NAA Industry Insider: Gables Residential Eyes $3 Billion Sale | National Apartment Association

NAA Industry Insider: Gables Residential Eyes $3 Billion Sale

August 5, 2014


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Gables Residential Eyes $3 Billion Sale
Digested From "US Landlord Gables Eyes $3bn Sale"
Financial Times (08/04/14) Hammond, Ed

Gables Residential has been put on the selling block by its private equity owners, which include Clarion Partners and Silverpeak, in a deal that could rank as one of the biggest sales of U.S. residential real estate since the economic meltdown. The Florida-based REIT has reportedly hired bankers and is expecting to receive initial bids within the next few weeks. The sale would mark an exit for Gables' private equity owners, who took the company private nine years ago for $2.8 billion. While the exact value of Gables has yet to be assigned, analysts expect it will fetch as much as $3 billion, attracting interest from private equity, sovereign wealth, and institutional investors. Property broker Eastdil Secured is assisting on the sale. Gables specializes in developing, owning, and operating apartment communities throughout much of the U.S. South. The company also has management contracts for properties in Boston, Chicago, and New York.

Market Trend Insights

How Renting Has Driven U.S. Homeownership to 19-Year Low
Digested From "Renting Drives U.S. Homeownership to 19-Year Low"
Reuters (07/29/14) Mutikani, Lucia

Commerce Department figures show that U.S. homeownership hit a 19-year low in this year's April-through-June period as tight finances continued to drive Americans toward renting. The seasonally adjusted homeownership rate slipped from 65.0 percent as of March 31 to 64.8 percent, the lowest level since 1995's second quarter. Economists now predict homeownership could fall even further as banks maintain tight underwriting and wage growth remains tepid. IHS Global Insight economist Patrick Newport states, "We are becoming more of a rental society. It's becoming harder to own a home. People who lost their homes to foreclosure are now renting and credit standards have tightened significantly." The shift toward renting could further buoy the construction of multifamily housing units but pinch the single-family segment. Multifamily starts have logged double-digit growth in the past few years as developers have scrambled to meet demand for apartments.

Two Reasons Why Central Ohio Rents Continue to Rise
Digested From "Apartments in Central Ohio Trend Toward High End"
Columbus Dispatch (07/29/14) Young, Liz

By the end of December, central Ohio is expected to have added more than 7,500 new apartments since Jan. 1, 2013. With all this new construction, one might imagine that rents would decline. Analysts, though, say that average rents are still expected to climb this year and vacancy rates are on pace to move up only slightly. At least two housing trends are having a major influence. One, the deep recession of the past decade pushed many to rent instead of own. Second, many apartments are being built in urban areas that carry a premium on rates, helping to boost overall averages. The market for those apartment communities consists primarily of Millennials, empty-nesters, and Baby Boomers, notes Rob Vogt, a partner at the property research firm Vogt Santer Insights. Vogt remarks, "The interesting thing about it is that some of [the people renting] don't particularly look at some of the other renters' choices out there. Millennials have been wanting to accept these higher rents." Still, as development of apartments continues, supply could be exceeding demand in the Columbus metro area. A Marcus & Millichap study forecasts that the vacancy rate for apartments in and around Columbus will climb to 5 percent in 2014 from about 4 percent a year earlier. Researchers attribute that increase partly to the completion of 3,830 apartments last year and the projected completion of 3,770 more rental units this year. Jordan Marshall, an associate at Marcus & Millichap's Columbus office, concludes, "There’s a lot more apartments coming online, and because so many are being added, obviously some of those get absorbed. But naturally, as you build more and more, there are going to be more vacant apartments."

What Is Fueling America's Urban Renaissance?
Digested From "Sizzling Tech Economy Is Fueling Urban Renaissance"
USA Today (07/30/14) Zuckerman, Sam

The hot tech sector is feeding an urban renaissance in some of America's top cities. With the digital revolution expanding, technology has become a fountain of job creation that is driving redevelopment of once-blighted urban cores. For lower-income residents and the squeezed middle class, however, skyrocketing rents and home prices are pushing some urban markets out of reach. Rents in the top 10 biggest U.S. metro areas where Internet and computer occupations play the largest role in the local economy increased 8 percent in the 12 months ended June 2014 -- nearly 40 percent faster than the gain in other urban areas, reports Trulia. Among the winners in the new digital gold rush so far have been New York, San Francisco, Seattle, Austin, and New Orleans.

