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NAA Industry Insider: Why Individuals Are the New Hot Apartment Investors

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Why Individuals Are the New Hot Apartment Investors
Digested From "Individual Investors Eye Apartments"
NU Wire Investor (04/24/13)

More and more real estate investors are forsaking single-family homes in favor of purchasing apartment communities in areas with low vacancy rates. One such investor is Spencer Cullor, founder of Kansas-based Cullor Properties/ApartmentVestors. He purchased his first apartment community in 2006 prior to the housing market's implosion. "A lot of people start with a four- to eight-unit and work their way up," said Cullor, who switched his business from building single-family residentials to spec on farmland and transferred to investing in multifamily. "We even started our business like that." Today, he has ownership stakes in 400 rental units across three states -- Kansas, Missouri, and Oklahoma -- and is next looking to set its sights on Texas. Indeed, the Lone Star State is in the top one-third of places for investments in multifamily housing because of its job market momentum, notes a recent Marcus & Millichap apartment report. Joe Fairless, principal of Fairless Investing, switched from purchasing single-family homes to investing in apartment communities in 2012. His firm is closing on its first apartment deal in June -- a $6.8 million lease accord for a 168-unit apartment community in Cincinnati under a syndicated deal with a group of investors. Fairless remarks, "It's more work to buy an apartment, but the returns are greater. If you want scale, it's an apartment complex. It's the equivalent of buying 100 homes at once."
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Market Trend Insights

Why Is Seattle's Apartment Market Enjoying Boom Times?
Digested From "Rental Market Increasing Apartment Building Sales"
Seattle Post-Intelligencer (04/26/13)

Seattle's rental apartment sector is currently booming. The demand for rental units in the city has gotten so high that the low inventory supply is resulting in multiple offers on apartment communities. Firms like Amazon, Microsoft, and Zillow continue to feed Seattle's job growth, propelling the multifamily housing surge. With so many new jobs be created in the metro area, it is expected that there will be enough residents to fill all or most of the 6,900 apartments scheduled to be completed this year along with the 4,000 rental units that were completed last year. The average price of apartments has climbed 15 percent to a five-year high of $152 per square foot. When new construction levels out, analysts expect vacancy rates to rise.
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Why Are D.C. Rents Expected to Fall in 2013?
Digested From "Washington Faces Apartment Glut After Boom: Real Estate"
Bloomberg (04/23/13) Carmiel, Oshrat

Delta Associates reports that Washington, D.C., and the surrounding suburbs of Maryland and Virginia will be the only major metropolitan area to see declines in apartment rents in 2013, as apartment construction outpaced job growth. Data also indicates that rents will fall further in 2014, and Axiometrics Inc. Vice President of research Jay Denton says, "Everyone around the country is really watching D.C. because it's on the front wave of all these markets -- all the supply is coming back." Washington is at the forefront of the market as work on multifamily buildings rose 31 percent in March to an annual rate of 417,000, according the U.S. Commerce Department. Equity Residential and Home Properties, however, are selling buildings in the region as competition heats up, and 30,211 apartment units are under construction, with more than half expected to open this year, says Delta Associates. However, construction is outpacing job growth in the area, which is heavily reliant a government that reduced federal contracting by $7 billion in the last two years and implemented sequestration cuts. Washington ranks at the top in terms of number of apartments in the development pipeline, says Axiometrics, but it ranks 11th in job growth.
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Two Types of Renters to Propel Philly's Apartment Market in 2013
Digested From "Better Economy Helps Region's Apartment Market"
Philadelphia Business Journal (04/25/13) Heavens, Alan J.

