Author Archives: Shaun Omar - Page 2

Demand in Houston Still Strong as Economy Prospers

By Amalia Otet, Associate Editor – MultiHousingNews.com

Strongly supported by a thriving energy sector as well as a robust multi-family industry, Houston’s economy is expected to experience further growth throughout 2014. Employment gains are projected to come from a wide array of industries, including manufacturing and professional services as well as corporate expansions, which will yield 111.700 jobs in 2014 and a 3.9 percent jump in payrolls, according to research data from Marcus & Millichap.

Investor interest in the Houston apartment market remains strong, with all property size tranches having recorded an increase in deals during the past year. While the number of properties sold with more than 100 units increased more than 40 percent, transactions involving assets with fewer than 50 apartments doubled from one year earlier. Marcus & Millichap further reports that Class A assets trade at cap rates of less than 6 percent, while Class B/C properties elicit bids at first-year returns starting near 7 percent.

Vacancy Rate Trends courtesy of Marcus&Millichap

The Houston metro has become an important target market for many out-of-state investors, such as Boston-based Intercontinental Real Estate Corp., which was drawn to the city specifically due to “its impressive commercial resiliency, its vibrancy and diverse economic engine.” The company parted with $61.6 million to acquire the Sawyer Heights Lofts, a 326-unit apartment community in Houston’s Downtown/West Inner Loop.

Rent Trends

Construction activity is also on the rise as the multi-family market tries to accommodate an influx of new residents, particularly young professionals, to the area. Last year, the local market saw the addition of 9,200 units. Despite the considerable completions, all areas of Greater Houston had positive absorption and vacancy remained unchanged in the third quarter of 2013 at 6.4 percent. In the same period, average rents rose 1.8 percent to $903 per month, or roughly $1.02 per square foot. Properties completed in the third quarter were reportedly spread across nine projects and six submarkets. Approximately 657 rental units have been delivered to the fast-developing Greenway Plaza/Upper Kirby submarkets, driving inventory up 4.8 percent.

Marcus & Millichap’s Market Forecast report indicates that residents will occupy an additional 10,000 units in 2014, bringing the overall vacancy rate down to 7.0 percent. Additionally, the pace of rent growth is expected to rise, with average rental rates climbing 3.6 percent to $941 per month.

More than 10,900 new apartments are projected to come online in 2014. Nearly 1,300 rentals will be placed in service in Galleria/Uptown, including ZOM’s latest development, The Hudson. The 431-unit luxury residential community will be located on a 5.3 acre site on Fountain View Drive at San Felipe Drive near a planned retail center that will be anchored by an upscale HEB Market, as reported by Multi-Housing News Online.

Houston marked an important milestone last year with the re-launch of the Mid-Main project, the city’s first transit-oriented development (TOD). Seven years in the making, the compound will feature 363 apartment homes alongside 30,000 square feet of retail space, in close proximity the METRORail light-rail system.

Charts courtesy of Marcus & Millichap, Apartment Research Market Report, Fourth Quarter 2013

Student Housing Pros: Watch Your Backs

 – NREIonline.com

The long-term outlook for student housing may be positive, but investors and managers should be on the lookout for competition from new construction.

“You are in a maturing industry where a lot of the easy money has already been made,” says Terrell Gates, founder and CEO, Virtus Real Estate Capital.

Experts expect demand for student housing to increase over the next several years. But student housing operators are looking over their shoulders for potential competition, especially in major student housing markets serving large universities. Nearly all of the new beds under construction are being built near the 300 or so largest universities in the country.

Demographics

Enrollment at U.S. universities reportedly declined last year by about 500,000 students. That news set off a wave of speculation that the student housing business might be overheated. Some investors worry that the recent dip in enrollment is the beginning of a long-term trend, as prospective students decide not to take on the burden of student loan debt.

“Students and parents are going to be more discerning on how much debt they pile on,” says Jim Arbury, vice president for the National Multi Housing Council. However, students are still likely to enroll. “An average student might pile up $25,000 in student loan debt. For the average job available to a college graduate, $25,000 is worth it.”

Projections from the U.S. Dept. of Education show college enrollment growing overall from 21 million in 2010 to 24 million in 2020.

In the recent dip in enrollment, the majority of the students who didn’t return were graduate students who have put off further education as the unemployment rate declined. “These are not people traditionally targeted by student housing,” says Terrell. Also the biggest drop in enrollment came at smaller, often more expensive private colleges, while most student housing properties can be found near larger, public universities.

“Nobody has seen a major impact on the great bargain schools, the state schools,” says NMHC’s Arbury.

