WASHINGTON, DC – The apartment market is showing signs of improvement, according to the National Multi Housing Council’s latest Quarterly Survey of Apartment Market Conditions.
The survey showed increased sales activity and improvements in the availability of debt and equity capital compared with three months ago. The Sales Volume Index hit its highest level in four years, while the Equity and Debt Financing Indexes were the highest in three years.
Only one index—the one measuring market tightness (vacancies and rent levels)—remained below 50 (index numbers below 50 indicate worsening conditions), but it also showed improvement over the prior quarter, rising from 20 to 31.
“The broad improvements in sales volume and debt and equity financing suggest the transactions market may finally be thawing,” noted NMHC Chief Economist Mark Obrinsky. “Nearly half (45 percent) of respondents indicated that the gap between what sellers are asking for and what buyers are offering—the bid-ask spread—has narrowed.”
“But the economic headwinds remain strong,” Obrinsky added, “as the employment market continues to sag, demand for apartment residences continues to slip. Though this quarter’s Market Tightness Index is improved compared to last quarter, it still indicates higher vacancies and lower rents.”
Highlights of the Survey Results
*
The Market Tightness Index rose from 20 to 31. Nearly half (49 percent) said markets were looser (with higher vacancies and lower rents), while 11 percent said markets were tighter. This was the ninth straight quarter in which the index remained below 50, but the fourth consecutive quarter in which the index measure has risen. For the year, the Market Tightness Index averaged 20, the lowest on record (since 1999).
*
The Sales Volume Index rose from 44 to 59, the highest level in four years. While most respondents (62 percent) reported no change in sales volume, 28 percent said sales volume was higher—the highest share reporting that in four years. This was the first quarter in four years in which this index read above 50. For the year, the Sales Volume Index measured 36, a substantial gain from the 2008 annual figure of 13.
*
The Equity Financing Index increased from 39 to 58, the highest in three years as 25 percent of respondents said equity financing was more available. This was the first quarter since April 2007 in which this index read over 50. For the year, the Equity Financing Index measured 35, also a substantial gain from last year’s figure of 13.
*
The Debt Financing Index increased again from 39 to 59, also the highest in three years with 28 percent indicating that this is a better time to borrow than three months earlier. This was also the first time in the last 11 quarters that this index read over 50. For the year the debt financing index measured 41, up significantly from 2008’s 21.
Full survey results are posted at www.nmhc.org/goto/QuarterlySurvey09.
Note: The October 2009 Quarterly Survey of Apartment Market Conditions was conducted October 19-26, 2009; 53 CEOs and other senior executives of apartment-related firms nationwide who serve on NMHC’s Board of Directors or Advisory Committee responded. The July 2009 Quarterly Survey was conducted July 20-29, 2009; 75 responded. The October 2008 Quarterly Survey was conducted October 14-23, 2008; 70 responded.
Friday, October 30, 2009
Friday, October 9, 2009
Local Firm Wins Technology Award
ista North America, the global leader in resident billing and Utility Expense Managementtm, was named Top Technology Choice Award Winner by readers of Multi-Housing News magazine. The 2009 Tech Choice Award is announced in the magazine’s August 2009 issue and on their website.
Each year Multi-Housing News asks its subscribers to name the providers representing the leading edge in serving the multifamily industry. Once again, ista North America was named as a leader in the Utility Management category because of its committment to advanced technologies and superior client service.
Clients are already leveraging ista North America’s innovative technology. They have moved beyond their residents passively receiving monthly billing statements to now allowing residents to actively engage in daily managing their consumption. Some residents can even sign-up to receive text messages or emails from ista’s systems alerting them during the month if their daily consumption is trending towards an usually high end-of-month utility bill. By giving residents options for frequent, targeted alerts through their preferred communication channels - and providing informative, on demand visualizations of their daily usage data, ista is able to increase customer satisfaction and allow residents to take a more active part in reducing their utility costs and benefiting the environment.
Each year Multi-Housing News asks its subscribers to name the providers representing the leading edge in serving the multifamily industry. Once again, ista North America was named as a leader in the Utility Management category because of its committment to advanced technologies and superior client service.
Clients are already leveraging ista North America’s innovative technology. They have moved beyond their residents passively receiving monthly billing statements to now allowing residents to actively engage in daily managing their consumption. Some residents can even sign-up to receive text messages or emails from ista’s systems alerting them during the month if their daily consumption is trending towards an usually high end-of-month utility bill. By giving residents options for frequent, targeted alerts through their preferred communication channels - and providing informative, on demand visualizations of their daily usage data, ista is able to increase customer satisfaction and allow residents to take a more active part in reducing their utility costs and benefiting the environment.
Thursday, October 1, 2009
NAA Operating and Expense Report
In a transformational year of bailouts, stimulus programs,
deficit spending and financial industry restructuring, in addition
to a dramatic decline of home and stock ownership and
values, rising unemployment and bankruptcies, the U.S. apartment
industry continues to face many short-term challenges. In the face
of a prolonged recession, rising cost of living, tax increases, declining
rents and a significant decline in both transactional volume and
asset values, the apartment industry is placing an even great emphasis
on operational basics and performance metrics.
The turmoil created by economic uncertainty has raised the
bar within the apartment industry for increased focus on operations.
Asset and property management skills and experience are
now more of a priority than ever before, as the apartment industry
focuses on offensive and defensive actions to control the financial
bottom line of property and portfolio operations.
These findings are just a few of the many conclusions drawn
from the recently completed National Apartment Association’s
2009 Survey of Operating Income & Expenses. This NAA-sponsored
survey of nearly 900,000 apartment units nationwide, conducted
by Los Angeles-based CEL & Associates Inc., concluded that
the quality and dedication of leadership and onsite talent within
the apartment industry does matter.
The 2009 survey results reveal that apartment operators are
successfully balancing a commitment to providing high-quality
living environments with the need to be financially diligent in
managing and controlling often unexpected increases in operating
costs. Within the apartment industry, the experience, knowledge
and dedication of onsite personnel is paying big dividends
for residents and owners alike.
NAA has completed its Survey of Operating Income & Expenses
in Rental Apartment Properties for 2009, based on annual data
for 2008.
Major findings in this survey of the professionally managed
rental apartment industry reflect the uncertainties of the current
economy, as demonstrated by net operating income in the “market
rent” segment of the rental apartment market declining by 2.7
percentage points to 53.9 percent and a higher economic loss rate
of 12.42 percent from 10.11 percent in 2007. Total operating expenses
increased by 0.9 percentage points, or 2.3 percent. The economic
state of subsidized properties in the survey also experienced
variable results over 2007.
A total of 3,619 properties containing 898,523 units are represented
in this year’s report. Data was reported for 3,107 market
rent properties containing 822,991 units and 512 subsidized properties
containing 75,532 units. Forms with partial data or apparent
problems that could not be resolved were not included.
The report presents data from stratifications of garden and
mid-rise/high-rise properties, further segmented by individually
metered and master-metered utilities. Survey data is presented in
three forms: dollars per unit, dollars per square foot of rentablefloor area and as a percentage of gross potential rent (GPR).
Responses from garden properties with individually metered
utilities represent 85.9 percent of the market rent properties and
70.5 percent of the subsidized properties. Therefore, the analysis is
focused primarily on the garden properties with individually metered
utilities.
