NAA Industry Insider: Urban- and Transit-Based Amenities Driving Apartment Living Popularity

July 29, 2014
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TimeWarnerCableApril14
Urban- and Transit-Based Amenities Driving Popularity in Apartment Living
Digested From "National Skyline: With an Influx of Residents, Urban Areas See a Rise in Amenities"
Keystone Edge (Pa.) (07/24/14)

The U.S. urban population increased by 12.1 percent from 2000 to 2010, and it continues to grow. With the rise in urban living, cities are seeing a boom in amenities. Urbanites want businesses and institutions that support their lifestyle, and building a complete city is essential to sustaining growth. The amenities needed to support a dense urban environment include parks, retail, childcare, and bike sharing. Density "supports programming and retail, and creates a 24/7 environment that generates safety and comfort," explains Steve Cramer, CEO of the Downtown Council and Downtown Improvement District in Minneapolis. What the city needs next, says David Frank, Minneapolis' director of transit development, is high-performing schools. Frank heads up the North Loop Neighborhood Association, which is collaborating with the Downtown Council and Minneapolis school district to locate an elementary school downtown. Currently, there are plans to renovate a shuttered school north of the river. Meanwhile, Cleveland has invested heavily in public transit. Euclid Avenue, the historic main street, bustles with new investment thanks to a 10-year-old bus rapid transit line, and free shuttles take people throughout downtown. Downtown Cleveland's residential population will soon approach 15,000, double the number who lived here a decade ago. It's one of the fastest-growing communities in the region.

Denver has set the stage for similar growth in the amenities available to the city's urban population, including a new transit center and a new school. One example is the development of LoHi in the downtown Highland neighborhood. LoHi quickly attracted young singles, urban professionals and growing families who enjoy proximity to galleries, coffee shops and eateries. The Highland pedestrian bridge connects LoHi to the rest of downtown. Additional development followed: office towers and residential high rises, a mass transit system, the designation of Lower Downtown as a mixed-use Denver Landmark District, the conversion of the Central Platte Valley from a rail yard to an urban neighborhood, the development of green spaces and parks. In 2014 alone, 24 projects are slated for completion, including 6,000 residential units and 2.7 million square feet of office space.

Market Trend Insights


RealPage-July14
News Flash! Young Americans Are STILL Buying Homes
Digested From "Younger Americans Still Buying Homes"
Desert Sun (07/19/14) Boak, Josh

The Millennial generation are increasingly ethnically diverse, more educated, and less likely to be married -- all factors that Trulia researchers say should make them less likely to become homeowners. However, after adjusting for population changes, younger Americans are actually buying residences at the same rate as they did during the late-1990s. Trulia chief economist Jed Kolko comments, "For at least the past 20 years, there have been significant demographic headwinds for homeownership for young people." According to Census figures, the share of 18- to 34-year-olds who are married is 30 percent -- a decrease from 47 percent in 1983. Only 29 percent of them live with children versus 39 percent in '83. Because more people in that age range are unwed and childless, Trulia researchers looked at the number of homeowners who are also identified as the head of their households. After adjusting for these shifts, they found that the share of people under 35 who own homes is the same as it was for 1997. The analysis suggests that the recession actually did little to turn off Generation Y from the idea of owning a home compared to the generations before them. In fact, the study shows that the major group whose ownership rates suffered due to the downturn is middle-aged Americans. That is because many in that demographic purchased houses during the bubble at inflated prices with loans they ended up being unable to repay.

The Sun Continues to Shine on Phoenix Apartment Market
Digested From "Apartment Development Wave May Have Crested"
Phoenix Business Journal (07/24/14) Sunnucks, Mike

The current wave of new apartments in Phoenix may have crested, but there are so many units already in the pipeline that the high tide of multifamily construction will continue for some time. Brian Smuckler, senior vice president and multifamily real estate expert with CBRE Group Inc., says if apartment developers don't already have plans in place for new apartments, they may have a harder time getting financing and competing with projects already in the works. "If the parcel isn't acquired now, it's probably going to be too late," Smuckler says. "It's going to be difficult to get financing if you are the fourth or fifth guy in line." There are as many as 27,900 apartment units in the regional planning pipeline, according to research from Marcus & Millichap Real Estate Investment Services. Research firm Axiometrics Inc. estimates 5,600 new units will come online in 2014 and 2,200 have already been delivered. In 2015, 4,900 more units are planned for delivery. However, multifamily experts say not all those planned units are going to get built. The multifamily market is also challenged by laggard post-recession wage growth in Phoenix and nationally. Limited wage gains put downward pressures on rents apartment owners can ask. June numbers from Axiometrics show a slight slowdown in occupancy and rental rates from May.

