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Spencer Hayes' Blog

By Spencer Hayes | Agent in 36117
  • Are Mega-Investors Changing Rental Housing?

    Posted Under: Rental Basics, Rent vs Buy, Rentals  |  July 30, 2014 8:57 AM  |  43 views  |  No comments

    When large investors such as Blackstone and Colony American Homes began buying up single-family homes in 2011, most observers considered the acquisition a short-term play. Now, although acquisition has slowed, the successful securitization of SFH rental income by Invitation Homes (a Blackstone subsidiary), the transformation into REITs of large single-family owners such as American Homes 4 Rent, and the creation of the National Rental Home Council, a group that includes most of these new mega-investors, all indicate large investors are in it for a longer haul. How will their business models change the dynamics of the rental marketplace? 

    How large a presence do these mega single-family owners represent in rental markets?

    At the end of 2013, mega-investors controlled about 200,000 single-family properties. That’s not much in a national market of 13 million single-family home rentals. It’s certainly not a game changer. Still, within certain niche markets in cities such as Atlanta, Phoenix, and Tampa, mega-investors are more of a factor. Most of these buyers have concentrated on a dozen or so cities with good potential for price appreciation. The one exception is American Homes 4 Rent, which owns properties in many more markets. Even within these markets, mega--investors won’t buy just anything. They are buying mostly homes priced between 100 and 140 percent of median price in locations where the sales price-to-rent ratio is favorable enough to yield a 5 to 10 percent annual cash flow with a five- to eight-year hold period.

    Which segments of the multifamily market are most vulnerable to competition from these new single-family properties?

    The demand for rentals is increasing, especially in moderate and middle-income groups that a few years ago might have bought homes. Single-family rentals have always attracted families with children who want a larger space with a yard. Homes owned by mega-investors may also attract renters willing to pay a premium if they can deliver the more professional management these large owners propose to offer. And relocation companies may be attracted to the extensive portfolios held by mega-investors.

    Will the mega-investors benefit from technology and economies of scale?

    The jury is still out on that. Single-family management requires a lot of hands-on involvement. One management option is to partner with local third-party management companies that already handle large pools of single-family rentals for small investors. Other potential partners might be large local investors. Perhaps the most successful model will end up looking more like a franchise with local managers who have some financial interest.

  • Landlords Tell More Renters: No Smoking

    Posted Under: Rental Basics in Alabama, For Rent in Alabama, Rentals in Alabama  |  July 1, 2013 9:41 AM  |  577 views  |  No comments

    Many landlords maintain nonsmoking policies, but the bans are growing in numbers, according to the National Multi Housing Council, a trade group of landlords. 

    One of the nation’s largest landlords, Related Cos., announced June 19 that it would phase in a smoking ban in all of its apartments (that includes on terraces and private balconies). The company owns 40,000 units in 17 states. 

    Several municipalities are also taking up the smoking ban issue, with some municipalities moving to ban smoking in all multifamily housing in an area. For example, city officials in Walnut Creek, Calif., are expected to take such a step in July. 

    Some smoking-advocacy groups are speaking out against the bans, calling them “intrusive” in prohibiting a behavior that’s legal. 

    But with tight rental supplies and high demand, landlords may be feeling more confident to implement such bans, says Rick Haughey, vice president of operations and technology for the National Multi Housing Council. Landlords say that the smoking bans are being driven by concerns that secondhand smoke can drift in from unit to unit. Also, the extra costs involved by having smokers on the premises are driving change. 

    “There are higher cleaning costs when smokers move out of apartments,” Haughey says. “Any soft surface would absorb the smells. Carpets would have to be cleaned, maybe even removed. And drapes would more likely need to be cleaned — even the wall would need a deeper clean than you would otherwise have to do. I believe you would find reduced insurance costs as well. So there are financial incentives [to the ban], but I don't know if those costs have been quantified, industrywide.”

