Tag Archives: Expenses

New Report Shows More Benefits to Greening Apartments

green money

The multifamily sector could save almost $3.4 billion annually, nationwide, on energy costs with a full expansion of efficiency upgrades, according to a new report from the Washington, D.C.–based American Council for an Energy-Efficient Economy (ACEEE) and Chicago-based think tank CNT Energy. The report, released Jan. 26, details how energy expenditures increased by 10.6 percent from 2005 to 2009 but says many owners have been able to reduce their energy bills by 20 percent or more by implementing energy-saving measures, including everything from installing energy-efficient lightbulbs and reducing hot-water consumption to replacing old refrigerator models and adding extra insulation to attics and basements to prevent energy loss.

Both longtime residences and new buildings can improve on energy savings. But Eric Mackres, senior analyst and local policy lead for the ACEEE and co-author of the report, says owners of older multifamily buildings will find it especially useful. “We were mainly looking at programs and opportunities to improve efficiency in existing buildings to save money for residents and owners,” he says. “There is no one-size-fits-all answer when it comes to efficiency, but just about every building has at least one improvement that can save a significant amount of money.”

Mackres says the key takeaway should be the need for more cooperation between multifamily owners and local utility companies, which often provide financial incentives and programs to help offset installation costs.

The problem with that, says David Woodward, president of Denver-based CompassRock Real Estate and longtime implementer of energy-efficient measures in his own buildings, is that multifamily owners often don’t know about the programs available in their areas. He wishes there were better resources available, especially a website, detailing specific utility, state, and federal programs exclusively for multifamily owners, because, he says, the programs are constantly being updated and changed.

Still, Woodward says “everyone wins” when it comes to energy efficiency. “My message is: Just get started, because people get overwhelmed and don’t do anything,” he says. “Do energy-efficient lighting and basic low-cost things that are really easy and that your site management team can do by themselves. Not only are you providing work, [you’re also creating] self-sustainability because of the labor savings involved in changing bulbs [for example].”

As the former CEO of Chicago-based Laramar Group, Woodward started a “green team” to meet once a month to come up with new ideas for energy-efficiency savings. He says that even after four years, the team was still coming up with fresh ideas after the initial basic retrofit of lighting and installation of low-flush toilets. “We found that payback was really strong,” he says. “Within one or two years, the cost savings were significant.”

Mackres says those savings are out there for all multifamily owners to take advantage of. “There are a lot of opportunities for energy savings, translating directly to cost saving for building owners and residents,” he says. “But there are also a number of [local utility] programs [available], and expanding these programs and making improvements will save a lot of energy.”

The full report is available for download from the ACEEE at http://www.aceee.org/research-report/a122.

Click here to view the original article written by Jane Wolkowicz for MultifamilyExecutive.com.

Maximize Income & Minimize Expenses

Maximize Income & Minimize Expenses

An illustration of methods used by experienced investors to maximize income and minimize expenses for apartments.  

 

Date: February 23, 2012 – 8:00 AM to 9:00 AM
Location: Columbia Square Office Building: 111 SW Columbia Street, 8th Floor Conference Room, Portland, OR 97201
Cost: Free  
Parking: Free validation   
Speaker: Bernard Gehret MA, Co-founder & Principal Broker for Joseph Bernard, LLC and Commercial Association of REALTORS 2010 Investment Broker of the Year  

  • How to obtain an immediate rent survey for 50+ properties near yours
  • Examples on how to manage a tenant utility billback program
  • Recommendations for minimizing expenses while increasing quality services  
  • Recommendations from others in the industry:
    • Insurance Agents
    • Landscapers
    • Contractors  

Call today to register!
503-546-9390

NMHC Survey Shows Two Continuous Years of Growth for Multifamily

market growthWashington, D.C.—The latest Quarterly Survey of Apartment Market Conditions from the Washington, D.C.-based National Multi Housing Council (NMHC) indicates that improving market conditions continue to be an advantage for the multifamily industry.

Showing growth vis-à-vis the previous quarter was each of the survey’s four indexes, reflecting Market Tightness, Sales Volume, Equity Financing and Debt Financing. It was the seventh time in the last eight quarters all indexes had stood about 50, denoting growth over the previous quarter. The January 2012 Quarterly Survey of Apartment Market Conditions was conducted January 23 through 30, 2012, and garnered responses from 105 chief executive officers and other senior executives of apartment-related companies across the country.

