NAA Industry Insider: Why Blackstone Is Betting Big on Apartments

May 27, 2014
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TimeWarnerCableApril14
Why Blackstone Is Betting Big on Apartments
Digested From "Blackstone Hunts for Apartments in Latest Rental Foray"
Bloomberg (05/22/14) Yu-Hui-yong

Blackstone Group is carving out a new company to own apartments, betting demand will outpace supply for at least three more years. The firm is hunting for new acquisitions to expand LivCor, a Chicago-based company formed last year from the purchase of stakes in 71 apartment communities valued at $2.4 billion. Blackstone is concentrating on suburban areas where there has not been as much new construction, including in the Southeast and in Texas. Blackstone has bought approximately 45,000 homes over the past three years, leading the burgeoning industry for single-family rentals. LivCor represents its first major foray into the multifamily housing market. The population of 20- to 34-year-olds -- considered the prime renting years -- exceeded 64 million as of the latest Census Bureau estimate for 2012. That represents nearly 20 percent of the country's population. Meanwhile, construction remains low by historical standards. Completions in buildings with five or more apartments averaged nearly 155,000 new units a year from 2010 to last year, notes the U.S. Census Bureau. "When you look at the demand trends, there’s a good reason to be optimistic over the next certainly three to five years, and likely beyond," comments Jay Parsons, director of analytics at property specialist MPF Research. "The cycle still has some legs."

Market Trend Insights


RealPageMay14
Are the 'Burbs Making a Comeback?
Digested From "Signs of a Suburban Comeback"
Wall Street Journal (05/22/14) P. A3 Shah, Neil

The tug of war between America's urban and suburban areas appears to be tilting back in favor of the land of lawns and shopping malls. According to new data from the U.S. Census Bureau, 14 of the country's 20 largest cities -- including Detroit and Philadelphia -- saw growth slow or their populations decrease in 2012-2013 versus 2011-2012. In several cases, rapidly expanding cities are beginning to flag. Austin's growth rate, for instance, dipped from 3.1 percent to 2.4 percent. In other examples, slower-growing cities saw progress decelerate even more. In New York, for instance, the growth rate decreased from 0.9 percent to 0.7 percent. In total, only 18 of the nation's 51 metro areas with more than 1 million people had cities growing faster than their suburbs in 2013. That is down from 25 the year before, notes an analysis of Census data by Brookings Institution demographer William H. Frey. He comments, "City growth may be bottoming out, as well as the downsizing of the outer suburbs. [It remains unclear] whether the city slowdown signals a return to renewed suburban growth." Overall, cities continue to grow slightly faster than the suburbs. Some of this growth has been fueled by younger Americans and retirees opting for city life, either for lifestyle reasons or as part of an age-related downsizing. At the same time, exurbs are seeing an increase in growth. When taken together, suburbs and exurbs increased at a 1.04 percent annual rate in 2012-13, an increase from 0.99 percent in 2011-2012, according to Frey's analysis. Over that same time span, growth in urban core areas slipped from 0.91 percent to 0.81 percent.

Apartment Pricing Is Heating Up in Minnesota's Twin Cities
Digested From "Many Minneapolis Apartment Operators Need to Get More Aggressive on Pricing"
Property Management Insider (05/21/14) Willett, Greg

According to MPF Research, effective rents for new leases across Minneapolis and St. Paul grew 1.9 percent in the first quarter, trailing the nation's average pricing increase of 3.2 percent. The below average rent inflation registered despite the fact that the occupancy rate in the metro stands at 97.3 percent, joining New York and Portland to rank as the country's tightest markets. Top-of-the-market properties in the cities posted rent growth averaging just 0.3 percent during the past year. Deliveries during the year ending in the first quarter totaled 4,300 units, with another 7,149 units under construction. MPF is reminding apartment owners that they need to be more aggressive in the urban core's Downtown/University and Uptown/St. Louis Park submarkets. Additionally, rent growth under the 3 percent mark in the city's middle-market and bottom-tier product means money is being left on the table.

Cities Need to Adapt as Senior Citizens' Housing Needs Change
Digested From "Cities Need to Adapt as Senior Citizens' Housing Needs Change"
Washington Post (05/24/14) P. 7 Lewis, Roger K.

