More Multifamily REITs Looking Beyond Primary Markets
Digested From "More Multifamily REITs Looking Beyond Primary Markets"
CoStar Group (11/28/12) by Mark Heschmeyer
The strategies pursued by three of the major apartment REITs -- Home Properties, Mid-America Apartment Communities, and AvalonBay Communities -- are indicative of the changing dynamic in the multifamily housing investment market. With a number of investors bidding up prices for higher quality apartment communities in the nation's top markets, many of America's apartment REITs are increasingly focusing their development activities in the core markets while also looking to invest in secondary markets outside of the major urban cores. Mid-America Apartment Communities Chairman and CEO H. Eric Bolton Jr., in particular, likes what he sees in the secondary markets. "Within our large market segment of the portfolio," he states, "latest projections suggest a ratio of just over eight jobs to each new unit expected to be delivered next year, which is stronger than the last up-cycle we had over the 2004 to 2007 timeframe. Within our secondary market segment, the story is even better, with a job growth to new supply ratio projected to be just over 10-to-one in 2013." Meanwhile, AvalonBay Communities Inc. continues to have a strong major market presence, with apartment communities concentrated in Northern and Southern California, Seattle, the Mid-Atlantic region, Boston, and New York. Nevertheless, it has been looking more and more closely at the "exurbs" in its major markets. AvalonBay President Timothy J. Naughton concludes, "Clearly over the last 10 years, urban has outperformed suburban. On the other hand, that hasn't gone unnoticed by the market and that's been reflected certainly in asset pricing and in land pricing. So, our view is to pursue more of a mixed strategy."
U.S. Multi-Housing Vacancy Rate to Rise Slightly in 2013
Digested From "U.S. Multi-Housing Vacancy Rate Expected To Rise Slightly In 2013 But Remain Near Historic Average"
CBRE Media Release (12/03/2012)
According to a new CBRE Group Inc. study, the U.S. multi-housing market vacancy rate is expected to increase modestly to 5.3 percent in the new year. The increase, from 4.5 percent in this year's third quarter, will be driven by two factors -- new construction completions and a slight tapering off of demand from historically robust levels in recent years. CBRE researchers further forecast that the multi-housing vacancy will fall back to 5.2 percent in 2014. Gleb Nechayev, senior managing economist for CBRE Econometric Advisors, remarks, "It is a great time to own multi-housing properties: apartment demand is benefiting from the slowly recovering economy as well as rapidly expanding pool of renter households." Monthly rents have now exceeded previous peaks in most markets, while vacancy rates are below historical averages. The market entered an expansion phase in the fourth quarter of 2011. Since then, fundamentals have continued to steadily improve. In addition, new supply has picked up significantly due to positive fundamentals. Geographically, CBRE projects that top-performing multi-housing markets will be those with heavy concentrations of high-tech employment, most notably San Francisco, Denver, Austin, and Atlanta. Those markets where total employment has already surpassed pre-recession peaks, such as Houston and San Antonio, are also expected to do well. Finally, strong cyclical recoveries in rents are also expected to start in some of the cities hardest by the housing boom going bust. These markets, which include Orlando and Phoenix, should lead the country in rent growth.
San Jose Has Lowest Housing Vacancy Rate, Study Shows
Digested From "San Jose Has Lowest Housing Vacancy Rate; Florida Markets Have Worst"
Business Journal (San Jose) (11/26/12) by G. Scott Thomas
According to the U.S. Census Bureau's newest American Community Survey, more than 95 percent of all houses, apartments, and condominiums in the San Jose metro area are occupied -- tops in the country. In fact, just 28,100 of San Jose's 650,700 housing units were empty as of the end of 2011, the year covered by the survey. That translates to a vacancy rate of 4.3 percent. The next lowest vacancy rates were 5.6 percent in Lancaster, Pa., and 5.7 percent in Minneapolis-St. Paul. Meanwhile, Cape Coral-Fort Myers, Fla., recorded the country's worst vacancy rate (35.9 percent) as of 2011, according to the survey. Seven other Florida markets made the nation's bottom 10.