The trend marks a reversal from the early days of computers and information technology, when growth was centered in such sprawling suburban areas as Silicon Valley and Route 128 outside of Boston. In the last five years, for example, San Francisco's rate of tech job creation has far outpaced Silicon Valley's. Even companies firmly rooted in suburban areas, like Google and Apple, are offering free daily bus or van commutes to employees who prefer city living. Finally, to attract the young and the hip, more and more companies headquartered in the suburbs have expanded their city offices.

Metro Denver's Tight Housing Market Puts a Squeeze on Rentals
Digested From "Metro Denver's Tight Housing Market Puts a Squeeze on Rentals"
Denver Post (08/03/14) Svaldi, Aldo

Apartment seekers and those who currently rent are feeling the squeeze in and around Denver, with the metro area's increasingly constricted housing market. Higher home prices and quicker sales times have resulted in a bigger number of apartment owners cashing out, leaving less housing for lease and pushing up monthly rents. Real Property Management Colorado, for instance, began 2014 with approximately 1,600 homes for rents in its portfolio and is now down to 1,300. Meanwhile, Metro Denver's inventory of homes for sale as of the end of this year's second quarter was a low 7,458 and homes were only taking 27 days on average to sell, notes a Coldwell Banker study. That contrasts with 10,438 homes for sale and an average turnover time of 35 days a year earlier. Back then, that was considered an abnormally tight market. Exacerbating the tight inventory is Denver's ongoing popularity with young adults from other states. More young people are also moving out of their family homes as the economy improves and the unemployment rate drops. Ron Throupe, an associate professor at the University of Denver's Burns School of Real Estate and Construction Management, observes, "If you want anything other than your standard apartment, inventory is miserable." He predicts that many of those seeking rental housing will be forced into apartments even though some prefer houses to apartments because of the greater privacy they provide and their lower cost per square foot, among other reasons. While rents are on the rise locally, apartment owners cannot name their price.

Post Recession, Single-Family Home Rentals Are Hot
Digested From "Post Recession, Single-Family Home Rentals Are Hot"
USA Today (07/31/14) P. 1B Daneman, Matthew

Broadstone Real Estate, which traditionally has focused on commercial properties ranging from medical space to retail stores, is paying more and more attention to the single-family rental home market. The Rochester, N.Y.-based company recently announced that, under its Broadtree Homes arm, it had bought 127 single-family residences in the Atlanta metro area for nearly $10 million. The purchase more than doubled the portfolio of single-family homes that it began amassing at the end of 2012 in such markets as Minneapolis, Florida's Palm Beach County, and Rochester. According to a recent analysis of the single-family rental market by Keefe, Bruyette & Woods Inc., nearly 50 percent of the country's 14 million rental homes are owned by individuals who own a single rental property. Only about 2 million are owned by investors with 10 or more properties. Until the crisis, it really did not make sense for investors to build a large portfolio of single-family rentals, as it is such a management-intensive niche. However, the number of large property firms doing just that is on the rise. Blackstone Group, for instance, is currently the biggest landlord of single-family homes, having spent approximately $8 billion over the past couple of years buying up 43,000 homes. California-based American Homes 4 Rent is the second-largest such firm. Founded in 2012, it now owns more than 25,000 homes in 22 states.

Deals and Transactions

How Many Phoenix-Area Apt. Communities Did P.B. Bell Buy?
Digested From "Seven Phoenix-Area Apartment Complexes Sell for $169M"
Phoenix Business Journal (07/30/14) Sunnucks, Mike

P.B. Bell Cos. has teamed with a New York-based partner, Stonecutter, to acquire a seven-property portfolio of nearly 2,800 apartments from Los Angeles-based Standard Portfolios Asset Management. The total purchase price was around $169 million. The deal could wind up ranking among the largest apartment transactions in the Valley this year. Colliers International brokers Cindy and Brad Cooke represented Standard in the deal. The seven apartment communities are located in Chandler, Glendale, Mesa, and the city of Phoenix.

