Apartment Construction Soars, But Red Flags Flutter
Digested From "Apartment Construction Red Flags"
The Commerce Department reports that housing starts jumped 7 percent in March, led by gains in rental apartment construction as single-family starts declined. Multifamily construction was up 27 percent from February and 82 percent year-over-year to an annualized pace of 392,000 -- which is substantially higher than the 10-year average of 238,000. For the first time since the mid-1980s, multifamily housing starts were more than two-thirds of single-family. With an increase in apartment supply on the way, some analysts are worried about apartment REITs. Analysts at Cantor Fitzgerald say, "Supply is clearly on the way. . . . The big unknown is how desensitized (or not) investors are to the idea. The perception of a supply spike could cause the stocks to underperform as cash flow growth trajectories are lowered."
Market Trend Insights
The One Big Factor Driving U.S. Rental Demand
Digested From "Altos: No Sign of Single Family Rental Weakness -- Yet"
United Press International (04/15/13)
A report by Altos Research indicates that rental demand continues to be driven by increases in household formation, but investors are experiencing cap rate compression due to a weakening in the costs-to-income ratio. "Every week, new investment purchases are a worse deal for investors," says Altos Research's Mike Simonsen. The report, which surveys 1 million apartments and single-family houses for rent nationwide, indicates the rental market is strong in such areas as Phoenix, Los Angeles, Dallas, Florida, and Las Vegas. "Some of these new households are buyers, some are renters, but we're all moving out from Mom's basement," says Simonsen. "So rents are up a little bit."
Three Reasons Why Columbus Is Embracing Upscale Apartments
Digested From "Swanky Apartments in Demand at Up to $3,000 a Month"
Columbus Dispatch (OH) (04/15/13) Weiker, Jim
A wave of uber-luxury apartment communities is pushing monthly rents in Columbus and throughout central Ohio to new heights. Some owners and managers are offering two-bedroom units for more than $2,000 a month. These properties typically share three key elements. They are all in or near Downtown or the Short North neighborhood, where building costs are higher and where a plethora of stores and eateries are close by. In addition, they feature such high-end amenities as granite countertops, wood floors, and stainless-steel appliances. Third, most of these communities offer space, with some two-bedroom units boasting more than 1,500 square feet. Among the local communities with rents climbing northward of $2,200 a month for a two-bedroom apartment are 600 Goodale, Highpoint on Columbus Commons, and downtown's Annex at River South. Robert Vogt, a partner in a Columbus-based apartment-research firm, states, "Certainly for apartment complexes, this is new. It's definitely a major change from what we've seen." So far, local owners and managers say the residents renting uber-luxury apartments fall into four categories: empty-nesters who have a retirement home elsewhere; affluent young professionals, such as doctors and lawyers, who expect to relocate within a year or two; the recently divorced who are accustomed to luxury living; and corporations that keep apartments on hand for visiting executives.
How Tight Will the Portland Apartment Market Get?
Digested From "Apartment Market Grows Tighter, But Rent Increases Slow"
Oregon Live (04/17/2013) Njus, Elliot
It's getting increasingly difficult to find an apartment in and around Portland, but new construction could soon bring some relief. The apartment vacancy rate across the area has fallen to 3.55 percent, according a recent survey of apartment managers and owners by Multifamily NW. With an average of 39 days between the time an apartment is vacated to when it is rented again, there is currently fierce competition between potential residents. Rents reached an average of $1.04 per square foot across the metro area in the first quarter, an increase of 4 percent compared with a year ago. But over the past six months, rents have increased by less than 1 percent, which could be caused by growing competition from new construction. Apartment appraisers Patrick Barry and Mark Barry say more than 2,600 new rental units reached the market in 2012 across the Portland area and 5,300 are under construction and scheduled for completion in 2013 or 2014. The new apartments are expected to slow rent increases and ease the rental shortage over the next 18 to 24 months.
Why Are Rents on the Rise in Pittsburgh?
Digested From "Rent, Number of Apartments on Rise in W.Pa."