The market rent segment generally has greater units per property
and greater floor area per unit than the subsidized segment.
The average size of individually metered market rent garden
properties is 269 units (143 units in subsidized). Rentable floor
area averaged 909 square feet for market rent apartments and 875
square feet for the subsidized units.
The complete report (available online Oct. 1 at
www.naahq.org/09ies) contains detailed data summarized for six
geographic regions and metropolitan areas. Seventy-seven metropolitan
areas met the separate reporting requirements for market
rent properties. Sufficient numbers of subsidized properties were
submitted for 20 metropolitan areas.
This report also includes results for all “other” properties at the
state level with a minimum of six properties located in metro
areas that did not meet requirements for separate reporting. Nonmetro
area reporting also is included at the state level. Tables for
market rent properties are provided for 12 states and for subsidized
properties in 16 states.
Market Rent Properties
Economic Losses. A standard measure of the health of the
rental housing market is economic losses, defined as the difference
between Gross Potential Rent (GPR) and rent revenue collected,
expressed as a percentage of GPR. Included in the losses
are revenues lost to physical vacancies, net uncollected rents and
the value of rent concessions.
The economic loss rate in the survey for market rent individually
metered garden properties increased to 12.42 percent in the
data for 2008, the highest in the past four years of reporting, compared
to 10.11 percent in 2007, 10.20 in 2006 and 11.87 percent
in 2005. Economic losses overall reported in the survey increased
over levels not seen since prior to 2005.
Net Operating Income (NOI) and Revenues. NOI is a
key measurement for evaluating the health of a property and the
rental housing market. It is defined by the difference between
total revenue collected and total operating expenses. NOI represents
the gross cash available for debt service, capital expenditures
and profits. NOI in the survey also reflected the current downward
pressure on rental apartment market economics in 2008.
NOI measured as a percent of GPR for 2008 was 53.9 percent,
declining 2.7 percentage points from 56.6 percent in 2007 (56.9
percent in 2006, 53.9 percent in 2005 and 52.2 percent in 2004).
The NAA survey’s historical peak was 58.9 percent in 1999. Regionally,
NOIs in 2008 ranged from a high of 59.4 percent in the
Northeast (Region I) and Pacific (Region VI) states to a low of
48.5 percent in the Southwest states (Region IV), which has usually
experienced the lowest NOI percentage among the regions.
Average NOIs for the last three survey data years of individually
metered garden properties are presented in the table on p. 65.
Gross Potential Rent (GPR). GPR in the survey data tables.
is defined on a “look-back” fiscal year basis. It is the sum of total
rents of all occupied units at 2008 lease rates and all vacant units
at 2008 market rents.
Average annual GPR decreased by 2.4 percent in 2008 for garden
properties with individually metered utilities. Average GPR
was $10,367 per unit ($864 monthly) in this year’s survey versus
$10,624 per unit ($885 monthly) in the previous year’s survey
(2007). On a per square foot basis, GPR was $11.41 ($0.95 per
month) versus $11.67 ($0.97 per month) in 2007.
Median annual GPR for individually metered garden properties
in the survey is $9,700 ($808 per month) versus $9,639 ($803 per
month) in 2007 and $8,751 ($729 per month) in 2006.
Rent Revenue Collected. Annual rent revenue collected averaged
$9,080 per individually metered garden property unit,
down 4.9 percent from $9,550 in last year’s survey. Measured on a
per square-foot basis, rent revenue averaged $9.99 per square foot
versus $10.49 in 2007 and $10.04 in 2006.
Revenue Losses. Revenue losses averaged 12.42 percent of
GPR in 2008 versus 10.11 percent in 2007, 10.20 percent in 2006
and 11.87 percent in 2005. Revenue losses were reported in three
categories: those from vacancies, collections and concessions. Vacancy
losses for individually metered market rent garden properties
averaged 7.6 percent of GPR in the current survey ($785 per
unit, $0.86 per square foot) versus 6.9 percent of GPR ($732 per
unit, $0.80 per square foot) in 2007. Collection losses averaged
0.9 percent of GPR ($94 per unit, $0.10 per square foot) in comparison
to 0.6 percent of GPR ($64 per unit, $0.07 per square
foot) from 2007. Losses from rent concessions increased, averaging
3.9 percent of GPR ($407 per unit in the property, $0.45 per
square foot) in 2008 versus 2.6 percent of GPR ($278 per unit in
the property, $0.31 per square foot) last year.
Other Revenue Collected. The trend of multifamily housing
owners and service providers creating and offering additional
revenue sources is reflected in a continued increase of 0.5 percent-
age points or 8.1 percent as a percent of
GPR this year. Other revenue collected
from operating sources includes receipts
from onsite laundries, cable, TV/Internet
service, telephone systems, parking fees
and other charges for services and amenities.
These other operating revenues averaged
$691 per unit ($0.76 per square foot)
in 2008 versus $658 per unit ($0.72 per
square foot) in 2007 for individually metered
garden properties reported in the survey.
Median other operating revenues were
$608 per unit.
Total Operating Expenses. Total operating
expenses, as a percent of GPR, increased
by 0.9 percentage points or 2.3
percent in 2008, because of the decline in
overall GPR. The total operating expenses
represented 40.4 percent of GPR versus 39.5
percent in 2007. Total operating expenses
for individually metered garden properties
in the survey averaged $4,185 per unit
($4.61 per square foot) versus $4,196 per
unit ($4.61 per square foot) in 2007.
Operating expenses in the survey are
collected for nine major categories: salary
and personnel costs, insurance, taxes (real
estate and other directly related property
only), utilities (net of any reimbursements
from residents), management fees, general
and administration, marketing, contract
services and maintenance. (Non-recurring
capital expenses were excluded and reported
separately.)
There continues to be variation in the
trends among individual categories of operating
costs, some of which may be derived
from variations in accounting policy
regarding expense classification that the
survey cannot further delineate. Average
property-related insurance costs decreased
12.0 percent in 2008 to $234 per unit
($0.26 per square foot) from $266 per unit
($0.29 per square foot) in 2007. Administrative
costs rose 1.3 percent to $238 from
$235 per unit in 2007. Management fees
decreased 15.0 percent to $289 per unit
(2.8 percent of GPR) from $340 per unit
(3.2 percent of GPR) a year earlier. Marketing
costs increased 1.7 percent to $175
per unit or 1.7 percent of GPR from $172
per unit or 1.6 percent of GPR in 2007.
Maintenance costs increased again at 3.4
percent to $428 per unit from $414 per
unit in the 2007 survey. Contract services
costs increased 7.2 percent to an average of
$284 per unit in 2008 from $265 in 2007.
The overall turnover rate declined again
from last year. As previous homeowners
continued the migration back to apartment
units, the overall turnover rate declined
to 55 percent of total units among
the individually metered garden apartment
properties reported in the survey for
2008 from 59 percent in 2007 and 62 percent
in 2006. This equals a new low
turnover rate over the history of this survey,
which has been in the range of 59 percent
to 69 percent. The previous lows
occurred in the data for 2007 and 1995
and the high during the recession year
1990.
All regional turnover rates declined last
year: Northeast (Region I), 52 percent to 42percent; Southeast (Region II), 59 percentto 58 percent; North Midwest (Region III), 52 percent to 50 percent;
Southwest (Region IV), 61 percent to 60 percent;
Mountain/South Midwest States (Region V), 60 percent to 58 percent
and in the Pacific (Region VI), 62 percent to 52 percent.