    Source: “Change in the air: Rental smoking bans,” The Chicago Tribune (June 28, 2013)

  • Apartment Rents Still Ballooning in Manhattan

    Posted Under: Rentals in New York  |  July 20, 2012 1:09 PM  |  848 views  |  1 comment

    New York—Landlords have it good in Manhattan, at least in terms of a recovery in rental rates in recent years, according to a new report by Real Impact Real Estate. Comparing all average June rents over the past six year, this year surpassed 2007 rents by about 3 percent, the report notes. Compared with the trough of 2009, rent growth has been 15 percent in Manhattan, including over 6 percent year per year in 2010 and 2011.

    Although overall Manhattan rents didn’t move much in June compared with May, some kinds of properties experienced month-over-month increases. One-bedroom units showed the largest increase, up 1.2 percent.

    But Manhattan one-bedroom properties have seen a slower recovery over the past five years than other sizes. “On the ground, we saw those one-bedroom renters being more price sensitive and flocking either to a studio or pairing up for a two-bedroom, forcing a quicker recovery for those unit types,” the report notes. Overall, apartment rents are 3 percent higher than in 2007, but not for one-bedroom units, whose rents are only 1.1 percent higher than five years ago.

    Rents are expected to continue their upward trajectory, however. Any renter now up for renewal on a two-year lease will see an average rent increase of 12.8 percent for all unit types when compared to average rent from June 2010. “The biggest sticker shock [in June] was in the 15.4 percent two-year renewal on non-doorman two bedrooms that went from $3,720 in June 2010, to $3,830 in June 2011, to $4,293 in June 2012,”Real Impact Real Estate reports.

    As usual for Manhattan, rental growth has been uneven, varying from submarket to submarket. Non-doorman studios in Greenwich Village were up 5.2 percent in June, for instance, and both doorman and non-doorman one-bedrooms in Gramercy spiked 6.1 percent. Those were the largest increases for the month.

    Remarkably, the company was able to report some parts of Mahanttan where rents were down month-over-month in June. These included, for example, Harlem, where doorman one-bedrooms were down 0.7 percent; doorman one-bedrooms on the Lower East Side, down 2.2 percent; non-doorman studios on the Upper East Side, down 2.6 percent; and non-doorman studios in Midtown West, off 4.4 percent.

  • Michael M. Adler Discusses Next Wave of Miami Multifamily Development

    Posted Under: Market Conditions in Miami, Property Q&A in Miami, Rentals in Miami  |  July 20, 2012 1:02 PM  |  1,049 views  |  No comments

    MIAMI-The Adler Group is no stranger to multifamilydevelopment. Over the past 50 years, the firm has built more than 8,000 multifamily units.

    As land prices got too high, Adler Group expanded into other commercial real estate sectors—namely, industrial, retail, and office. Now that the market is settling down, Adler Group is returning to its roots in the multifamily sector.

    GlobeSt.com caught up with Michael M. Adler, chairman and CEO of the Adler Group, to discuss how his firm will move forward in themultifamily market. Adler also discusses the firm’s specific plans for multifamily in South Florida as market dynamics change.

    GlobeSt.com: There were initial signs that we might be headed for another wave of condo development, but now we are seeing new multifamily projects announced. Why the shift?

    Adler: The South Florida multifaily market is balancing out after years of emphasis on condo development. We are still going to see new condos built, but rentals will be built side-by-side. As the condo supply diminishes and prices begin to rise, new product will deliver. But there is still a large segment of the market that is not interested in ownership. For them, the best real estate decision is to rent, likely due to cost factors or the flexibility that comes with an apartment. Our culture is readjusting to the reality that ownership is not for everyone.

    GlobeSt.com: A number of high profile developers have unveiled South Florida multifamily projects in the past three months. Why is this market appealing so appealing for multifamily development?

    Adler: We begin by evaluating the market and the customer base, recognizing that different product types suit different people. South Florida learned from the condo wave and consumers now appreciate the benefits of renting. Condo developers look to turn a quick profit by selling as many units as possible before handing ownership over to an association, while rental developers prioritize long-term investments that will yield income and provide value to tenants. It’s the difference between a short-term and long-term financial view. Adler Group has a decades-long history developing and operating income producing assets across all product types, so this is our model of choice.

    GlobeSt.com: Adler Group started out building apartments, then expanded to industrial, office and retail, and is now returning to its multifamily roots. How did this evolution come to be?