Housing Crash Leaves Many Young Homeowners Underwater
Digested From "Housing Crash Leaves a Generation of Young Homeowners Underwater: Diminished Expectations"
Oregonian (12/02/12) by Elliot Njus
New CoreLogic data shows that years of tumbling home values nationally have left almost 11 million Americans upside-down on their home loans. According to the research, the housing crash has hit young, first-time homeowners who bought at or near the height of the market especially hard. By some counts, almost 50 percent of mortgage holders under the age of 40 are currently upside down on their mortgages and are, as a result, stuck in place both geographically and in building wealth and potentially their careers.
Stuyvesant Tenants Reach $68.8 Million Settlement
Digested From "Stuyvesant Tenants Reach $68.8 Million Settlement"
Business Week (11/30/12) by Don Jeffrey; Oshrat Carmiel
In New York, tenants of Stuyvesant Town-Peter Cooper Village who sued alleging they were overcharged for rent this week reached a $68.8 million settlement with MetLife Inc. and CWCapital Asset Management. The settlement has indeed received preliminary approval from Richard Lowe, chief justice of the New York State Appellate Term, First Department. A hearing on final approval of the settlement has been scheduled for April 9. Residents sued MetLife and Tishman Speyer Properties LP five years ago, charging that the companies had improperly forced at least 25 percent of the massive apartment property's residents to pay market rents while the owners received upwards of $25 million in tax breaks. CWCapital gained control of Stuyvesant Town-Peter Cooper Village in 2010 after Tishman defaulted on its senior mortgage. The settlement paves the road for the eventual sale of Manhattan's largest apartment complex.
Charlotte Sees Low Vacancy Rate for Apartments
Digested From "Charlotte Sees Low Vacancy Rate for Rentals"
WSOCTV.com (NC) (11/27/12) by Torie Wells
Real Data reports that Charlotte's apartment sector continues to boast a low vacancy rate. Demand for rental units is so high that some communities are adding on and pre-leasing some of the apartments before they are even finished. Charles Dalton of Real Data confirms, "We've been on an upward trend over the past two years." According to his firm, which tracks apartment communities throughout the Southeast, rent for existing apartments in Charlotte rose 5.7 percent in 2011 and 5 percent so far this year. He expects the increase to continue well into 2013, stating, "somewhere between 4 percent and 5 percent."
Apartment Market Booming in Downtown St. Paul
Digested From "Apartment Market Booming in Downtown St. Paul"
Currently, there are more than 14,000 new apartments in the planning stages for the Minneapolis-St. Paul metropolitan area. According to a third-quarter survey by Marquette Advisors, the rate of absorption continues to outpace the completion of new rental units. Some speculate that multifamily housing developers will know the boom is over only when residents fail to show for the next, newest building. That does appear to be a concern anytime soon. There are currently four large apartment communities now under development in downtown St. Paul and nearby neighborhoods. Several more are rumored. Builders believe part of the trend is that people who are landing new jobs in the rebounding economy are not eager to purchase a home. Low vacancy rates for rental units support that theory, with Minneapolis' rate currently at 1.6 percent and St. Paul at 2.8 percent as of the end of the third quarter, notes the latest quarterly survey by Marquette Advisors. Abe Appert, first vice president at CBRE, notes that a movement of young professionals is definitely helping drive demand, adding, "Renters have not had the options that we have now, and they want it." This demographic is increasingly age 25 to 35 years old with jobs paying at least $50,000. He concludes, "They don't want to be pinned down; they don't believe in the wealth-creation model of the last 15 years" tied to real estate.
Apartment Sector Remains Strong in D.C. Area
Digested From "Real Estate Market Remains Strong in DC Area"
Patch.com (11/28/12) by Laura J. Thornton
According to the National Association of Realtors, apartment vacancy rates in the Washington, D.C., metro area remain among the lowest in the country at 3.5 percent in Northern Virginia and 3.7 percent in the Maryland suburbs. Apartment owners and managers, though, have to be aware that the region's residential real estate market is also quite strong. Looking at the numbers for October, Evers & Co. Real Estate President Donna Evers notes that there was a "28 percent increase in the dollar volume of sales over October 2011. . . . Every indicator shows that we've got tremendous momentum in this fall's residential real estate market, with many motivated buyers in our area."