The survey’s key findings included the following:

The Debt Financing Index edged up from 70 to 74, with one of every two respondents reporting that now was a better time to borrow. One year before, that ratio had stood just above one in five.

The Market Tightness Index grew to 60 from 52, in what was the eighth consecutive quarter with the index standing above 50. Compared with a 46 percent average over the dozen-year history of the survey, 51 percent of respondents reported the markets as unchanged from the previous quarter.

The Sales Volume Index continued an unbroken 10-quarter-long streak at or above 50. However, the index fell from 54 to 50, its lowest showing since July 2009.

The Equity Financing Index climbed to 60 from 54, also establishing a 10-quarter run of 50-or-higher results. More than half of all respondents reported conditions unchanged from the earlier three-month period in the Market Tightness, Sales Volume and Equity Financing Indexes.

In addition, most markets displayed an uptick in development activity, with 53 percent of respondents reporting increases in land acquisition, lining up financing and obtaining building permits. An additional 20 percent reported that a rapid pace had been established for new project groundbreakings.

Reflecting on the past two years’ nearly continuous recovery, NMHC chief economist Mark Obrinsky was upbeat. “In the face of an unprecedented virtual shutdown of development, the apartment market continues its strong recovery as developers play catch up to the growing demand for rental housing,” he said.

“Investors continue to view apartments as a preferred asset class in today’s environment, and long-term demographic changes favor rental housing. However, we expect the pace of improvement in transaction activity to ease somewhat moving forward.”

Article written by Jeffrey Steele, Contributing Writer for Multi-Housing News Online. To view the original article, click here. To view the full survey data, visit http://www.nmhc.org/goto/6500.

Apartment Industry Continues Recovery, Survey Says

market improvementWASHINGTON, DC – Market conditions continued to improve for the multifamily industry across all areas, according to the latest National Multi Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions. For the seventh time in the last eight quarters, all four indexes reflecting Market Tightness, Sales Volume, Equity Financing and Debt Financing were at or above 50 – indicating growth from the previous quarter.

“In the face of an unprecedented virtual shutdown of development, the apartment market continues its strong recovery as developers play catch-up to the growing demand for rental housing,” said NMHC Chief Economist Mark Obrinsky. “Investors continue to view apartments as a preferred asset class in today’s environment and long-term demographic changes favor rental housing. However, we expect the pace of improvement in transaction activity to ease somewhat moving into 2012.”

The survey reflects nearly continuous recovery over the past two years. Key findings include:

  • The Debt Financing Index increased from 70 to 74. Half (50 percent) of respondents reported that now was a better time to borrow, up from 22 percent this time last year. This is the only index that fell below 50 over the past eight quarters – and just barely (48 in January 2011).
  • The Market Tightness Index rose to 60 from 52, marking the eighth straight quarter with the index at or above 50. Half of respondents (51 percent) reported the markets as unchanged from the previous three months. This compares with the 46 percent average over the 12-plus years of the survey.
  • The Sales Volume Index eased further to 50 from 54. This continues a ten-quarter run of at or above 50, though it reflects the lowest number since July 2009.
  • The Equity Financing Index moved up to 60 from 54, also continuing a ten-quarter run of at or above 50. More than half of respondents considered conditions unchanged from the previous quarter in the Market Tightness, Sales Volume and Equity Financing Indexes.
  • Development activity continues to increase in most markets, with just over half (53 percent) reporting a substantial pickup in land acquisition, lining up financing, and getting building permits, though not yet much in the way of actual construction starts. An additional 20 percent said that developers have been breaking ground on new projects at a rapid clip.

Full survey data are available by clicking here.

 The January 2012 Quarterly Survey of Apartment Market Conditions was conducted January 23-January 30, 2012; 105 CEOs and other senior executives of apartment-related firms nationwide responded.  

Based in Washington, DC, NMHC is a national association representing the interests of the larger and most prominent apartment firms in the U.S.  NMHC’s members are the principal officers of firms engaged in all aspects of the apartment industry, including owners, developers, managers and financiers.  One-third of Americans rent their housing, and over 14% live in a rental apartment. 

To view the original article posted on MultifamilyBiz.com, click here.

Buyers Chase Apartments as Construction Dwindles

Joseph ChaplikQ: How as the multifamily market played out this year? 

A: The 2011 year-to-date data shows 71 apartment transactions involving  complexes of five to 50 units, four transactions of 51-100 units, and nine transactions with buildings containing more than 100 units.