One option for older Americans is to trade off their big suburban homes in favor of smaller condos or apartments in denser, urban environments. This decision often entails downsizing from two or multiple cars to one vehicle with a move to walkable neighborhoods with convenient access to public transit, shopping, dining, cultural activities, and public parks. The problem, however, is that not many viable housing options for older Americans exist within central cities or densely developed urban areas near city centers. Instead, most senior housing is relegated to low-density suburbs or small towns due to cheap land and lower development costs. In those markets, services for seniors are often limited and far-flung. While large numbers of rental apartments and for-sale condos are being developed within cities, many are marketed more to younger, gainfully employed singles or couples. Such units are suitable only for seniors who can live independently and who have sufficient assets and/or income. On the positive side, many seniors will be selling their suburban homes at prices reflecting greatly appreciated value and equity in the months and years to come. In addition, many will enjoy stable yearly incomes from pensions and investments. Consequently, there is a market developing of millions of seniors who will have the financial means to rent or buy spacious, conveniently located apartments or condos. Meeting the availability challenge will require sensible, yet aggressive public- and private-sector efforts, including new land use, zoning, and fiscal policies that foster private-sector development or redevelopment specifically tailored to meet the housing and healthcare needs of this demographic.

How Much Did ABQ's Apartment Sector Improve in Q1?
Digested From "ABQ Apt Vacancy Rates Improve in First Quarter"
Albuquerque Journal (05/22/14) Metcalf, Richard

According to the latest Hendricks-Berkadia research, the Albuquerque metro area's apartment vacancy rate improved during the first quarter, dropping from 7.9 percent to 7 percent year over year. The report says local apartment communities built after 1970 are doing better than the market as a whole, with some owners reporting a recent shift downward in the vacancy rate to the 5 percent range. Hendricks-Berkadia forecasts the metrowide apartment vacancy rate will drop to 6.2 percent by the end of December. While the slow movement in a narrow range makes the city's apartment market comparatively low risk, it has not provided the returns in recent years that typically attract a lot of real estate deals. "Nevertheless, the Albuquerque apartment market remains on investors' radars," the report concludes.

Where in Dallas Is Apartment Construction Booming?
Digested From "West Dallas Is Becoming Hotbed of Apartment Construction"
Dallas Morning News (05/22/14) Brown, Steve

A number of new apartment communities with more than 1,300 rental units are now in the works for the redeveloping area in West Dallas. Over the past decade, the neighborhood has been slowly transitioning from a mostly industrial and commercial district to a residential one. Several of the same developers that spearheaded the building boom in Dallas' Uptown area and Design District are now migrating to West Dallas. Among them is Wood Partners, which is building about 200 apartments in the Sylvan Thirty mixed-use project and has another 252 apartments under construction nearby. "We are surprised at the pace at which things are moving over there, and it's good for the city,” remarks Ryan Miller of Wood Partners. "It sounds like there is going to be a lot more product coming into that market." High rents and even higher land prices in popular Uptown have caused apartment builders to migrate to West Dallas for potential development sites. Apartment industry analysts expect this migration of builders to continue. Jay Parsons of MPF Research Inc., remarks, "It's a trend we are seeing nationally where there is a trickle-out effect from the central business district into these surrounding neighborhoods. Developers are trying to get in an urban neighborhood, but at a cheaper price point."

Outside Buyers Chip Away at Twin Cities' Apt. Market
Digested From "Outside Buyers Chip Away at Apartment Market"
Finance & Commerce (05/21/14) Bretts, Anne

Out-of-state investors made eight of the top 10 apartment property acquisitions in the Twin Cities metro area in 2013 and have made three of the top four buys so far this year. Keith Collins, first vice president and head of the Multi-Housing Group in CBRE's Minneapolis office, said that outside buyers still own only around 25,000 rental units in a market with more than 325,000 apartment. Local investors indeed dominate the list of buyers and sellers in Finance & Commerce's Apartment Sales Tracker, which has reported on the sale of 13,076 units since August 2011.

Deals and Transactions


Lowes-14April
What REIT Is Buying Up Apartments in Atlanta?
Digested From "Resource Real Estate Opportunity REIT Purchases Two Apartment Communities in Atlanta, Georgia"
Business Wire (05/22/14)

Resource Real Estate Opportunity REIT Inc. has purchased two apartment communities in Atlanta for a combined price of $51.8 million. The first acquisition is Berkeley Run, which boasts 194 rental units on a 14.5-acre property. Amenities range from a salt water swimming pool and on-site fitness facility to a business center and individual garages. The second purchase is the nearby Berkeley Trace, a 165-unit community located in a 5.5-acre gated community. Its amenities include a business center, a state-of-the-art fitness center, and housekeeping service. Both of the apartment communities are situated less than a mile from Atlanta's Perimeter Center, a neighborhood that includes a shopping mall and one of the city's biggest business districts comprising approximately 29 million square feet of office space.