Age of Property. Operating expenses as a percentage of GPR
and dollars per square foot basis expectedly rose in individually
metered garden properties in the report as they age. Operating
expenses are 38.9 percent of GPR ($4.41 per square foot) in
properties less than 5 years old and rise to 42.5 percent of GPR
($4.76 per square foot) for properties 20 or more years old. As
operating expenses decrease over the span of years, capital expenditures
increase as the building ages. For example, operating
expenses were $4,231 per unit for those 5 to 9 years old and decreased
to $4,071 per unit for properties 20 or more years old,
while capital expenditures ranged from $270 to $1,006, respectively,
by age of property.
The highest average NOI as a percentage of GPR occurred in properties
10 to 19 years old at 56.5 percent. Measured in terms of dollars
per unit, the low was $5,027 per unit in properties that are 20 or more
years old and the high was $6,801 for properties 5 to 9 years old.
Economic losses continue to be the highest among the newest
properties. Properties less than 5 years old reported the highest
ratio of economic losses at 17 percent of GPR, while the lowest
was in those that are 20 or more years old at 12 percent.
Age of property groupings again show distinct differences in the
individual cost components of operating costs. The largest difference
is in real estate and related property taxes and fees, varying
from a high (average) of $1,334 per unit ($1.34 per square foot)
in those properties five to nine years old, to a low of $820 ($0.96
per square foot) for those aged 20 or more years.
Expectedly, capital expenditures were significantly lower for the
newest properties. They averaged $270 per unit ($0.28 per square
foot) for properties less than five years old, compared to the highest
average reported for properties 20 or more years old at $1,006
per unit ($1.18 per square foot).
Size of Property. Economies of scale in apartment property
size are evident if operating costs decline as the size of properties
increases. Economies of scale did appear when total operating
costs were measured on a percentage of gross potential rent basis,
dropping from 43.7 percent of GPR in properties of less than 100
units, to 40.3 percent in those containing 500 or more units. The
survey results, however, did not show similar economies of scale
on a per unit basis. Operating costs, across property sizes, ranged
from $4,024 to $4,261 per unit.
Economic losses varied based on property size. Losses were highest
with properties with 500 or more units at 13.1 percent of GPR and
the lowest for properties with fewer than 100 units at 8.9 percent.
Metro-Area Operating Income & Expenses
Detailed tables in the full report are presented for the 77 metropolitan
areas where a total of six or more garden communities of
all types were reported in the survey. This is the only section of the
report with metropolitan area data for garden, mid-rise and highrise
building properties, and is further segmented into those with
utilities that are individually or master metered. Care should be
taken when reviewing the data for individual property types in metropolitan
areas where the number of properties reported is small.
Following are highlights of the metropolitan area data, focusing
on garden properties with individually metered utilities unless
otherwise noted.
• NOIs on a dollar-per-unit basis ranged from $12,179 ($13.19
per square foot) in the San Jose-Sunnyvale-Santa Clara metro
area to a low of $2,013 ($2.43 per square foot) in the Augusta-
Richmond County, Ga.-S.C. metro area. The New York-Northern
New Jersey-Long Island metro area had the highest NOI measured
as a percent of GPR at 68.6 percent and Augusta-Richmond
County, Ga.-SC had the lowest at 39 percent.
• GPR averages were the highest in the San Jose-Sunnyvale-
Santa Clara, Calif., metro area at $19,272 per unit ($20.87 per
square foot). A low of $5,156 per unit ($6.22 per square foot) was
tabulated for properties reported from Augusta-Richmond County,
Ga.-S.C.
• Economic losses were lowest in the Des Moines, Iowa, metro
area at 2.07 percent of GPR and Salt Lake City at 4.31 percent.
68 UNITS August 2009 www.naahq.org
2009Following are highlights of the metropolitan area data, focusing
on garden properties with individually metered utilities unless
otherwise noted.
• NOIs on a dollar-per-unit basis ranged from $12,179 ($13.19
per square foot) in the San Jose-Sunnyvale-Santa Clara metro
area to a low of $2,013 ($2.43 per square foot) in the Augusta-
Richmond County, Ga.-S.C. metro area. The New York-Northern
New Jersey-Long Island metro area had the highest NOI measured
as a percent of GPR at 68.6 percent and Augusta-Richmond
County, Ga.-SC had the lowest at 39 percent.
• GPR averages were the highest in the San Jose-Sunnyvale-
Santa Clara, Calif., metro area at $19,272 per unit ($20.87 per
square foot). A low of $5,156 per unit ($6.22 per square foot) was
tabulated for properties reported from Augusta-Richmond County,
Ga.-S.C.
• Economic losses were lowest in the Des Moines, Iowa, metro
area at 2.07 percent of GPR and Salt Lake City at 4.31 percent.Both, however, have small numbers of reported individually metered
garden properties. Metro areas with the highest economic
losses were Birmingham, Ala., at 18.63 percent, and Wilmington,
N.C., at 17.43 percent.
• Total operating costs’ highs and lows vary among metro
areas based on which measure is selected. Properties reporting
from the Boston metro area had the highest operating costs based
on a per unit basis at $7,048 ($7.35 per square foot), followed by
Ventura, Calif., at $6,528 per unit ($7.50 per square foot). A low
of $2,862 per unit ($2.93 per square foot) was reported in the
Jackson, Tenn., metro area.
• Real estate taxes remained high in many metro areas in
2008. The San Jose-Sunnyvale-Santa Clara, Calif., metro area had
the highest real estate taxes per unit at $2,083; Miami, Fla., was
second at $2,073 per unit followed by the New York-Northern New
Jersey-Long Island metro area at $1,878 per unit. The lowest average
was for properties located in Colorado Springs, Colo., and
Wilmington, N.C., metro areas at $245 and $307, respectively.
• Insurance costs on a per unit basis were the highest among
the following areas, including several hurricane prone metro
areas: They were at $544 per unit ($0.52 per square foot) in Fort
Lauderdale, Fla.; $525 ($0.79 per square foot) in the New York-
Northern New Jersey-Long Island metro area; and $492 ($0.58 per
square foot) in Deltona-Daytona Beach, Fla. They were lowest in
the Tucson, Ariz., and Des Moines metro areas at $103 per unit
($0.13 per square foot and $0.12 per square foot, respectively).
• Salaries and personnel costs were the lowest in the Jackson,
Miss., metro area at $680 per unit ($0.63 per square foot) and Des
Moines, at $661 ($0.78 per square foot). Boston had the highest
average at $2,322 per unit ($2.42 per square foot) followed by
$1,391 in the Philadelphia-Camden metro area ($1.52 per square
foot).
• Dayton, Ohio, and Jackson, Miss., had the largest units among
the metro areas reported separately in this report with an average of
1,089 and 1,088 square feet of floor area per unit, respectively. Properties
reporting located in the Salt Lake City and New York metros
had the lowest averaging at 675 and 663 square feet per unit, respectively.
Metrics (Garden, Individually
Metered Properties)
To provide a better understanding of apartment operations,
CEL has provided additional analysis in the form of ratios (metrics),
which provide benchmarks of the relationship between key
operating variables from survey participants.