New Lenders Enter Property Market and Think Small
Digested From "New Lenders Enter Property Market and Think Small"
Wall Street Journal (07/23/14) Yoon, Al

A new group of lenders, including ones controlled by asset managers Waterfall Asset Management and Guggenheim Partners LLC, has started to target properties valued at $10 million and less. This is a welcome trend for many of the nation's mom-and-pop property owners and small-business owners. While large deals involving trophy buildings garner most of the headlines, many commercial property markets depend just as much on debt financing being available for the acquiring, selling, and refinancing of cheaper apartment communities, stand-alone restaurants, and doctor offices. Loans on small or less expensive properties represent about 15 percent of the $3.2 trillion in commercial real-estate debt outstanding.

Many lenders have been avoiding smaller deals since the economic meltdown due to the fact that they can be riskier than bigger properties. Furthermore, the underwriting costs are high relative to their size. Now, though, lenders are paying them more attention as the economy improves and loans are viewed as less risky. One beneficiary of this trend is BKM Capital Partners. The California-based investment firm turned to ReadyCap Commercial LLC for a $4.6 million loan earlier in the year to acquire Hayden Island Business Park in Portland, Ore. ReadyCap was able to offer terms that banks would not, most notably limiting lender recourse in case of default. By making real-estate loans to investors and small businesses under a U.S. Small Business Administration program, ReadyCap expects to quintuple volume to $1.25 billion by 2016.

How Housing Has Affected Freddie Mac's Economic Outlook
Digested From "Freddie Mac Sees Bittersweet Economic Outlook"
DSNews (07/22/2014) Templeton, Derek

Freddie Mac's July 2014 U.S. Economic Housing Outlook shows that economic results were mixed in the first and second quarters as the housing sector slowed. Residential fixed investment decreased 4 percent in the first three months of the year. Housing starts for June, meanwhile, were off 9.3 percent from May. After adding to economic growth in 2012 and through last year's second quarter, housing activity has braked to the point where it is no longer the primary driver of economic recovery. The results are not all negative, though. "There is good news to share as we head into the latter half of summer," according to Freddie Mac chief economist Frank Nothaft. "The multifamily rental market has led the rest of the housing sector into recovery, and about one-third of housing starts in the first quarter were for multifamily rental apartments. There's no question the single-family recovery is moving slowly, but it continues to doggedly press forward and we are cautiously optimistic." However, Americans appear less certain. A Rasmussen Reports poll determined that only 19 percent of consumers surveyed rate the U.S. economy positively, while 40 percent rate consider it "poor."

Deals and Transactions


Lowes-14April
What Zillow's $3.5 Billion Deal for Trulia Means
Digested From "Zillow to Buy Trulia for $3.5 Billion in All-Stock Deal"
The New York Times (07/28/14) de la Merced, Michael J.

Zillow has agreed to acquire Trulia in a $3.5 billion stock deal. The deal, which is expected to close in 2015, has been approved by both companies' boards of directors. Together, the two are poised to dominate the traffic for online home listings. In June alone, Zillow reported 83 million users, while Trulia reported 54 million — a combined 61 percent of total Internet users for the category, reports comScore. Under terms of the agreement, the two real estate brands will continue to operate under their individual names, while Trulia CEO Pete Flint will remain in his position and report directly to Zillow CEO Spencer Rascoff. According to Rascoff, "Both companies are coming at this from a lot of strength and momentum. When we approached them, I think they were both very open-minded about it."

