Leaving Home Apartments Empty Out as Troops are Called to Iraq March marks the two-year anniversary since the deployment of U.S. military troops to Iraq. Approximately 150,000 military personnel are stationed overseas, and the numbers keep rising as more active duty and reservist units are called up. For apartment owners in markets with a high military population, this mass exodus of troops often spells trouble—and the need for a plan.
The occupancy rate at a colorado-springs-co/employment.aspx" title="See 15 charts and data on Colorado Springs, CO" target="_blank">Colorado Springs, Colo., property located right next to Fort Carson Army post dipped to the low 80s last year. That's not surprising, considering that more than 10,000 Fort Carson troops have been sent to Iraq since the war's start. But thanks to a quick-thinking management company, Cobblestone Ridge Apartments' occupancy is back up to the mid-90s.
“We just turned around and said lower [the rents] until you can get someone to rent there,” says Pat Stanforth, vice president of residential management for Griffis-Blessing, a Colorado Springs-based manager. “We were able to stay really well occupied when everybody else around us was dropping in the 50s and the 70s.” Competitors are now lowering rents as well, but being one of the first companies to do so really helped capture renters, Stanforth adds.
Other apartment owners are focusing their efforts on maintaining leases with residents throughout their military deployment. Dale Johnson, owner of The Woods Apartments in Colorado Springs, will reduce residents' rent by $150 during their leave. “Because we had such a mass exodus of 12,000 soldiers [when the war broke out], it was much more economical to reduce the rent than have a vacant apartment,” says Johnson.
Several residents have taken Johnson up on his offer, even while their spouses temporarily moved back in with family. “They figured out that was just about as cheap as renting [storage] space, and all their furniture would be all set up when they get back,” Johnson says. The property company checks on these vacant units once a week and will even feed pet fish left behind.
And Johnson doesn't give up on those residents who don't want to keep their units while they serve overseas. He e-mails the soldiers in Iraq, offering a month's free rent to encourage them to move back after their deployment. It's a financial hit, but one Johnson is willing to take. “I never kept track of how much money I lost, but I didn't feel that I needed to, because it was well worth the publicity and the goodwill that I developed with the Army and the Air Force.”
Some property owners, especially those that offer a higher proportion of two-bedroom units, are seeing more families remain in their units while spouses are away. That's the case at communities around Fort Sill artillery training post in Lawton, Okla., where the Army encourages and supports a family environment, says Peter Ingersoll, a senior advisor with Sperry Van Ness who also owns a 216-unit property near Fort Sill.
To help families stay in their apartments, one San Diego property manager is connecting families with community support groups. “[We] assist those remaining family members and support them in whatever way so that they do not have to terminate their tenancy,” says Richard Snyder, owner of the San Diego-based R.A. Snyder Properties. In military communities, every occupancy helps.
These strategies can help you maintain apartment occupancy in highly populated military areas:
- Home Base: Form a strong relationship with the base's central housing office. A reputation of owning clean, friendly properties goes a long way.
- Stay Alert: Official notifications announcing a ship's arrival into a military base are rare. So watch what's going on around you, and read the local press to get an idea of when the next ship, and potential residents, will arrive.
Resident Retention: There's no way to control military turnover, but you can minimize turnover among the rest of your resident base. Maintain residents by offering activities, renewal incentives, and top-notch customer service. –Rachel Z. Azoff
In Good Company Community-building pays off at Apartment Life properties It's sad but true: Many apartment residents can go months, even years, without knowing their neighbors. Luckily, that's not the case at Mark-Taylor Residential properties in the Phoenix area, thanks to the faith-based company Apartment Life.
Apartment Life's CARES teams, typically husband and wife, live on-site and serve as social directors. They plan holiday bashes and summertime luaus, as well as welcome new neighbors and deliver balloons to residents on their birthdays.