In the table below, several operating metrics are presented,
stratified by number of units per community.
These include measures of the relationship between payroll
(staffing) and revenue (top line) and income (NOI), shown as
Revenue (or Income) dollars per dollar of payroll, or Payroll as
a percent of Revenue or NOI, and the number of units supported
by each full-time (and total) employee.
These metrics should be used as a point of reference and
guidelines for readers of this survey report, and not necessarily as
a target or requirement to assure efficiency or operational policy.
Summary
Calendar year 2009, despite its challenges, provides an opportunity
within the apartment industry to do more with less. It is
clear that many apartment firms, leaders and onsite personnel
have and continue to demonstrate the managerial and service
qualities of which the apartment industry can be proud.
It also is clear that economic conditions in 2009 will not likely
improve dramatically. The hidden value during these difficult
times is the opportunity for industry professionals to fine-tune
property and portfolio operating policy and procedures, which
are capable of building an even stronger financial management
platform as markets recover.
The NAA survey results in 2009 continue to demonstrate that
many in the apartment industry know how to protect, add and
create value, and are proving their skills in operations management.
Beyond financial results, the real “bottom line” for the multifamily
housing industry is creating and maintaining a welcoming
environment for approximately 35 million apartment
residents—a deliverable requiring the range of diverse skills,
creative talents and experience within the apartment industry.
deficit spending and financial industry restructuring, in addition
to a dramatic decline of home and stock ownership and
values, rising unemployment and bankruptcies, the U.S. apartment
industry continues to face many short-term challenges. In the face
of a prolonged recession, rising cost of living, tax increases, declining
rents and a significant decline in both transactional volume and
asset values, the apartment industry is placing an even great emphasis
on operational basics and performance metrics.
The turmoil created by economic uncertainty has raised the
bar within the apartment industry for increased focus on operations.
Asset and property management skills and experience are
now more of a priority than ever before, as the apartment industry
focuses on offensive and defensive actions to control the financial
bottom line of property and portfolio operations.
These findings are just a few of the many conclusions drawn
from the recently completed National Apartment Association’s
2009 Survey of Operating Income & Expenses. This NAA-sponsored
survey of nearly 900,000 apartment units nationwide, conducted
by Los Angeles-based CEL & Associates Inc., concluded that
the quality and dedication of leadership and onsite talent within
the apartment industry does matter.
The 2009 survey results reveal that apartment operators are
successfully balancing a commitment to providing high-quality
living environments with the need to be financially diligent in
managing and controlling often unexpected increases in operating
costs. Within the apartment industry, the experience, knowledge
and dedication of onsite personnel is paying big dividends
for residents and owners alike.
NAA has completed its Survey of Operating Income & Expenses
in Rental Apartment Properties for 2009, based on annual data
for 2008.
Major findings in this survey of the professionally managed
rental apartment industry reflect the uncertainties of the current
economy, as demonstrated by net operating income in the “market
rent” segment of the rental apartment market declining by 2.7
percentage points to 53.9 percent and a higher economic loss rate
of 12.42 percent from 10.11 percent in 2007. Total operating expenses
increased by 0.9 percentage points, or 2.3 percent. The economic
state of subsidized properties in the survey also experienced
variable results over 2007.
A total of 3,619 properties containing 898,523 units are represented
in this year’s report. Data was reported for 3,107 market
rent properties containing 822,991 units and 512 subsidized properties
containing 75,532 units. Forms with partial data or apparent
problems that could not be resolved were not included.
The report presents data from stratifications of garden and
mid-rise/high-rise properties, further segmented by individually
metered and master-metered utilities. Survey data is presented in
three forms: dollars per unit, dollars per square foot of rentablefloor area and as a percentage of gross potential rent (GPR).
Responses from garden properties with individually metered
utilities represent 85.9 percent of the market rent properties and
70.5 percent of the subsidized properties. Therefore, the analysis is
focused primarily on the garden properties with individually metered
utilities.
The market rent segment generally has greater units per property
and greater floor area per unit than the subsidized segment.
The average size of individually metered market rent garden
properties is 269 units (143 units in subsidized). Rentable floor
area averaged 909 square feet for market rent apartments and 875
square feet for the subsidized units.
The complete report (available online Oct. 1 at
www.naahq.org/09ies) contains detailed data summarized for six
geographic regions and metropolitan areas. Seventy-seven metropolitan
areas met the separate reporting requirements for market
rent properties. Sufficient numbers of subsidized properties were
submitted for 20 metropolitan areas.
This report also includes results for all “other” properties at the
state level with a minimum of six properties located in metro
areas that did not meet requirements for separate reporting. Nonmetro
area reporting also is included at the state level. Tables for
market rent properties are provided for 12 states and for subsidized
properties in 16 states.
Market Rent Properties
Economic Losses. A standard measure of the health of the
rental housing market is economic losses, defined as the difference
between Gross Potential Rent (GPR) and rent revenue collected,
expressed as a percentage of GPR. Included in the losses
are revenues lost to physical vacancies, net uncollected rents and
the value of rent concessions.
The economic loss rate in the survey for market rent individually
metered garden properties increased to 12.42 percent in the
data for 2008, the highest in the past four years of reporting, compared
to 10.11 percent in 2007, 10.20 in 2006 and 11.87 percent
in 2005. Economic losses overall reported in the survey increased
over levels not seen since prior to 2005.
Net Operating Income (NOI) and Revenues. NOI is a
key measurement for evaluating the health of a property and the
rental housing market. It is defined by the difference between
total revenue collected and total operating expenses. NOI represents
the gross cash available for debt service, capital expenditures
and profits. NOI in the survey also reflected the current downward
pressure on rental apartment market economics in 2008.
NOI measured as a percent of GPR for 2008 was 53.9 percent,
declining 2.7 percentage points from 56.6 percent in 2007 (56.9
percent in 2006, 53.9 percent in 2005 and 52.2 percent in 2004).
The NAA survey’s historical peak was 58.9 percent in 1999. Regionally,
NOIs in 2008 ranged from a high of 59.4 percent in the
Northeast (Region I) and Pacific (Region VI) states to a low of
48.5 percent in the Southwest states (Region IV), which has usually
experienced the lowest NOI percentage among the regions.
Average NOIs for the last three survey data years of individually
metered garden properties are presented in the table on p. 65.
Gross Potential Rent (GPR). GPR in the survey data tables.
is defined on a “look-back” fiscal year basis. It is the sum of total
rents of all occupied units at 2008 lease rates and all vacant units
at 2008 market rents.
Average annual GPR decreased by 2.4 percent in 2008 for garden
properties with individually metered utilities. Average GPR
was $10,367 per unit ($864 monthly) in this year’s survey versus
$10,624 per unit ($885 monthly) in the previous year’s survey
(2007). On a per square foot basis, GPR was $11.41 ($0.95 per
month) versus $11.67 ($0.97 per month) in 2007.
Median annual GPR for individually metered garden properties
in the survey is $9,700 ($808 per month) versus $9,639 ($803 per
month) in 2007 and $8,751 ($729 per month) in 2006.
Rent Revenue Collected. Annual rent revenue collected averaged
$9,080 per individually metered garden property unit,
down 4.9 percent from $9,550 in last year’s survey. Measured on a
per square-foot basis, rent revenue averaged $9.99 per square foot
versus $10.49 in 2007 and $10.04 in 2006.