This is up from last year, and I predict we will have approximately a 25 percent increase in transactions this year from 2010 with a strong fourth quarter. Portland has been a top apartment market in the nation with low vacancy rates averaging 3.34 percent and annual rental increases averaging 9.5 percent. With new construction of apartment units down about 90 percent from past averages, the demand is strong and will be for years.

 Q: What pricing does the Portland area command now and how will prices change in 2012? 

A: The 2011 data shows an average sales price per unit of $71,650, up from $69,065 in 2010.

I believe the market will continue to see a slight increase with price per unit and price per square foot for 2012. Investors’ returns based on current rents, also known as capitalization rates, remain low but increased to an average of 7.17 percent currently.

This should remain relatively low but increase 200-400 basis points. However, the rising rents and back revenue from water utility bills will keep the net operating income increasing into 2012.

There will be more new construction of class A units, which will have a premium price if sold. The close-in city core properties will always hold their value for well-managed buildings with good tenants. Even with a rise in the cap rate, these properties should remain high in terms of price per unit pricing.

 Q: How will the apartment market unfold in 2012? 

A: There should definitely be an increase in number of transactions. However, the bulk of these transactions are buildings of five to 85 units. This will continue to lead the volume as more single investors and owners are transitioning into more buildings or moving their equity through an exchange sale into a larger building.

With the interest rates remaining low, savvy apartment owners are deciding to sell and exchange as opposed to refinancing. The most notable trend will be a shrinking gap between “ask” and “bid” prices. Currently, for 2011, it is a 6.15 percent difference. For the transactions we handled in the third quarter this ask/bid gap was about 2 percent.

 Q: Are certain parts of the Portland area in higher demand than others? 

A: The core of downtown and close-in surroundings are always in demand for the investor looking for better neighborhoods. These buildings usually reflect pride of ownership and remain well priced. The tenant mix is strong with limited turnover and higher rents. Apartment investors and owners of these buildings usually have higher equity in these properties or own them debt free.

However, there is quite a bit of volume in the outer city limits due to the lower price per unit and higher cap rates. These investors are looking for more opportunity to obtain higher returns by improving the property. Most investors are looking for a cap rate above 7 percent. The seasoned investor with the ability to rehabilitate buildings by improving their condition and management will continue to search for distressed properties with higher cap rates.

 Q: What types of buyers will step up to the plate in 2012, and why? 

A: Most of the market is local single owners and I believe they will reposition their portfolio with selling and exchanging into larger or better located buildings to take advantage of the low interest rate market.

So far in 2011, there have only been six out-of-state first-time buyers in Oregon. That means that more than 95 percent of the transactions were made by local investors. With 13 percent of the transactions in 2011 being cash purchases, I believe we will see a slight rise in these cash buyers if more properties are showing more deferred maintenance and are owner managed.

 Q: Are landlords investing less in renovations since the recession started? 

A: I don’t believe so, as you will always have the owners that choose to spend less and owners that understand the valuation to the buildings with keeping quality higher. You will see more sales in 2012 by owners that have more deferred maintenance. These buildings typically sell for less not only due to the condition but because there is a lack of record keeping with the income and expenses. When properties in a neighborhood are getting nicer, it puts pressure on apartment owners who were reluctant to improve their buildings.

Article written by Joseph Chaplik for the Portland Business Journal’s 2011 Commercial Real Estate Services Guide. Joseph Chaplik is the President & Principal Broker for Joseph Bernard Investment Real Estate.

U.S. Apartment Vacancy Drops to Five-Year Low as Rents Increase

Oct. 6 (Bloomberg) — U.S. apartment vacancies fell to a five-year low in the third quarter, enabling landlords to increase rents even as tepid job growth slowed leasing in what is usually a strong season for demand, Reis Inc. said.

The vacancy rate dropped to 5.6 percent, the lowest since the third quarter of 2006, the New York-based property-research company said in a report today. It was 5.9 percent in the previous three months and 7.1 percent a year earlier. The average monthly effective rent rose to $1,004 from $997 in the second quarter and $981 in the same period of 2010.

Mounting foreclosures, tighter credit for homebuyers and young people moving out on their own have increased demand for apartments after the vacancy rate reached a three-decade high of 8 percent at the end of 2009. Leasing may be starting to cool as the U.S. unemployment rate sticks above 9 percent and concern grows that the economy is weakening, Reis said.

Apartment demand in the third quarter “was good, but maybe not as good as it could have been,” Ryan Severino, senior economist at Reis, said in a telephone interview. “Sentiment turned severely negative during August and there was a heightened fear of the economy backsliding.”