Growing Atlanta Firm Inks $182 Million Apartment Deal
Digested From "Gallatin Apartments Part of $182M Deal"
Nashville Post (07/29/14) De Lombaerde, Geert

Atlanta-based Preferred Apartment Communities has acquired a portfolio of 1,400 apartments in a four-city package for which it is paying $182 million. The rapidly growing apartment owner says the properties are spread throughout Dallas, Houston, Kansas City, and Nashville and include the 364-unit Stoneridge Farms in Music City. "I've visited all of the communities and believe they are a perfect fit, both in terms of location and quality, with our existing portfolio," remarks Preferred Chairman and CEO John Williams. "I'm confident we're buying these assets at a substantial discount to current replacement cost and believe they will be very accretive to our stockholders." The identity of the seller was not disclosed. Williams and his team expect to close on their purchase by early October. Preferred Apartment Communities recorded a first-quarter profit of $2.8 million on revenues of $10.2 million.

Industry Buzz

Why Did Home Properties' Q2 FFO Decrease?
Digested From "Home Properties FFO Drops Due to Exit From New Development"
Rochester Business Journal (08/01/14) Deckert, Andrea

Home Properties Inc. posted a decrease in its second-quarter funds from operations mainly because of its decision to exit the business of developing new apartment communities. The firm reported quarterly FFO of $1.04 a share versus $1.11 a share one year earlier primarily due to $3.8 million in charges related to its departure from new development. Sales totaled $168.4 million versus $162.4 million in the second quarter of 2013. Home Properties this week said its two apartment communities now under construction in Pennsylvania and Maryland will be completed, but no additional new apartments will be started. Home Properties President and CEO Edward Pettinella remarks, "We believe that it is in the best interest of the company's stockholders for us to dissolve our new-development platform and focus 100 percent on our core differentiating strategy of acquiring and redeveloping mature apartment communities."

How Much More Are Landmark Apartment Trust Execs Now Earning?
Digested From "Landmark Apartment Trust Execs Get Pay Hikes"
Tampa Bay Business Journal (07/28/14) Manning, Marnie

Landmark Apartment Trust of America Inc.'s top executives have bigger paychecks after signing new employment contracts late last month with the Florida-based REIT. Joseph Lubeck, executive chairman, will receive a base salary of $675,000 -- a sizable increase from the $250,000 salary he received last year when his total pay package was $1.9 million, including a $250,000 bonus and almost $1.4 million in stock awards. Landmark CEO and CFO Stanley Olander, meanwhile, will get a base salary of $625,000. Olander’s total compensation a year ago was $905,551, including salary, bonus, and stock awards. The new employment agreements also include formulas for receiving bonuses and stock. Two other Landmark executives also signed new employment agreements and received hikes in overall compensation -- COO James Miller and CIO Elizabeth Truong. Landmark Apartment Trust specializes in acquiring and operating apartment communities across the southern United States. The REIT owns or has ownership stakes in nearly 28,000 rental units and provides management services for an additional 5,000 apartments owned by affiliates.

Can Green Housing Oomph Up the Mortgage Market?
Digested From "Can Green Housing Oomph Up the Mortgage Market?"
National Mortgage Professional Magazine (07/30/14) Hall, Phil

The residential real estate market could get a shot in the arm from housing that makes intelligent use of energy. According to a new study, titled "Green Multifamily & Single Family Homes: Growth in a Recovering Market," there has been a strong increase in the volume of green building for single-family homes in recent years. Published by McGraw Hill Construction, the study finds that builders and remodelers in both the single-family and multifamily housing sectors recognize the value of going green: 73 percent of the former and 68 percent of the latter say consumers will pay more for green homes. Furthermore, the research determines that the most dramatic shift in the single-family market involves firms dedicated to green construction. The current percentage has climbed to 19 percent, and it is on pace to double in four years. Harvey Bernstein of McGraw Hill Construction, adds, "The findings also suggest that lenders and appraisers may be starting to recognize the value of green homes, making it a factor that could help encourage the market to grow if there is more widespread awareness across the U.S."