Revenue Losses. Revenue losses averaged 12.42 percent of
GPR in 2008 versus 10.11 percent in 2007, 10.20 percent in 2006
and 11.87 percent in 2005. Revenue losses were reported in three
categories: those from vacancies, collections and concessions. Vacancy
losses for individually metered market rent garden properties
averaged 7.6 percent of GPR in the current survey ($785 per
unit, $0.86 per square foot) versus 6.9 percent of GPR ($732 per
unit, $0.80 per square foot) in 2007. Collection losses averaged
0.9 percent of GPR ($94 per unit, $0.10 per square foot) in comparison
to 0.6 percent of GPR ($64 per unit, $0.07 per square
foot) from 2007. Losses from rent concessions increased, averaging
3.9 percent of GPR ($407 per unit in the property, $0.45 per
square foot) in 2008 versus 2.6 percent of GPR ($278 per unit in
the property, $0.31 per square foot) last year.
Other Revenue Collected. The trend of multifamily housing
owners and service providers creating and offering additional
revenue sources is reflected in a continued increase of 0.5 percent-
age points or 8.1 percent as a percent of
GPR this year. Other revenue collected
from operating sources includes receipts
from onsite laundries, cable, TV/Internet
service, telephone systems, parking fees
and other charges for services and amenities.
These other operating revenues averaged
$691 per unit ($0.76 per square foot)
in 2008 versus $658 per unit ($0.72 per
square foot) in 2007 for individually metered
garden properties reported in the survey.
Median other operating revenues were
$608 per unit.
Total Operating Expenses. Total operating
expenses, as a percent of GPR, increased
by 0.9 percentage points or 2.3
percent in 2008, because of the decline in
overall GPR. The total operating expenses
represented 40.4 percent of GPR versus 39.5
percent in 2007. Total operating expenses
for individually metered garden properties
in the survey averaged $4,185 per unit
($4.61 per square foot) versus $4,196 per
unit ($4.61 per square foot) in 2007.
Operating expenses in the survey are
collected for nine major categories: salary
and personnel costs, insurance, taxes (real
estate and other directly related property
only), utilities (net of any reimbursements
from residents), management fees, general
and administration, marketing, contract
services and maintenance. (Non-recurring
capital expenses were excluded and reported
separately.)
There continues to be variation in the
trends among individual categories of operating
costs, some of which may be derived
from variations in accounting policy
regarding expense classification that the
survey cannot further delineate. Average
property-related insurance costs decreased
12.0 percent in 2008 to $234 per unit
($0.26 per square foot) from $266 per unit
($0.29 per square foot) in 2007. Administrative
costs rose 1.3 percent to $238 from
$235 per unit in 2007. Management fees
decreased 15.0 percent to $289 per unit
(2.8 percent of GPR) from $340 per unit
(3.2 percent of GPR) a year earlier. Marketing
costs increased 1.7 percent to $175
per unit or 1.7 percent of GPR from $172
per unit or 1.6 percent of GPR in 2007.
Maintenance costs increased again at 3.4
percent to $428 per unit from $414 per
unit in the 2007 survey. Contract services
costs increased 7.2 percent to an average of
$284 per unit in 2008 from $265 in 2007.
The overall turnover rate declined again
from last year. As previous homeowners
continued the migration back to apartment
units, the overall turnover rate declined
to 55 percent of total units among
the individually metered garden apartment
properties reported in the survey for
2008 from 59 percent in 2007 and 62 percent
in 2006. This equals a new low
turnover rate over the history of this survey,
which has been in the range of 59 percent
to 69 percent. The previous lows
occurred in the data for 2007 and 1995
and the high during the recession year
1990.
All regional turnover rates declined last
year: Northeast (Region I), 52 percent to 42percent; Southeast (Region II), 59 percentto 58 percent; North Midwest (Region III), 52 percent to 50 percent;
Southwest (Region IV), 61 percent to 60 percent;
Mountain/South Midwest States (Region V), 60 percent to 58 percent
and in the Pacific (Region VI), 62 percent to 52 percent.
Age of Property. Operating expenses as a percentage of GPR
and dollars per square foot basis expectedly rose in individually
metered garden properties in the report as they age. Operating
expenses are 38.9 percent of GPR ($4.41 per square foot) in
properties less than 5 years old and rise to 42.5 percent of GPR
($4.76 per square foot) for properties 20 or more years old. As
operating expenses decrease over the span of years, capital expenditures
increase as the building ages. For example, operating
expenses were $4,231 per unit for those 5 to 9 years old and decreased
to $4,071 per unit for properties 20 or more years old,
while capital expenditures ranged from $270 to $1,006, respectively,
by age of property.
The highest average NOI as a percentage of GPR occurred in properties
10 to 19 years old at 56.5 percent. Measured in terms of dollars
per unit, the low was $5,027 per unit in properties that are 20 or more
years old and the high was $6,801 for properties 5 to 9 years old.
Economic losses continue to be the highest among the newest
properties. Properties less than 5 years old reported the highest
ratio of economic losses at 17 percent of GPR, while the lowest
was in those that are 20 or more years old at 12 percent.
Age of property groupings again show distinct differences in the
individual cost components of operating costs. The largest difference
is in real estate and related property taxes and fees, varying
from a high (average) of $1,334 per unit ($1.34 per square foot)
in those properties five to nine years old, to a low of $820 ($0.96
per square foot) for those aged 20 or more years.
Expectedly, capital expenditures were significantly lower for the
newest properties. They averaged $270 per unit ($0.28 per square
foot) for properties less than five years old, compared to the highest
average reported for properties 20 or more years old at $1,006
per unit ($1.18 per square foot).
Size of Property. Economies of scale in apartment property
size are evident if operating costs decline as the size of properties
increases. Economies of scale did appear when total operating
costs were measured on a percentage of gross potential rent basis,
dropping from 43.7 percent of GPR in properties of less than 100
units, to 40.3 percent in those containing 500 or more units. The
survey results, however, did not show similar economies of scale
on a per unit basis. Operating costs, across property sizes, ranged
from $4,024 to $4,261 per unit.
Economic losses varied based on property size. Losses were highest
with properties with 500 or more units at 13.1 percent of GPR and
the lowest for properties with fewer than 100 units at 8.9 percent.
Metro-Area Operating Income & Expenses
Detailed tables in the full report are presented for the 77 metropolitan
areas where a total of six or more garden communities of
all types were reported in the survey. This is the only section of the
report with metropolitan area data for garden, mid-rise and highrise
building properties, and is further segmented into those with
utilities that are individually or master metered. Care should be
taken when reviewing the data for individual property types in metropolitan
areas where the number of properties reported is small.
Following are highlights of the metropolitan area data, focusing
on garden properties with individually metered utilities unless
otherwise noted.
• NOIs on a dollar-per-unit basis ranged from $12,179 ($13.19
per square foot) in the San Jose-Sunnyvale-Santa Clara metro
area to a low of $2,013 ($2.43 per square foot) in the Augusta-
Richmond County, Ga.-S.C. metro area. The New York-Northern
New Jersey-Long Island metro area had the highest NOI measured
as a percent of GPR at 68.6 percent and Augusta-Richmond
County, Ga.-SC had the lowest at 39 percent.
