Companies Crowd Housing Market as Rental Gains Slow
Digested From "Blackstone Crowds Housing Market as Rental Gains Slowing"
Bloomberg (03/18/13) Gittelsohn, John; Gopal, Prashant
Companies are flooding the market with single-family houses for rent, causing such rents to rise slower than house prices. "Investors are buying houses, in part, to rent them out, and that has added a lot of rental supply, and that's preventing rents from rising. It means some investors will start to think about selling those single-family rentals," says Trulia Chief Economist Jed Kolko. Oliver Chang of Sylvan Road Capital LLC says these large institutional investors are competing for the same properties, mainly three-bedroom houses built since 1990, and are "pushing prices up on each other." However, some firms still see potential in the sector. American Residential Properties Inc., a single-family rental operator in Scottsdale, Ariz., plans to file for an initial public offering in the first quarter. Silver Bay Realty Trust Corp., the first publicly traded REIT to invest only in single-family rentals, also continues to snap up houses. Experts say the apartment market remains strong as the single-family rental supply rises because apartments attract young single people and houses attract families, says MPF Research Vice President Greg Willett.
Market Trend Insights
Investors Are Piling Into Homebuying ... to Rent?
Digested From "Investors Pile Into Housing, This Time as Landlords"
Wall Street Journal (03/25/13) Timiraos, Nick
The current recovery in the U.S. residential real estate market is being propelled by investors, including several major Wall Street players. Unlike the flippers that contributed to the previous housing boom going bust, today's investors are mostly buying with the intention of holding on to the homes and renting them out. In turn, analysts say they have triggered a chain reaction that has stabilized prices and even changed market psychology. The fear of buying a home when prices are in freefall has been replaced by the fear of losing out on cheap buying opportunities. ZipRealty CEO Lanny Baker remarks, "Whether they knew it or not, investors helped set a floor. They warmed up the market, and it brought buyers back." Cash buyers currently comprise nearly 32 percent of sales nationally, notes the National Association of Realtors. In Southern California alone last month, absentee buyers made up 31.4 percent of purchases -- an increase from an average of less than 17 percent between 2000 and 2010, notes DataQuick MDA. American Residential Properties Inc. earlier this month purchased more than 90 homes in Chicago's southern suburbs, bringing its total there to about 300. Late last week, the company confirmed plans to raise $300 million in an initial public offering. To be sure, investors' arrival will further transform some hard-hit communities as renters have less of a stake than do homeowners. Nevertheless, deep-pocketed investors can still be good news for neighborhoods that otherwise would be at risk of blight and vacant houses.
How Hot is the Jacksonville Apartment Market?
Digested From "Jacksonville's Multifamily Complexes Are Among the Nation's Hottest Investments"
Florida Times-Union (03/24/13) Bull, Roger
A number of Jacksonville-area apartment comunities have changed hands in the last couple of months for big dollars. CBRE senior vice president Brian Moulder notes that $375 million worth of large apartment comunities (50 units and above) was sold in Jacksonville throughout 2011. Last year's total soared to $600 million, and 2013 is looking equally promising. Moulder notes that large firms and even pension funds are among the most active buyers locally. He adds, "They just meet higher return thresholds than sitting in the bank or the stock market." Such investors like that Jacksonville is currently unvalued compared to other coastal cities where multifamily housing has seen greater price increases in recent years. Having major players like Behringer Harvard Opportunity Funds investing in Jacksonville is significant for future growth prospects, notes Alex Coley, principal for NAI Hallmark Partners. He concludes, "It means that the big institutional property owners around the country are really interested in us. It means that a considerable number of really high-quality investors are looking at Jacksonville and saying, 'Yes.'"
Which Demographic Is Behind Charlotte's Apt. Building Boom?
Digested From "Charlotte in Middle of Major Apartment Building Boom"
WCNC (NBC North Carolina) (03/21/13) Boudin, Michelle
According to the Charlotte Apartment Association, the city's apartment market is in the middle of a major building boom. "It's definitely the hot market, and it's exciting to see the market coming back," apartment developer Clay Grubb recently stated. "It's primarily being driven by an influx of young folks wanting to come to Charlotte." The apartment association reports that the number of rental units under construction last year was 3,147 -- a number has since doubled to 7,473. Additionally, there are another 10,738 apartments proposed. Developers say most of the action is in the heart of the city. Grubb concludes, "Downtown is clearly the winner for that generation, so I expect to see a lot more development in downtown Charlotte."