New construction hits markets

Roughly 50,000 student housing beds came onto the market in the summer of 2013, in time for the 2013-14 school year. Next summer another 50,000 beds should hit the market. That’s up from 40,000 that came on line in the summer of 2012, according to Terrell.

The new flood of student housing follows a long period during and after the crash when very little new student housing was built. Also, the level of new construction is not that large considering that there are more than 20 million students now enrolled in college or university.

However, the flood of new construction is concentrated in the area nearby the roughly 300 largest universities with more than 10,000 students apiece, says Arbury. The newest student housing is targeted even more tightly. Because of the high cost of new construction, these new beds target the wealthiest students who can afford the cost. “You can only make the math work if you’re delivering class-A properties,” says Terrell.

Terrell expects to see more consolidation in the business as more large institution investors enter the space and existing student housing companies grow to an institutional size.  “The news is out: Everyone understands that student housing is recession resilient,” he says. “Consolidation is coming.”

Office Market Remains Stuck in a Rut

 and  – NREIonline.com

The national vacancy rate for office properties remained unchanged during the fourth quarter at 16.9 percent. Given how slowly the office sector’s recovery has progressed, this is not necessarily reason for worry.

Since the third quarter of 2007 the national vacancy rate hasn’t declined by more than 10 basis points in any given quarter. For all of 2013, the vacancy rate fell by just 20 basis points, roughly comparable to the 30 basis point decline in 2012.

National vacancies remain elevated at 440 basis points above the sector’s cyclical low, recorded in the third quarter of 2007, before the recession began that December. Tepid supply growth and lackluster demand have remained largely in balance during this recovery, accounting for the slow pace of vacancy compression.

 

 

With most employment growth coming from low-paying, low-skilled jobs that do not utilize office space, demand remains weak. The amount of occupied stock rose by 8.9 million sq. ft. in the fourth quarter. This is a meager increase from the 7.6 million sq. ft. that were absorbed during the third quarter. This was, however, largely due to a jump in completions. For the quarter, 9.3 million sq. ft. came on-line, up from last quarter’s 6.3 million sq. ft. of new construction.

This dynamic between net absorption and construction held throughout the year. For 2013, quarterly net absorption averaged 7.1 million sq. ft., a 69 percent increase from 2012’s average of 4.2 million sq. ft. For construction, the quarterly average was 6.5 million sq. ft., a 109 percent increase from 2012’s average of 3.1. Demand certainly increased in 2013, with office buildings entering the market mostly occupied (or leasing up quickly). This is in line with strict requirements for pre-leasing from lenders that provide construction and development financing.

The bottom line is that until the growth rate in high-wage, high-skill jobs that require office space accelerates expect slack demand for existing inventory to be the norm and vacancy compression to be slow but steady.

Rent growth plods along

Asking and effective rents both grew by 0.7 percent during the fourth quarter. Asking and effective rents have now risen for 13 consecutive quarters. During 2013 the average asking rent increased by 2.1 percent while effective rent grew by 2.2 percent. This was somewhat better than 2012’s performance when asking rents grew by 1.8 percent while effective rents grew by 2.0 percent.

 

 

Unfortunately, there is too much vacant space for market dynamics to be conducive to significant rent growth. With the national vacancy rate at 16.9 percent and declining slowly, landlords remain unable to drive asking rents upward or pull back on lease concessions. That does not mean that rents are unable to slowly creep up—as they did in 2013—but stronger, healthier rent growth is only possible at far lower vacancy rates such as were observed before the recession. Reis’ historical data indicates that national vacancies need to compress by another 300 basis points before rent growth accelerates on a broader basis. Given the pace of vacancy declines, it will take another few years to get there.

Top metros reap outsized gains

In the current market environment, weakness at the national level does belie strength found in a handful of metropolitan markets and selected submarkets. With the technology and energy industries  continuing to grow and create a meaningful amount of high-wage office-using jobs, the performance of markets with a concentration of companies in these industries continues to excel. This is a familiar trend over the last few years.  The markets with the highest year-over-year effective rent growth in the fourth quarter were San Jose (+5.0 percent), San Francisco (+4.5 percent), New York (+4.2 percent), Houston (+3.7 percent), Seattle (+3.0 percent), Boston (+2.9 percent) andDallas (+2.8 percent).  Also at the top of the list was Orange County (+2.8 percent), a metro we haven’t mentioned much.  A combination of recovering tourism and an increase in demand for space from the healthcare industry has helped support the metro’s office market. Orange County ranked fourth in terms of quarterly effective rent growth (+1.3 percent) in the last three months of the year.

