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Multifamily Housing Deals Multiply
Industry News
New Study Shows Renting in Manhattan Increased 5.5 Percent
Apartment Rents to Rise in California's Inland Empire
Related Group Hires Paul as Investment Fund Manager
Apartments' Borrowing Position Improves
Lehman Cuts Profit Estimates on Apartment REITs
Post Properties Asset Backs $120 Million Loan
Coalition Looks at the Rent Crunch Nationwide
Legislative/Legal News
NAA and Others Decry Apartment Squeeze
Wisconsin Apartment Owners Now Need Photo Proof of Resident Damage
Florida Town Authorizes Rezoning for Multifamily Housing
Iowa Survey Testers Uncover Housing Bias
Rent Control on the Ballot in Orange County, Calif.
Housing to Become Denser in Franklin County, Pa.
1031s Under Scrutiny
NAA Announcements
2008 NAA PARAGON Awards - Call for Entries
NAA Education Conference (June 26-28 ~ Orlando, FL) – Personal Development Education Track
April 15 Deadline for NAA Leadership Lyceum Scholarship Applications
NAA Government Affairs HotSheet—Latest Edition
Top Story
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Multifamily Housing Deals Multiply
Digested From "Multifamily Deals Multiply"
Wall Street Journal (04/09/08) P. C13; by Jonathan Karp
Deal activity remains brisk in the multifamily housing sector, with apartment values buoyed by a rare availability of financing, compliments of Fannie Mae and Freddie Mac. Looking to fulfill their mandate to provide funding for affordable housing while turning a profit, the two government-sponsored enterprises are expanding in the multifamily housing sector and filling the void left by private lenders. Denver-based UDR Inc. recently benefited from that capital availability in its $1.71 billion sale of nearly 40 percent of its apartment portfolio to a joint venture of DRA Advisors LLC and Steven D. Bell & Co., as Fannie Mae provided the lion's share of financing. AvalonBay Communities Inc., meanwhile, turned to both GSEs in March for $265 million in mortgage financing on two apartment communities in Northern Virginia. Green Street Advisors Inc. Chairman Mike Kirby expects the good times to last, as the apartment sector "is the beneficiary of the housing mess, and it feels like it has room to run."
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Industry News
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New Study Shows Renting in Manhattan Increased 5.5 Percent
Digested From "Renting in Manhattan Climbs 5.5 Percent"
New York Daily News (04/09/08)
According to a new Citi Habitats study, the cost of renting an apartment in Manhattan rose 5.5 percent in 2007 as residents continued to pay a premium to live in the country's priciest residential market. The average monthly apartment rent increased to $3,310 a month for all sizes of apartments south of 96th St. By contrast, Reis Inc. reported that the average U.S. apartment rent increased 4.8 percent last year to $975 a month. Manhattan vacancy rates, meanwhile, remained around 1 percent for the third straight year. The Citi Habitats report further determined that rental units account for about 75 report of the city's total housing stock. Citywide, studio units in new buildings with doormen were going for an average of $2,751 a month in 2007; while one-bedroom apartments cost $3,979 on average, and two-bedrooms rented for $6,695. SoHo and TriBeCa, respectively, were the most expensive areas last year. Meanwhile, the least expensive place to rent a studio was the Lower East Side, with apartment rents there averaging $1,827 a month.
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Apartment Rents to Rise in California's Inland Empire
Digested From "Apartment Rental Costs Expected to Rise in 2008"
Press Enterprise (Riverside, CA) (04/09/08) by Leslie Berkman
According to the USC Casden Forecast's 2008 multifamily market report, apartment rents will slowly increase in California's Inland Empire this year despite a growing supply of units and a slumping homebuying market. Rents on existing apartments will increase on average 2 percent to 2.5 percent in 2008, following a 2.2 percent hike last year. With an influx of 1,170 new, higher-priced apartments expected over the next nine months or so, Casden Forecast Director Delores A. Conway estimates that the average monthly apartment rent in Riverside and San Bernardino counties will increase from $1,104 in the fourth quarter of 2007 to between $1,130 and $1,140. Inland Empire apartments are currently about 95 percent occupied. Looking ahead, researchers expect that the region will continue to attract apartment residents due to the fact that it offers faster economic growth and lower rents than surrounding counties.