• GPR averages were the highest in the San Jose-Sunnyvale-
Santa Clara, Calif., metro area at $19,272 per unit ($20.87 per
square foot). A low of $5,156 per unit ($6.22 per square foot) was
tabulated for properties reported from Augusta-Richmond County,
Ga.-S.C.
• Economic losses were lowest in the Des Moines, Iowa, metro
area at 2.07 percent of GPR and Salt Lake City at 4.31 percent.
68 UNITS August 2009 www.naahq.org
2009Following are highlights of the metropolitan area data, focusing
on garden properties with individually metered utilities unless
otherwise noted.
• NOIs on a dollar-per-unit basis ranged from $12,179 ($13.19
per square foot) in the San Jose-Sunnyvale-Santa Clara metro
area to a low of $2,013 ($2.43 per square foot) in the Augusta-
Richmond County, Ga.-S.C. metro area. The New York-Northern
New Jersey-Long Island metro area had the highest NOI measured
as a percent of GPR at 68.6 percent and Augusta-Richmond
County, Ga.-SC had the lowest at 39 percent.
• GPR averages were the highest in the San Jose-Sunnyvale-
Santa Clara, Calif., metro area at $19,272 per unit ($20.87 per
square foot). A low of $5,156 per unit ($6.22 per square foot) was
tabulated for properties reported from Augusta-Richmond County,
Ga.-S.C.
• Economic losses were lowest in the Des Moines, Iowa, metro
area at 2.07 percent of GPR and Salt Lake City at 4.31 percent.Both, however, have small numbers of reported individually metered
garden properties. Metro areas with the highest economic
losses were Birmingham, Ala., at 18.63 percent, and Wilmington,
N.C., at 17.43 percent.
• Total operating costs’ highs and lows vary among metro
areas based on which measure is selected. Properties reporting
from the Boston metro area had the highest operating costs based
on a per unit basis at $7,048 ($7.35 per square foot), followed by
Ventura, Calif., at $6,528 per unit ($7.50 per square foot). A low
of $2,862 per unit ($2.93 per square foot) was reported in the
Jackson, Tenn., metro area.
• Real estate taxes remained high in many metro areas in
2008. The San Jose-Sunnyvale-Santa Clara, Calif., metro area had
the highest real estate taxes per unit at $2,083; Miami, Fla., was
second at $2,073 per unit followed by the New York-Northern New
Jersey-Long Island metro area at $1,878 per unit. The lowest average
was for properties located in Colorado Springs, Colo., and
Wilmington, N.C., metro areas at $245 and $307, respectively.
• Insurance costs on a per unit basis were the highest among
the following areas, including several hurricane prone metro
areas: They were at $544 per unit ($0.52 per square foot) in Fort
Lauderdale, Fla.; $525 ($0.79 per square foot) in the New York-
Northern New Jersey-Long Island metro area; and $492 ($0.58 per
square foot) in Deltona-Daytona Beach, Fla. They were lowest in
the Tucson, Ariz., and Des Moines metro areas at $103 per unit
($0.13 per square foot and $0.12 per square foot, respectively).
• Salaries and personnel costs were the lowest in the Jackson,
Miss., metro area at $680 per unit ($0.63 per square foot) and Des
Moines, at $661 ($0.78 per square foot). Boston had the highest
average at $2,322 per unit ($2.42 per square foot) followed by
$1,391 in the Philadelphia-Camden metro area ($1.52 per square
foot).
• Dayton, Ohio, and Jackson, Miss., had the largest units among
the metro areas reported separately in this report with an average of
1,089 and 1,088 square feet of floor area per unit, respectively. Properties
reporting located in the Salt Lake City and New York metros
had the lowest averaging at 675 and 663 square feet per unit, respectively.
Metrics (Garden, Individually
Metered Properties)
To provide a better understanding of apartment operations,
CEL has provided additional analysis in the form of ratios (metrics),
which provide benchmarks of the relationship between key
operating variables from survey participants.
In the table below, several operating metrics are presented,
stratified by number of units per community.
These include measures of the relationship between payroll
(staffing) and revenue (top line) and income (NOI), shown as
Revenue (or Income) dollars per dollar of payroll, or Payroll as
a percent of Revenue or NOI, and the number of units supported
by each full-time (and total) employee.
These metrics should be used as a point of reference and
guidelines for readers of this survey report, and not necessarily as
a target or requirement to assure efficiency or operational policy.
Summary
Calendar year 2009, despite its challenges, provides an opportunity
within the apartment industry to do more with less. It is
clear that many apartment firms, leaders and onsite personnel
have and continue to demonstrate the managerial and service
qualities of which the apartment industry can be proud.
It also is clear that economic conditions in 2009 will not likely
improve dramatically. The hidden value during these difficult
times is the opportunity for industry professionals to fine-tune
property and portfolio operating policy and procedures, which
are capable of building an even stronger financial management
platform as markets recover.
The NAA survey results in 2009 continue to demonstrate that
many in the apartment industry know how to protect, add and
create value, and are proving their skills in operations management.
Beyond financial results, the real “bottom line” for the multifamily
housing industry is creating and maintaining a welcoming
environment for approximately 35 million apartment
residents—a deliverable requiring the range of diverse skills,
creative talents and experience within the apartment industry.
Judge Dismisses Lawsuit Against Post Properties
Arlington, VA, Sept. 29, 2009 - In a ruling favorable to the apartment industry, Judge Richard Leon of the United States District Court on Sept. 28 granted Post Properties’ Motion for Summary Judgment and dismissed a lawsuit filed in 2006 by the Equal Rights Center (ERC) that had alleged violations of the Fair Housing and Americans with Disabilities Acts.
Post owns and manages 55 apartment communities with more than 19,864 apartment units in seven states and the District of Columbia. ERC is a civil rights organization that has filed many lawsuits against multifamily housing companies alleging that apartment units did not comply with the Fair Housing Act and the Americans with Disabilities Act.
"The decision is a major set-back for ERC and similar advocacy groups which have utilized litigation in an attempt to impose non-mandatory ‘safe harbor’ building codes on the industry, which were not authorized or contemplated by Congress,” Christopher Hanback, Partner, Holland & Knight, Washington, D.C., said. “Under this decision, advocacy groups cannot simply file suit against the entire portfolio of a company regardless of the company’s track record of providing accessible living and accommodations for their disabled residents.”
Judge Leon’s ruling is based on the concept of “standing,” which requires a plaintiff to prove injury to maintain a lawsuit. The court reasoned that although organizational plaintiffs such as ERC can establish standing “either on its own behalf, or on behalf of its members,” ERC filed its case alleging that it had sustained injuries that entitled it to bring the lawsuit.
The court noted that the injury sustained by the ERC “occurred as a result of its decision to investigate Post.” The court ruled that the ERC failed “to establish that the injuries it suffered were not due to a self inflicted diversion of resources.”
Having concluded that ERC had not suffered injury, the court concluded that it lacked standing to maintain the lawsuit and dismissed the case. Post Properties was represented by the Holland & Knight law firm.
“Post is gratified that the Court carefully considered the detailed record and dismissed the lawsuit in its entirety,” Post Properties’ CEO and President David P. Stockert said. “Post remains committed to serving its current and future residents with disabilities and to providing equal housing opportunities for all.”