Landlords saw a net increase in occupied space of about 36,000 units in the third quarter, fewer than the 42,000 units in the previous three months and 95,000 units a year earlier, Reis said. The period is usually one of the strongest for apartment leasing because people tend to move during warmer- weather months and school vacations.

 Slower ‘Unbundling’Renewed weakness in the labor market slowed a wave of young people moving out of their parents’ homes or leaving roommates to rent their own place, a phenomenon known as unbundling, said Donald Davidoff, head of marketing for Archstone, the apartment owner based in Englewood, Colorado. The U.S. economy added zero jobs in August, the weakest reading since September 2010, and the unemployment rate remained at 9.1 percent, according to the Labor Department.

 “The fact that job growth has slowed is certainly not encouraging additional unbundling,” said Davidoff, whose company owns 434 apartment complexes across the U.S. “The pace of that has clearly slowed over the past couple of months.”

Vacancies shrank partly because new completions remain near their lowest since Reis began tracking the quarterly data in 1999, Severino said. About 8,200 units came to market in the past three months, the second-lowest quarterly number of the past 12 years, according to Reis. New supply from developers could start affecting occupancy rates in late 2012, Reis said.

Effective-Rent Gains

Effective rents, or what tenants pay after landlord giveaways are included, rose on a year-over-year basis in 81 out of the 82 metropolitan areas tracked by Reis. San Jose, California, led with 5.5 percent growth in effective rents from a year earlier, followed by San Francisco at 4.5 percent and New York at 3.7 percent, Reis said.

Las Vegas was the only city where rents fell. The 2.3 percent annual growth nationwide in effective rents outstripped the 2.1 percent annual increase in landlords’ asking rents, suggesting that concessions continued to decrease amid strong demand for rental housing, Reis said.

Vacancies should decline further as the number of jobs increases for people ages 20 to 34, the prime group of renters, said Severino. Lingering pessimism about home prices and the difficulty of qualifying for mortgages also favor the rental market, he said.

Pushing Rents

“The market hasn’t quite tightened to the point where landlords can really push rents in excess of inflation,” Severino said. “But we’re not too far away. We can envision within the next year or so seeing a figure more in the 3 to 4 percent range” for rent growth. Effective rents have climbed 4.1 percent from their recession low in 2009, according to Reis.

Higher rates may spur people to double up again, move home or downsize to a less expensive rental, according to Ron Johnsey, president of Axiometrics Inc., a Dallas-based apartment-research company.

Rent growth is “definitely flattening out,” he said.“The operators really pushed rents the first half of the year and then just stood there to protect those gains,” Johnsey said. “It looks like that may be happening again.”

William Kendust, a 26-year-old church youth director in the city of Melbourne on Florida’s eastern shore, moved back in with his parents in January after sharing an apartment with his brother and a friend for two years.“I just felt that it would be throwing money away to rent a place before I was ready” to buy a house, said Kendust, who plans to stay at home longer to help his mom after his father died unexpectedly.

“A lot of young people in their 20s want to be able to get up and go, and the opportunity of going back to school is a draw,” Kendust said. “Living with their parents for a while gives them the freedom to do that.”

 –Editors: Kara Wetzel, Christine Maurus To contact the reporter on this story: Hui-yong Yu in Seattle at hyu@bloomberg.net; Katie Spencer in New York at kspencer14@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

 To view the original article posted on Bloomberg Businessweek, click here.

CFO Strategies Survey Benchmarks Multifamily Industry’s Optimism

2012 growthMultifamily finance professionals are growing increasingly optimistic, budgeting for continued growth in 2012 as the industry plots its course through the early stages of a strong recovery.

About 44 percent of multifamily firms are increasing their acquisition appetites, while nearly 38 percent plan to start more development projects over this coming year, according to a survey of 138 senior-level multifamily finance professionals conducted by Apartment Finance Today.

Underscoring that trend, about 24 percent of respondents plan to add headcount, and more than 26 percent of firms plan to enter new geographic markets in 2012.

“We’re looking at 2011 to 2013 as some of the best years multifamily will probably have ever seen,” says David Gardner, CFO of Rochester, N.Y.–based REIT Home Properties. “It’s the old story of limited new supply and more demand—people moving out for homeownership purposes is the lowest we’ve ever seen. I think we all have a couple of good years ahead of ourselves.”