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Related Group Hires Paul as Investment Fund Manager
Digested From "Related Group Hires Investment Fund Manager"
South Florida Business Journal (04/09/08)
Jordan Paul has been appointed as the new senior managing director of The Related Group's investment fund. In March, the Florida-based multifamily housing developer partnered with Lubert-Adler to form The Related Investment Fund. This $1 billion investment vehicle is being used to purchase distressed mortgages and property from other property developers, lenders and owners. Related Chairman and CEO Jorge M. Perez stated, "Jordan Paul offers a valuable combination of private equity and institutional investment experience and excellent relationships in the banking community. He will make a significant contribution to the fund at this time." Paul founded Aquila Property Co., a commercial property investment and advisory firm that has completed more than $100 million in distressed property acquisitions and sales this decade.
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Apartments' Borrowing Position Improves
Digested From "Plots & Ploys: Lucky Few"
Wall Street Journal (04/09/08) P. C10; by Alex Frangos; Kris Hudson; Lingling Wei
Despite the ongoing credit crunch, those commercial property owners that have been able to find cooperative lenders are enjoying low rates. The recent series of interest-rate slashes by the Federal Reserve have caused the yield on the benchmark 10-year Treasury to hover near a five-year low. This, in turn, has helped reduce borrowing costs for some investors in everything from office towers to apartment communities. Adelante Capital Management CEO Michael Torres notes that the key beneficiary of the rate cuts are "public companies with strong balance sheets."
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Lehman Cuts Profit Estimates on Apartment REITs
Digested From "Lehman Cuts Profit Estimates on Apartment REITs"
MarketWatch (04/09/08) by John Spence
Lehman Brothers analysts have cut their earnings estimates on several apartment REITs prior to the upcoming first-quarter earnings season. In a research note, they stated: "We believe the challenging economic/jobs outlook combined with the oversupply of residential property will put downward pressure on apartment fundamentals." However, the analysts assured that they will maintain their previous price targets on the stocks "to reflect the current relative debt financing advantage that apartment owners enjoy over the other property types." Specifically, Lehman cut its 2008 and 2009 outlooks on such apartment REITs as Apartment Investment and Management Co., AvalonBay Communities, Camden Property Trust, Equity Residential, Post Properties Inc. and UDR Inc. Since the first of the year, apartments have ranked as the top-performing group within REITs, gaining almost 19 percent versus 7 percent for the broader sector.
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Post Properties Asset Backs $120 Million Loan
Digested From "Post Properties Asset Backs $120M Loan"
GlobeSt.com (04/08/08) by Connie Gore
Post Properties Inc. confirms that it has latched onto $120 million of fresh capital in a loan from Freddie Mac. The Atlanta-based REIT's collateral was Post Addison Circle, one of the Dallas metro area's most prominent mixed-use projects. The asset represents Post's first-ever loan from the government-sponsored enterprise. Post Addison Circle contains 1,334 apartments, along with 41,000 square feet of office space and more than 108,700 sq. ft. of retail stores. The apartments boast a 94.6 percent occupancy rate. Post created a special-purpose entity, dubbed Post Addison Circle LP, in setting up the loan. The strategy was likely a tool for additional funding for Post's $1.3-billion construction and pre-development pipeline. Post currently has six apartment communities, two condominium projects and one expansion in various stages of development. In addition, it has land in pre-development stages for another 3,312 apartments.
