November 26, 2015

A Merry Christmas Made Possible By Federal Officials

A holiday theme, with a re-post of this article for context to the second: National Real Estate Investor, “Lenders will keep pouring money into apartment properties over the next two years, originating about the same volume of loans in 2016 and 2017—with slight increases—that they are likely to close in 2015, according to the latest Commercial/Multifamily Real Estate Finance Forecast from the Mortgage Bankers Association (MBA), an industry trade group. That’s still going to be a big change from the last few years, when business of lending on multifamily real estate didn’t just grow a little, but instead grew incredibly quickly. So far in 2015, lenders have increased the volume of apartment loans they made by well over 10 percent compared to the year before. In 2016, experts expect more moderate growth, with less frenetic competition to make deals.”

“Lenders will likely originate a total of $224 billion in permanent loans to multifamily properties in 2015, according to MBA. That’s a 15 percent increase from the $195 billion they lent in 2014, which in turn marked a 13 percent increase from $173 billion in multifamily originations in 2013. That year marked an 18 percent increase in originations from 2012. Lending volume can’t grow like that forever. The growth this year already caught most experts by surprise. ‘The volume in 2015 is higher than most people anticipated,’ says Jamie Woodwell, vice president for the research and economics group at MBA.”

“The Federal Reserve was expected to raise its benchmark interest rates earlier this year. Instead, federal officials continue to postpone raising rates. Their next chance will be in December. In the meantime, low interest rates support high property values, encourage potential investors to buy more assets and existing property owners to refinance. All these factors increase demand for financing. And lenders continue to be eager to lend on apartment properties.”

“The lenders growing the fastest in 2015 include banks and agency lenders, who make loans to apartment properties based on the programs set by Fannie Mae and Freddie Mac. They increased the amount of mortgage debt they have outstanding to commercial and apartment properties by $15 billion in the second quarter of 2015. Giant loans on large portfolios of apartment properties account for much of the growth. The federal officials who effectively govern Fannie Mae and Freddie Mac also made this growth possible. Halfway through the year, they tinkered with the limits on how much the agencies can lend, so that many loans to affordable and workforce housing properties don’t count towards the agencies’ caps on lending.”

“Lenders will keep busy over the next two years, keeping their volume of apartment lending at about the same level they maintain today. Lenders are expected to originate $225 billion in permanent loans on apartment properties in 2016, roughly the same as in 2015. They are expected to originate $227 billion in 2017, a tiny increase. Over the long term, the volume of loans lenders make should continue to gradually grow. ‘There is natural growth in the system,’ says Woodwell. ‘Over the long term, one does see property values increasing.’”

The Idaho Statesman. “Beth Stapleton, a single mother to her son, Carter, 2, is scrambling to find a new apartment after receiving notice to vacate Westwood Apartments. The new owner is kicking everybody out in order to renovate and increasing rent rates. She thinks there’s $150 to retrieve from a retirement fund. There might be a couple of hundred more in a health insurance flex account as part of the benefits she receives from her employer, Fred Meyer. Stapleton is more worried that she won’t find another apartment by Dec. 10, the deadline given by Verity Property Management for tenants to move out of the 43-unit Westwood Apartments.”

“In a letter sent with the 30-day notices to vacate, Verity President J. Steven Fender said the new owner of the apartments — Preece Lane LLC, according to state filings — plans to renovate the complex. Stapleton said she was told the rent for her unit will increase from $595 per month to $900. ‘I appreciate that the timing is poor with the holidays coming up but the new owner is being compelled by the lender to proceed with the refurbishing of all the units as quickly as possible.’ - Letter to tenants from Verity President J. Steven Fender.”

“The Westwood situation resembles that of Glenbrook Apartments, located near the intersection of Cassia Street and Curtis Road. There, new owners Mark and Caran Daly of Eagle bought the complex as an investment. They planned to renovate and increase rent rates by more than 40 percent. Their decision forced nearly 400 tenants, most of whom were refugees, to scramble for housing. The property manager — Verity — issued 30-day notices to vacate to tenants of the complex’s 112 units. Most if not all requests for concessions to help tenants find new housing were denied, advocacy groups told the Statesman. Requests included extending the move-out deadline, returning deposits early or waiving deposit reductions for damage that would be replaced during renovation.”

“Preece Lane LLC bought the Westwood complex for an undisclosed price in August. The registered agent, Fender, filed to create a limited liability corporation. The filing with the Idaho secretary of state lists Steven Jackson and Cristine Clark, both real estate agents with Realty Executives in Vista, Calif., as members or managers of the company. Calls to Jackson, Clark and Verity were not returned. Verity has not staffed the Westwood office since the 30-day notices were delivered.”

“Bruce Ferrin, 59 has lived at Westwood for five years, including the last four with partner Nancy Summers, 62. Ferrin, who is disabled from a foot injury, lives on disability payments. Ferrin, who takes oxygen and suffers from respiratory problems, lives on Social Security. Ferrin said they must wait for payments before applying for apartments, tightening their window to find a rental by Dec. 10. ‘We’re trying to find a place before we’re kicked out,’ he said. ‘We took down the Christmas tree. Merry Christmas.’”

Bits Bucket for November 26, 2015

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