction. More than 7,000 rental units opened in 2013 throughout King and Snohomish counties, including many in downtown Seattle. At least 10,000 more are poised to open this year and perhaps as many as 14,000 in 2015. On the downside, all these new additions are producing a largely unseen side effect: apartment residents of modest means are being pushed out. Older apartments -- a major source of affordable market-rate housing in and around the city -- are being demolished at a rapid pace. Consequently, city records indicate that 304 Seattle households were displaced last year versus 118 in 2012. Those who rent in older, Class B and C communities are seeing bigger rent hikes than those in newer apartments, possibly because those of modest means have fewer affordable alternatives. Jay Parsons, director of analytics and forecast at Texas-based MPF Research, states, "You could raise your rents pretty aggressively without risking losing your renters to a new apartment property." In the first three months of this year, the average rent on new leases in King and Snohomish counties climbed 6.8 percent from a year ago to $1,233 a unit. That is more than five times the general inflation rate, according to Seattle-based Apartment Insights Washington. Meanwhile, Dupre+Scott Apartment Advisors notes that a one-bedroom apartment in downtown Seattle currently goes for around $1,800 a month, on average. Furthermore, more than 80 percent of apartment communities in Seattle and King County plan to hike rents in the next six months by an average 4 percent, Dupre+Scott reports. The Seattle market now ranks sixth among the country's metro areas in annual rent growth, trailing three San Francisco Bay Area cities, Portland, and Denver, according to the latest MPF Research report. By some estimates, it now costs between $250,000 and $300,000 per unit to build new apartments downtown due to the fact that the land costs so much. One owner laments, "That can't be low income. You'd just go into the hole."
LIHTC Property Operating Expenses Rise at 2.92 Percent Annual Rate
Digested From "LIHTC Property Operating Expenses Increasing at 2.92 Percent Annual Rate"
Novogradac Journal of Tax Credits (04/14)
Operating expenses between 2010 and 2012 for low-income housing tax credit (LIHTC) properties rose at an annual rate of 2.92 percent, notes a newly released Novogradac & Company LLP study. Titled "Novogradac Multifamily Rental Housing Operating Expense Report — Survey and Analysis for LIHTC Properties," the research found that operating expenses for all multifamily rental properties increased at an annual rate of 2.39 percent during the same time span. The study covers more than 2,100 market-rate and LIHTC properties that include 585,000 individual units. It will be updated annually, examining how rental housing's operating expenses differ over time as well as by property size, type, and location. Researchers note that a look at the relative operating expense growth rates from region to region shows that operating expense trends depend in part on where a rental community is located. From 2010 to 2012, the fastest growth in total operating expenses was seen in such Western and Midwestern states as Iowa, Kansas, Missouri, Nebraska, Colorado, Montana, North Dakota, South Dakota, Utah, and Wyoming. Total operating expenses in this combined region increased at an annual rate of 6.36 percent, primarily because of a surge in administrative expenses and operating costs that include everything from security to trash costs. The region with the second fastest growth rate for total operating expenses encompasses Arizona, California, Hawaii and Nevada, where operating expenses for multifamily rental housing grew at a 3.62 percent annual growth between 2010 and 2012. According to the report, this increase was due mainly to increases in administration, payroll, and management fee expenses. Finally, several regions' operating expenses increased at a slower rate than the U.S. average. For instance, expenses in Region 6 -- Arkansas, Louisiana, New Mexico, Oklahoma, and Texas -- grew at 2.43 percent annually between 2010 and 2012.
Deals and Transactions
CoStar Closes Deal for Apartments.com
Digested From "CoStar Closes Deal for Apartments.com"
GlobeSt.com (04/02/14) Bubny, Paul
CoStar Group Inc. has completed its $585 million acquisition of Apartments.com, an apartment rental marketplace, from Chicago-based Classified Ventures Inc. According to the information and analytics provider, the all-cash deal creates an online information and marketplace leader in the $2-trillion multifamily asset class. CoStar CEO Andrew Florance remarks, "We believe that the two companies now together are uniquely capable of providing invaluable new services to both apartment seekers and apartment owners. . . . [The acquisition] will lead to an even stronger platform for the company’s future growth and to increased shareholder value." In the $2-trillion multifamily housing sector, CoStar has assembled what it touts as the most comprehensive information source covering U.S. apartment communities. CoStar has information on 17 million rental units, including availabilities, rents, key contacts, comparable sales, photographs, and building characteristics.