New York has reclaimed the title of the tightest market from Washington, D.C., with a 9.9 percent vacancy rate at the end of the fourth quarter of 2013. Washington fell to second place at 10.3 percent. While both markets experienced vacancy rate increases during the quarter, Washington’s rise is more troubling. While New York’s was likely a short-term aberration, Washington-based employers continue to bear the brunt of budget cuts and political brinkmanship. Although the budget has been passed and the shutdown proved to be ephemeral, haggling over the state of the federal government’s finances is far from over.

Near-term office outlook

The outlook for 2014 is for moderate improvement versus 2013. Many companies refrained from hiring in 2013 because of so much uncertainty. As this fog of uncertainty dissipates, particularly surrounding policy making in Washington, D.C., it should serve as a catalyst for hiring. We expect that the labor market, including the professional, managerial, technical and sales-related occupations that typically reside in office buildings, will improve throughout the year. Therefore, we anticipate that vacancy compression will increase modestly, to about 40 basis points.

Rent growth should continue to accelerate next year, rising by close to 3 percent on an asking rent basis and by over 3 percent on an effective rent basis. It has taken the economy and the office market years to claw their way back from the depths of the worst recession since the 1930s. 2014 is not likely to be the breakout year, but there are reasons to be more optimistic.

Brad Doremus is senior analyst, and Victor Calanog is head of research and economics, for New York-based research firm Reis.

Self-Storage Rents, Revenues Attract Investor Recognition

Robert Carr – NREIonline.com

Self-storage property owners have increased their income this year because they are enjoying the best of both worlds—lower vacancies and higher rents. In fact, increased rental rates haven’t deterred customers, so owners continue to lift unit rates higher every few months to see how high they can lift the ceiling.

The industry has about 91 percent occupancy, with the rental rates averaging just more than $87 a 100-sq.-ft. ground level, non-climate-controlled unit, the asking rate matching the peak following the housing collapse in 2009. Rental income in second quarter 2013 was up about 4.1 percent from a year prior, says R. Christian Sonne, executive managing director at the company and author of the Self Storage Performance Quarterly report.

“We used to have, on average, about 1,000 new properties being built a year nationwide, this year there’s only 117,” Sonne says. “For self-storage, the two pillars of success are population growth and time, and that’s happened. With little new building and high demand, the owners can raise rents whenever they want—and they are.”

Marc Boorstein, principal of Chicago-based MJ Partners Real Estate Services, said in his recent second quarter report that the low homeownership rate, which is still down about 4 percent from a decade ago to 65.1 percent, means that there’s more people renting. Homeowners tend to move, the typical time a storage unit is needed, a lot less than renters, Boorstein said.

Boorstein said the main four public REITs: Public Storage, Extra Space Storage, CubeSmart and Sovran Self Storage Inc., saw revenues grow 5 percent to 9 percent in the second quarter. This compares sharply to the performance of all four in the second half of 2009, where revenues dropped to negative 6 percent, according to the Cushman & Wakefield report. Revenue rocketed up starting in the first half of 2010, and hasn’t dropped or plateaued since.

However, REITs still only make up a small percentage of self-storage ownership, with private owners still the majority owners of most properties. The trusts have been trying to increase market share, but there’s just not that much being offered, Sonne says. “There’s been about $2 billion in portfolio acquisitions in the past couple of years, including Storage Deluxe’ $560 million East Coast portfolio sale to CubeSmart last year. They are trying to find portfolios, but there’s just not that much out there.”

In a recent deal where trusts have succeeded, Glendale, Calif.-based Public Storage was reportedly the winning bidder last week to acquire Harrison Street Real Estate Capital’s joint-venture stake in a 43-facility portfolio owned by Matthews, N.C.-based Morningstar Properties LLC for $315 million. Private investors are still trying to jump into the self-storage sector, Sonne says, though the niche label is hard to overcome.

“We’ve seen huge interest by companies such as Prudential, Heitman, Blackstone, Starwood Capital and retirement fund firms,” he says. “Self-storage had the lowest loan loss of any other sector during and since the recession, and the highest consistent returns. We’ve also seen interest from cross-over players, by those who invest in apartments on the private equity side; the Carlyle Group, for example, is looking for the right partner to get into self-storage. With the few new properties coming online in the next 18 months, our forecast for the sector is pretty strong.”