“The Equal Rights Center is deeply disappointed in the recent ruling in the Post Property matter,” ERC’s Executive Director Donald L. Kahl said. “This ruling reverses a prior ruling of this same Court and ignores the consistent rulings in favor of the ERC on the same issue by every other federal district courts in the region. But more importantly, we believe that the ruling fails to address a substantial amount of evidence that was before the Court in this case, and does not correctly apply the law announced by both Supreme Court and several other Courts of Appeals. The Equal Rights Center continues to analyze the Court’s ruling and will take the appropriate actions in due course.”
Post owns and manages 55 apartment communities with more than 19,864 apartment units in seven states and the District of Columbia. ERC is a civil rights organization that has filed many lawsuits against multifamily housing companies alleging that apartment units did not comply with the Fair Housing Act and the Americans with Disabilities Act.
"The decision is a major set-back for ERC and similar advocacy groups which have utilized litigation in an attempt to impose non-mandatory ‘safe harbor’ building codes on the industry, which were not authorized or contemplated by Congress,” Christopher Hanback, Partner, Holland & Knight, Washington, D.C., said. “Under this decision, advocacy groups cannot simply file suit against the entire portfolio of a company regardless of the company’s track record of providing accessible living and accommodations for their disabled residents.”
Judge Leon’s ruling is based on the concept of “standing,” which requires a plaintiff to prove injury to maintain a lawsuit. The court reasoned that although organizational plaintiffs such as ERC can establish standing “either on its own behalf, or on behalf of its members,” ERC filed its case alleging that it had sustained injuries that entitled it to bring the lawsuit.
The court noted that the injury sustained by the ERC “occurred as a result of its decision to investigate Post.” The court ruled that the ERC failed “to establish that the injuries it suffered were not due to a self inflicted diversion of resources.”
Having concluded that ERC had not suffered injury, the court concluded that it lacked standing to maintain the lawsuit and dismissed the case. Post Properties was represented by the Holland & Knight law firm.
“Post is gratified that the Court carefully considered the detailed record and dismissed the lawsuit in its entirety,” Post Properties’ CEO and President David P. Stockert said. “Post remains committed to serving its current and future residents with disabilities and to providing equal housing opportunities for all.”
“The Equal Rights Center is deeply disappointed in the recent ruling in the Post Property matter,” ERC’s Executive Director Donald L. Kahl said. “This ruling reverses a prior ruling of this same Court and ignores the consistent rulings in favor of the ERC on the same issue by every other federal district courts in the region. But more importantly, we believe that the ruling fails to address a substantial amount of evidence that was before the Court in this case, and does not correctly apply the law announced by both Supreme Court and several other Courts of Appeals. The Equal Rights Center continues to analyze the Court’s ruling and will take the appropriate actions in due course.”
NMHC Report Apartment Market Approaching Stabilization
The U.S. apartment market continues to struggle, but shows early signs of possible stabilization, according to the National Multi Housing Council’s latest quarterly survey of apartment conditions. Some 75 CEOs and other senior executives of apartment-related firms participated in the survey conducted July 20 through July 29.
All four of the survey’s market indexes covering occupancy, sales volume, equity finance and debt finance remained below 50, indicating that conditions had worsened over the past three months. Still, three of the four indexes posted higher readings when compared with the previous quarterly survey. Only the Debt Financing Index, which fell from 41 to 39, declined during the period.
“Apartment demand remains tethered to an economy that continues to shed jobs at a fairly rapid pace,” stated NMHC Chief Economist Mark Obrinsky in a press release. “Financing is beginning to stabilize, but the market is still a long way from ‘normal’.”
“The survey also suggests that transaction activity is mainly being restrained by uncertainty in apartment property values — whether they have bottomed out —and not financing constraints. Only when this uncertainty fades are we likely to see a significant upturn in apartment transactions,” added Obrinsky.
Fears of future declines in property values help explain why apartment firms are struggling to obtain equity financing. In a special survey question, 76% of respondents indicated that the potential for a drop in property values best explained the lack of equity availability.
Another 13% pointed to deteriorating apartment market conditions resulting from the economic downturn; 7% said lower leverage required by lenders had reduced expected returns; and 3% said lower leverage means that the same equity capital supports fewer transactions. Several respondents indicated that all of these conditions have contributed collectively to the challenges in obtaining equity finance.
Among the survey highlights:
* The Market Tightness Index rose from 16 to 20, marking the eighth straight quarter in which the index remained below 50. On the bright side, it was the third straight quarter in which the index measure rose. A growing number of respondents reported that vacancies were unchanged from the previous quarter, a sign of stabilization.
* The Sales Volume Index rose again from 30 to 44, the highest level in 14 quarters. Twelve percent of respondents said sales volume was higher — the highest percentage reporting that trend in two years. It is possible that some buyers and sellers are beginning to test the waters in this depressed transaction environment. Still, this was the 15th consecutive quarter the index was under 50, an indication of declining sales.
* The Equity Financing Index increased from 29 to 39. The majority of respondents (68%) thought equity financing conditions were unchanged, the highest such response in seven quarters. This was the ninth consecutive quarter with an index reading below 50.
* Approximately three out of 10 respondents indicated that the market conditions for debt financing had worsened, which led to the drop in the Debt Financing Index. This marked the ninth straight quarter the index posted a reading under 50.
A complete recap of the survey can be viewed at www.nmhc.org/goto/QuarterlySurvey09.
All four of the survey’s market indexes covering occupancy, sales volume, equity finance and debt finance remained below 50, indicating that conditions had worsened over the past three months. Still, three of the four indexes posted higher readings when compared with the previous quarterly survey. Only the Debt Financing Index, which fell from 41 to 39, declined during the period.
“Apartment demand remains tethered to an economy that continues to shed jobs at a fairly rapid pace,” stated NMHC Chief Economist Mark Obrinsky in a press release. “Financing is beginning to stabilize, but the market is still a long way from ‘normal’.”
“The survey also suggests that transaction activity is mainly being restrained by uncertainty in apartment property values — whether they have bottomed out —and not financing constraints. Only when this uncertainty fades are we likely to see a significant upturn in apartment transactions,” added Obrinsky.
Fears of future declines in property values help explain why apartment firms are struggling to obtain equity financing. In a special survey question, 76% of respondents indicated that the potential for a drop in property values best explained the lack of equity availability.
Another 13% pointed to deteriorating apartment market conditions resulting from the economic downturn; 7% said lower leverage required by lenders had reduced expected returns; and 3% said lower leverage means that the same equity capital supports fewer transactions. Several respondents indicated that all of these conditions have contributed collectively to the challenges in obtaining equity finance.
Among the survey highlights:
* The Market Tightness Index rose from 16 to 20, marking the eighth straight quarter in which the index remained below 50. On the bright side, it was the third straight quarter in which the index measure rose. A growing number of respondents reported that vacancies were unchanged from the previous quarter, a sign of stabilization.
* The Sales Volume Index rose again from 30 to 44, the highest level in 14 quarters. Twelve percent of respondents said sales volume was higher — the highest percentage reporting that trend in two years. It is possible that some buyers and sellers are beginning to test the waters in this depressed transaction environment. Still, this was the 15th consecutive quarter the index was under 50, an indication of declining sales.