TribLIVE.com (04/17/13) Spatter, Sam
Rents for apartments in the Pittsburgh metro area have been on the rise, increasing faster than inflation, according to a recent Census Bureau report. This, in turn, has sparked a mini-boom in multifamily housing construction in the region. More and more developers have shifted their focus from single-family homes to capitalize on the demand and higher rents. While some choose to rent, many apartment residents have no choice because banks have made it more difficult to get a home loan. Additionally, the region has seen significant growth in high-paying jobs associated with the Marcellus shale development. Local apartment owners say rents over the past five years have increased an average of 3 percent to 6.5 percent for all bedroom units. "The Pittsburgh apartment rent is characterized by high demand and strong fundamentals, with a growing employment base," confirms Mark H. Dambly, president of Pennrose, a Philadelphia-based developer. "All of these factors makes Pittsburgh an attractive market for apartment developers."
How Is Multifamily Holding Up in the Real Estate Recovery?
Digested From "The Commercial Real Estate Recovery"
Bloomberg TV (04/17/13)
Speaking recently with Bloomberg TV, Walker & Dunlop CEO Will Walker says commercial real estate is basically on fire right now, with a lot of foreign capital coming into the market to buy commercial property in the United States. He observes that there has been a resurgence in the commercial mortgage-backed securities (CMBS) sector. To be sure, CMBS is a long way from the peak market of 2007 ($230 billion), with only $50 billion in deals last year. But there is greater investor demand because of the higher yields and the ability of commercial real estate, especially the multifamily housing market, to withstand the last downturn. Multifamily is the asset class that clearly upheld the best during the downturn, says Walker, but returns on investments have fallen as prices on apartments have risen. In terms of Fannie Mae and Freddie Mac, multifamily-related securities are only purchased from approved lenders, which means that there is a lot of private capital in front of government capital in those securities deals. However, with single-family securities deals, there is virtually no private capital out in front of the government capital.
Deals and Transactions
Boston Capital Closes $130M Apartment Fund
Digested From "Boston Capital Closes $130M Fund"
Boston Herald (04/16/13) Kantor, Ira
Boston Capital this past week announced the closing of Boston Capital Tax Credit Fund XXXVII, a diversified portfolio of 25 affordable apartment communities in 16 states with a fund size of $130 million in equity. According to the real estate investment and advisory firm, the various communities acquired by the fund add 1,350 rental apartments to Boston Capital's holdings. The fund includes nine developments for senior citizens, along with 16 apartment communities for families spread across such states as Arizona, California, Iowa, Indiana, Maryland, Massachusetts, Oklahoma, Tennessee, and Wisconsin.
HFF Takes Manhattan With the Sale of Class A Residential Towers
Digested From "HFF Closes Sale of Two Class A Residential Towers in Manhattan's Upper West Side"
Investors Business Daily (04/18/13)
HFF recently announced that it has closed the sale of The Aldyn and The Ashley, two newly-developed, Class A residential towers with 345 rental and for-sale units on Manhattan's Upper West Side. HFF marketed the properties exclusively on behalf of the seller, a joint venture between GID and The Carlyle Group. Completed in 2010, the towers include a mixture of studio, one-, two-, three-, and four-bedroom apartments averaging 1,002 square feet each. In addition to its 136 rental units, the Aldyn includes 150 condominiums.
Feldman Mall Properties Transformed Into Apartment REIT
Digested From "Feldman Mall Properties Transformed Into Apartment REIT"
Commercial Real Estate Direct (04/19/13)
The former Feldman Mall Properties Inc. has transformed itself into an apartment investment firm and changed its name to Trade Street Residential Inc. It is now seeking to raise fresh equity to acquire high-yielding properties. After disposing of its retail properties earlier in the year, it acquired apartment communities from Trade Street Property Fund I and BCOM Real Estate Fund in return for shares in itself. It is now looking to raise equity via a public offering of its common stock led by Sandler O'Neill & Partners. The plan is to use proceeds of this offering to buy out its venture partners in five communities and fund pending acquisitions. Trade Street currently owns 14 apartment properties containing 3,183 rental units. These communities are spread across seven states, including Georgia and Texas. Last year, they together generated $13.6 million of net operating income. The company, which would operate as a REIT, is hoping to pursue investments in garden-style and mid-rise apartments throughout the Southeastern markets and Texas. Particular focus will paid to those areas that have stable work forces, limited competition from other apartment REITs and other institutional investors, and a limited supply of new construction.
Who Is Equity Residential's New COO?