What You Need to Know About Crow Holdings' New Apt. Buy
Digested From "Crow Holdings Makes Big Apartment Sale Including Two Communities in Dallas Area"
Dallas Morning News (04/01/14) Brown, Steve
Crow Holdings Capital Partners confirms that it has sold 12 top-quality U.S. apartment communities, including three in the Dallas-Fort Worth area. Together, the dozen properties contain more than 4,400 rental units and were bought by an affiliate of Boston-based Berkshire Property Advisors LLC. Terms were not disclosed. What is known is that Apartment Realty Advisors and HFF LP brokered the sale, and that the various communities are located in five states -- Colorado, Oregon, Georgia, Tennessee, and Texas. Dodge Carter, Crow Holdings Capital's director of multifamily investment, remarks, "The successful sale of this portfolio further affirms our value creation strategy focused on high-amenity properties located in high-growth markets with strong income streams." Since the late 1990s, Dallas-based Crow Holdings' private equity real estate funds have invested in 73 apartment communities with more than 24,000 rental units.
Why Multifamily Lenders Are Scrambling for Business
Digested From "Multifamily Lenders Scramble For Business"
Commercial Observer (03/28/14) Stoler, Michael
The residential rental asset class has become one of the most sought-after investments by buyers of commercial properties. The buyers and owners of this property class have been fortunate that most commercial and savings banks, in addition to Fannie Mae, Freddie Mac, and Wall Street firms providing CMBS financing, are all very interested in financing rental apartments. Consequently, more banks have jumped into the fray, and borrowers are being actively courted. Lenders are offering an array of attractive terms, including fewer or no administrative fees. In the last 10 or so years, the most prominent lenders in this arena have included New York Community Bank, Signature Bank, Capital One, and TD Bank. Each year, new lenders from all over the country seek to enter the financing arena, especially in the red-hot market of New York City. In many instances, their first order of business is lending for rental apartments. A trio of new entrants provided upwards of $2.5 billion in multifamily housing financing last year: Pennsylvania-based Customers Bank; Florida-headquartered BankUnited, which recently acquired Herald National Bank; and Connecticut-based People's United Bank, which last year opened its flagship branch on Park Avenue. The new players still have to compete with the likes of insurance firms, investment banks, and retail banks. To capture market share, commercial and savings banks have become extremely creative in providing attractive terms and conditions for financing. Dan Harris, the chief lending officer at Dime Savings Bank of Williamsburg, concludes, "The multifamily market has always been competitive, but it has become much more competitive the last two years as more lenders enter the business."
What's Old Is New for Florida Apartment Investor in Austin
Digested From "Florida Investor Nabs Third Austin Apartment Community"
Austin Business Journal (04/01/14) Buchholz, Jan
Florida-based Avesta Communities is continuing its buying spree of older apartment communities in Austin. Its latest acquisition is the Anderson Springs Apartments. The developer previously bought the 504-unit Solano Apartments and the 334-unit Capella Apartments. Both were renamed as Avesta Solano and Avesta Capella, respectively. Its latest acquisition will be rebranded Avesta Agave Falls. Terms of the deal were not disclosed. Jeff Rogers, who represented the seller, remarks, "Anderson Springs was an excellent fit for Avesta Communities, who has focused on strategically located, middle-market renter communities near relevant employment drivers."
Is Google Taking Over Apartment Internet Marketing?
Digested From "Is Google Taking Over Apartment Internet Marketing?"
Apartment Internet Marketing (04/07/14)
It’s official: journalist and super Google watcher Danny Sullivan — the founder and chief editor of Search Engine Land — returns to AIM 2014: Conspire for a command performance and a deeper dive into whether or not Google is finally primed for a complete takeover of the online display of real estate for rent (this means us). In this exclusive address, Sullivan — one of the highest rated AIM speakers of all time — will look inside the alleged Google conspiracy for capturing the entirety of online search traffic for apartments. From 360° walk-throughs to ratings and reviews to maps and video, Google seems committed to providing a new and compelling experience directly on the search engine results page.
