Look Who's Buying Up Apartments Across The Country
Digested From "REITs Buying Up Apartment Buildings Across The Country"
NuWire Investor (05/06/14) Anderson, Bendix
Despite increasingly high prices for apartment communities, REITs remain on a buying binge in the multifamily housing sector. Many are realizing value in mergers that offer them efficiencies that put a strong hold on their markets. Others are looking at markets and regions where asset prices are not so high compared to the income from the communities. Brady Titcomb, research director for U.S. multifamily at JLL, notes, "Yield and upside have multifamily REITs moving towards the Sunbelt and the Heartland." During this year's first quarter, REITs purchased approximately $1.5 billion in apartments -- impressive considering the first major apartment transaction for the year, the $4.3 billion merger of Essex Property Trust and BRE Properties, didn't close until April 1. The second quarter is already shaping up to be a busy one, too. Top acquisition markets for REITs include Atlanta, Charlotte, Dallas, Denver, Los Angeles, Memphis, and Oklahoma City. Meanwhile, apartment REITs have sold over $100 million in apartment communities in the San Diego and the nation's capital in the early going of 2014.
Market Trend Insights
Three Reasons Why Home Flipping Profits Soared in Q1
Digested From "House Flipping Becomes More Profitable"
MarketWatch (05/04/14) Hill, Catey
In this year's first quarter, home flippers recorded a 30 percent gross return on their investment -- one of the highest levels in years, reports RealtyTrac. Flippers purchased the residences for an average of $183,276 and sold them for $238,850, the firm's data showed. Meanwhile, the median amount spent on improvements for home flips was only around $4,800, according to BuildZoom. The impressive returns are due to three main factors -- a more stable housing market, slower new-home building, and fewer total home flips. Indeed, flips were down to just 3.7 percent of all single-family home sales from January through March, states Daren Blomquist, vice president of RealtyTrac. He believes this to be a trend that will hold steady in the coming months, reasoning, "Flippers are behaving rationally this time around as opposed to the last boom when they helped create a price bubble." Of course, flippers in some markets are faring better than others. In Pittsburgh, for instance, flippers purchased houses for an average of just under $55,000 and sold them for nearly twice that, on average. On the downside, flippers in Charlotte, Houston, Tampa, and Indianapolis tended to lose money on their deals.
Why More Offices Are Being Transformed Into High-End Apts.
Digested From "Developers Turn Former Office Buildings Into High-End Apartments"
Wall Street Journal (05/08/14) Brown, Eliot
Over the years, office space has traditionally commanded significantly higher rent than residential space. That is starting to change, particularly for older buildings that have lots of architectural charm -- often located in urban downtowns -- but are no longer desirable as top-notch commercial office space. As of Dec. 31, Reis Inc.'s analysis of 50 top markets shows that the U.S. apartment vacancy rate stood at 4.1 percent -- the lowest since the end of the dot-com boom in the early 2000s. Meanwhile, the office vacancy rate was 16.7 percent not very far off from the 17.6 percent post-economic crisis high reached in 2010. The fact that residential rents are surpassing office rents reflects the path of the U.S. economic recovery in addition to demographic and lifestyle shifts. During a typical cycle, tenant demand for offices picks up within a year or two after the onset of the recovery, enabling building owners to fill their vacancies and charge higher rents.
In this recovery, however, office vacancies have stayed stubbornly high as employers have been slow to expand, leaving hundreds of millions of square feet empty. While prime-quality offices continue to command top dollar, the economy has been especially harsh on many older properties that just can't compete with newer spaces and never fully recovered from earlier economic downturns. Meanwhile, demand for rental apartments is so strong that property owners in such cities as Cleveland and New York are reporting months-long waiting lists from people eager for places to live, especially those close to employment centers. Reis economist Ryan Severino concludes that the economic recovery has "been the kind of one that gets people renting…but not a lot of people back to work using office jobs. Normally you wouldn't expect to see this kind of divergence where apartment vacancies are plummeting and office vacancies are stuck."
Three Reasons Why San Antonio Makes This Top 10 Apt. List
Digested From "San Antonio Named a Top Renter Market by Rent.com"
San Antonio Business Journal (05/09/14) Silva, Tricia Lynn
In observance of May being National Moving Month, Rent.com has partnered with FlatRateMoving to create the Top 10 Cities for Renters on the Move list. New Orleans has laid claim to the top spot based on a variety of factors. More interesting is the fact that four Texas markets placed in the top 10, including: Austin, second; Dallas/Fort Worth, fifth; San Antonio, sixth; and El Paso, ninth. San Antonio ranked so high this year due to such factors as its famous River Walk, such popular cultural venues as Artpace San Antonio, and the fact that its population has increased by 4.2 percent since 2010. In addition, it has more than 17,000 rental units in various stages of planning and developing, which will likely bring down its 9 percent vacancy rate in the months to come.