    Adler: Adler Group’s earliest days were marked by large-scale high-rise rental development, having built more than 8,000 apartment units across South Florida dating back 50 years. As land prices climbed, the rental model became less feasible and an overall shift to condo development ensued. Our firm turned its attention to industrial, office, and retail uses. Now that market dynamics are balancing out, the timing is ripe for a re-entry into the multifamily sector.

    GlobeSt.com: You are partnering with Atlanta’s ECI Group on your new Miami project. How did that relationship come to be and why did you decide to team up for this development?

    Adler: ECI Group is one of the largest operators of multifamily properties in the Southeast and we have known the firm’s leadership for years. The firm has a strong history of high-quality multifamilyproperty management across the region, so they bring an operational platform and infrastructure that we will employ in Miami. ECI Group already operates in central Florida, so this development is a great opportunity for them to enter the Miami market.

    GlobeSt.com: How will this new project stack up against the existing rental product in Miami—including the thousands of condos that are individually owned and rented?

    Adler: For starters, it will be a luxury multifamily development directly on Biscayne Bay, just north of Downtown Miami and minutes away from Miami Beach. Most important, the complex’s two 20-story towers will be professionally managed, marking a clear distinction from the thousands of individually-owned condos-turned-rentals now on the market. This creates a peace of mind for tenants that is forfeited when leasing a condo unit from an independent owner.

    GlobeSt.com: Adler Group has made a number of acquisitions outside Florida in recent years. Are there more multifamily developments in the firm’s future—in South Florida and beyond?

    Adler: Yes. Adler Group’s roots are in developing and operating income-producing real estate assets.Multifamily residential is at the center of that equation alongside office, industrial and retail product. In fact, there are many similarities across these sectors, with all tenants seeking a professionally-run environment and a landlord who brings value to the property and its occupants.

    GlobeSt.com: Is there a concern that the new rental product being built will ultimately evolve into condo conversions as the market rebounds and owners look to profit from a quick sale?

    Adler: It’s possible that there will be condo conversions as individual units become more valuable, but we are hopeful that the market has learned from its past mistakes and will be more balanced. What’s best for the market and consumers is a contingent of high quality rentals alongside condos. The two are not mutually exclusive. Our Miami property with ECI Group is a long-term hold that will be developed, marketed and leased as a luxury rental community.

  • BrickellHouse Breaks Ground in Downtown Miami

    Posted Under: General Area in Miami, Financing in Miami, Rentals in Miami  |  July 20, 2012 1:01 PM  |  908 views  |  No comments

    MIAMI—Construction just began on the Downtown Miami/Brickell market’s first new-to-market luxury condominium development to be announced since 2008. Newgard Development Group is holding the groundbreaking ceremonies for BrickellHouse condo on Wednesday.

    Located at 1300 Brickell Bay Drive, BrickellHouse is scheduled for completion in 2014. The 46-story, 374-unit condominium tower is already almost 90% sold. Newgard converted all contracts in just 45 days to meet its summer groundbreaking goal.

    “Newgard is following an optimistic yet patient approach as we enter the new real estate cycle, developing one high-quality project at a time,” Harvey Hernandez, chairman and managing director of Newgard Development Group, tells GlobeSt.com. “BrickellHouse is our first project since the recession and so far, the market has responded favorably—with almost 90% of our units sold before we even broke ground.”

    Miami is experiencing an appetite for high-end, new-to-market product from international buyerswho are accustomed to paying in cash. All-cash sales accounted for 64% of total closed sales in Miami-Dade County and 78% of condominium closings in the area, according to a recent Miami Association of Realtors report. BrickellHouse’s sales velocity has been fueled by a majority of cash-heavy buyers hailing from Europe, Canada and a range of Latin American countries such as Argentina, Venezuela, Mexico and Brazil.

    “Downtown Miami has bounced back stronger and faster than anyone could have expected,” Alyce Robertson executive director of the Miami Downtown Development Authority, tells GlobeSt.com. “Our current inventory of new condominiums are already nearly 100% occupied thanks to a renewed demand for urban living and a surge in investment among foreign buyers. Projects like BrickellHouse are coming at just the right time and proving once again the resilience of Miami’s real estate market.”
     