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Coalition Looks at the Rent Crunch Nationwide
Digested From "Rent Crunch"
Worcester Telegram & Gazette (MA) (04/08/08) by Bronislaus B. Kush
Residential rents are up across the country, confirms the National Low Income Housing Coalition in the latest issue of its annual report "Out of Reach." The organization identifies Hawaii, California and New York as the least unaffordable states and names Connecticut's Stamford-Norwalk market as the most costly metropolitan area in the nation. According to the study, one in seven U.S. households is contributing more than half of their income toward keeping a roof over their heads. Low-income, minority and first-time home buyers are especially being impacted by escalating shelter costs. "The numbers in Out of Reach are a stark reminder that in nearly every community in our nation, families are struggling to make ends meet," said U.S. Sen. Christopher J. Dodd (D-Conn.), in a preface to the NLIHC report. "While we have federal programs in place to assist people in affordable housing, they are relatively small compared to the great need. More must be done to ensure housing opportunities for all."
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Legislative/Legal News
NAA and Others Decry Apartment Squeeze
Digested From "Industry Groups, Advocates Decry Apartment Squeeze"
Commercial Property News (04/09/08) by Dees Stribling
Apartment groups and advocates for affordable housing have been sounding some similar alarms lately about the squeeze on apartment residents. Both are urging that more action from the federal government is needed in dealing with the worsening problem. The National Apartment Association recently joined with the National Multi Housing Council and the National Leased Housing Association in testifying before the Senate Banking Committee that thousands of affordable housing residents are at risk of losing their housing if lawmakers do not force changes at the HUD. Hector Pinero, senior vice president of Related Management, cautioned that the Section 8 housing program is facing major disruptions as HUD is no longer making timely payments to building owners who take part in the program. A recent report by the National Low Income Housing Coalition, titled "Out of Reach 2007-2008," found that there is no metro area or rural county in the nation in which a full-time minimum wage earner by him- or herself can afford the rent on even a modest one-bedroom apartment.
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Wisconsin Apartment Owners Now Need Photo Proof of Resident Damage
Digested From "Landlords Must Have Photo Proof of Tenant Damage"
Wisconsin State Journal (04/09/08) by Brittany Schoepp
In Wisconsin, the Madison City Council recently ruled that apartment owners throughout the city must have photographic proof of damage charged against residents' security deposits. Among the ordinance change's advocates was Alderman Eli Judge, who represents many University of Wisconsin-Madison students who rent apartments near campus. Owners are now required to take photos, keep them on record and, when requested, provide them to tenants to ensure any deductions are supported by evidence. The change also requires owners who withhold any part of the security deposit to give residents written notification of their right to request a copy of the pictures. In addition, owners must inform tenants they can view photos documenting problems charged to the apartment 's previous occupants. Exceptions to the requirement include damages that cannot be captured on film, such as pet or smoke odors. Nancy Jensen, executive director of the Apartment Association of South Central Wisconsin, is another supporter of the change. She is pleased that the move will take "99 percent of the 'he said, she said'" out of disputes over security deposit deductions.
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Florida Town Authorizes Rezoning for Multifamily Housing
Digested From "Delray Beach Corridor Plans Focus on Transit: Workforce Housing Near I-95, Tri-Rail"
Trading Markets (04/08/08) by Maria Herrera
Almost four years ago, officials in Delray Beach, Fla., authorized the rezoning of 225 acres on Congress Avenue so that developers could build condominiums and apartments amid restaurants and shops. Not a single developer has attempted to take advantage of the high-density rezoning of the acreage near I-95 and the Tri-Rail station, but Palm Beach County hopes to jump start revitalization with a project on the 25-acre South Palm Beach County Administrative Complex. The county will renovate buildings on one portion of the site to house consolidated administrative offices, with the remainder of the site reserved for a 370-unit, mixed-use residential development. The city and county are working together on the project--which will include a workforce housing component--and will solicit proposals from developers. "We want the rest of the property to go back to the tax rolls," County Commissioner Mary McCarty said. "We are looking at 370 units and some of them have to be workforce housing, and we're looking at retail that will work well with transit."