Capital Markets
Home Properties, which specializes in acquiring older, undermanaged properties for significant rehabs, still sees a lot of opportunity in that space over the coming year. In fact, 38 percent of survey respondents envision more value-add opportunities, and nearly 50 percent expect more distressed properties to hit the market in 2012.

Last year, Home acquired nine properties for $339 million. “It was a unique opportunity—interest rates were as low as we ever saw, so we were able to match up some great funding for those,” says Gardner. “And we’re continuing to have a fairly big appetite. A lot of people don’t like the heavy lifting associated with a significant upgrading effort, but that will continue to be where we see the most opportunities.”

Indeed, the industry’s optimism is buoyed by today’s ultra-low interest rates and the ever-improving capital markets. Last year, only 16 percent of survey respondents borrowed from either life insurance companies or conduit lenders. But more than twice that amount, 39 percent, expect to tap CMBS or life company debt over the next year.

The availability of equity has also improved. Nearly 60 percent of respondents believe that equity capital is more available now than it was a year ago, and 64 percent expect the market to stay just as healthy, or even improve, in 2012.

“We’ve been doing as much if not more life company long-term debt than agency debt—they’re definitely competitive again,” says Jay Hiemenz, CFO of Phoenix-based Alliance Residential. “We’ve been doing a lot of five- to seven-year mini-perms with commercial banks, too. In fact, we probably use more balance-sheet lenders than securitized lenders.”

Supplementing NOI
Though the focus for many firms over the past few years has been on slashing costs, revenue-generation strategies are now clearly the emphasis as the industry enters another growth cycle.

The top NOI booster in this year’s survey was passing utility costs on to residents, with about 42 percent of respondents signing on.

Charleston, S.C.–based Greystar, which manages nearly 190,000 units across the nation, moved to one vendor, National Water & Power, to standardize and maximize its water-rebilling efforts over the past year. “We’ve taken our rebill recovery from 67 percent to 85 percent,” says Derek Ramsey, CFO of Greystar. “It was a needle-mover for us and the properties we manage.”

Revenue management software also continues to gain traction—it was the second-most-popular NOI-boosting strategy in this year’s survey, at 23 percent. Greensboro, N.C.–based Bell Partners started rolling out Yieldstar in 2008 and expects to have it implemented in about 175 communities by year’s end.

“It really helped us during the downturn. Our strategy was to push occupancy to help offset rent declines,” says John Tomlinson, CFO of Bell. “Now, clearly, the focus is on maximizing rents.”

Indeed, the focus today for just about every multifamily firm is on growth—only 7 percent of survey respondents report having no growth plans for 2012.

Excerpt from the article written by Jerry Ascierto for Multifamily Executive.com
To view the original article in its entirety, click here.

 

Multifamily Energy Efficiency Pilot Program Launched

energyWASHINGTON, DC – The U.S. Department of Housing and Urban Development announced that $25 million is available through HUD’s new Multifamily Energy Efficiency Pilot program. Once awarded, these grants will help develop new innovative approaches for multifamily residential properties to reduce their energy consumption, lower greenhouse gas emissions, while saving money for the residents, property owners and taxpayers.

“HUD is extremely excited about this pilot program because it aligns with the goals of the Administration to create green jobs and build sustainable communities,” said Acting Federal Housing Commissioner Carol Galante. “The innovations that flow from this pilot program will serve as models to create future industry standards in energy efficiency.

“Rather than tell applicants what we want to see, we are asking the private sector to develop new innovative approaches to create jobs and help people save energy and save money. Since these grants will be complemented by private capital, the investors will also have a unique opportunity to become leaders in helping make affordable multifamily homes greener,” said Theodore Toon, Associate Deputy Assistant Secretary for HUD’s Office of Affordable Housing Preservation.

The goal of the pilot program is to develop ideas and mechanisms that could potentially be replicated nationally, as well as help create industry standards in the home energy efficiency retrofit market. In addition, the pilot program will create a public/private partnership as a result of capital investments from private industries and create green jobs in construction, property management, and technical analysis (e.g. energy audits and building commissioning), including opportunities for low income residents.

Download Energy Innovation Fund Application.

HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD is working to strengthen the housing market to bolster the economy and protect consumers; meet the need for quality affordable rental homes: utilize housing as a platform for improving quality of life; build inclusive and sustainable communities free from discrimination; and  transform the way HUD does business.

Source: U.S. Department of Housing and Urban Development
Article posted on MultifamilyBiz.com. To view the original article click here.