Music City Apartments Sound the Right Notes for Iowa Co.
Digested From "Iowa Company Pays $51M for Apartment Communities"
The Tennessean (07/24/14) Ward, Getahn

Nashville's apartment continues to receive strong investor interest. An affiliate of an Iowa-based property management firm has purchased a trio of apartment communities locally for $51.2 million. The transaction involved a total of 764 rental units and marks the entry of BH Management Services LLC of Des Moines into the Nashville metro area. "It's another example of the demand for multifamily in Nashville," observes Scott Tyrone, a multifamily broker with Apartment Realty Advisors. "Nashville is in the national spotlight and performing so well." Real estate investment management group Grover Corlew was the seller. In its second-quarter multifamily housing report, Colliers International's area office attributed solid growth in the local apartment sector to two factors: one, Nashville transitions from a third-tier to second-tier city status and, two, a recent influx of new jobs. Despite the new supply of apartments coming online, average monthly rent rose by 2.4 percent to $933 in the most recent quarter and the occupancy rate was 96.1 percent.

Industry Buzz


SatelliteProlinkJuly14
Six Fire Safety Tips for Summer
Digested From "Six Fire Safety Tips for Summer"
Buildings (07/22/14)

The United States Fire Administration estimates that nearly 5,000 fires take place every day during the summer, which ranks second in fire incidence rates compared to other seasons. Income-generating properties such as apartment communities and office complexes are especially vulnerable to fire damage. Cintas Corp., a leading provider of fire protection services, offers a half-dozen tips to lower a building's likelihood of a summertime fire. Tip one is proper HVAC maintenance. Dust can settle over electrical components and cause tracking faults. This, in turn, can spark fires. Two, owners and managers should clean out their exhaust fans regularly and clear all debris out of the vents. Additionally, they should avoid running the fans consistently for long periods of time.

Tip three, exercise proper lawn mower care. This typically entails following the manufacturer's recommended maintenance schedule on all mowing equipment and never refueling a lawn mower if it is overheated. Four, store all gas cylinders upright and never indoors. Five, be sure to preach grilling safety. Top suggestions in this regard include regularly removing grease buildup from the grills and the trays below the grilling components and never leaving a grill unattended no matter what. Finally, managers should make sure their preventive maintenance should include fire alarm testing.

Are SCADpads the Future of Apartment Living?
Digested From "Multistorey Car Park in US Transformed Into Designer Micro-Apartments"
Guardian (United Kingdom) (07/09/14) Burns, Rebecca

A year-long experiment at the Savannah College of Art and Design (SCAD) looked at the potential of turning parking decks into micro-apartments. As 18- to 35-year-olds -- those in the Millennial generation -- buy fewer cars but still want to live in cities, the need for affordable apartments is growing. Parking spaces take up significant revenue but also significant tax dollars, with two recent studies showing that a single parking spot costs a city about $1,000 in lost tax revenue each year. The study, from the University of Connecticut and the Smart State Transportation Initiative, noted that Hartford, Conn., could generate $50 million in additional tax revenue if space dedicated for parking was instead used for buildings. The SCAD project challenged faculty, students, and alumni from the school to limit the apartments to the average size of a U.S. parking spot, about 135 square feet. Affordability was a factor, but the primary goal was to demonstrate that "You can live large in a small space," said Christian Sottile, dean of the School of Building Arts at SCAD.

As the Millennial students worked on the project, their priorities included incorporating technology and art into living spaces, enabling individual customization, energy efficiency, and establishing communal spaces. The resulting SCADpads, which were built at the school's Savannah campus and then transported to Atlanta for installation, have a common shell--with a bathroom, kitchenette, and bed/sitting space--but very different designs. The three prototype SCADpads, costing $40,000-$60,000, include "smart glass" windows controlled by an iPad; programmable LED ceiling lights; and small induction stovetops, refrigerator/freezer units, microwaves, and stainless steel sinks. Given their small size, the heating and cooling costs for the SCADpads are low, and they also include recycling systems that repurpose "gray water" from the sinks and showers for use in the community garden; a waste-processing system; and composting bins. In addition, the SCADpad installation features a tiny patio for each unit, two lounge areas, and a "park" that uses artificial turf.

What Two Things Do Most People REALLY Not Want to Live Near?
Digested From "Survey: Cell Towers & Antennas Make Homes Less Desirable"
RealtyBizNews (07/28/14) Wheatley, Mike

Of 1,000 buyers and renters polled, 94 percent indicated that they find properties in close proximity to a cell tower or antenna less appealing and would not pay as much for such a home. Just over three-quarters of survey participants said they would never even consider buying or renting a property located within a few blocks of a cell tower or antenna. Additionally, the research showed that condominium skyscrapers and other buildings where a cell tower or group of antennas are clustered on top of or attached also turns off buyers. “A study of real estate sales prices would be beneficial at this time in the Unites States to determine what discounts home buyers are currently placing on properties near cell towers and antennas,” remarked Jim Turner, chair of the National Institute for Science, Law & Public Policy, which conducted the poll. The findings echo an earlier study by Sandy Bond of the New Zealand Property Institute.