Marcus & Millichap researchers are reporting that "modest" economic growth will benefit the Philadelphia metro area's apartment sector for the remainder of 2013, with vacancy rates expected to continue falling and effective rents on pace to rise. There will be two sources of renters for the Philadelphia region's market in 2013, researchers add. One results from increased employment -- at least 36,800 workers have been added, expanding local payrolls by 1.3 percent. The second source results from pent-up demand by young adults eager to move out of their parents' homes, but are not yet ready to make the leap to homeownership. Developers are set to add approximately 2,000 rental units to the market, nearly doubling the 1,031 completed last year. Marcus & Millichap forecasts that building permits for multifamily housing will likely rise by 5 percent to 3,900, comprising both rental apartments and for-sale condominiums. There will be two sources of renters for the Philadelphia region's market in 2013, researchers add. One results from increased employment -- at least 36,800 workers have been added, expanding local payrolls by 1.3 percent. The second source results from pent-up demand by young adults eager to move out of their parents' homes, but are not yet ready to make the leap to homeownership. Center City will continue to be a major focus for luuxury apartment developers. Their new units will be targeted to affluent buyers moving from the suburbs or seeking weekend getaways. Finally, the Marcus & Millichap expects regionwide vacancy rates to decline from 5.2 percent currently to 4.8 percent. Consequently, average effective monthly rents will climb 2.1 percent this year to $1,122.
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Why Are Milwaukee Apartment Rents Expected to Climb?
Digested From "Milwaukee Apartment Rents Expected to Climb"
Milwaukee Business Journal (04/24/13) Ryan, Sean

The opening of 1,000 new apartments in the Milwaukee area this year will slightly boost vacancy rates, notes a new Marcus & Millichap study. However, average monthly rents are expected to climb 4 percent, reaching $934 by the end of this year's fourth quarter. Overall, the region's apartment sector received high marks in the firm's second-quarter report. Employment in and around Milwaukee is expected to rise in the months to come, generating new residents to fill local apartments. However, vacancies are on pace to increase to 3.5 percent. Of the approximately 1,000 apartments to be completed this year, 245 of them will be senior housing units versus 1,500 that were completed a year ago. Marcus & Millichap researchers conclude that the market is currently favoring people who are trying to sell apartment communities over investors who want to buy them. There are few properties on the market compared with the demand from investors.
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Where Will New Apartments Be Popping Up in the Denver Area?
Digested From "Job Growth Spurs Denver Apartment Market"
Denver Business Journal (04/24/13) Huspeni, Dennis

Marcus & Millichap Real Estate Investment Services' newly released second-quarter apartment market report shows that apartment developers will finish approximately 4,200 rental units in the Denver metro area before the end of the year. Most of the new construction is happening in downtown. The added apartments will expand the market's inventory by 2 percent, researchers note, which is on top of the 1,900 new apartments delivered in 2012. Much more apartment construction is on the way, as builders pulled multifamily housing construction permits for 10,600 units in 2013 -- "nearly three times the amount from one year ago," the report notes. Marcus & Millichap researchers further wrote: "The pipeline is growing rapidly with 12,000 units under construction and another 18,000 apartments in the planning stages." With more businesses moving to metro Denver, opening offices locally, or expanding operations, resident demand for rental housing should continue. The study states that nearly 35,000 jobs will be added to the area by the end of 2013. That is a 2.8 percent year-over-year growth.
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What's Ahead for N.C.'s Triad Apartment Market?
Digested From "Triad Apartment Vacancy Dips"
Business Journal of the Greater Triad Area (04/22/13) Carlock, Catherine

A new Real Data report shows that average apartment vacancy in North Carolina's Triad region was a historically low 8.3 percent during March versus 8.7 percent as of the end of last year's third quarter. Demand continues to be strong for rental apartments, researchers noted, with nearly 3,000 units being absorbed in the last two years. There are currently 1,130 units in various stages of development, including the Winston Factory Lofts in Winston-Salem and the Gardens at Anthony House in Greensboro. Beyond those units now under construction, there are 3,326 apartments in the proposal stage, including the Greenway at Stadium Park in Greensboro and Smith Crossing in nearby Kernersville. Real Data forecasts that the average apartment vacancy in the Triad will approach 7 percent in the coming year. Meanwhile, the average rent of $699 per month is expected to grow by around 3 percent in that time frame. It should be noted that the Triad had a vacancy rate of nearly 14 percent in 2009.
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Deals and Transactions

