March 12, 2018

What Did I Buy During The Binge?

A report from the Alabama Newscenter. “The multifamily market is hot. Rents continue to rise, occupancies remain strong and the development pipeline seems to be all but slowing down. In Huntsville, nine of the 13 multifamily developments in the pipeline — planned, prospective or under construction — are luxury, A-class projects totaling 4,133 units. Can the multifamily market continue to command premium prices?”

“‘Nearby markets like Nashville are flooding their metros with these A-class products and have started to experience a steady decline in occupancy over the course of 2017; however, Huntsville discretionary assets have managed to maintain a 95 percent occupancy over the last 12 months. With the arrival of so many new science and technology companies, we will see a surge in the young professional population, the primary renters of luxury, multifamily units in the Rocket City. This population will continue to drive rental rates and fill the downtown dwellings,’ said veteran multifamily specialist Andrew Agee.”

From RE Business Online on Tennessee. “Nashville has set several notable records in recent years for job growth, rent growth, population growth, tourism and tax revenue, among others. But for the multifamily industry, the most notable benchmarks lately have been related to the amount of inventory that has been delivered. The big question on everyone’s mind is the impact of new supply. In short, yes, there are pockets of oversupply, with approximately 8,500 units delivered in 2017 compared with net renter demand of roughly 6,300.”

“Given the steady levels of new inventory delivered to the market, the pace of rent growth has slowed, especially at the top end of the market, where most of the new projects are competing. Increased concessions in urban Nashville caused effective rents to back up 3.3 percent. Urban Nashville currently shows the lowest average occupancy for 2017 at 93.2 percent.”

From Urban Milwaukee in Wisconsin. “Wangard Partners went before the City of Milwaukee Board of Zoning Appeals Thursday seeking changes to a long-planned project for the city’s greater downtown area. Wangard initially planned apartments there, but now has plans for condominiums. Michael Cockroft, a project manager for Wangard, said the firm re-evaluated their plans in light of changing markets for housing downtown. Apparently the market for high-end apartments downtown is starting to look saturated as vacancy rates rise. And Cockroft said those looking downtown are increasingly interested in owning a home downtown, thus, the condos.”

“Is this the end of the apartment boom downtown? Wangard appears to be signaling that. Apartment developments are still occurring Downtown, and in big ways. But if a major developer like Wangard is already hesitant about the apartment market, what does that mean for those projects that have yet to cut a ribbon? That could be worrisome… except that other apartment projects are still going strong.”

The Greenville Reflector in North Carolina. “A new housing complex is being planned for Charles Boulevard. It has generated some controversy because it applied for a special-use permit to include dormitory-style apartments. Since a recent study noted that Greenville’s student housing market is already oversaturated, adding more bedrooms for the younger set seems just plain silly. So I am working up a proposal for Landmark Developers, the company that is planning the complex.”

“Landmark wants to call the dormitory portion of its project The Retreat. Instead, why not go for the middle-aged crowd with The Repeat? Repeat is a great name for housing targeting middle-aged people. I am constantly asking people to repeat things, either because I did not hear them or because I have forgotten what they told me. It has a built-in joke factor too if people ask us where we live, we can just shout ‘Repeat! Repeat!’ then laugh wildly when they ask the question again and again.”

From the National Real Estate Investor. “It’s no secret that seniors housing is in high demand, with the independent and assisted living subsets the most desirable. But there are also currently major supply issues in the sector, as some markets are beginning to see a lot of new product and, as a result, stagnating occupancy rates. In the fourth quarter of 2017, the national occupancy rate—based on aggregated data from 31 markets—averaged 88.8 percent, down 70 basis points year-over-year, according to the National Investment Center for Seniors Housing & Care.”

“Many industry insiders may be quick to say that seniors housing is overdeveloped in most markets, but that is an issue in many asset classes, particularly in places with lower barriers to entry—for example, Dallas, Houston, Atlanta, San Antonio and Denver, says Aron Will, vice chairman of debt and structured finance, seniors housing, at real estate services firm CBRE. ‘Those are the markets where supply-demand is at an imbalance,’ Will says.”

From Senior Housing News. “Pricing senior housing properties is more of an art than a science—and today’s prospective buyers weigh different components in wide variety of ways. As senior housing buyers, real estate investment trusts (REITs) are nowhere near as active as they once were, panelists agreed. Currently, they’re acting more as sellers than buyers.”

“That’s because, for a few years, REITs were ‘hungry, hungry hippos,’ Ross Sanders, senior director within HFF’s national seniors housing group, expressed during the panel. To put it plainly, REITs went on a buying spree, picking up a variety of assets that they then held on to for a while. ‘Then last year and this year, they’re trying to figure out, ‘What did I buy during the binge?’ Ross said.”

The Norman Transcript in Oklahoma. “A local buyer recently purchased Summerfield Village Apartments on Lindsey Street in Norman. The buying entity is controlled by David H. Kinnard who owns the adjacent Springfield Village Apartments. Kinnard said over investment by out of state interests and the university’s decision to build residential housing collided and created the current soft market. ‘The student market is well over-served,’ Kinnard said. ‘There’s an imbalance in the market that needs to be righted.’”

“Mike Buhl of Commercial Realty Resources Co. handled the sale. He said investors and owners may have to adjust their expectations while Norman is in a soft rental market.”

From the Bend Bulletin in Oregon. “A mother-daughter property development team from Chicago is bullish on the Central Oregon rental market, despite hundreds of new units in the works for Bend and reports from property managers that rents have flattened. The Kapps are looking for more places they can build projects like The 27 Elm, which will be 36 townhouse units. ‘Where we came from in Chicago, they’re overbuilt again,’ said Jeanmarie Kapp of the multifamily rental market. ‘Here, people are still looking for rental options.’”

“Plus Property Management lists a three-bedroom townhouse with a garage on NW 25th Street in Redmond for $1,295 per month. That rent is the same as a year ago, property manager Mike Hoff said. Hoff said his company, which is based in Bend, noticed fewer applications last year for properties in all Central Oregon cities. Other property managers in Bend have cited the opening of new, large apartment complexes in Bend as creating more competition for renters. ‘There was a definite slowdown in the market,’ he said. ‘You don’t want to raise rents.’”