Denver Apartment Rents Stay Mile High
Digested From "Metro Denver Apartment Rents Rise Despite New Construction"
Denver Business Journal (05/05/14) Huspeni, Dennis
According to the first-quarter report from the Apartment Association of Metro Denver, the increasing supply of new rental units in the Denver metro area has yet to have any significant impact on the market's low vacancies and increasing rents. Average monthly rents rose to $1,074 across the region from January through March -- a 3 percent increase from the fourth quarter. It was third quarter in a row an increase was measured, according to the study which was co-produced by the University of Denver. Every county in metro Denver -- Adams, Araphaoe, Boulder/Broomfield, Denver, Douglas, and Jefferson -- saw its average rent increase. The average vacancy rate, meanwhile, slipped from 5.2 percent at the end of last year to 5.1 percent as of March 31. Anything around the 5 percent mark is considered a tight market. Mary Wessler, the Colorado regional vice president of ConAm Management Corp., comments, "The apartment industry is working feverishly to deliver more residences to meet demand, but practical hurdles like a shortage of framers have resulted in construction delays. However, additional supply is under construction and coming soon, which will offer more options to apartment [residents]." A separate first-quarter study by ARA Colorado's Apartment Insights showed 19,349 rental units are under construction in metro Denver, with an additional 19,110 apartment in the planning stages.
Deals and Transactions
D.C. Apartment Developer Goes Big-Deal Hunting in Portland
Digested From "Portland's Superhot Apartment Market Attracts a Big-Deal Developer"
Portland Business Journal (OR) (05/08/14) Culverwell, Wendy
The continuing strength of Portland's apartment sector has attracted Fore Property Company, a national development firm headquartered in Washington, D.C., with West Coast operations based in Las Vegas. It recently started building a 244-unit apartment community north of the city's Pearl District. The development will be located in the Riverscape district and be ready for residents in 2015. Lee Novak, vice president of development, said the Riverscape community is the first of several planned in Portland and throughout the Northwest. He noted that the region's low vacancy rates and rising rents make it an obvious target for such new construction. The Portland area's apartment vacancy rate was 3.5 percent in the most recent survey of area managers for Multifamily NW, an industry organization -- the lowest level recorded in the spring in six years. Fore has several additional sites along the Williamette River under contract, including one immediately to the north of Riverscape. The plan is for this second Riverscape community to offer 270 apartments in a couple of six-story buildings. It will be the subject of a design commission hearing on the afternoon of June 5.
Three Ways Greystar Saved $6 Million on Utilities in 2013
Digested From "Greystar Saves $6 Million on Utilities and Plans More Energy-Saving Projects"
Property Management Insider (05/09/14) Blackwell, Tim
DeeAnne McClenahan, Greystar's senior director of procurement and sustainability, has played a key role in implementing a number of energy-saving projects at many of the more than 700 apartment communities under the company's management. Last year, she estimates that Greystar saved $6 million in utilities on three initiatives: changing shower heads, properly programming thermostats, and improving irrigation systems. She believes there is the potential for much more savings, especially with a portfolio as large as Greystar's. The firm owns a $7.5 billion global portfolio of more than 50,000 rental units in more than 40 markets. McClenahan remarks, "One of my favorite things to do is to look at the overall portfolio. While we can only affect the properties one at a time on retrofits, there's still plenty we can do across the board. We work with on-site property team members to let them know what the best practices are and try to get them to do the little things like turning off the lights when you leave a room."
Greystar-managed communities last year spent approximately $183 million in gross utility expenses. Consequently, a savings of even 1 percent or 2 percent is significant for a line item that is only overshadowed by payroll expense at most apartment communities. To be sure, if an owner is not going to hold on to an apartment community for long, it may not make sense for a retrofit or upgrade. Once such a project is complete, though, savings should be diligently monitored. McClenahan says that phase can be a real difference maker when getting the corporate buy-in and for later when the decision is made to turn the property. She concludes, "If you can hold it for a year and you can document the savings that you had, and that you're going to pass on to your seller, then you may be able to sell that improved NOI at a similar cap rate."