AvalonBay Among Firms Whose CEO and CFO Share an Alma Mater
Digested From "Flying School Colors in the C-Suite"
Wall Street Journal (07/21/14) Murphy, Maxwell

AvalonBay Communities Inc. is one of more than two dozen major U.S. companies whose current CEOs and CFOs hail from the same university, reports a Wall Street Journal review of data from executive recruiter Crist|Kolder Associates. The connections appear to be concentrated among 22 schools, which have bestowed one or more Bachelor's degrees or Master's in business administration to 285 CFOs at roughly 670 of the nation's biggest firms. The top undergraduate schools included the University of Illinois, Indiana University, and the University of Notre Dame. Harvard's M.B.A. program ranks No. 1 for having the most power duos currently in office, including at AvalonBay. It should be noted that these future executives rarely overlapped as students, and the matchups often happened years after graduating.

Condos Have Given Developers a Can-Do Attitude in Miami
Digested From "Condo Builders Fuel Land Rush in Miami"
Wall Street Journal (07/23/14) P. C1 Whelan, Robbie; Campo-Flores, Arian

Miami is in the midst of a land rush as condominium builders scramble to claim what few prime undeveloped sites are left in the city. In turn, values of undeveloped plots have bounded to all-time highs. The soaring land values, though, are having some unintended effects. Ultra-luxury condo developers are crowding out less-lucrative types of development, including rental apartments and office space. "The other product lines can't compete," noted commercial real estate attorney John Sumberg. "Any site that could possibly be a condo cannot be utilized economically for any other purpose." Climbing land values could even impede the future development of rental apartments, which are also in strong demand throughout Miami. Nevertheless, this marks the latest phase in an impressive recovery of Miami's condo market, where many of the 22,200 units erected during the last boom sat vacant for years after the housing bubble burst. When prices plunged, cash-paying buyers from Latin America, Canada, Europe, and elsewhere started snapping them up. Those units have now been almost entirely absorbed. Robert Given, a broker with CBRE Inc., declares, "We're basically running out of waterfront properties for high-density development in Miami."

Legal/Legislative Did You Know


What Company Is Going Smoke-Free at Its Apt. Communities?
Digested From "Domain Companies Properties Going Smoke-Free"
Baton Rouge Advocate (LA) (07/26/14)

The Domain Companies announced late last week that it is banning smoking in all apartments and indoor/outdoor common areas. The policy is effective immediately for new residents, while a smoke-free addendum will be inserted into current leases once they expire. The move will affect approximately 1,000 apartment units that Domain owns and manages in Baton Rouge and New Orleans, along with another 700 units that are currently in various stages of development. Matt Schwartz, co-founder of Domain, comments, "Domain is committed to improving the health and well-being of our residents and creating sustainable developments that improve lives and livelihoods. We believe that the vast majority of renters desire smoke-free living, and that these [residents] have the right to a healthier home and smoke-free air." Domain believes it to be the first major Louisiana apartment owner to go smoke-free in all of its communities.

Family Suing Ga. Apartments Where Innocent Man Was Killed
Digested From "Family Suing Gwinnett Apartment Complex Where Innocent Man Was Killed"
Gwinnett Daily Post (07/23/14) Estep, Tyler

A Gwinnett County, Ga., apartment community is being sued by the family of Kevin Pierre, a 23-year-old innocent bystander shot and killed there back in April. Pierre's parents and sister have filed a lawsuit in DeKalb County State Court, maintaining that several management firms with ties to the Bradford Gwinnett Apartments should be held liable for his death. The suit claims that the apartment community knew it had a crime problem and should have taken more steps to keep its residents safe. Pierre was killed on April 13 following a disagreement involving people he did not know. Gwinnett County authorities believe he was hit in the back by a stray bullet that was intended for someone else. "They have a duty under law to try to make it safe," states lawyer Matt Stoddard, who is representing the Pierre family. "Once they learn of a problem, that duty extends to safety from criminal attacks. If you know there's a pattern and the writing's on the wall, then you have a duty to do something about it." The Bradford Gwinnett apartment community is the same one that, three years ago, Gwinnett cops identified as the epicenter for local branches of the "Gangster Disciples" street gang. Attempts to reach Riverstone Residential Southeast, the management company listed as the suit's lead defendant, had been unsuccessful as of presstime. The suit petitions for reimbursement of funeral expenses and lawyers' fees, in addition to "damages in an amount to be determined by the enlightened conscience of a fair and impartial jury."