Canadian REIT Crosses the Border to Buy U.S. Apartments
Digested From "Canadian REIT Completes Purchase Of Six U.S. Multifamily Properties" (04/22/13)

Morguard North American Residential Real Estate Investment Trust (REIT) has completed the purchase of six multifamily properties from an institutional fund sponsored by Pearlmark Real Estate Partners for $218 million. The properties acquired include residential apartment and townhome communities with 1,793 units located in four U.S. markets -- Denver, Atlanta, Tampa, and Cary, N.C. The Ontario-based REIT is expected to complete the acquisition of an additional six multi-unit residential assets by the end of next month. "These investments are strategic to the REIT's ongoing success of acquiring institutional quality assets resulting in dependable income for unit holders," said Rai Sahi, CEO of Morguard North American Residential REIT.
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SWBC Finds Even the Apartment Deals Are Big in Texas
Digested From "SWBC Sells San Antonio, Fort Worth Apartment Complexes for $100 Million"
San Antonio Business Journal (04/22/13) Aldridge, James

SWBC Real Estate LLC confirms that it has sold a trio of apartment communities for a total sales price of $100 million in Texas. The three communities that changed hands were Mission Hills and Evans Ranch in San Antonio's Stone Oak neighborhood and Dry Creek Ranch in the Fort Worth suburb of Northlake. The two San Antonio properties were purchased by Boston-based TA Associates. The buyer of the 288-unit Dry Creek Ranch was Calgary-based Western Securities Ltd. "It was a great time to sell these assets, as multifamily properties are performing very well and acquisitions for this property type are in high demand for real estate investors," remarks SWBC Real Estate President Terry Gwin. "We believe that these transactions were a good sale on our part and will continue to be valuable assets for the purchasers." He adds that his company plans to break ground on a new apartment community in the Lone Star State by the end of the year. Dubbed Overlook Ranch, it will offer 318 Class A rental units in the AllianceTexas area of north Fort Worth.
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Industry Buzz

National Exemption Service Inc.
Nonprofit Firms Form Apartment REIT
Digested From "Nonprofit Firms Form REIT"
Wall Street Journal (04/29/13) Pruitt, A.D.; Wotapka, Dawn

Some of the country's biggest housing-related nonprofit organizations are delving into the for-profit world in order to safeguard affordable housing. The nonprofits, which include Mercy Housing Inc. and LINC Housing Corp., have created a private REIT that will acquire apartment communities nationwide. Dubbed the Housing Partnership Equity Trust, the new entity will focus mainly in communities where rising property values have prompted property owners to turn low-income housing into housing for the middle class or affluent. The REIT holds the distinction of being the country's only real-estate company owned and operated by nonprofits. It's also the second REIT to focus on affordable housing. Housing Partnership has raised over $100 million from private-sector investors, ranging from Citigroup Inc. to Morgan Stanley. It closed on its first acquisition late last week, a 128-unit apartment community in Aurora, Ill., for $5.2 million. According to the Housing Partnership, the REIT structure gives it access to low-cost capital and the financial ammo to compete with deep-pocketed investors who are increasingly looking for older properties to purchase, renovate and repair, and charge higher rents.
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Three Reasons for Apartment Boom in Charlotte's NoDa District
Digested From "Apartment Developers Say Yes to NoDa"
Charlotte Observer (NC) (04/25/13) Lacour, Greg