How Much Will Rents Go Up in Nashville?
Digested From "Get Ready to Pay More to the Landlord, Nashville Renters"
Tennessean (03/21/13) Marsteller, Duane
Nashville apartment resdients will likely see escalating rents even as supply soon outstrips demand due to a boom in construction, according to Real Data. Its latest biannual market snapshot forecasts that the region's average monthly rent, which stood at $833 in January, will top $850 by July and $900 by 2015. Much of the increase will come from new apartments coming online, especially in the higher-rent West End and Franklin submarkets. Builders have started more than 2,500 new rental units since last summer alone, feeding the construction boom. Real Data researchers say that the arrival of those apartments, coupled with improvement in home sales, likely will increase the apartment vacancy rate from its current 5 percent.
Will the Sequester Slow D.C.'s Apartment Growth?
Digested From "Capital Area's Apartment Boom Could Fizzle"
Wall Street Journal (03/17/13) Wotapka, Dawn; Whelan, Robbie
While construction cranes in Washington, D.C., have signaled a strong apartment market over the past few years, concerns have grown that the city could be a victim of over-building. In 2013 alone, developers will deliver more than 15,000 new apartment units, with another 11,000 more scheduled for delivery in 2014. As the threat of sequester weighs heavily on the region's workers, the area's recovery efforts could slow, especially if too many new apartments pushes rents down and causes developers to scale back or cancel projects. In 2012, rents rose 1.9 percent in 2012, but the rental prices for 2013 could drop further and the vacancy rate for high-end apartments could rise to 5.9 percent in 2014, according to Delta Associates. Already the sequester pressures are hitting some of the major apartment developers, with Camden Property Trust slowing its pipeline and AvalonBay Communities focused more on building less-expensive rental units.
Rentals Slowing Down as Housing Market Picks Up
Digested From "Rentals Slowing Down as Housing Market Picks Up"
Trulia Inc. reports that while private-equity firms have bolstered real estate values by reducing the number of foreclosures for sale, these firms also are hindering the rental market, flooding it with single-family houses and holding down rents. As more firms compete for foreclosures to turn them into rentals, analysts suggest that purchase prices are rising more than those in the broader market. Greg Willett, vice president of MPF Research, notes that while the single-family house rental supply has increased, the apartment market has remained strong as its properties appeal to different renters. However, Keefe Bruyette & Woods Inc. analyst Jade Rahmani says, "One of the risks is prices run up and therefore the rental economics don't justify the business model."
Deals and Transactions
Major Merger Creates BIG Apartment Management Firm
Digested From "Cocke Finkelstein, Inc. to Acquire Lane Management, LLC, Merging Two of Atlanta's Most Prominent Multifamily Real Estate Companies"
Cocke Finkelstein Inc. (CFI) has agreed to acquire the assets of Lane Management LLC, in a deal that creates one of the country's biggest multifamily property management firms. The deal, terms of which have yet to be announced, is expected to close by the end of this month. Dubbed CFLane, the new company will employ more than 800 staffers and be headed by Byron Cocke and Brett Finkelstein as co-CEOs. CFLane's immediate plans will include retaining all of the current office locations and personnel, in addition to maintaining business-as-usual operations for all current clients. Cocke states, "This deal brings synergies to both companies. The similarities in terms of service and corporate culture will make for a seamless transition, while each company's strengths will allow CFLane to maintain all current office locations and personnel, forming a new company that boasts one of the nation's leading acquisition, property management and asset management platforms." Both CFI and Lane specialize in acquiring apartment communities for investors, which their respective firms then manage.
What's Happening in the Denver-Area Apartment Market?