    BrickellHouse will offer condominiums ranging in size from studios and 1-, 2-, 3-bedroom units, to 7,000-square-foot penthouses. The $170 million luxury condominium development will feature private balconies with bay, ocean and skyline views as well as a 46th-floor rooftop pool deck, luxury health spa and fitness center, and a fully-automated robotic parking garage system.

  • Driggs Avenue Multifamily Gets $50M Refi

    Posted Under: Rentals in New York  |  July 10, 2012 6:20 AM  |  806 views  |  1 comment

    NEW YORK CITY-Now that the condo bust of '08 is long gone, low vacancy rates and high demand are driving lenders back to Brooklyn. As part of that growing trend, Berkadia Commercial Mortgage LLC  has closed on $49.95 million in financing for a new multifamily project at 205 N. Ninth St. in Williamsburg, GlobeSt.com has confirmed.

    The firm’s SVP Stewart Campbell and VP Thomas Tolandoriginally structured interim construction financing for the 113-unit, 112,000-square-foot property through Berkadia’s bridge lending program in November 2011. “We allowed them money to complete the job and stabilize,” Toland tells GlobeSt.com, explaining that the funds were then used to refinance the construction loan and to provide funds to finish and lease the project.

    After the development was completed, Berkadia provided the borrower, North Driggs Holdings LLC, with a permanent 10-year Fannie Mae loan at a 3.62% interest rate, which closed on June 14. The building reached 100% occupancy in March 2012, and includes amenities such as a gym, lounge, screening room and rooftop deck. It is also in close proximity to the Bedford Avenue L subway stop.

    At the same time, Campbell tells GlobeSt.com that many hurdles existed when refinancing the loan, which included development issues, a lack of a permanent certificate of occupancy at closing, preliminary certificate of eligibility for 421-A tax exemption, and issues relating to cross-easements for ingress/egress and parking.   

    “The biggest challenges there were it is an ongoing development site,” he says. “The challenges were separating our collateral between the three sites, so making sure we could legally separate our collateral from the other sites, and with that, the complications that come with separating the tax abatement. Those are the biggest challenges. Certainly from a construction standpoint, all that was top notch construction.”

    But overall, Campbell says the deal is a sign that the stalled site phenomenon in Williamsburg has come to an end. “The inventory of stalled condo jobs is pretty much through,” he says. “The deals that were developed as condos and went rental are pretty much done. There are certainly some other jobs out there that stalled at the footing stage, and I think this area has showed renewed interest because the rental numbers are working on those deals for new construction financing. I still think it is a big challenge to get new construction financing today, but it gets better day by day. Six months ago, I would have told you that you had to be a top 50 developer, but now you can maybe be a top 100 developer.”

  • LA Fitness Signs 45,000-SF Lease

    Posted Under: Rentals in Dallas, Investment Properties in Dallas  |  July 9, 2012 9:38 AM  |  945 views  |  1 comment

    DALLAS-LA Fitness signed a long-term lease to build a 45,000-square-foot facility in the Old Town Shopping Center at the site of a former Borders bookstore. LA Fitness, which has begun razing the building, will build a new prototype club that is scheduled to open at the end of the year.

    Old Town Shopping Center is at the northeast corner of Lovers Lane and Greenville Avenue. John Zikos, Jonathan Cooper and Chris Booras of Venture Commercial represented LA Fitness, working with Walt Brown Jr. and Tim Dollander of Diversified Partners, master broker for LA Fitness in the Southern US. Elizabeth Allenand Michelle Caplan of the Weitzman Group represented the landlord. 

     


    ACQUISITIONS/DISPOSITIONS

     

    EULESS, TX

    • Messenger College acquired a 25,000-square-foot office building at 400 S. Industrial. Messenger College will occupy the third-floor and part of the second floor of the building. Darrel Higginbotham with SCM Real Estate Services represented the seller in the transaction. Dean Lemons represented the buyer.

    HOUSTON

    • Realrona Inc. acquired a 10,000-square-foot building at 14230 Interdrive East. The seller, Gary and Vickie Long, were represented by Travis Land and John Ferruzzo of NAI Houston. Glynn Mireles of CBRE represented the purchaser, Realrona, Inc, in the transaction.
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