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Iowa Survey Testers Uncover Housing Bias
Digested From "Housing Survey Testers Were Trained, Told to Record Facts"
Cedar Rapids Gazette (Iowa) (04/04/08)
An audit of 39 property management firms in Cedar Rapids, Iowa, found that 29 of them discriminated between black and white applicants. Some building managers informed black applicants they had no apartments available but provided information on open units when white applicants visited soon afterward. In other cases, black testers were directed to low-income communities or shown apartments that were in disrepair, while white testers were shown nicer accommodations. None of the testers actually filled out applications for housing. The Cedar Rapids Civil Rights Commission has filed discrimination complaints against the 29 companies, charging them with failing to follow city and federal law. If any of the firms are found guilty of wrongdoing, fines and sanctions can be levied and staff training will be mandated. Kenneth White, director of the Cedar Rapids Civil Rights Commission, states, "It shows that there is some differential treatment, and it looks like it's based on race, and we have to address it because it is illegal. ... This is an opportunity to educate the public on fair housing and to resolve issues."
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Rent Control on the Ballot in Orange County, Calif.
Digested From "Rent Control Targeted in June Election"
Orange County Register (CA) (04/02/08) by Mary Ann Milbourn
In Orange County, Calif., the debate over rent control will almost certainly heat up this June thanks to a couple of ballot measures that could affect both apartment owners and residents. The primary focus of Proposition 98 and Proposition 99 is to close a loophole in the state's eminent domain law. The former is spearheaded by the Howard Jarvis Taxpayers Association, apartment owners, the mobile home park industry and the California Farm Bureau. It contains a provision that would phase out rent control in apartments and mobile homes as the units are vacated. Rent-control proponents--led by a coalition of residents, senior citizens, mobile home associations and environmental groups--have countered with Prop. 99, which would provide eminent domain protection while keeping rent control intact. Prop. 99 advocates are expected to frame the campaign as one about the potential abolition of all tenant protections, ranging from the return of rental deposits to the 60-day notice for eviction. Statewide, more than a dozen cities have some form of apartment rent control now in place. Rent control has met with only limited success in Orange County, though, and no local jurisdictions have rent control for apartments. However, with average Orange County rents now approaching $1,600 a month, there is mounting public pressure to take action. The Apartment Association of Orange County has voiced its support for Prop. 98. Apartment Association President Vicki Binford states, "Government has tried to keep affordable housing, but they want to do it at the owner's expense."
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Housing to Become Denser in Franklin County, Pa.
Digested From "Housing to Become Denser in Franklin County"
Chambersburg Public Opinion (Pa.) (03/28/08) by Jim Hook
At a seminar held by the Adams County Partnership for Land Use Education in Gettysburg on March 25, speakers talked about the need to boost densities in Pennsylvania's Franklin and Adams counties as a means of expanding affordable housing, preserving open space, controlling growth, attracting quality retail, and reducing the cost of public services. Watershed Alliance of Adams County President Mark Berg noted, for instance, that the $350,000 homes currently being built are not what young professionals, empty nesters, childless couples, single parents, and seniors need. Denser communities would provide maintenance-free lifestyles for these households as well as provide affordable housing for teachers, firefighters, nurses, and retail sales associates. Berg pointed out that households need to earn $62,350 per year in Adams County and $53,650 per year in Franklin County to purchase a median-priced home, while renters in Adams County need an hourly wage of at least $12.75. Shanna Weist of the Realtors Association of York and Adams County said development guidelines for dense communities with a mix of housing types will be created by the York/Adams Smart Growth Coalition for use by local governments. The guidelines will include Traditional Neighborhood Design communities with apartments, condominiums, and single-family dwellings and such features as narrow streets, front porches, and common recreational areas.