Legal/Legislative Did You Know

Housing Groups Lobbying Against Changes to Ohio Discrimination Rules
Digested From "Housing Groups Lobbying Against Changes to Ohio Discrimination Rules"
Cincinnati Enquirer (07/30/14) Tweh, Bowdeya

Fair housing advocates are denouncing a new Ohio Senate bill that aims to make far-reaching changes to state laws on housing discrimination cases. Sen. Bill Seitz (R-Green Township) introduced Senate Bill 349, which would cap punitive damages for those who rent who successfully sue their apartment owners on racial, religious, gender, or other discrimination claims. A property owner would be liable for up to $5,000 in punitive damages for a first offense. In addition, the legislation would hold small owners to different standards than larger ones. Area housing agencies would not be able to receive actual or punitive damage awards if they make successful claims on behalf of those who rent. G. Michael Payton, executive director of the Ohio Civil Rights Commission, responds, "We do not support it in any method or manner. There's no sound reason to change fair housing law in Ohio." Payton's agency is tasked with investigating discrimination in housing and other venues Seitz counters that his bill is a step toward making Buckeye State law mirror federal law. Earlier in the year, he noted that the National Real Estate Investors Association reached out to him with concerns about the state's fair housing laws. Since then, both the trade group's state chapter and the Ohio Apartment Association have thrown their support behind the bill.

10 Ways to Create a Crime-Free Atmosphere
Digested From "Reducing Property Crime: 10 Ways to Create a Crime-Free Atmosphere"
Property Management Insider (08/01/14) Blackwell, Tim

Drugs, guns, and criminal mischief increases resident and employee turnover in apartment communities. Such a negative reputation can detract significantly from curb appeal. Legacy Community Housing Corp.'s Brent Sobol and real estate investor Mike Butler detailed a number of ways to create a crime-free atmosphere at June's National Apartment Association Education Conference & Exposition in Denver. Chiefly, putting together an efficient crime-prevention program will not only pay dividends in the form of higher resident retention and occupancy, but also in potentially lower insurance premiums. Butler says apartment owners and managers need to realize the power of the leases they hold when it comes to dealing with crime. "[The criminal] is focused on the lease, not criminal code," he stated. "If you threaten to call the housing supervisor, they will comply all the way, 100 percent. Your lease is more important and valuable to them than the law." Sobol recommends identifying property crime with quarterly unit inspections. A third-generation real estate professional and former cop, he routinely inspects units and looks for signs that drugs and guns are present. He adds that the quarterly property inspections must be done in accordance with state leasing laws. Among the tell-tale signs of drug activity to look for are: sandwich bags, razor blades, Brillo pads, digital scales, and lighters.

Sobol also recommends knowing who is in your apartments and never tolerate unauthorized occupants. Furthermore, the lease agreement should define the number of days visitors are permitted to stay in an apartment before they must be added to the lease or are considered trespassers. If this is violated, immediately take the necessary legal steps to evict that resident. Another rule of thumb is to establish community rules and enforce them. Residents must be conditioned to follow lease terms. In this regard, it's a smart idea to use infraction notice forms to document incidents or build a case. Other tips range from getting graffiti down as fast as possible to forming partnerships with local law enforcement and security look beyond your property line to improve the entire neighborhood.

Houston District to Recognize Low-Crime Apartment Communities
Digested From "Brays Oaks District to Recognize Low-Crime Apartment Properties"
Your Houston News (08/02/14) Foster, Robin