Look Who Just Pulled Off Its Biggest Apartment Purchase Ever
Digested From "Towers at Wyncote Sells for More Than $106M"
Philadelphia Business Journal (05/19/14) Kostelni, Natalie

Lindy Communities has completed its $106 million acquisition of the Towers at Wyncote, which is located in the Philadelphia suburb of Cheltenham. This marks the largest transaction ever for the Philadelphia-based apartment owner and grows its portfolio by 20 percent. Lindy's portfolio now boasts 34 apartment communities, most of which are located in the Philadelphia metro area. Together, these properties contain a total of 6,200 rental units. CBRE Inc. arranged the deal. The Towers at Wyncote is comprised of three apartment towers that together have nearly 1,100 rental units. At the time of sale, it was 93 percent occupied.

NorthMarq Hits the Mark in Refinancing Three Apt. Communities
Digested From "Refi Arranged for Multifamily Trio"
GlobeSt.com (05/21/14) Philips, David

NorthMarq San Diego this past week arranged for $74 million in refinancing for a portfolio of three apartment communities -- two in Southern California and the third is in Dallas. The first is the Tierrasanta Ridge Apartments in San Diego, which is comprised of 356 rental units and was refinanced at $52 million. The transaction was arranged by NorthMarq for the borrower via its AmeriSphere Fannie Mae DUS platform. The second is Creekside Village Apartments in San Bernardino, Calif. This affordable housing property boasts 304 apartments and was refinanced at $16.1 million. Finally, NorthMarq provided supplemental financing of $6.35 million for Atera Apartments, a Class A community in Dallas. Financing for the 380-unit property came only after the borrower completed interior renovations and upgrades.

Industry Buzz


BehrMay14
Ohio Suburbs in Need of Apartment Communities
Digested From "Westerville in Need of Apartment Complexes"
Columbus Dispatch (05/24/14) Kurtzman, Lori

Young professionals, empty nesters, and others are having a difficult time finding quality apartments in the Ohio suburb of Westerville. It's a gap in the housing market that city officials are hoping to fill, especially with central Ohio's changing demographics. Growing numbers of Baby Boomers in the region are expected to shed their large houses in the coming years, while more and more young professionals are increasingly shying away from homeownership. To fill the demand, there are three apartment communities in the proposal stage that would bring nearly 900 rental units to Westerville. The city has so far approved two of them and is considering the third. A recent study showed that the city, where more than 80 percent of the homes are single-family residences, has room for as many as 1,500 new apartments. Other nearby suburbs will also look to fill the demand. For instance, Dublin's Bridge Street District proposal aims to draw both young professionals and empty-nesters by creating a walkable community of apartments and retail stores. Kerstin Carr, director of planning and environment at the Mid-Ohio Regional Planning Commission, confirms that several central Ohio towns are considering projects that offer a variety of housing options mixed in with shops, eateries, and easy access to transportation. "It all comes down to creating choices for people," she concludes.

Major Apartment Solar Installation Completed
Digested From "Largest Solar Thermal Installation of the Decade Completed Apartment Complex"
Environmental Protection (05/22/14)

Los Angeles-based ReGreen has successfully completed one of the largest multifamily portfolio solar installations of the decade, made up of 112 separate installations of solar thermal and solar photovoltaic (PV) systems for Goldrich & Kest Industries. The project, which retrofitted 34 apartment communities with solar energy solutions, involved the installation of 1,200 Heliodyne solar thermal panels as well as 1,665 solar PV panels. "We were able to create a massive reduction in Goldrich & Kest's energy costs," said Kevin Refoua, co-founder and CEO of ReGreen. "In fact, approximately 84 percent of their investment will be recovered by the end of year one, thanks to the 30 percent federal solar tax credit, depreciation, and utility rebates."

AvalonBay Communities Declares Q2 2014 Dividend
Digested From "AvalonBay Communities Inc. Declares Second Quarter 2014 Dividends"
Wall Street Journal (05/22/14)

AvalonBay Communities Inc.'s board of directors declared a second-quarter cash dividend on its common stock of $1.16 per share, which will be payable July 15 to shareholders of record as of June 30. As of the end of this year's first quarter, the REIT had ownership stakes in 276 apartment communities spread across a dozen states and Washington, D.C. Together, these properties contain containing 82,374 rental units. It specializes in developing and operating apartment communities in high barrier-to-entry markets of the United States.