Digested From "Three New Apartment Complexes Planned for Denver Metro Area"
Denver Post (03/19/13) ; Mossman, John
On the same day that the Urban Land Conservancy announced its purchase of 9.4 acres in northeast Denver to develop affordable apartments, two high-end communities also entered the multifamily pipeline in metro Denver. Behringer Harvard announced recently that construction has begun on a luxury apartment community in the Arapahoe Square/Ballpark area, while HFF confirmed that it has arranged a joint-venture equity for the development of a 341-unit, Class-A apartment community in Glendale. The three developments are expected to add a total of 709 rental units to the local apartment market. "Multifamily is still a darling of the commercial-real-estate arena," said Sherman Miller, executive director of the University of Colorado Real Estate Center. "Low vacancy rates coupled with rising rents have continued to fuel activity."
Mack-Cali/Roseland JV Enters D.C. Multifamily Market
Digested From "Mack-Cali Enters D.C. Multifamily Market with $262.5M JV Purchase"
National Real Estate Investor (03/21/13)
A joint venture of Mack-Cali Realty Corp. and a fund advised by UBS Global Asset Management has acquired the Crystal House in Arlington, Va., for $262.5 million. The acquisition of the two-tower, 828-unit multifamily property includes land to accommodate the development of approximately 295 more rental units. The 828 units are comprised of studio, one-, two-, and three-bedroom apartments and are currently 95.7 percent leased. AvalonBay was the seller. Mack-Cali reports that its Roseland subsidiary will manage the property, as well as oversee the renovation of all unrented units to so-called "designer" standards. Mack-Cali President and CEO Mitchell E. Hersh comments, "The Mack Cali/Roseland team is thrilled to be entering the Metro D.C. market, one that offers enormous potential. When we’ve completed the renovation project, we are confident that we’ll be able to command rents at the highest end of the market."
What Is This New And Different Housing Bubble Taking Shape?
Digested From "A New And Different Housing Bubble Is Taking Shape"
Business Insider (03/19/13) Richter, Wolf
Investors both big and small have made foreclosure sales their new "hunting ground." Blackstone Group LP, the world's largest private equity firm, indeed has plowed more than $3.5 billion into the housing market to acquire up 20,000 vacant and foreclosed single-family homes. Colony Capital LLC, meanwhile, is putting $2.2 billion to work in this regard. In 2012, institutional investors made up 30 percent of all sales in Miami, 23 percent in Phoenix, 21 percent in Charlotte, and 19 percent in Las Vegas. Suddenly, the market for single-family rental housing -- unlike apartment communities, which cater to different people -- has turned into an "elbow-to-elbow affair" and the pressure on monthly rents is huge. Occupancy rates of single-family rental homes are already low in a number of markets. However, investors are buying ever more properties and flooding the rental sector. As the Federal Reserve's money is trying to find a place to go, prices may continue to rise. But with the economics to support these prices -- specifically rental revenues -- giving way, the article's author laments that "the remaining reason to buy would be a singular hope: economically unsustainable price appreciation ... the definition of a bubble."
Why Are NYC Apartment Investors Suddenly Thinking Small?
Digested From "NYC Apartment Investors Seek Big Returns by Buying Small"
Bloomberg (03/20/13) Carmiel, Oshrat
Multifamily investors looking to capitalize on rents that are expected to exceed their 2006 peak are purchasing Manhattan properties with fewer than 50 apartments after a spike in demand drained the market of bigger buildings. Invesco Real Estate is one such company. The Dallas-based property manager, which has more than 51,000 apartments throughout the United States, entered a deal in October to buy a 48-unit property on East 86th Street for $76 million. "It's the smallest in any city we've bought," Greg Kraus, head of acquisitions for the firm, said. Smaller buildings, which tend to be older, offer opportunities for higher income after renovations, making them attractive as rent growth decelerates. The dollar volume of sales of Manhattan apartment buildings more than doubled in 2012 to $9.1 billion, according to Real Capital Analytics Inc. Simultaneously, the average price paid per unit dropped 14 percent to $421,968, indicating buyers may have moved toward smaller properties in need of rehab. Portfolio sales accounted for 34 percent of Manhattan multifamily deals last year -- an increase from 5 percent in 2011. The average capitalization rate for all Manhattan deals reached a six-year low of 4.4 percent in the first quarter of 2012 and stayed near there all year, added Real Capital. Median monthly apartment rent in Manhattan jumped 4.7 percent in the 12 months through February to $3,190, New York-based appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate noted in a recent report. The report also said that in buildings without doormen, which smaller properties tend to be, rents increased 11 percent from the previous year to a median of $2,685. Miller Samuel President Jonathan Miller said that Manhattan apartment rents will go up modestly in the next two years as the stabilizing job market drives competition among residents for a limited supply of new apartments.