Houston's Brays Oaks Management District is in the process of launching a new program to recognize area apartment communities that are taking steps to prevent crime. Created by the Texas Legislature nearly a decade ago, the management district reports that its previous public safety initiatives have included use of mobile surveillance cameras, graffiti abatement, and working with Houston Police Department (HPD) and the Harris County Attorney’s Office to target crime hot-spots. Presently, four apartment communities in the district have received a Blue Star designation via an HPD program aimed at reducing the potential for crime and raising public safety awareness among apartment managers and employees. The Blue Star program also includes an environmental design component. Director of Services Richard Rodriguez notes that some apartment owners in the district have found it is too expensive to meet those standards due to their property’s age or infrastructure. Consequently, the district has devised this alternative program to recognize low-crime communities. He remarks, "This provides a platform to bring folks up to par and recognize owners who are trying to make properties safer." The Brays Oaks District expects to launch the low-crime award program in September, with a goal of awarding the top five low-crime communities every quarter. To be eligible for the award, an apartment community's managers or staff must take part in the HPD's Blue Star training and regularly attend HPD Positive Interaction Program meetings. Additionally, they must participate in a resident screening program, such as the Houston Apartment Association's Rental Credit Reporting system that provides resident histories and criminal background data. The Brays Oaks District boasts 115 apartment communities.

NAA Announcements

6 Compelling Reasons You Are A Perfect Candidate to Attend Maximize: 2014 Multifamily Asset Management Conference

The Maximize: 2014 Multifamily Asset Management Conference, Oct. 13-15 at the Omni Amelia Island Plantation Resort in Amelia Island, Fla., isn’t for everyone; just those forward-thinking professionals who are collectively pushing the boundaries of multifamily housing revenue management and data analytics and are willing to share to get something in return. Following are six reasons why you should be among this select group of professionals dedicated to extracting total value and return from multifamily real estate assets and portfolios:

1. Expense Management Strategies. Whether it’s managing expenses at the community level or for an entire portfolio, subject matter experts are poised to deliver a deep dive into the more complex strategies that move the bottom line as they evaluate the biggest lift that asset managers can provide during a multi-year holding period. Combine that with the latest techniques used in unraveling the hidden costs and usage of utilities, and attendees are sure to leave the Conference with clarity around their portfolio’s fiscal outlays.

2. Revenue Enhancement and Pricing Strategies. From best practices in implementing, managing and maximizing revenue within an automatic pricing environment to integrating marketing, revenue management and customer analytics, be prepared to better grasp the potential of how better data can lead to greater demand at premium prices.

3. Data Analytics and Performance Benchmarking. From the untapped potential in customer relationship management systems to new methods and resources in operational performance benchmarking, the sessions dedicated to business intelligence and data analysis promise to identify best practices in tracking performance relative to competitors as well as determine the Key Performance Indicators that truly matter.

4. Green Best Practices. Whether it’s the NOI-enhancing green strategies for rehabs and new developments, or measurement and management strategies for water and waste, the sessions dedicated to sustainability guarantee product and process adjustments that can be marketed as green and deliver NOI both in savings and new revenue.

5. Capital Markets Financing Strategies. From alternative debt financing options to securing investors in equity capital markets, the perfect partner for your next set of deals is but a few education sessions away.

6. Innovation. A new breed of entrepreneur is disrupting the multifamily housing marketplace—and they’re at the Conference to show off their products and services to a panel of judges who’ll decide which has the most potential to positively impact rental housing investments.
The 2014 NAA Education Conference & Exposition: Shed Stale Marketing to Outsell Trendy Communities

The newest communities in your marketplace are your real competition, and not because they have nice new brick and mortar; it’s because they’re aggressive and novel in their marketing.

-“Lease it Like a Lease-Up”—one of more than 50 sessions offered in Denver during the 2014 NAA Education Conference & Exposition—explained that as the economy continues to improve and renting has quickly transformed into a lifestyle decision, you in turn need to boost your marketing and leasing efforts to outsell the new kids on the block.

Curious how to stop acting like a tired, old community using the same stale marketing techniques? You’re in luck: “Lease It Like a Lease-Up,” as well as other unparalleled education sessions focused on marketing and - leasing such as “Get in the Game: The Play-by-Play Strategy for Lease-Ups”— 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!


Nevada State Apartment Association
September, 2014

Roanoke Valley Apartment Association
November, 2014

CAM Online


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


Roanoke Valley Apartment Association
September, 2014

NALP Online


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.
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Upcoming Events

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