Leo DiCaprio Pays Titanic Sum for 'Eco-Friendly' Apartment
Digested From "Leonardo DiCaprio Buys £6m 'Eco-Friendly' Apartment"
Gulf News (United Arab Emirates) (05/07/14)
Oscar-nominated actor Leonardo DiCaprio has reportedly paid £6 million (around US$10 million) for one of the world's most environmentally advanced "green" apartments. The two-bedroom unit is located in New York City's Greenwich Village and features showers infused with Vitamin C and aloe to neutralize chlorine and soothe the skin. Other features range from a "dawn simulation" lighting system that streams energizing light in the morning to a shield coating that is designed to destroy bacteria in the kitchen and bathroom. The apartment's interior air, meanwhile, is mixed with aromatherapy appropriate to the time of day or the whims of the resident. The fourth-floor unit also boasts so-called "heat reflexology" floors have a layer of cork and rubber designed to reduce stress on the body and improve posture. Furthermore, the building's insulation is soy-based. The 39-year-old box-office star was won over in his choice of new digs by a commitment by owners Delos -- a company launched by two former Goldman Sachs partners -- to sustainability and the wellness of residents. The apartments in the building each boast amenities that deliver 23 therapies offering improved light, air, water, nutrition, energy use, and even slumber. It is an 1897 building that was previously a dress factory and a public parking garage.
Colorado Non-Profit, Local Utility Partner for Efficiency
Digested From "Colorado Non-Profit, Local Utility Partner for Efficiency"
Intelligent Utility (05/14) Pletcher, Suzanne
Grace Apartments sustainability manager Caitlin Rood applied for financial aid to replace aging, inefficient boilers that supply heat to the community, and she courted Energy Outreach Colorado (EOC), whom she had worked with on previous upgrades. “Energy efficiency upgrades benefit residents and our ability to operate quality properties, but they must be low cost,” Rood notes. “The challenge for managers of low-income housing is that financing is very tight. Without EOC’s help, we may have had to wait until the boilers actually broke down.” An energy audit by EOC also revealed that incandescent and fluorescent lights in the apartments and common areas needed replacing as well, while showerheads required conversion to conserve water. EOC asked a contractor experienced in energy efficiency upgrades via Xcel Energy, Grace’s utility supplier, to bid the work. The contractor submitted the $185,000 upgrade package to Xcel for rebates that would offset the total cost of the project. EOC obtained $50,000 from a municipal partnership and told Rood that Mercy Housing’s estimated share of the project cost would be $65,000, but Mercy's lending partners rejected the project. "The stumbling block was how much money we had available to invest in this, and at Grace we just didn’t have it," Rood says. The Colorado Public Utilities Commission prioritized energy efficiency rebate programs for affordable housing five years ago when they developed energy efficiency goals for shareholder-owned utilities, including Xcel. Xcel has requested that the commission cut its energy savings goals by 28 percent by 2020 in a decision expected by June. If Xcel’s request is granted, it could reduce funding for low-income and other residential energy efficiency programs. Xcel's actual rebate for Grace Apartments came in higher than their initial estimate, and Rood received approval to spend $22,000 for the upgrades, which were completed in February and are expected to save Grace Apartments some $13,000 of its yearly gas and electric costs.
How Much Did Apartment REIT Exceed Analysts' Estimates?
Digested From "Essex Property's Q1 FFO Beats"
Zacks Equity Research (05/08/14)
Essex Property Trust Inc. posted first-quarter 2014 funds from operations (FFO) of $2.02 per share, exceeding the Zacks Consensus Estimate by 1.0 percent. According to analysts, the REIT's quarterly results were driven primarily by "improving market fundamentals along its footprints." Factoring in merger expenses, acquisition costs, and non-recurring items, the company posted FFO per share of $1.68. Revenue, meanwhile, totaled $161.6 million from January through March -- a 9.2 percent increase from the same three months a year earlier and ahead of the Zacks Consensus Estimate of $160 million. Essex completed its mega-merger with BRE Properties on April 1 and was added to the S&P 500 Index on the same day.