Campus Apartments to Deliver Modern Housing to D.C. University
Digested From "Campus Apartments Announces Housing Partnership With Howard University to Develop Modern On-Campus Residences"
Campus Apartments last week announced a new development project with Howard University in Washington, D.C., that will enhance its on-campus housing stock and establish a dedicated residential neighborhood for its underclassmen. The new, modern living-learning facilities are designed to accommodate 1,360 students at an estimated cost of $107 million. It will include generous social, study, and programming spaces. On track for an August 2014 completion, the project will deliver a couple of on-campus residential facilities that will include two-person semi-suites, communal social and study lounges, game rooms, and laundry facilities. They will also feature independent apartment units for faculty, staff members, and guests. The facilities will also boast some classrooms and academic advisory offices. Howard University President Sidney A. Ribeau states, "The addition of these state-of-the-art residential facilities will help to revitalize the 4th Street corridor of our campus and establish a physical community for students to live, learn and socialize. By improving the quality of our housing, this project will aid in the recruitment and retention of students and enhance the overall collegiate experience at Howard."
Get Emotional About Your Apartment Marketing at AIM
Digested From "Get Emotional About Your Apartment Marketing at AIM"
AIM News Release (03/26/13)
The Art of Creativity is proud to announce Douglas Van Praet, author of Unconscious Branding: How Neuroscience Can Empower (and Inspire) Marketing as the 2013 conference keynote presenter.
As the executive vice president and group planning director for one of the country’s preeminent creative agencies at Deutsch LA, Van Praet has been the guiding force behind brand campaigns for Saturn DIRECTV, Dr Pepper, and Volkswagen, including the immensely successful and uber viral mini-Darth Vader Super Bowl commercials.
Van Praet’s message on the power of emotive marketing, his vision of marketers as modern day poets, and the undeniable results of connecting to consumers on an emotional, creative level couldn’t be more timely for multifamily marketers. Register today to join us for this exclusive look into the revolutionary application of inspiration and emotion to marketing and advertising that respects people not as targets, but as humans, then learn how to ignite that sense of humanity to compel attention and exponentially increase the reach and return of your marketing efforts.
Legal/Legislative Did You Know
Are Fannie and Freddie Too Big to Shrink?
Digested From "Fannie and Freddie: Too Big to Shrink?"
CoStar Group (03/06/13) Heschmeyer, Mark
The Federal Housing Finance Administration (FHFA) recently outlined plans to cut Fannie Mae and Freddie Mac's market share of new multifamily lending by 10 percent. FHFA Acting Director Edward J. DeMarco said that so far private enterprises have not stepped in sufficiently to cover the reduced market share of Fannie and Freddie. Cindy Chetti, senior vice president of government affairs for the National Multi Housing Council (NMHC) and the National Apartment Association (NAA) Joint Legislative Program, said in a joint response to the FHFA plan, "NMHC/NAA support returning to a more robust private capital market, but we believe that should be achieved through market-driven solutions and not the arbitrary 10 percent reduction ... in multifamily lending volume imposed by the FHFA." The two government sponsored entities have already reduced their share of the multifamily mortgage market to 45 percent, from the 90 percent share they held at the height of the financial crisis. Chetti added, "There is no evidence that private capital is willing or able to meet the broad liquidity needs of the apartment industry in all markets and at all times. The very successful multifamily programs of Fannie Mae and Freddie Mac were not part of the meltdown and have actually generated more than $10 billion in net profits to the government since conservatorship."
What New Bill Has S.F. Apartment Residents Quaking?