7 Percent Drop in U.S. Multifamily Mortgage Originations in Q3
Digested From "7 Percent Drop in U.S. Multifamily and Commercial Mortgage Originations in the Third Quarter of 2012"
San Francisco Chronicle (11/28/12)
According to the Mortgage Bankers Association's latest Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations, multifamily and commercial mortgage originations decreased 7 percent in this year's July-through-September period compared to the third quarter of 2011. This decrease was driven wholly by mortgage originations for office and retail space, MBA analysts note. There was a 30 percent increase in mortgage originations for multifamily housing. The research further shows that origination volume was 17 percent lower overall than this year's second quarter, but 15 percent higher on a year-over-year basis through the first nine months.
Essex Property Trust CEO on Its West Coast Success
Digested From "Essex Property Trust: Sharper Differentiation That Leads Greater Dividend Repeatability"
Forbes (11/29/12) by Brad Thomas
Essex Property Trust President and CEO Michael J. Schall is interviewed on a wide range of topics, including his apartment REIT's focused strategy of investing in densely populated West Coast markets. "We ultimately look for the economic factors that lead to strong rent growth," he remarked, "which is the primary driver of cash flow and property appreciation. The western urban and suburban coastal markets have a highly educated and skilled employment base that represent centers of innovation and wealth creation." Essex was founded in 1971. The company has paid an increasingly higher cash dividend for 18 consecutive years. He stated, "The key is our disciplined approach to operating the company, which includes the process for buying or building new communities, and management of the balance sheet." Clearly. the high demand for West Coast apartments has been beneficial for Essex's bottom line. Schall concluded, "The apartment REITs have become experts in housing supply and demand. While homebuilders need to sell their products once, we never stop selling our apartment homes. We look to increase our portfolio in areas that we expect housing demand to exceed supply, and we carefully track both sides of that equation."
Pace of Milwaukee Apartment Construction Sluggish Vs. '89 Peak
Digested From "Pace of Apartment Construction Sluggish Compared With Peak in 1989"
Milwaukee Business Journal (11/26/12) by Sean Ryan
The Milwaukee area's apartment sector appears to be booming with new construction. But the market remains well off its boom years pace, notes new data from John Burns Real Estate Consulting LLC. This year, the metro area recorded building permits for 700 new units of multifamily housing, most of which are apartments. That is compared with the peak in 1989, when a whopping 5,040 multifamily housing units were permitted. Lesley Deutch, vice president of John Burns Real Estate, comments, "We're actually predicting Milwaukee to get back to 1,500 units by 2013 and 2014 and then get back to 2,200." Apartment developers who are riding high on the local sector's 3.8 percent vacancy rate say the strength is partially the result of the long lull in apartment development during the first decade of the 21st century. But permits this year are on par with activity in the 1990s when apartments accounted for between 60 percent and 70 percent of units permitted in multifamily construction projects, Deutch noted.
Chinese Developers Dig Into U.S.
Digested From "Chinese Developers Dig Into U.S."
Wall Street Journal (11/28/12) by Craig Karmin
Chinese investment has yet to pour into U.S. real estate as some analysts predicted, but it has been steadily growing. For instance, Xinyuan Real Estate Co. is starting to develop residential space in the U.S., hoping to tap into the hot demand among Chinese investors for U.S. apartments. The Chinese company, which is listed on the New York Stock Exchange, bought a site last month in Brooklyn for its first development in the U.S. Chinese developers of multifamily housing have an edge over their U.S. counerparts when it comes to reaching potential condominium buyers in China, notes Omer Ozden, an adviser to Xinyuan and other Chinese investors in the market for U.S. properties. He states, "If right out of the gate you can get 40 percent the building sold to mainland Chinese, it's going to be a successful project." At least another two dozen Chinese property firms, both state-owned and private, are now scouring major American markets for property deals. Most of these players are primarily seeking residential developments.