Storage Wars: Investor Demand Grows for Self-Storage Properties

Michael Bull – Bull Realty – NREIonline.com

In the past, self-storage properties were often overlooked by investors, but that’s not the case anymore. While many other sectors of commercial real estate were hit hard by the recession, the self-storage industry weathered the storm with minimal damage. As vacancy rates fall and rents grow, investor demand for self-storage properties continues to rise.

Those were a few of the points made during the most recent episode of the “Commercial Real Estate Show” radio program, on which my guests and I discussed sector fundamentals, new construction and investor appeal.

Strong fundamentals

“Self-storage isn’t as glamorous as a high-rise office building or a mall,” said Michael Scanlon, president and CEO of the Self Storage Association. “We’ve always been relegated to secondary status in the commercial real estate industry. However, during the recession, many of the big segments took a nosedive, and self-storage sagged a little but didn’t take the same nosedive.”

Fundamentals have really been improving during 2013, which is a continuation of the last couple of years, said Ryan Severino, senior economist at Reis. Vacancy dropped from 14.9 percent at the beginning of the year to 12.6 percent in the third quarter, he said. Asking rents have grown 2.1 percent year-to-date.

In 2014, vacancy rates are expected to drop by another 80 basis points, and asking rents are expected to grow by about 2.8 percent, Severino added.

“The self-storage sector is sneaky big,” Scanlon said. “In 2013, all 30 teams in the NFL generated $9 billion in total revenue, while the music industry generated about $21 billion, and self-storage generated $24 billion.”

Increase in supply

During the last couple of years, 300 to 400 new self-storage facilities have been constructed, Scanlon said. With the economy continuing to improve, it’s estimated that as many as 800 new facilities will be constructed in 2014.

“Supply is increasing relative to where it’s been the past few years, but I don’t see it being an impediment to the market’s recovery,” Severino said. “We expect to see vacancy rates continue to trend down, which means we expect to see net absorption outpacing new construction.”

Despite the amount of properties being developed, building a self-storage facility can be tricky, Scanlon added. For most investors today, due to soaring construction costs it’s cheaper to buy a facility and fix it up than to build.

“When we started, we used industrial-zoned land in heavy commercial areas for self-storage facilities,” Scanlon said. “More recently, we are building in light-commercial and semi-residential zoned areas, and we’ve had to build them with more curb appeal.”

Investor demand increases

“We are now a mainstream part of portfolios that are involved in commercial real estate,” Scanlon said. “People are hedging their bets by putting some money in self-storage.”

Investors who are interested in entering the self-storage market should consider finding a facility they like and asking to invest in the owner’s next property, Scanlon said. “Country club money is how a lot of small operators get their money to build or expand,” he said.

Before purchasing properties, investors should perform a full audit, said Scott Zucker, partner at WZEM. “It’s important to have a good idea of what’s going on inside the facility and who the tenants are,” he added.

Access to the property and new developments around the area are also important factors to take into consideration, Zucker said. “Curb cuts are there so trucks can access the property,” he said. “If there’s a lot of development in the area, road access and access into the property can be affected.”

Cap rates for self-storage are about 6 percent for class-A properties, 7 percent for class-B properties and 7.5 percent for class-C properties, Severino said. In comparison, mean cap rates for apartments are about 6.4 percent, and cap rates for retail are about 8.1 percent.

“Investors are still being choosy about what they buy and sell,” Severino added. “Transaction volumes for all property types are down relative to what they were before the recession. Even with that selection bias, self-storage holds up well relative to the other property types.”

The entire episode on the self-storage industry is available for download atwww.CREshow.com. Michael Bull, CCIM, is the host of the nationally syndicated Commercial Real Estate Show and founder of Bull Realty, Inc., a U.S. commercial real estate sales and advisory firm headquartered in Atlanta. 

Seniors Seek Multifamily Units in Warm Climates

 – NationalRealEstateInvestor.com

As the U.S. housing market improves, senior citizens have been looking to sell homes they’ve been holding onto since the recession.

Seniors wanting to get out of underwater homes have been putting them on the market, where one in four home sellers is 65 years or older, according to the National Association of Realtors. Additionally, the National Association of Home Builders said in a fourth quarter report that improvements in the single-family housing market mean seniors are increasingly able to sell their current homes and move into smaller homes or apartments.

Nikki Buckelew, CEO and founder of Austin, Texas-based Seniors Real Estate Institute, says today’s residential brokers need to take the time to learn how to work with seniors to sell their homes and how to help them find either smaller properties or appropriate assisted-living facilities. The seniors housing market is a distinct niche, and Buckelew says in the next few years there will be many more seniors-only realtor teams formed to help owners sell their single-family homes and move into seniors housing.