* The Equity Financing Index increased from 29 to 39. The majority of respondents (68%) thought equity financing conditions were unchanged, the highest such response in seven quarters. This was the ninth consecutive quarter with an index reading below 50.
* Approximately three out of 10 respondents indicated that the market conditions for debt financing had worsened, which led to the drop in the Debt Financing Index. This marked the ninth straight quarter the index posted a reading under 50.
A complete recap of the survey can be viewed at www.nmhc.org/goto/QuarterlySurvey09.
Wood Partners Looking for Aquisitions
Atlanta--After multiple quarters of dismal investment activity, new funds and investment entities are cropping up to capitalize on the discounted commercial real estate assets that are hitting the market. Atlanta-based Wood Partners L.L.C. has just entered the game, too. The multifamily developer has expanded its business platform to include acquisitions.
"The investment acquisition strategy is to acquire properties in select submarkets in core cities nationwide, which in our opinion will generate long-term revenue growth," says Jay Jacobson, a Wood Partners director spearheading the firm’s new acquisition platform. "This could include urban core product as well as primary suburban product. The strategy does not distinguish between low- or mid-rise, medium density or high-density product."
The company will rely on multiple sources to finance the acquisitions, including individual investor partner funds and internal investment funds. "Wood Partners also is actively pursuing ventures with banks and other financial institutions in which Wood Partners would be an operating partner," adds Joe Keough, CFO of Wood Partners. "We are prepared to invest as much, or as little, as we feel is appropriate in each market at any given point in time." The amount that will be invested for each individual property will depend on the capital source, but will likely range between $20 million and $50 million each.
Timing is everything, and the company's decision to enter the acquisition business could be just right. The inhospitable lending climate and other factors have led to a decrease in prices on commercial real estate properties, so those with money in their pockets can take advantage of the bevy of opportunities to buy low. "The multifamily development industry is in a capital-constrained market both from an equity and debt perspective," Wood Partners CEO Jerry Durkin says. "We expect that to continue through 2010 and beyond. The equity in this market is clearly more interested in acquisition than development at this point and that’s where we need to be. There are going to be some very promising opportunities in the multi-family market over the next few years, and Wood Partners expects to be very successful in acquisitions over the long haul.”
Prime purchasing opportunities notwithstanding, Wood Partners is still very much in the development game. "The firm currently has six development projects for which financing has been dedicated," Jacobson notes. "Four of these projects that we expect will start construction within the next six months are in Oakland, Denver, Atlanta and Boston. For the other two, located in the North Carolina cities of Charlotte and Raleigh, we anticipate a start early next year."
And acquisitions isn’t the only business area Wood Partners is looking to add to its repertoire. The firm also plans to make a gradual entrée into the property management business beginning in 2010 for the purpose of overseeing the operation and management of certain multi-family projects in its portfolio.
"The investment acquisition strategy is to acquire properties in select submarkets in core cities nationwide, which in our opinion will generate long-term revenue growth," says Jay Jacobson, a Wood Partners director spearheading the firm’s new acquisition platform. "This could include urban core product as well as primary suburban product. The strategy does not distinguish between low- or mid-rise, medium density or high-density product."
The company will rely on multiple sources to finance the acquisitions, including individual investor partner funds and internal investment funds. "Wood Partners also is actively pursuing ventures with banks and other financial institutions in which Wood Partners would be an operating partner," adds Joe Keough, CFO of Wood Partners. "We are prepared to invest as much, or as little, as we feel is appropriate in each market at any given point in time." The amount that will be invested for each individual property will depend on the capital source, but will likely range between $20 million and $50 million each.
Timing is everything, and the company's decision to enter the acquisition business could be just right. The inhospitable lending climate and other factors have led to a decrease in prices on commercial real estate properties, so those with money in their pockets can take advantage of the bevy of opportunities to buy low. "The multifamily development industry is in a capital-constrained market both from an equity and debt perspective," Wood Partners CEO Jerry Durkin says. "We expect that to continue through 2010 and beyond. The equity in this market is clearly more interested in acquisition than development at this point and that’s where we need to be. There are going to be some very promising opportunities in the multi-family market over the next few years, and Wood Partners expects to be very successful in acquisitions over the long haul.”
Prime purchasing opportunities notwithstanding, Wood Partners is still very much in the development game. "The firm currently has six development projects for which financing has been dedicated," Jacobson notes. "Four of these projects that we expect will start construction within the next six months are in Oakland, Denver, Atlanta and Boston. For the other two, located in the North Carolina cities of Charlotte and Raleigh, we anticipate a start early next year."
And acquisitions isn’t the only business area Wood Partners is looking to add to its repertoire. The firm also plans to make a gradual entrée into the property management business beginning in 2010 for the purpose of overseeing the operation and management of certain multi-family projects in its portfolio.
RealPage Acquires EverGreen Solutions
RealPage, Inc (www.realpage.com), a leading provider of on-demand software and services to the real estate industry, further expands its ability to provide open solutions to clients with the acquisition of EverGreen Solutions, Inc. (www.evergreen-solutions.net), a technology consulting and integration firm serving the multifamily, commercial, senior, student and military housing markets.
“The acquisition of EverGreen Solutions further evolves our commitment to being open for business,” said Steve Winn, CEO of RealPage. “EverGreen will play an important role in facilitating the growth of our Cloud Computing Infrastructure-as-a-Service offering.”
RealPage recently announced its new Cloud Computing Division, which provides open access to RealPage products for RealPage clients and certified partners, and improves integration of RealPage products and services with third party accounting applications.
EverGreen Solutions will operate as a managed services model under RealPage. It will continue to work with its real estate clients to improve management systems in the areas of application hosting, including upgrades and new product implementation, application support, custom programming and reports and integrations and interfaces.
“This is an exciting new chapter for EverGreen,” said Georgianna W. Oliver, CEO and founder of EverGreen Solutions. “There are many innovative advancements coming in technology for the multi-tenant market, and our alignment with RealPage will provide broader and more comprehensive consulting opportunities with existing and new customers alike."
EverGreen Solutions will maintain its headquarters in Washington, D.C. for close access to national associations, regulatory agencies, and industry leaders, and will also maintain its fully-staffed technical division in Tulsa, Oklahoma. In addition, it will open an office at the RealPage headquarters in Carrollton, Texas.
RREEF Outsources Property Management Function
RREEF has announced the selection of CB Richard Ellis Group, Inc. ("CBRE"; NYSE: CBG) and Transwestern to take over direct property management of the office and industrial property portfolio currently managed by RREEF for its clients.
Prior to the selection of CBRE and Transwestern, the majority of the properties had been managed directly by RREEF, which will continue as the asset manager.
"After over 30 years of direct property management of our clients' portfolios, we have made the decision to transition out of the property management business and assign these services to two carefully selected, highly skilled property management companies," said Timothy K. Gonzalez, Chief Executive Officer of RREEF Americas. "We will be working closely with CBRE and Transwestern in our continuing role as asset manager for each of the properties, concentrating on the execution of asset business plans, investment strategies and risk management for our clients' portfolios." CBRE has been assigned an office and industrial portfolio totalling approximately 70 million square feet. The properties are primarily located in northern California, the Pacific Northwest, the Northeast, the Midwest and Southeast.
Transwestern's assigned office and industrial portfolio totals approximately 47 million square feet concentrated in the Midatlantic, southern California, the Southwest and Southeast.
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