Digested From "Equity Residential Names David S. Santee Chief Operating Officer"
Business Wire (04/17/13)
Equity Residential has appointed David S. Santee as its new COO. In this role, he will lead both the apartment REIT's operations and property management organizations. Since 2006, the 54-year-old has served as Equity Residential's executive vice president of operations, a position that has given him responsibility for the company's revenue, marketing, information technology, facilities, and procurement groups. Santee is a 19-year company veteran and has served in a variety of roles in Equity Residential's property management organization. Equity Residential President and CEO David J. Neithercut remarks, "His experience in all facets of our business combined with his dedication to maximizing performance make him ideally suited for this role." Equity Residential is an S&P 500 company that has ownership interests in 416 apartment communities located in 13 states and Washington, D.C., containing 118,778 apartments.
What Does the Future Hold for America's Housing Stock?
Digested From "A U.S. Template for a Third-Millennium City"
Urban Land (04/13) Vol. 72, No. 3, P. 61 Penalosa, Enrique
The population of the U.S. is expected to increase by 36 percent totaling 438 million people in 2050. This means that the U.S. will need 74.3 million new homes to meet demand. Enrique Penalosa, former mayor of Bogota, Colombia and international consultant on urban planning, says how the U.S. moves forward on techniques used to build these homes could greatly influence global sustainability. Penalosa says an urban model based on high density and close proximity to pedestrian and bicycle only paths is the ideal option to consider when building new homes and maintaining sustainable cities. This plan has the added benefit of reducing the need for roads, cars, and reduces the negative aspects associated with areas that see high volumes of vehicle traffic. He adds that such high-density habitats will attract people seeking suburban living in an urban setting. The best location for the high-density buildings is as close to city centers as possible to reduce the need for vehicle trips, but nearby suburbs will work as well. However, for low-density suburbs to be utilized, zoning regulations would need to be changed and infrastructure would need to be upgraded to meet demand. Penalosa argues that not taking advantage of the opportunity to redesign the urban model will mean a missed chance at improving living standards and building more sustainable cities.
How Are Apartments Leading Japan REITs?
Digested From "Apartments Lead Japan REITs"
World Property Channel (04/16/13)
Japanese REITs focused on apartments performed better than any other property sectors over the past five years, according to the Bloomberg Riskless Return Rankings. The new data showed that apartment REITs in the country produced a risk-adjusted 3.2 percent in the five-year period, followed by offices at 0.9 percent and retail at 2.3 percent. Overall, residential REITs were the best play in Japan, producing an average yield of 4.6 percent, according to data from Nomura Securities. Six of the top 10 performers of the REITs tracked by Bloomberg invest in residential real estate. By contrast, 10-year government bonds declined 1.7 percent.
Legal/Legislative Did You Know
Whole Lotta Shakin' Going on With New SF Apt. Quake Legislation
Digested From "Mayor Lee Signs New Earthquake Upgrade Requirement For SF Apartment Buildings"
CBS 5 (CA) (04/19/13) Taylor, Barbara
San Francisco Mayor Ed Lee recently signed legislation that aims to make thousands of apartments citywide safer during the next major earthquake. The seismic safety measure requires reinforcements of all the city's soft-story apartments containing at least five rental units. The soft-story retrofitting will cost, on average, between $60,000 and $130,000, and the new legislation will give building owners several years to complete the works. The owners have been given the green light to pass on much of the costs to residents. Seismologists continue to predict that a major Bay Area earthquake will happen within the next 30 years.
Calif. Committee Snuffs Out Apartment Smoking Ban
Digested From "Bill to Ban Smoking in Condos, Apartments Defeated"
Associated Press (04/18/13)
In California, a proposal to ban smoking in apartments and condominiums failed last week in the Assembly Housing and Community Development Committee. Introduced by state Sen. Marc Levine (D-San Rafael), the bill was rejected on 5-2 vote. AB746 would have created designated smoking areas outside of apartment communities, at least 20 feet from the building or 100 feet from a playground or pool. But critics say the rule would be too difficult to enforce. A Levine spokesman says the lawmaker will try to have the bill reconsidered.
Which Canadian City Could Soon Be Getting Apartment Recycling?
Digested From "Recycling Services Could Be Coming to Calgary Apartments"
Waste & Recycling News (04/17/2013) Johnson, Jim
Calgary could soon extend recycling services to local apartment residents. The Canadian city is considering three options for the service, including one idea to mandate the service be provided by apartment owners using the private sector. The other two options call for services coordinated by the city. Devin Goss, co-owner of BluPlanet Recycling, comments, "All of those options are more-or-less supporting independent recycling companies such as my own. I'm going to guess that this is going to translate into a significant amount of new business for companies like mine."