What New Amenity Is Warming Prospective Residents' Hearts?
Digested From "Apartment Offers Up 'Happiness' Amenity: A DOG!"
WHAS 11 News (04/06/14) Bowker, Makenzie
A new apartment community in Washington, D.C., is advertising an amenity that is very different than granite countertops or on-site tennis courts. Holli Beckman, vice president of marketing and leasing operations, and her staff are touting a cute English bulldog named Emmy. In the nation's capital, caring for a canine is not always an option. Between busy schedules and very small apartments, the demands of owning a pet can be unattainable for many city residents. Beckman says Emmy will serve as "a warm welcome, a sense of love, and community that you don't get from a pool or basketball court." Emmy, though, will not be available for checkout like a library book. People can play with her under supervised care in the internal dog park, but only if she's up for the puppy playtime. The rest of her days will be spent snuggled up in the leasing office and ending her "work" days with her permanent owner, a property manager named Doug. Beckman recalls that not everyone took her seriously when she pitched the idea. Co-workers thought she was joking, right up until Emmy appeared at their corporate office.
Beckman says a lot of research went into finding a breed perfect for what she has deemed the "puppy ambassador" role. She says the breed's mellow personality, low aggression, and agreeable attitude with children and other pets were important. The leasing office opens in May for the community's 314 apartments. Beckman said prospective residents have already requested to see Emmy when filling out their applications. Beckman and her staff have even assigned Emmy her own Instagram and Twitter accounts. Ahead of her debut, she is also busy learning new tricks. Emmy can currently sit on command, lay down, and wave goodbye. Looking ahead, Beckman said, "[Emmy has] received such an amazing response from our residents, I do think we're going to move forward and do this in other communities."
Why CEO Is Sure His New Tower Will Be THE Place to Live in B'more
Digested From "Proposed Downtown Baltimore Apartment Tower Will Be an 'Urban High Rise of the Highest Caliber,' Developer Says"
Baltimore Business Journal (04/01/14) Litten, Kevin
Questar Properties Inc. is currently planning an apartment tower for 414 Light St. in downtown Baltimore that will offer "resort-style" amenities intended to set the building apart from other residential high-rises under construction or being planned. The building will rise at a height of between 40 and 45 stories. Once completed, it will include an eighth-floor pool and cabana that will overlook the city's famed Inner Harbor. Given the amenities package the building is preparing to offer, Questar CEO Stephen M. Gorn said he is unconcerned the tower will face competition from the 4,000 rental apartments in development within one mile of downtown. He states, "Baltimore is still underserved for apartment buildings, and this particular building is going to be an urban high rise of the highest caliber. Its amenities will make it a resort-style package, and we don't think there's a building nearby that’s been conceived that has those elements."
To ensure the building becomes a Charm City icon, Questar has hired Chicago-based Solomon Cordwell Buenz Architecture (SCB) -- a firm Gorn touts as "known for urban high-rise buildings." Indeed, recent residential projects SCB has worked on range from 500 Lake Shore Drive in Chicago to 55 Ninth St. in San Francisco. In addition to the fancy pool and cabana, 414 Light St.'s ground floor will contain 12,500 square feet of retail space. Gorn adds that the building will also offer a "liberal amount of parking" for both residents and visitors to the retail.
What Ala. City Ranks Among Best Cities for Rental Households?
Digested From "Birmingham Among Best Cities for Renters"
Birmingham Business Journal (Alabama) (04/04/14) Davis, Bryan
Kiplinger has named Birmingham the No. 5 most affordable city in the nation for those who rent. The report read: "Birmingham's recent unemployment rate was a healthy 5.6 percent, and there is a strong concentration of good-paying technical jobs, many of which require only an associate's degree or less." A recent Trulia study, meanwhile, said that it was 58 percent cheaper to rent in Birmingham than to purchase a house. Kiplinger tallie's Birmingham's rental population at 124,026 households out of 432,911, or 28.6 percent of the local population. The average monthly rent there is $685, while the median household income for those who rent is $27,307. Furthermore, the cost of living in Birmingham is 11.8 percent below the U.S. average. Raleigh, N.C., topped Kiplinger's list at No. 1.