NAA Announcements


2014 July Mission Banner
Consumers Pay Premiums For Organic Groceries With No Hesitation; Will Prospective Residents Mirror that Behavior For “Green Living?”

Savvy multifamily housing asset managers know “green” is one of the most misunderstood and potentially underappreciated terms in the rental-housing lexicon.

Though conventional wisdom casts doubt on whether residents will pay extra for green living, modern American consumers display no qualms when paying for organic products at specialty grocers. So why the disconnect? Join forward-thinking, green initiatives experts at the Maximize: 2014 Multifamily Asset Management Conference (Maximize), Oct. 13-15 at the Omni Amelia Island Plantation Resort in Amelia Island, Fla., as they explore NOI-enhancing green strategies for multifamily housing.

Just one of many efficiency-oriented sessions at Maximize, “NOI-Enhancing Green Strategies in Rehabs and New Development” will focus on product and process adjustments that can be marketed as green and deliver NOI both in savings and new revenue. But the strategies don’t stop there; be first in line for “Focusing on Water and Waste—Measurement, Management and Revenue” and discover hard and soft technologies that can deliver huge savings for a portfolio, especially those with multiple asset managers operating in different silos.

The education isn’t limited to greater efficiency, though; experts from a spectrum of disciplines, including Expense Management Strategies; Revenue Enhancement and Pricing Strategies; Data Analytics and Performance Benchmarking; Green Practices Including Utility Management; Capital Markets Financing Strategies; and Innovation, will be on hand to outline exactly how to extract total value and return from multifamily real estate assets and portfolios.

Register before Sept. 3 to save $100 and be part of the industry’s exclusive forum for connections, strategies, best practices and tactical innovations focused on accelerating real returns on real properties.
The 2014 NAA Education Conference & Exposition: Hire Right The First Time, Every Time

Have you ever found yourself in a situation where you hired Henry Jekyll, Ph.D., only to have a certain Mr. Edward Hyde show up (late) on the first day of work?

If the substantial size of the audience in the session, “Hire Right the First Time, Every Time,”—one of more than 50 education sessions presented in Denver during the 2014 NAA Education Conference & Exposition—is any indication, multifamily housing operations professionals are seeking best practices for ensuring they’re onboarding staff who complement their organizations.

Presenters Bill Nye, Chief Executive Officer for Caviness and Cates, and Rebecca Rosario, Principle, of Full House Marketing, Inc, offered the crowd insight into leading strategies for interviewing, recruiting and leveraging the verification process and the steps to better match company values, standards and culture with prospective employees during the interview process.

Curious how you can avoid hiring human resources suffering from “split personalities?” You’re in luck: “Hire Right the First Time, Every Time,” as well as other unparalleled education sessions focused on operations such as “Show Me the Money: 10 Proven Ways to Increase Online Payments”—are now available to you as part of the NAA Education Institute’s (NAAEI) “REWIND” program, offering 20 video recorded sessions and 22 audio-synched PowerPoint sessions from the 2014 NAA Education Conference & Exposition. Order your sessions today!
NAAEI Designation Courses Offered Near You!

CAM:

Nevada State Apartment Association
September, 2014

Roanoke Valley Apartment Association
November, 2014

CAM Online

CAMT:

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

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.
Did You Know?

NAA Turned 75 this year! Celebrate with NAA.
Upcoming Events

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



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Event Highlights

NAA Releases 2014 Survey of Operating Income & Expenses

NAA Releases 2014 Survey of Operating Income & Expenses  

NAA President and CEO Doug Culkin shares highlights from this year's Survey of Operating Income & Expenses in Rental Apartment Communities. Check out the report today.

 

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