A decade ago, Buckelew notes, the seniors living communities were not a good fit for the typical real estate agent who had no training in how to work elderly clients. However, she says agents must get trained up quickly, as the Census Bureau estimates that 11.3 million seniors will sell their homes by 2020, and that number is expected to reach 15 million between 2020 and 2030.

“This group of 80-somethings are trying to exit their homes, and the typical agent still isn’t equipped for the transaction,” Buckelew says. “The right team is critical, and should include elder law attorneys, financial planners, estate liquidators, antique appraisers, home inspectors and senior move specialists. Just the move alone is a huge hassle for seniors, as they have a hard time liquidating their personal belongings.”

On the move

Self-storage listing agency Sparefoot said in a recent study that the Southwest, particularly Texas, should get ready for a large influx of seniors. San Antonio topped a list of 15 cities where baby boomers are thriving, with the list also including Austin, Houston and the McAllen-Edinburg-Mission corridor.

The Carolinas also took up top spots in the study, with Raleigh and Charlotte in North Carolina cracking the top 10, and Columbia, S.C. coming in at number 11. The list is based on government and NAR statistics on boomer population growth, housing affordability and total health care workers per capita.

Boise, Idaho was the northernmost city to make the list, as the rest of the SpareFoot communities listed are in Southern climates. Las Vegas gained about 20 percent more boomers between 2000 and 2010, according to the study, while Chicago and New York City both lost about 9 percent.

Downsizing boomers are also responsible for the drop in the popularity of single-family homes in favor of apartment living, according to a recent white paper written by John Rappaport, a senior economist with the Federal Reserve Bank of Kansas City. Rappaport writes that major cities must start planning for more multifamily properties, and related amenities such as medical properties, to handle this wave.

“The projected shift from single-family to multifamily living will likely have many large, long-lasting effects on the U.S. economy,” Rappaport said in the report. “The aging of the U.S. population will put further downward pressure on single-family con­struction but offsetting upward pressure on multifamily construction…The longer term outlook is especially positive for multifamily construction, reflecting the aging of the baby boomers.”

Ancillary Income in the Year 2019: Prepare Now for the Generation of ‘Cord Nevers’

By Jason Scutt, Worth Telecom Advisors – MultiHousingNews.com

It’s easy to look back at the 1980s as the far distant past with its big hair, curious clothing choices and antiquated technologies. After all, think how far we’ve come from rotary phones, VCRs, camcorders and the Sony Walkman. Yet when you look at the past, some things really haven’t changed at all—particularly when you look at these now defunct and/or dying technologies and study their original appeal such as mobility, control of when content is consumed, and the creation of personalized content. In effect, these root features make up the core functionality that created the rise of the internet itself and the now ubiquitous smart phones which are enabled by it.

A similar common thread between the past and present exists with the providers of TV and phone services which have adjusted their business models from single service businesses (Bell providing phone and Comcast providing TV) to internet and mobility centric organizations.

Property owners across the US have been unwitting, yet active, participants in this technology evolution as they have been granting providers access to their private properties in order to secure services to their tenants. In some ways, this symbiotic relationship is as important to the owners as it is to the providers since tenants require these services similar to utilities. Over the years the relationship has changed somewhat as the wiring requirements improve, FCC regulation changes, and more competitive providers enter previously single provider markets. Fundamentally, though, the relationship is mostly unchanged: the provider seeks access and marketing rights at a property, the owner grants access in exchange for some financial or in-kind consideration and residents consume the provider’s services. In fact, telecommunication based ancillary income is one of the largest sources of revenues for owners and managers.

What has changed—and what will fundamentally alter the relationship between owner and provider—is the apartment resident whose paradigm has changed completely. In a recent survey 49% of respondents stated “cellular coverage is extremely important” in the selection of a community. In another, residents rated internet as the most important amenity at a property. Landline subscriptions per home are down from 90% to less than 20% while mobile phone rates are up to 90%. Residents demand cellular coverage, quality internet access and providers of their choice. The technology demanded by residents enables a resident to completely bypass the property owner and provider’s infrastructure altogether. So called, “cord-cutters” can use a wireless hotspot as their source for internet access, connect a WiFi enabled TV to the hotspot and, of course, use their cell phone for communications. In fact, residents under 30 years old may become the first generation of “cord-nevers” as they’ve never had a wired connection.

Although their average monthly spend remains at around $200 per month, this group is typically budget conscience and very tech savvy. This group’s first device was a mobile phone which they used for communication and entertainment all while mobile. As they move into their first apartment homes, they see no reason to be tethered. While this trend is less than 2% of the market it’s not unreasonable to assume the trend may increase to 5% of all users. With more and more wireless capability and free content options, the signs point to a “tipping point.”