Legal/Legislative Did You Know


SatelliteProlinkMay14
What Fla. Market Requires Families to Have Passing Grades to Get Apts?
Digested From "Report Cards Required for Families to Get Apartment Leases in Riviera Beach"
WPTV 5 (Fla.) (05/22/14) Bagg, Marissa

At the Sonoma Bay apartment community in Riviera Beach, Fla., children's report cards are required in order for the parent or parents to qualify for a lease agreement. "I don't think it's right, a child's education has nothing to do with where they live," said resident Julie Sattler, who wasn't asked for her child's report card because the kid was under the age of five when they moved in. The Fair Housing Center of the Greater Palm Beaches is on the case, have sent out testers, monitored Craigslist, and are further investigating this as an example of discrimination. The Sonoma Bay and nearby Marsh Harbour apartment communities are now being sued in federal court as a result. "The fact kids are being required to have their personal information given to an association is obviously an invasion of their family privacy," said Vince Larkins with the Fair Housing Center. The lawsuit is pushing for the communities to drop the policy, as well as a rule that requires a sundown curfew for kids.

NAA Announcements


EDUConfAd14
2014 NAA Opening Party: No One Has Experience The Festivals of Colorado Like This

June marks the beginning of Colorado’s world-famous summer festival season, and attendees of the 2014 NAA Education Conference & Exposition—June 18-21 in Denver—get to experience the best, most-well known gatherings, all in one night and in one location during the 2014 NAA Opening Party.

Epicures, beverage connoisseurs art aficionados and music enthusiasts all will delight in the 2014 NAA Opening Party, which endeavors to recreate the experiences of popular gatherings such as the Denver Chalk Art Festival; Aspen Food & Wine Classic; Great American Beer Fest; and Taste of Colorado.

Amid 12 local food trucks, three bands and the Flying Ace All-Stars, Olympic-caliber athletes specializing in high energy aerial performances, one will find savvy multifamily housing professionals making new connections during the industry’s premiere networking event of the year.

The NAA Opening Party is included with all full conference registrations, with additional tickets available for purchase $175 via the registration form.

Register by June 6 to take advantage of up to $150 of savings on your investment.

And, make sure to book your housing as soon as you register—rooms will go fast and this Thursday, May 29, is the last day to take advantage of NAA rates. Visit the Education Conference website for information and reservations for all official NAA Education Conference hotels.
Act Now to Brand Yourself a Rental Housing Expert: June 6 Is the Deadline for Speaking Proposals for Maximize: the 2014 Multifamily Asset Management Conference

June 6 is your last chance to set yourself apart in a highly competitive industry by sharing your expertise during 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.

Combining both the Apartment Revenue Management Conference and the NAA Green Conference into a comprehensive retreat for asset managers charged with creating new value for their investors, the new name reflects the important role that revenue management plays in professional apartment management.

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.

2014 Curb Appeal Contest Deadline Friday, May 30

It's your chance to be on the cover of the July edition of units Magazine!

NAA’s units Magazine will report on Curb Appeal trends in the July 2014 issue. We are seeking input from member communities.

Please send NAA’s Paul Bergeron your best “curb appeal” photo and a description (100 words or less) about why your curb appeal strategy works.

Entries must be submitted by noon ET Friday May 30 to Paul Bergeron.

Entries must include a high-resolution photo (4x6 inches at 300 dpi) to be considered. You may submit multiple entries.

The decision to publish a photo entered for the July cover is up to the discretion of NAA units Magazine.
Supplier Success Course will be offered at the 2014 NAA Education Conference & Exposition in Denver

The Supplier Success course is designed to offer an overview of the apartment industry and recommends ways that suppliers can maximize partnerships with apartment owners, apartment management companies and apartment association members. It has been written by successful apartment industry suppliers with years of professional experience.
Wednesday, June 18, 10:30 a.m. – 4:30 p.m.

This course is limited to 50 suppliers and is not included in the conference registration. The price is $99 for members and $129 for non-members. To register, contact Shana Treger.
NAAEI Designation Courses Offered Near You!

CAM:

Nevada State Apartment Association
September, 2014

Roanoke Valley Apartment Association
November, 2014

CAM Online

CAMT:

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

CAPS:

Chicagoland Apartment Association
July, 2014

NALP:

Roanoke Valley Apartment Association
September, 2014

NALP Online

CAS:

Nevada State Apartment Association
September, 2014

Roanoke Valley Apartment Association
November, 2014

NAAEI Leadership Experience: Powered by Dale Carnegie:

Greater Cincinnati Northern Kentucky Apartment Association
October, 2014

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.
Upcoming Events

2014 NAA Education Conference & Exposition
June 18-21
Colorado Convention Center
Denver

2014 Multifamily Asset Management Conference
October 13-15, 2014
Amelia Island Plantation Resort
Amelia Island, Fla.



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