After years of inactivity, developers are beginning to build rental housing anew in Charlotte's trendy NoDa arts district. In addition to NoDa's status as a popular neighborhood, the increasingly tight lending market is driving the mini-boom. A third factor is the eagerly anticipated LYNX Blue Line Extension, the light rail project that will link uptown through NoDa to the University City area. "I think it's a snowball effect," said John Bell, a partner with Gvest Partners. "As [light rail] comes in, there'll be more people visiting, and as our community goes in and others are built, it'll just bring more people in to spur retail businesses, the shops, the restaurants." At least four major residential projects that will add more than 600 multifamily housing units to the area are planned. Most are rental apartments designed to meet the needs and budgets of young professionals drawn to NoDa's walkability and nightlife.
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Who (Wood) Framed Multifamily Housing?
Digested From "Laminated Strand Lumber Helps Meet Special Demands of Tall Wood Buildings"
Building Products Digest (04/13) Midgette, Ben

Wood framing is being increasingly used for multifamily housing developments, and laminated strand lumber (LSL) can effectively address the issue of wood shrinkage in wall plates by using the material for horizontal framing members. Hardwoods are combined to create LSL, with raw logs debarked, cut into strands, mixed with waterproof adhesives that contain no formaldehyde, and formed into dense mats. The mats are then converted into billets with a steam injection press. The resulting LSL usually has moisture content around 7 percent to 8 percent less than the equalized framing in most enclosed structures, which means wall plate shrinkage is minimal or nonexistent. LSL utilized in stud and rim board applications can further ameliorate wall shrinkage along the length of the grain. In addition, the LSL manufacturing process offers a uniform cure and even density gradient across the product's thickness, enhancing its strength and making it less prone to warping, shrinkage, and twisting.
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Commercial Lenders More Aggressive as Economy Heals
Digested From "Commercial Lenders More Aggressive as Economy Heals"
Albuquerque Journal (04/22/13) Gineris, Peter J.

The economy is slowly improving and so are commercial real estate fundamentals, according to the general consensus at the Mortgage Bankers Association's recent Commercial Real Estate Finance/Multifamily Conference in San Diego. Peter Gineris, senior vice president of debt and equity at CBRE/Capital Markets in Albuquerque, says the mortgage markets have more liquidity now than in 2007. Different types of financing are also available, and competition among lenders will pick up this year. Freddie Mac, Fannie Mae, and HUD combined for a record $63 billion in new originations in 2012. Meanwhile, FHA multifamily lending added over $12 billion to the agency segment. For the government-sponsored enterprises, the credit pendulum has swung toward more conservative underwriting for full-leverage requests and a continued reduction in partial interest-only payment periods. While it is not likely there will be enactment of definitive GSE/housing finance reform in 2013, talks are ongoing. In the meantime, they will remain the dominant capital source for multifamily housing borrowers in 2013.
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Legal/Legislative Did You Know

2013 Diamond Sponsors with correct Azuma logo
NAA Was Among Housing Groups to Testify on U.S. Tax Breaks
Digested From "Housing Industry Defends US Tax Breaks"
Financial Times (04/24/13) Politi, James

Last week, the U.S. housing industry urged Capitol Hill legislators not to curb the tax deduction on mortgage interest. Lawmakers continue to debate over how to reform the U.S. tax code and reduce the country's budget deficits. National Association of Realtors President Gary Thomas remarked, "Congress must first look to reduce spending in order to get our nation’s fiscal house in order." In addition to Thomas, there was testimony from the National Apartment Association, the National Association of Home Builders, and the Housing Advisory Group, along with various housing policy analysts and researchers.
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900 HUD Employees Affected in Plan to Close 16 Field Offices
Digested From "900 HUD Employees Affected in Plan to Close 16 Field Offices"
Federal Times (04/25/13) Reilly, Sean

The shutdown of 16 of the Department of Housing and Urban Development's 80 field offices by this fall will impact an estimated 900 HUD employees. Affected workers will have the option of changing jobs; relocating, with moving assistance; or accepting early retirement or buyouts. Upon completion of the massive reorganization -- which is not tied to 2013 budget cuts as a result of the federal sequester -- each state will still host at least one HUD field office. In addition to closures, the department also will consolidate staff in its multifamily housing program starting this fall. Employees in that program, which provides mortgage insurance to HUD-approved lenders, will work out of 10 offices across the nation by 2016 instead of 50 now.
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NAA Announcements

Owners and Employers: ROI of 2013 NAA Education Conference & Exposition Attendance Is Second-To-None

With regard to return on investment, nowhere else can you get so much for one small fee as you can by attending the 2013 NAA Education Conference & Exposition, June 19-22 in San Diego.