To an owner or manager of a community (and the providers) this trend can impact occupancy and thus their core source of income. As residents require ubiquitous internet and cellular coverage, they will make their buying selections accordingly. Properties without ubiquitous wireless coverage and provider choice will on a tangible level be less successful than similar properties with coverage and choice. This dilemma is further compounded as the “cord cutting” trend continues. If the trend continues at up to 5% of renters per year, in five years 25% of this critical source of ancillary revenue will disappear! For certain demographics it’s not unreasonable to forecast up to 10% may make the switch and thus 50% of revenues are gone.

To optimize occupancy and maximize ancillary income, many owners are beginning to take a more proactive role in shaping the future of their participation in the technology at their properties. Highlights include:

Cell coverage solutions – To address cellular coverage issues experienced by residents, the most effective solution is a distributed antenna system, which is in effect a cell tower spread across a property. While effective, the solution can also be expensive, ranging from $250,000 to $500,000 or more. Lower cost alternatives exist, at a fraction of the cost. One such solution is a WiFi based cell boost technology which amplifies existing cellular signals and retransmits the signal across the property. A critical potential issue with this solution is a common provision written into traditional telecommunication access and marketing agreements (i.e. TV, internet and phone) whereby the owner is precluded from offering competitive “bulked” services to residents which the WiFi solution can be considered.

Cell towers and antennas – As residents migrate to cellular services as the backbone of their telecommunication services, it is important for owners to participate in the revenue potential available from the placement of cellular towers and antennas at their properties. In recent years, the country has witnessed an explosion in the number of cellular towers with 30,000 or less in 2000 to more than 300,000 in 2013. Cell towers have the ability to dwarf the traditional income seem by any other ancillary income program with revenues ranging from $1,500 to $3,000 per carrier per property per month). While the roof rights of tall buildings, land beside highways, and the high ground remain valuable, so too are properties in dense urban markets, properties adjacent to power transmission lines and train tracks and certain rural locations. An important consideration for owners is to be aware that cellular antennas are becoming smaller and more discrete

Traditional cable TV and internet access and marketing agreements – As described previously, many of the common carriers at each property have a wireless strategy and are seeking to expand their offerings. As the income from revenue share programs are in decline, the need for subscription based vs marketing rights only compensation programs becomes more critical than ever. Historically, providers would pay the owner for exclusive access to a property. As the FCC has struck these type of arrangements, the providers would pay for access, use of wire and marketing rights. These agreements often underperform as the owner and provider would disengage as soon as the agreement was signed, with the owners receiving seemingly arbitrary payments and the providers receiving little to no marketing support. As owners are the ultimate gatekeepers in terms of knowing when the resident is moving in and out—and they maintain regular contact—an opportunity exists for the owner to more actively participate in supporting providers by incorporating their services into their operating processes (i.e. work orders, HOA coupons, etc). Providers are also taking the initiative to offer enhanced services such as portals, concierge, security, and home controls which can dovetail with the owner’s current platforms. New providers are entering the market such as Google Fiber, which offers futurist speeds and a seamless platform between mobile and fixed devices.

The big picture

Providers such as AT&T and Verizon have corporate structures whereby the residential services groups report to the mobility unit. Further, the circuit required to power an cellular antenna is often times the same circuit that can be used to power residential services. For these providers capturing cellular services and residential services is a very efficient and effective business proposition that can be leveraged by an owner. With greater revenue opportunities providers can consider properties and business terms they might not typically consider. Further, for providers, working with a single owner or manager of multiple properties is much more efficient than finding and negotiating with individual owners. As described, cellular solutions such as the WiFi cell boost service are directly affected by the underlying traditional cable TV, internet and phone agreements. And, while adding new providers to a property can help owners create an initial marketing boost, it may also effectively cannibalize existing revenue share programs and be in conflict with existing agreements. It therefore critical to look at the entire telecommunication picture—cellular, TV, internet, phone and WiFi—in order to create a comprehensive strategy to optimize leverage, operational capabilities, resident satisfaction, ancillary income potential and occupancy overall while also ensuring the agreements dovetail together without conflict.

While it’s impossible to fully imagine what technology trends will be dominant five, 10 and 20 years from now, it is possible to identify the obvious trends and position yourself to minimize potentially negative results and realize the most benefit possible. In the case of telecommunications, your residents—and most likely your personal habits—have already identified this trend. By identifying all of the providers and options within the ecosystem described herein, and striking out on your own with a logical game plan or utilizing a professional services group with the experience and expertise to efficiently guide you, the time to start protecting your occupancy and maximizing ancillary income is now.