Digested From "Tenants Say Earthquake Retrofit Law Could Circumvent Rent Control"
San Francisco Public Press (03/20/13) Arroyo, Noah
San Francisco officials are weighing a bill that would let apartment owners retrofit their buildings to better withstand earthquakes and pass those costs on to residents in the form of higher rents -- a proposal that some say would force some rent-controlled residents to move or try to declare financial hardship as a way to avoid the higher rents. Sara Shortt, executive director of the Housing Rights Committee of San Francisco, said the process to establish hardship is lengthy and difficult, and that residents should not pay for retrofits that benefit property owners. The proposed law would amend the building code to require the retrofits of San Francisco's roughly 3,000 "soft-story" apartment buildings, whose unstable first floors are susceptible to collapse in a major earthquake. The cheapest such retrofits could cost more than $50,000 for a single building. Though owners would initially pay for the retrofits, the San Francisco Rent Ordinance currently lets them pass as much as 100 percent of the costs to residents by raising rent gradually over 20 years, in addition to the maximum allowable increase each year. Maria Zamudio, organizer for tenant-rights group Causa Justa, said those rent hikes would expedite displacement in some parts of the city where residents have vacated in search of cheaper rents in other neighborhoods.
Donovan Goes to Bat for GSE Multifamily Finance
Digested From "Donovan Goes to Bat for GSE Multifamily Finance"
GlobeSt.com (03/19/13) Morphy, Erika
Speaking at a recent American Enterprise Institute meeting, Peter Donovan, immediate past chair of the National Multi Housing Council, defended the support the multifamily industry receives from the government-sponsored enterprises (GSEs). Donovan said the multifamily market displayed "discipline and unprecedented performance" during the recession, and he pointed out that the GSE multifamily portfolio default rate is currently 25 basis points on a combined GSE portfolio of more than $300 billion that has a 20- to 25-year history and that the 2012 GSE average loan to value for newly originated loans is 65 percent with a 1.45 debt service coverage and an outstanding balance of 50 to 55 percent at maturity. In response to critics who contend that continuing the federal guarantee will result in a high risk of downward pressure on multifamily underwriting standards, Donovan said, "The GSE multifamily experience was not the single family experience. In times of severe economic crisis it worked even better than any of us imagined. It was quite simply the model that needs to be emulated because it works."
NAA Welcomes Two Affiliates to the NAA Family
At its March meeting, the NAA Board approved charter applications for Multifamily Northwest in Portland, OR, representing 787 communities, 551 management companies, 221 suppliers and 105,977 units and the Greater Gulf Coast Apartment Association in Biloxi, MS, representing 35 communities 11 suppliers 7,000 units.
2013 NAA Survey of Income & Expenses in Rental Apartment Communities
Some of the most valuable information your staff needs when preparing for the upcoming budget season is available to you for free from the National Apartment Association.
By your Company’s participation in the 2013 NAA Survey of Income & Expenses in Rental Apartment Communities, you will receive a free copy of detailed market and national economic analysis this fall that will help ensure valuable, accurate financial and benchmarking information for your company. This data helps you to compare your community’s performance against your peers.
There are several methods for your Company to complete the survey including using our designated Excel file to download data directly from your internal data systems or using our secure survey website. You can download a pdf version for reference to the questions and definitions.
If your (ownership or management) Company has multiple properties, please contact Janet Gora of CEL to determine the best response method for your company (Excel or Online). Janet can be reached at 310/207-7328. If you need an Access Code, contact NAA’s Valerie Sterns at 703/797-0624. The deadline to complete the survey is April 26.
2013 National Real Estate Compensation & Benefits Survey
NAA has partnered with CEL & Associates to conduct the National Apartment Compensation and Benefits Survey, the nation’s largest, most widely used, referenced and recognized compensation resource for the real estate industry. This is an overall Company/Corporate-level survey, and is completed by the Human Resources department or CFO/COO offices for your firm.
In its 24th year, the national survey encompasses compensation trends, benefits, compensation policy questions, long-term incentive compensation structures, and detailed information/statistical (quartile) breakout of compensation results on a position by position basis stratified by Company Size (employees), Company Type (public and private), Specialization, Region, and Metropolitan Area.