Legal/Legislative Did You Know
The Three Things La Crosse's New Rental Regulations Will Do
Digested From "Panel Passes New Rental Regulations"
LaCrosse Tribune (Wisconsin) (04/02/14) Bloom, Betsy
In Wisconsin last week, a La Crosse committee endorsed a modified rental registry program that will require annual renewals and inspections every five years, despite opponents' claims it would violate a new state law limiting local regulations over apartment owners. The revised ordinance would not only issue certificates to rental property owners, it would also merge the city's single-family rental home list with the overall rental registry. Members of the Grandview-Emerson Neighborhood Association told the Judiciary and Administration Committee the measure is needed to support to help safeguard their residential area near the University of Wisconsin-La Crosse campus. That market has seen a steady shift of homes to rental use. The amended ordinance would require rental housing owners to apply for a registration certificate every year within 30 days of July 1, paying anywhere from $25 for a single-unit property to $65 for 48 or more units. Those who miss the 30-day window would be assessed a $100 penalty for each application. The charge for reinstating a lapsed registration would be $150. If caught with an unregistered rental, fines under the ordinance could range from $500 to $3,000 depending on the number of offenses.
What Does L.A.'s New Trash Plan Mean for Apartments?
Digested From "LA City Council to Consider Dramatic Change to Garbage Collection"
KPCC.com (CA) (03/31/14) Walton, Alice
A plan to overhaul the way garbage is collected from Los Angeles apartment communities and commercial businesses is expected to be approved by the Los Angeles City Council. The City of Los Angeles is responsible for collecting trash from single-family homes. However, private haulers handle trash collection at apartments and businesses. Under the current system, haulers are able to negotiate directly with building owners. The ordinance now under consideration by the L.A. City Council would divide the city into areas served by haulers chosen by the city via a competitive bidding process. This would enable L.A. to mandate higher environmental standards for trucks and greater efforts to recycle. Opposing the proposal are several pro-business groups and the Apartment Association of Greater L.A. These critics contend that the franchise system will reduce competition. The new system would go into effect in 2017 if approved by city council members.
Evanston's Bigger Apt. Communities Are Recycling Slackers. Why?
Digested From "Big Buildings Are Recycling Slackers"
Evanston Now (04/02/14) Smith, Bill
In Illinois, Evanston City Manager Wally Bobkiewicz says he wants to start "waving a red flag" about the need to increase recycling rates among the apartment communities and commercial businesses served by the city's municipal solid waste franchise. Public Works Director Suzette Robinson calculates that about 40 percent of the refuse collected from single-family homes and small apartment communities ends up being recycled. But only around 8.2 percent was recycled from larger apartment communities and businesses in 2013. Furthermore, only a little over 50 percent of the 1,321 accounts in the solid waste franchise program even take part in the recycling program. Bobkiewicz says that prior to the franchise agreement's 2017 expiration, city staffers are likely to propose major changes in how the program operates in order to increase recyling at the larger properties. "The result will be much confusion and anger among people," warns Bobkiewicz, predicting that many building owners will say they don't have room for the recycling containers. Consequently, Bobkiewicz notes, there will need to be "lots of discussion and community meetings over the next 18 months to make people aware of the significant issue we'll be grappling with." Evanston officials plan to conduct a customer survey later this summer and follow up on additional research on best practices for increasing the recycling rate. Staffers will then prepare a comprehensive request for proposals in the fall that would include all of Evanston's waste hauling programs.
Only 10 Days Remain to Take Advantage of Discounted Registration to the 2014 NAA Education Conference & Exposition
Save up to $275 by registering before April 18 for the largest, most exciting multifamily housing event of the year: the 2014 NAA Education Conference & Exposition, June 18-21 in Denver.
From world-famous speakers to the latest and greatest from multifamily supplier partners, if career enhancement is what you seek, then this is the one event you can’t afford to miss. Want to talk ROI? Where else can you get benefits like these for one low investment?