Jason Scutt is president of Worth Telecom Advisors


 

Tech-Savvy Communities

Thanks to Kingsley Associates for sharing their Tenant feedback 

Are your apartment communities tech-savvy? Many residents expect their apartments to meet their various technology requirements, whether it be communication with management through social media, being able to choose their cable provider online, or having Wi-Fi access in common areas. This month, MHN teamed up with research and consulting services firm Kingsley Associates to ask residents about the technology in their apartment communities—and what they think is lacking.

❝    New tenants should be advised that depending on the location of their unit they may not be able to get the cable provider of their choice. ❞
—Birmingham, Ala.

❝    Look into an online management system for the washer
and dryers so that people can be notified when their laundry is done. ❞
—Charlotte, N.C.

❝    I especially like the front office’s use of Facebook and email to keep residents updated on what’s going on in the community (for example, power outages).❞
—Middletown, Conn.

❝    Setting up cable and Internet service prior to moving in would be helpful. I had to wait over two weeks to get set up. ❞
 —Pasadena, Calif.

❝    Community WiFi access would be a really
nice feature. ❞
—Miami

❝    I’m very upset about my phone and Internet connection. It was never communicated to me that this complex has no reception, and now I have to incur huge expenses because of it. ❞
—Melrose, Mass.

❝    The resident portal could be more efficient if it allowed for payments on the rental units to be paid partially, rather than all or nothing. This would drastically help those that have roommates and travel a lot, allowing for an easier transaction between the tenants. ❞
—Charlotte, N.C.

❝    I don’t care about social networking sites—it’s the community’s website that matters to me. ❞
—Washington, D.C.

❝    My apartment has horrible cell phone reception. In the day and age where folks are using their cell phones more, this is a huge problem for me. I have to stand in one or two spots of my apartment just to send a text or receive a phone call. ❞
—Alexendria, Va.

❝    The business center Internet and printer seems to be out of service a large percentage of the time. ❞
—Jersey City, N.J.

❝    The ability to pay rent online would be fantastic! ❞
—Baltimore

❝    I’m disappointed in the limited availability of technology due to the building’s contractual obligations. It’s difficult to leverage a connected lifestyle. ❞
—Chicago

❝    When I’ve communicated with the management team over Facebook, if it’s something complimentary they were very happy. But if had a concern, then the apartment manager would immediately ask me to stop using Facebook saying that Facebook is only for publicity. ❞
—Woburn, Mass.

❝    The Internet does not meet my expectations and makes it incredibly difficult to work from home or have video chats with family in other states. ❞
—S. Orange, N.J.

❝    I do not like having limited options for cable and Internet service. ❞
 —Jacksonville, Fla.

❝    If they could get the cable hooked up in the gym that would be great. ❞
—San Mateo, Calif.

❝    Can we get a Facebook page set up for the community? A previous community I lived at had a Facebook page and it was really useful for the residents to learn about community news and get to know each other. ❞
—Atlanta

❝    I do wish management could provide wireless Internet throughout the building. I would be glad to pay $10-20 more per month for this service.❞
—Dallas

Resident feedback from Kingsley Associates

2014 Top Mortgage Banking Firms

Cautious Optimism

By Mike Ratliff and Jack Kern – MultiHousingNews.com

Mortgage bankers continue to see good things coming for 2014. This optimism is bolstered in part by increased certainty in the lending environment. More than 60 percent of the firms that responded to the 2014 MHN-CPE Top Mortgage Banking Firms survey anticipate an increase in business for the new calendar year, while nearly a quarter expect to see a significant increase in business—somewhere in the 21 to 41 percent range.

While this year’s business is heavily weighted toward multifamily, we anticipate that lending will continue to diversify throughout 2014. We believe that the industrial and retail sectors will both see a marked increase in activity when we re-examine these firms next year.

MB_MHN_3

Transaction levels are expected to rise in 2014, though refinancing volume should remain in the “trough” until 2016 and 2017, when CMBS loan maturities realize a sharp uptick. That said, properties across all sectors are seeing fundamentals improve, with higher rents and lower occupancies, putting owners—both old and new—in a better position to refinance. In addition, December brought a bipartisan budget deal that signals Washington might be ready to play nice and avoid the hiccups that periodically downshifted the ongoing economic recovery. However, uncertainty over the future of the GSEs and concerns over a tapering of QE3 will keep the optimism for 2014 in check.