Companies wishing to participate can complete the survey on our < ahref="https://compsurvey.celassociates.com/Home/Login.aspx?ReturnUrl=%2f">secure survey website. In addition to the general company-level questions online, a designated Excel file is available to download individual salary/bonus data from your HRIS or other internal database. The survey results will be available in early August. Companies participating in the survey receive a complimentary copy of the results. For further information, contact CEL’s Janet Gora via email or at 310/207-7328. The deadline to complete the survey is April 26.
Don’t Delay: Last Chance To Take Advantage of Discounted Registration for the 2013 NAA Green Conference Ends Next Friday
Attendees of the 2013 NAA Green Conference, April 15-17 at the Baltimore Marriott Waterfront, will be rewarded with ideas for huge savings on energy and utility expenses from the knowledge and insight delivered by the apartment management professionals scheduled to share their proven methods for cost reduction.
But don’t be intimidated by the perceived costs of sustainable community improvements—many of the savings strategies promised at the 2013 NAA Green Conference are ideal for small and mid-sized owners.
No matter the size of your organization, there is one quick, easy way to save money on green in 2013: register for the 2013 NAA Green Conference by April 5 for a $100 discount.
Please note tomorrow, Wednesday, March 27, is the cut-off date for hotel reservations.
Three World-Class Thought Leaders Scheduled to Inspire at the 2013 NAA Education Conference & Exposition
They range from New York Times bestselling authors to former fighter pilots, but the three innovative thought leaders schedule to speak during the 2013 NAA Education Conference & Exposition, June 19-22, in San Diego, Calif., share one thing in common: the ability to inspire.
Join Chuck Martin, digital pioneer and CEO of the Mobile Future Institute, to hear key insights into the business implications of a world gone mobile. His special brand of research—focusing on how marketers can most effectively reach users in this digital landscape—is sure to resonate with multifamily professionals in the audience during his presentation on Thursday, June 20, at 10:45 a.m.
Vernice Armour, former Captain in the United States Marine Corps, author of the 2011 book “Zero to Breathrough: The 7-Step, Battle-Tested Method for Accomplishing Goals that Matter,” will speak from 9 a.m. to 10 a.m., Thursday, June 20, and will help attendees understand how passion and leadership help individuals and organizations through her unique insight and life strategy.
Janine Driver is the New York Times bestselling author of “ You Say More Than You Think” and media expert for NBC's TODAY Show, 20/20, CNN, and the Dr. Oz Show, as well as founder, president, and lead instructor for the Body Language Institute (BLI). Drive will share her expertise on an elite certification program that offers award-winning advanced communications training that help executives, sales people, and other professionals build executive presence, explode their selling skills, and create and deliver business presentations that win new business during two sessions: 9:45 a.m. to 11:15 a.m.?and 4:00 p.m. to 5:30 p.m. on Friday, June 21.
This could be the most inspiring event of your life—but only if you’re registered for the 2013 NAA Education Conference & Exposition. Visit the conference website for more information and remember to consider group discounts: register five or more attendees and save your organization up to $400!
Attention Supplier Partners: NAAEI Supplier Success Course Offered as Webinar Series
NAA Education Institute (NAAEI) will offer its new course for apartment industry supplier partners, Supplier Success, as a series of three webinars.
The course, which costs $99 for members and $129 for non-members (don’t forget group discounts for 10 or more students) will be held between 2 p.m. and 4 p.m. ET on April 2, 3 and will be recorded so as to make it as easy as possible for you to
Other advantages of the webinar series include the opportunity to ask questions, share experiences, learn from instructors and other suppliers taking the course and, best of all, the ability to participate whenever—and wherever—you might find yourself ready for success.
Register for Supplier Success today!
NAAEI Designation Courses Offered Near You!
Greater Charlotte Apartment Association
East Bay Rental Housing Association
South Dakota Multi-Housing Association
February – March, 2013
Rental Housing Association of Boston
April – May, 2013
Chicagoland Apartment Association
July - August, 2013
Apartment and Office Building Association of Metropolitan Washington
Greater Charlotte Apartment Association
To find more courses in your area, click here.
For more information about any of the classes listed, please contact Kimberly McCrossen at [email protected] or 703/518-6141 ext. 121.
Abstract News © Copyright 2013 INFORMATION, INC.