** General sessions led by world-renowned speakers representative of some of the greatest minds and business entrepreneurs in the world—the value of which alone covers the price of admission. This year’s big names include critically acclaimed international star Michael J. Fox; ABC’s “Shark Tank” co-stars Barbara Corcoran and Daymond John; Travelocity.com Founder Terry Jones; HGTV Co-Founder Susan Packard; “America Now” host and First “Apprentice” winner Bill Rancic and many others!
** More than 40 breakout sessions covering the gamut of multifamily housing operations and ownership, including marketing, sales, technology, industry trends, executive issues and so much more.
** Two days of NAA Exposition exploration featuring the newest, most innovative products and services from hundreds of leading-edge rental housing supplier partners.
** Receptions, meetings and interactive education sessions where attendees can share ideas and build their network of professional colleagues and potential service partners.
** Six available continuing-education credits offer NAA designates the chance to reach their designation renewal goal (not to mention the career investment) in one place and at one time, saving time and money.
What are you waiting for? Invest in your company and your career today. Visit the Education Conference website and remember that the largest discounts go to those who register early. Have four friends? Register as a group to take advantage of even more savings!
Always Popular Executive Exchange & Engage General Session Wows at 2014 NAA Student Housing Conference & Exposition
Housing the next generation of residents was the name of the game at the seventh-annual 2014 NAA Student Housing Conference & Exposition at ARIA Resort in Las Vegas, as more than 800 multifamily housing professionals were treated to a the perennial fan-favorite general session, “2014 Exchange & Engage: Executives, Meet Your Customers.”
The executive panel—a who’s who of talent and expertise in the student housing industry—discussed their thoughts on new amenities (bowling alleys?!), the benefits and challenges of housing international students and communicating with a Millennial generation that has been raised on technology. As one COO panelist said, “Don’t just look at student housing residents as entitled kids who want, want, want. They may be entitled, but they’re paying customers.”
Missed the action? Not to fear, NAA has you covered. Student housing professionals seeking to enhance their careers can take advantage of this and other session recordings from 2014 NAA Student Housing Conference & Exposition, all for just $149!
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.
Visit units Magazine for more coverage of the 2014 NAA Student Housing Conference & Exposition.
‘Maximize’ Your Multifamily Assets This October
New name, same great conference! The 2014 Maximize: The Multifamily Asset Management Conference—October 13-15 at the Amelia Island Plantation Resort in Amelia Island, Fla.— is the industry’s only event dedicated to staying ahead of the ever-evolving operational curve.
Nowhere else but the The Multifamily Asset Management Conference can you find world-class education and first-rate networking, as well as ideas and strategies for boosting net operating income.
Rental housing owners, operators and asset manager attendees will have unique access to insight on operational best practices, supplier and system recommendations, ideal benchmarking metrics and much more.
Register today to and be first in line for the information, insight and answers to questions necessary to boost your bottom line.
Advance Your Career 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.
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
Participate Today: 2014 NAA Survey of Income and Expenses
It’s a win-win when your company participates in the 2014 NAA Survey of Income & Expenses in Rental Apartment Communities.
All participants receive a complimentary copy (a $599 value) of the final report which contains:
•Valuable information your staff needs to prepare for the upcoming budget season.
•Detailed local market and national economic analysis that will help ensure accurate financial and benchmarking information for your company.
•Data that will help you compare your community’s performance against your peers.
There are two methods for your company to complete the survey including using our designated Excel file to download data directly from your internal data systems or using our secure survey website.
Contact Janet Gora of CEL at 310-207-7328 to determine the best response method for your company (via Excel or Online). If your company has previously participated, be sure to contact Janet via email before you get started as she can also assist in pre-loading base property data for you.
If you missed last year’s 2013 NAA Income & Expense Survey—here’s the 2013 IES Executive Summary. To purchase your copy today, visit the NAA Bookstore.
NAAEI Designation Courses Offered Near You!
Rental Housing Association of Boston
April – May, 2014
Chicagoland Apartment Association
May – June, 2014
Apartment Association of Southeast Texas
May – June, 2014
Chicagoland Apartment Association
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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