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1031s Under Scrutiny
Digested From "1031s Under Scrutiny"
National Real Estate Investor (03/01/08) by G.M. Filisko
The Internal Revenue Service's plans to tighten the rules on 1031 tax-deferred exchanges and audit more taxpayers are far from certain. The heightened discussion of "like-kind" exchanges--also called 1031 or Starker exchanges--results from the release of a fall 2007 report by the Treasury Inspector General for Tax Administration (TIGTA), which found that taxpayers filed more than 338,500 IRS forms in 2004 claiming deferred gains or losses of more than $73.6 billion. That was twice the number of like-kind exchanges reported in 1998 and three times the total dollar amount deferred. The IRS has adopted the report's recommendations, agreeing to study reporting and compliance issues associated with these transactions. In addition, it will revise instructions for certain tax forms and provide additional guidance on like-kind exchanges to taxpayers and practitioners. William Exeter, president and CEO of Exeter 1031 Exchange Services, doubts the IRS will increase audits. Meanwhile, Brondino & Associates President Jim Brondino adds that it would be a mistake for the IRS to tighten the scrutiny on exchanges in a way that substantially reduces the number of exchanges that take place. Similar to how the sale of a house creates a cascade of revenue for related businesses, the sale of commercial properties has the same effect. Such deals create taxable income for the agency. Brondino comments, “The momentum created by exchanges gives the IRS more revenue than it would get if it eliminated the exchange and taxed transfers. There would be a substantial reduction in transactions in play if the IRS eliminated the 1031."
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NAA Announcements
2008 NAA PARAGON Awards - Call for Entries
Each year, the National Apartment Association recognizes the distinguished efforts of builders, individual professionals and affiliated apartment associations and the unique contributions they make to the multifamily housing industry through its premier, national awards program—the PARAGON Awards.
The Call for Entries for the 2008 PARAGON Awards is now open! If you would like to nominate an individual, affiliated association or community that represents our industry's models of excellence, please visit the PARAGON Awards Overview page. Entries are due by April 18, 2008.
Winners will be recognized at the NAA PARAGON Awards Ceremony at the 2008 NAA Education Conference & Exposition in Orlando, Fla., in June.
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NAA Education Conference (June 26-28 ~ Orlando, FL) – Personal Development Education Track
Register today for the NAA Education Conference and take advantage of the Personal Development Education Track. Life can be chaotic. Making the most of it means knowing how to make important changes in your life so you can get your life back on track. This June join NAA in Orlando and our Personal Development Education track will show you the tools you need to do just that! On Thursday join Steve Farber as he explores, “Extreme Leadership.” On Friday, be enlightened as Natalie Brecher discusses, “The Lion’s Way: How to Delegate and Empower Your Way to Success.” And don’t leave on Saturday without learning, “How to Succeed in Business… and Still Have a Life!” Attendees are sure to go back to the office ready to work with great take-away ideas from these sessions!
Choose from more than 50 education sessions divided into nine education tracks including: Executive, Development & Rehab, Marketing & Leasing, Human Resources, Independent/Small Owner, Specialty Housing, Personal Development, Wild Card! and Shared Interest Roundtables.
Register for the conference and book your hotel room TODAY! Be a part of the largest show in the multifamily housing industry. Group discounts are also available for companies purchasing five or more full conference registrations.
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April 15 Deadline for NAA Leadership Lyceum Scholarship Applications
Two affiliate scholarships are available for NAA’s acclaimed Leadership Lyceum. Scholarship recipients will receive airfare, lodging, applicable registration fees and class materials for the three major national NAA meetings at which the Lyceum sessions are held: NAA Education Conference & Exposition, June 26 – 28, 2008; Assembly of Delegates, November 13 – 15, 2008; and, Capitol Conference, March 7 – 10, 2009.
The primary purpose of these scholarships is to empower recipients with the knowledge they need to succeed in developing their local affiliates. The secondary goal is to facilitate the recipients also becoming productive members of NAA at the state and national level. Therefore, applications will only be accepted from affiliates, not directly from potential scholarship recipients.
The deadline for applications is April 15, 2008. Scholarship recipients will be announced May 1, 2008. For additional information contact Sandra Bowman, NAA’s Manager of Governance by e-mail sandra@naahq.org or phone 703-518-6141, ext 253.
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NAA Government Affairs HotSheet—Latest Edition
NAA's Government Affairs Department HotSheet highlights critical state and local legislative activity affecting the multifamily housing industry. This electronic newsletter is delivered by NAA once per month. Visit the Web Link below to access the latest edition.
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