Methodology

This year’s group of participating companies provided a view of their transaction volumes and a breakout of what loans were processed, including healthcare, multifamily, office, retail, hotel, industrial, mixed-use and other types. Our rankings consider a combination of greatest coverage, transaction volume commitment across sectors, loan positioning, total intermediary lending volume and direct lending activity.

Marcus & Millichap 2014 Outlook: Refinance Now, Look to Value-Add

By Mike Ratliff, Senior Associate Editor – MultiHousingNews.com

Long term fundamentals for the apartment industry are looking strong according to Marcus & Millichap’s 2014 Apartment Market Outlook. Continued job growth and already record-high occupancies should keep the multifamily sector strong for several years. The presentation did, however, warm of the possibility for softness in certain core urban markets due to overbuilding.

Overall macro economic trends paint a positive picture for apartments. Retail sales are 15 percent above where they were in the depths of the recession. We have regained 7.4 million out of the 8.7 million jobs lost during the downturn. This job growth is broad based, with meaningful hiring occurring in all the critical sectors. Another positive indicator is coming from a strengthening single-family market, says Hessam Nadji, senior vice president, managing director and chief sustainability officer at Marcus & Millichap.

“The strength we are now seeing in single-family does concern some apartment investors,” Nadji says.  “And that is for good reason. We have lost renters to home buying — we continue to lose some renters to home buying — but that trend is pretty stable. Roughly 30 percent of home sales are going to first time home buyers. But the bigger message of the single-family recovery is again, very positive for the multifamily side for two reasons. First off, a 10 percent price gain on a year-over-year basis in the single-family market bodes well for the economy. Some of those construction jobs are a result of residential construction on the for-sale side coming back.”

Nadji’s second point was that increasing interest rates and prices in single-family have made it harder for would-be homeowners to make a down payment and get approved for a loan. This bodes well for multifamily as well.

One particular concern (in addition to overbuilding) is how long the trend of rent growth can continue. Rents have grown faster than rental household income. This should cause a slowdown in rent growths, but primarily for the Class A sector. Class B and C assets are still showing strong rent growth, which is typical as their fundamentals typically lag those of the higher end product.

On the finance side of the industry, we can expect to see an increase in originations from life insurance companies, banks, pension funds and agency lenders throughout 2014. One of the drivers for this phenomena is the continued improvement of property fundamentals for multifamily (as well as all asset classes), says William Hughes, senior vice president and managing director of Marcus & Millichap Capital Corp.

“Historically low cost of debt and its improving availability have become major positive factors in facilitating more business,” Hughes says.  “In essence, this allows investors to take advantage of some great opportunities. Today we are seeing a wide variety of competitive financing sources along all property sectors in most markets, with credit discipline adjusting to become slightly less restrictive, particularly with multifamily, in order to accommodate in the increase in active capital sources.”

Looking ahead, Hughes is excited for the prospects for 2014. While the fed will reduce its acquisition of bonds and MBS, Hughes believes that the central banking system will remain accommodative until the economy demonstrates significant jobs growth that results in substantial employment gains. Now that the federal budget has been approved and inflation is in check, we should see both improving employment and GDP growth. All these factors make now a great time to finance.

“We recommend that investors take a fresh look at their financing needs, both in terms of refinancing and pursuing new investment opportunities,” Hughes adds. “We continue to believe that at some point in the not too distant future, we will look back on this period and realize how unique it was.”

Investors looking for opportunities in 2014 might be served by examining deals in older properties or in secondary/tertiary urban core markets.

“Class A properties in preferred markets saw cap rates drop substantially in 2010, 2011 and 2012 as institutional investors poured funds into premiere assets,” says John Sebree, senior vice president, director of Marcus & Millichap’s National Multi Housing Group. “Class B and C product likely provides some of the best opportunity in the coming year.”

Value-add plays to drive rent growth are also becoming an increasingly popular strategy. According to Sebree, investors are targeting 1980s construction due to the ability to go in and update in order to compete a bit more with the Class A stock. Investing in next generation or hip urban markets is another possibility.

“The other value-add that is taking place is that we have had a resurgence in the urban core,” Sebree says. “Most metros have had new construction come into the urban cores at a higher rate over the past couple of years compared to what we have seen in the past. This trend is growing the urban cores and is expanding out into neighborhoods that are close to downtown areas. Areas that maybe a few years ago people would not have considered buying. Now I am seeing people say ‘I am going to buy this property — it is a little bit rough right now — but I can see the growth coming my way and I am going to get out in front of it.’”