Ballard's Apartment Boom Comes With Risks
Digested From "Ballard's Apartment Boom Comes With Risks"
Seattle Times (11/26/12) by Eric Pryne
Currently, around 1,200 market-rate apartments are under construction in the Seattle neighborhood of Ballard, with hundreds more in the pipeline. As a result, multifamily housing analysts warn that the enclave could soon be at serious risk of getting overbuilt. Indeed, when all these apartment communities projects are completed sometime in the summer of 2014, the number of units in communities of 20 or more apartments in Ballard will have increased by 70 percent -- more than any other Seattle neighborhood. After that, apartment projects with another 750 or so rental units that have not broken ground yet likely will be completed before the end of 2015, notes research firm Dupre + Scott Apartment Advisors. Researcher Tom Cain of Apartment Insights Washington marvels, "They're doubling the inventory in that market. That's just unbelievable." Of course, Seattle's apartment boom extends well beyond Ballard. Nearly 8,400 apartments are currently under construction citywide -- the largest number in at least two decades, notes Dupre + Scott. Developers are building at such a rapid clip because demand has increased, sparked by a demographic surge of young adults who are preferring in-city living at a time when there is little new supply. For example, the last new apartment community in Ballard opened more than two years ago. However, Dupre + Scott's Mike Scott forecast that, in a year or so, all the new development will start to tip the balance between demand and supply. Cain concludes, "It could be a disaster . . . except, of course, for the tenants."
Developers File Site Plans for High-Rise Apartments in Ann Arbor
Digested From "Developers File Site Plans for High-Rise Apartment Buildings on East Huron, Church Streets"
AnnArbor.com (11/29/12) by Lizzy Alfs
In Michigan, the developers behind two high-rise student apartment buildings proposed for downtown Ann Arbor have formally submitted site plans to the city's planning department. The new developments, which would bring 733 bedrooms to the rental market, follow a wave of new housing construction throughout Ann Arbor. Proposed by Pizza House owner Dennis Tice in partnership with Minnesota-based Opus Group, the first project would be erected in the city's D1 zoning district. The developers behind the second project, proposed for East Huron and North Division streets, confirm that they have made all the requested changes since going before the Ann Arbor Design Review Board and are eager to proceed.
Aimco CEO Says Customer Service Key for Apartment REITs
Digested From "Aimco CEO Says Customer Service Key for Apartment REITs"
REIT.com (11/26/12) by Matt Bechard
Aimco Chairman and CEO Terry Considine says that with the residential housing market starting to show signs of rebound, apartment owners and managers must take steps to ensure the quality of their product and customer service. "At Aimco," he remarked, "we place a great priority on satisfying customers. We have the highest renewal rate in the business and among the highest increases in renewal pricing." He further projected that Aimco shareholders will enjoy an annual earnings increase for at least "the next several years" of 6 cents per share solely because of lower interest expense. "We do expect it to come down in terms of total leverage to about seven times EBITDA," he concluded. "We think that will be achieved in about another year or year and a quarter." Considine went on to stress the importance of being well-positioned to take advantage of future acquisition opportunities, as well as the importance of apartment REITs being involvement in their local communities. Aimco, for instance, sponsors a number of community service programs for its employees.
Jacksonville Apartment Crime-Prevention Program Succeeds
Digested From "Jacksonville Apartment Crime-Prevention Program Reaches Milestone"
Florida Times-Union (12/01/12) by Janay Cook
Since the end of this year's first quarter, a total of 15 apartment communities have joined the Crime-Free Multi-Housing Communities program in Jacksonville. The total has now exceeded 100 communities. The program was created in Arizona two decades ago to battle criminal activity in inner-city apartment settings. The Jacksonville Sheriff's Office introduced it in 2008 and the collaboration between apartment owners, managers, residents and local law enforcement was very quickly a success. Lt. Daniel T. Adams stated, "The managers have told us how effective it is. The unit is always looking to expand the program." The Jacksonville Sheriff’s Office reaches out to apartment communities that have shown violent crime trends. The residents are required to sign a "Crime-Free Lease Addendum" prior to signing their lease agreement. They also must agree to report illegal activity to the department. The program calls for both management and residents to complete three phases, including a walk-through, before they can be officially admitted into the program.
Catch the Wave of Innovation with Sir Richard Branson at the 2013 NAA Education Conference & Exposition
Sir Richard Branson, business icon and leader in innovation and customer service will be the keynote speaker at the Opening General Session of the 2013 NAA Education Conference & Exposition in San Diego, June 19-22.