Legal/Legislative Did You Know
How Apartments Could Give Electric Vehicles a Jolt in Calif. City
Digested From "Palo Alto Eyes Expanded Electric-Vehicle Requirements"
Palo Alto Online (CA) (05/09/14) Sheyner, Gennady
In California, a Palo Alto City Council committee is considering a new law that would require all new non-residential developments and multifamily housing communities to accommodate charging stations. The ordinance aims to build on a similar law council members passed late last year, which requires all new single-family houses to include circuitry that can accommodate charging stations. If adopted, this new law would require other types of newly constructed housing to provide electric-vehicle-friendly infrastructure. Exact requirements will vary depending on development type. According to Palo Alto officials, the requirements would come in three tiers. The most stringent requirement is being reserved for hotels and non-residential developments, requiring the new buildings to include parking spaces with charging stations. The next tier calls for an "EVSE-ready outlet" -- infrastructure that would ensure that almost no additional work would be required to install a charging station. The lowest tier would require installing a conduit capable of accommodating newly installed charging stations. Under the proposed ordinance, the requirements would vary widely for multifamily housing depending on the types of parking structures they have and on whether they are condominiums or rental apartments. Condos communities would be required to have just one "EVSE-ready outlet" per unit. Apartment communities would be required to have a charging station for the number of spaces equal to 5 percent of housing units.
Mich. Town Considers Ordinance to Terminate Leases for Wrongdoing
Digested From "Proposed Ordinance Would Terminate Leases for Criminal Activity"
WNEM (Saginaw, Mich.) (05/07/14) Felton, James
A proposed new ordinance is being discussed in Saginaw, Mich., that would require multifamily housing residents to sign a crime-free lease with their property owner. Under terms of the agreement, residents who engage in criminal activity can have their leases terminated and be immediately kicked out. Saginaw Chief Inspector John Stemple says the plan would make local apartment communities safer. He remarks, "It certainly doesn't promote home ownership. It doesn't promote people to maintain their home, stay in the city. Everybody wants to live where it's safe. According to Stemple, the biggest part of the program is the crime-free lease addendum that gives owners the right to evict a resident immediately if they are involved in criminal activity on his or her property. Law enforcement officials in Saginaw Township believe the program to be effective. Stemple adds that his goal is to make Saginaw a place where criminals know they are not welcome. All parties involved are now in the process of drafting the language for the proposed ordinance.
How Cops and Apartment Pros Are Taking a Bite Out of Crime in Tampa
Digested From "Tampa Police Partners With Apartment Complexes to Make City Safer"
Bay News9.com (05/08/14) Mueller, Paul
The Tampa Police Department has teamed with at least 68 local apartment communities to minimize multifamily housing crime. As part of the crime-free initiative, maintenance crews are tightening door locks, installing new lighting, and securing windows. Tampa Police Chief Jane Castor recently presented the property manager at Meridian Pointe Apartments with the first Crime-Free sign, meaning it's the first community to be certified by the department. Apartment owners and their staff must undergo a three-phase process in order to be certified. First, management is required to take an eight-hour course at the Tampa Police Department. Second, where necessary, they will have to make safety enhancements. Third, they must get the word out to all residents about the new program. Bob Kelsey of Meridian Pointe remarks, "We can't do it without the police. The police can't do it without us, and we can't do it without the people sitting in here, which are the residents."
In some cases, maintenance personnel will be replacing doors that are easy for cops to kick in. Managers are also going to speed up the eviction process for residents caught dealing drugs on the property. They will also ensure that all of the plants and trees are trimmed to give guards and property management a better view of what’s going on in a given community. In addition to the 68 apartment communities that are now in the process of getting certified, an undisclosed number of others are on a waiting list to become part of the program.
Heads Up! Last Chance to Save on Registration for the 2014 NAA Education Conference & Exposition Is Just Around the Corner
The industry event of the year—the 2014 NAA Education Conference & Exposition, June 18-21 in Denver—is your opportunity to “Reach New Heights” in your career. Register by June 6 to take advantage of up to $150 of savings on your investment. But act fast: prices will increase in just three short weeks.
What awaits you in Denver? The real question is, “What doesn’t?”
• 50 education sessions offering the latest trends and hot topics in all areas of rental housing management, from marketing and leasing to operations and management.
• Four world-renowned featured keynote speakers, including Michael J. Fox, critically acclaimed television and film star; and Barbara Corcoran, co-host on ABC’s hit show “Shark Tank.” (http://educonf.naahq.org/barbara-corcoran-daymond-john)
• Four world-class Thought Leaders, including Terry Jones, Founder of Travelocity.com; Susan Packard, co-founder of HGTV; and Bill Rancic, Host of “America Now” and season one winner of Donald Trump’s “The Apprentice.”
• New for 2014, NAA is offering 21 “grab and go” 30-minute education sessions on the exposition show floor in three themed Learning Zones: Green/Sustainable, Mobile Marketing and Technology. Enhance your conference experience by joining NAA Exhibitors for interactive, “lean in” learning in an intimate setting.