The practical know-how, classroom education and industry networking offered to attendees will no doubt have a positive effect on your company’s bottom line.

For NAA members, consider that full conference registration includes:

** Three general sessions led by world-renowned speakers Sir Richard Branson, Erik Wahl and Bert Jacobs, the value of which alone covers the price of admission.

** 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 Exposition exploration featuring the newest, most innovative products and services from the 350 supplier partners in a space the size of four football fields.

** 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 NAA Education Conference website today!

Rock the Block and Spark Connections During the 2013 NAA Education Conference & Exposition

Attendees of the 2013 NAA Education Conference & Exposition, June 19-22 in San Diego, should double-check their luggage just to make sure they brought their dancing shoes in preparation for what is sure to be a memorable evening—the 2013 NAA Opening Party: “NAA Rocks the Block, Sparking Connections.”

Join 4,000 of your closest friends for a night to remember as two full city blocks of San Diego’s famed historic Gaslamp Quarter—including streets, sidewalks, restaurants and shops—are shut down to the public for an exclusive event solely for conference attendees and their guests.

Mark your calendars now for this not-to-be-missed block party featuring food, drinks, live music (including famed West Coast band Haute Chili!), theme lighting and interactive entertainment: Thursday, June 20, from 7 p.m. to 10 p.m.

The NAA Opening Party is included with all full conference registrations. Additional tickets can be purchased for $175 via the registration form. We can’t wait to see you there!
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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.
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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.
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Announcing Maintenance Day at the NAA Education Conference

The National Apartment Association will host its first Maintenance Day which will be held on Thursday, June 20 in San Diego. As part of the NAA Education Conference & Expo, Maintenance Day is represents our continuing efforts to focus on those who keep our industry running every day. The program, specifically tailored to apartment industry maintenance professionals, includes the following:

• Advanced maintenance training
• Lunch
• Tabletop exhibits with focused learning
• One-day pass to the largest trade show in the industry
• Free tickets and reserved seating at the 2013 Maintenance Mania National Championship

Registration is $99 and is limited to 100 participants. For more information and to register, visit the NAA website.
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NEW DATES! Upcoming IROP Webinar

Registration is open for the IROP webinar series! Remember, if you promote these courses, you will receive a revenue share of $50 for individuals in your area who sign up!

This Webinar series will begin on Tuesday May 21, 2013 and will run every Tuesday through June 11. All Webinars will be held from 2 p.m. to 5 p.m. ET and includes time for Q&A.

Registration fee: $349 for members or $499 for non-members. Module prices are $99 for members or $125 for non-members.

Group pricing is available for 10 students or more, contact NAA's Shana Treger.

Don't wait, register today!
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Is Your Company Military Friendly With Job Openings Across the US?

Exhibit at the 2013 NAAEI Military Career Fair in San Diego and fill those open positions with veterans, military spouses and transitioning military members who are looking for a career “back home”.

When: Wednesday, June 19, 2013
Time: 9 a.m. to 3 p.m.
Where: San Diego Convention Center

Register for a booth at the Apartment Careers website.

For more information, contact Vicki Sharp at 512/550-2021.
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NAAEI Designation Courses Offered Near You!


Greater Charlotte Apartment Association
April, 2013

East Bay Rental Housing Association
May, 2013

Nevada State Apartment Association
September, 2013

Roanoke Valley Apartment Association
November, 2013

CAM Online


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
September, 2013

Roanoke Valley Apartment Association
November, 2013

NALP Online


Greater Charlotte Apartment Association
August, 2013

Roanoke Valley Apartment Association
September, 2013

To find more courses in your area, visit 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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April 30, 2013

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