Have You Stopped By The NAA Website Lately?
The new NAA website is here! Come by and see our new look and site improvements, including a better site search, organization, community function and mobile view.
Then, tell us what you think on Twitter, with the official hashtag #ANewNAAhq.
2013 NAA Survey of Income & Expenses in Rental Apartment Communities
Some of the most valuable information your staff needs when preparing for the upcoming budget season is available to you for free from the National Apartment Association.
By your Company’s participation in the 2013 NAA Survey of Income & Expenses in Rental Apartment Communities, you will receive a free copy of detailed market and national economic analysis this fall that will help ensure valuable, accurate financial and benchmarking information for your company. This data helps you to compare your community’s performance against your peers.
There are several 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. You can download a pdf version for reference to the questions and definitions.
If your (ownership or management) Company has multiple properties, please contact Janet Gora of CEL to determine the best response method for your company (Excel or Online). Janet can be reached at 310/207-7328. If you need an Access Code, contact NAA’s Valerie Sterns at 703/797-0624. The deadline to complete the survey is April 26.
Participate in Apartment Compensation Survey: And Get a Free Copy
NAA has partnered with CEL & Associates to conduct the National Apartment Compensation and Benefits Survey, the nation’s largest, most widely used, referenced and recognized compensation resource for the real estate industry. This is an overall Company/Corporate-level survey, and is completed by the Human Resources department or CFO/COO offices for your firm.
In its 24th year, the national survey encompasses compensation trends, benefits, compensation policy questions, long-term incentive compensation structures, and detailed information/statistical (quartile) breakout of compensation results on a position by position basis stratified by Company Size (employees), Company Type (public and private), Specialization, Region, and Metropolitan Area.
Companies wishing to participate can complete the survey on our secure survey website. In addition to the general company-level questions online, a designated Excel file is available to download individual salary/bonus data from your HRIS or other internal database. The survey results will be available in early August. Companies participating in the survey receive a complimentary copy of the results. For further information, contact CEL’s Janet Gora via email or at 310/207-7328. The deadline to complete the survey is April 26.
Tax Season Relief: Discounted Registration for the 2013 NAA Education Conference & Exposition
Glad tax season is over? You’ll be even happier if you register for the 2013 NAA Education Conference, June 19-22 in San Diego, between April 22 and April 26: Use the promo code “taxbreak” to save $125 off your registration to the largest event in the multifamily housing industry.
What awaits you this summer? The 2013 NAA Education Conference & Exposition promises inspiration, innovation and connection as you join more than 6,200 of your peers to hear insight from world-class speakers, including Virgin Group Chairman Sir Richard Branson, Life is good® co-founder Bert Jacobs and entrepreneur, author and artist extraordinaire Erik Wahl (to name just a few; preview these and other exciting speakers now) and tour the latest and greatest from the multifamily supplier partners in an exhibit space equal to that of four football fields.
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.
Catching this wave doesn’t require a surfboard, but you will need to register. Visit the Education Conference website and remember to consider group discounts: register five or more attendees and save your organization up to $400!
Is Your Company Military Friendly With Job Openings Across the US?
Register for the 2013 NAA Education Institute Military Career Fair, featuring up to 1,000 veterans, military spouses and transitioning military members.
WHY HIRE MILITARY VETERANS? THEY ARE:
• Team players who are prepared to accomplish company goals
• Quick learners who have technical skills gained through extensive training
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respect other cultures
• Tested leaders responsible for lives, budgets and multi-million dollar equipment
Sign up at the Apartment Careers website.
For more information, contact Vicki Sharp at 512/550-2021.
NAAEI Designation Courses Offered Near You!
Greater Charlotte Apartment Association
East Bay Rental Housing Association
Nevada State Apartment Association
Roanoke Valley Apartment Association
Chicagoland Apartment Association
July - August, 2013
Central Iowa Apartment Alliance
September - October, 2013
Greater Charlotte Apartment Association
October - November, 2013
Apartment Association of Greater Los Angeles
November - December, 2013
Nevada State Apartment Association
Roanoke Valley Apartment Association
Greater Charlotte Apartment Association
Roanoke Valley Apartment Association
To find more courses in your area, click here.
For more information about any of the classes listed, please contact Kimberly McCrossen at email@example.com or 703/518-6141 ext. 121.
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