• Attending the 2014 NAA Education Conference & Exposition earns you six continuing education credits—all you need to reach your NAA professional designation renewal goal.
• Four days of awe-inspiring networking events, from the Conference Kick-Off Celebration on Wednesday, June 18, the NAA Opening Party, “Festivals of Denver,” to the Saturday NAA Awards Breakfast Celebration, featuring special guest speaker Alex Sheen from because I said I would.
• Over 400 multifamily service partners exhibiting in the Exposition, a space equivalent to five football fields chalk full of the latest and greatest products and services available to the rental housing industry.
And the list just keeps going. Between the scheduled events and surprises in store, missing this event might just be the biggest mistake in your professional career. Read more about what to expect in Denver.
What are you waiting for? Invest in your company and your career today.
Download the Mobile App for the 2014 NAA Education Conference & Exposition
NAA is pleased to announce the availability of the mobile app for use in navigating the 2014 Education Conference & Exposition, June 18-21 in Denver.
The app, available for Apple and Android smartphones and tablets, offers a conference dashboard, scheduling functionality, event overviews and more.
Visit the NAA Education Conference website for downloading instructions.
Maximize Your Exposure by Submitting a Speaking Proposal for the 2014 Multifamily Asset Management Conference
Maximize: The 2014 Multifamily Asset Management Conference—October 13-15 at the Amelia Island Plantation Resort in Amelia Island, Fla.—the industry’s only event dedicated to asset management and long-term value creation in multifamily housing communities—is accepting speaker applications through June 6.
Co-produced by National Apartment Association (NAA) and the Joshua Tree Conference Group (JTCG), the conference builds upon the success of the Apartment Revenue Management Conference and the NAA Green Conference to create a comprehensive retreat for asset managers charged with creating new value for their investors.
Nowhere else but 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. Maximize: The Multifamily Asset Management Conference focuses on five key areas: Expense Management Strategies; Revenue Enhancement and Pricing Strategies; Data Analytics and Performance Benchmarking; Capital Markets Financing Strategies; and Innovation.
Have something to say? Visit the conference website for full details on submitting your proposal. Then, make sure to register today and be first in line for the information, insight and answers to questions necessary to boost your bottom line.
Register Now for a Webinar on Fair Housing for the Deaf and Hard of Hearing
Join NAA for a special webinar providing fair housing education and guidance addressing the hearing impaired. The webinar is slated for Wednesday, May 14 at 2 p.m. ET.
The National Fair Housing Alliance (NFHA) has filed housing discrimination complaints with the U.S. Department of Housing and Urban Development against major apartment complex owners for discriminating against the hearing impaired. The webinar will feature a panel of experts, including Stella Adams, founder and CEO of S J Adams Consulting, which performs research and policy development in the areas of fair housing and fair lending.
2014 NAA Survey of Income and Expenses Deadline May 16
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!
Nevada State Apartment Association
Roanoke Valley Apartment Association
Chicagoland Apartment Association
May – June, 2014
South Dakota Multi-Housing Association
September – October, 2014
Apartment Association of Greater Omaha & Lincoln
September – November, 2014
Lubbock Apartment Association
October – December, 2014
Connecticut Apartment Association
October – December, 2014
Roanoke Valley Apartment Association
October – November, 2014
Chicagoland Apartment Association
Roanoke Valley Apartment Association
Nevada State Apartment Association
Roanoke Valley Apartment Association
NAAEI Leadership Experience: Powered by Dale Carnegie:
Greater Cincinnati Northern Kentucky 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.
Did You Know?
The NAA Education Conference is super social! Stay informed on Facebook, Twitter and Instagram by following #NAAEduConf.
Apartment Internet Marketing (AIM) Conference
May 5-7, 2014
Huntington Beach Hyatt
Huntington Beach, Calif.
2014 NAA Education Conference & Exposition
Colorado Convention Center
2014 Multifamily Asset Management Conference
October 13-15, 2014
Amelia Island Plantation Resort
Amelia Island, Fla.
Don't forget to check out Lauren Boston's weekly blog for a humorous take on all the latest trends in the multifamily housing industry. Check out Lauren's latest blog!
||The National Apartment Association (NAA) is America's leading advocate for quality rental housing. NAA's mission is to serve the interests of multifamily housing owners, managers, developers and suppliers and maintain a high level of professionalism in the multifamily housing industry to better serve the rental housing needs of the public.
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