Branson, international business magnate and founder of the Virgin Group—one of the world’s most recognized and respected brands—is well known for his entrepreneurial spirit, unrivaled network and transformational leadership style. Expect to hear insights into how he’s identified new markets, engaged stakeholders and how he’s challenged legacy players to win market share.
The benefits of attendance don’t end there—awaiting you in San Diego are practical, take-home tactics from general and breakout sessions, as well as the opportunity to explore cutting-edge products and services from multifamily supplier partners during the trade show.
Don’t delay—registration for the 2013 NAA Education Conference & Exposition is open and the largest discounts go to those who register early. Visit here by Feb. 1 and save up to $400.
Understand Your Future Residents Today at the 2013 Student Housing Conference & Exposition
Plan to better understand what makes Millennials tick Feb. 25-27 as NAA convenes the 2013 Student Housing Conference & Exposition in Las Vegas at the ARIA Resort.
Millennials’ attitudes toward higher education evolve faster than their smartphone models, making it critical to understand the needs and expectations of future students now so as to be prepared to engage them when they arrive on campus.
Michael Wood, Senior Vice President at TRU, one of the world’s leading research firms specializing in teens and 20-somethings, will headline the keynote session “Youth Truths The Millennial State of Mind.” Wood's presentation is but one of many learning opportunities during two days full of education and networking, from general and breakout sessions to reception and time spent interacting with exhibitors on the trade show floor.
The deadline for early registration is Jan. 4. Visit here for registration, schedule, housing and the latest announcements. And remember to use the official hashtag #NAAStudentConf to engage, discuss and follow the conference.
Green For Your Community, Green For Your Bottom Line
Green is the buzzword in the real estate industry today and NAA is at the forefront of this issue. The ever-growing market of sustainable, environmentally friendly and recycled building products, along with the greater availability of educational opportunities for developers, owners, operators and residents has quickly accelerated green building’s acceptance in the marketplace.
NAA is helping its members move the practice of green building and operations into the multifamily mainstream. Energy efficiency, water and resource conservation, sustainable or recycled products, and indoor air quality are increasingly being incorporated into the everyday process of the multifamily housing industry.
Make plans now to attend NAA’s Green Conference, April 15-17 in Baltimore, where education and networking opportunities will aid members prepare for the market shift to sustainable building and operations. Visit the green website for more information.
2012 NAA Survey of Income & Expenses Data Now Available
The 2012 NAA Survey of Income & Expenses is now available. The survey includes an executive summary, detailed data, reports and charts about rental communities. A total of 4,645 properties containing 1,159,874 units are represented in this year’s report. Data was reported for 4,114 market rent properties containing 1,087,228 units and 531 subsidized properties containing 72,646 units. The executive summary appeared in the Aug. issue of units magazine. To order, please visit the NAA Store.
2013 NAAEI “Get Reel” Career Challenge
Looking for a free trip to the 2013 NAA Education Conference & Exposition in San Diego, CA? Enter the 2013 NAAEI “Get Reel” Career Challenge. Submit a 30-second YouTube video about a day in your life as an apartment career professional. Click here for more information.
Need Something? Try the NAA Community Site & Online Resource Center
Don’t forget to stop by the NAA Community Site & Online Resource Center when you need to discuss an issue, seek an opinion, or access any of the hundreds of white papers, best practices, sample forms or market reports in the Online Resource Center.
An NAA benefit, members can choose from a variety of Communities and Forums to connect with others who share their industry interests, or conduct research.
Questions? Contact Online Resource Manager Mary Scott.
Find an NAAEI Designation Course Near You!
Roanoke Valley Apartment Association
South Dakota Multi-Housing Association
Greater Charlotte Apartment Association
Austin Apartment Association
January – February, 2013
Apartment and Office Building Association of Metropolitan Washington
February – March, 2013
South Dakota Multi-Housing Association
February – March, 2013
Rental Housing Association of Boston
April – May, 2013
Roanoke Valley Apartment Association
Apartment and Office Building Association of Metropolitan Washington
To find more courses in your area, click here.
For more information about any of the classes listed, please contact Kimberly McCrossen at firstname.lastname@example.org or 703-518-6141 ext. 121.
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