“It takes a while sometimes to get the right [CARES] team at your community, but once you do, they really establish a relationship with the resident from day one,” says Prima Walker, director of marketing and public relations at Scottsdale, Ariz.-based Mark-Taylor. That relationship translates into higher renewal rates and word-of-mouth advertising to residents' friends and co-workers, she adds.
Just as importantly, Apartment Life provides support to the on-site leasing team, says Kim Papscun, a regional director at Euless, Texas-based Apartment Life. “We know that on-site staff are totally overworked and stressed out,” she says. “What we found is managers have all these dreams and visions for their community—they just don't have the resources in terms of time and energy to do them.”
CARES teams live in two Mark-Taylor properties, and the apartment company hopes to add four more communities this year. In addition to setting aside a resident activities budget, companies must provide a two-bedroom apartment for the CARES team and pay a monthly $405 fee to Apartment Life.
But these extra expenses should pay off in the long run. According to a recent survey by market advisory firm Ron Witten Advisors (which surveyed residents and staff at eight properties with CARES teams), a typical 300-unit apartment community would be expected to receive an extra $75,000 to $140,000 in net income as a result of offering the CARES program.
– R. Z. A.
Separate Accounts As online rent payment grows more common, so do the financial and security concerns. In February, PropertyBridge, a California-based company that offers property management solutions and other services to multifamily firms, introduced a new online payment option that it believes will allay such worries. Developed in conjunction with VISA USA and Wells Fargo Bank, the module (which is integrated into PropertyBridge's existing services) meets the financial and legal compliance requirements of both the real estate industry and credit card associations for data security, accountability, and privacy.
– R. Z. A. Automatic Updates Multifamily firms will be able to save time and maintain accurate asking rents on their Apartment Guide.com listings, thanks to a new arrangement with Realty DataTrust. The Arizona-based firm developed VaultWare, an online leasing product that they are expanding to include a service called VaultWare DX that will automatically update apartment pricing that appears online.
– A.R. Super Sub Like many people, Jeff Thomason, a construction manager for Toll Brothers, a luxury developer, spent his two-week vacation in Florida. But Thomason, a retired NFL player, didn't spend much time on the beach: He played with his former team, the Philadelphia Eagles, in Super Bowl XXXIX. But even his return wasn't enough to bring the Eagles a victory over the New England Patriots, who won 24-21.
– L.S.I ncentive Plan For the first time, one Massachusetts community will pay landlords to help increase the state's affordable housing stock. Boston suburb Marlborough is offering a new incentive program that provides subsidies to landlords who agree to cap rents and lease apartments exclusively to low-income residents, those who earn less than 80 percent of the region's median income.
– R.Z.A. Tax Break Just in time for tax season, Intuit introduces Quicken Rental Property Manager software to help owners of 10 or fewer properties organize rental property income and expenses. Forget sorting through piles of receipts at tax time: Users can categorize transactions throughout the year by property and stay on top of cash flow. The software also reduces tax-time hassles by automatically creating a rental tax report that maps directly to the Schedule E. The software costs $99.99 and includes a year of free technical support. For more information, visit www.quickenrental.com.
– R.Z.A. Caught on Film Sarasota, Fla., filmmakers Diane Mason and Darryl Saffer dove into the squalor of Sarasota's public housing with their film “Condemned,” which profiled the living conditions in at the rundown Janie Poe housing complex. The film shows everything from mold growing to the walls to residents shaking cockroaches out of their beds and clothes, according to the Sarasota Herald-Tribune.
– L.S. Showing Support More than 3,000 units of supportive housing are expected to be built over the next two years, thanks to a new public-private endeavor. The Supportive Housing Investment Partnership—a joint venture between The Enterprise Social Investment Corp. (and its parent company The Enterprise Foundation) and the Corporation for Supportive Housing—will combine planning grants, technical expertise, low-interest loans, and equity investment to increase the supply of supportive housing across the country.
– R.Z.A. Behind Bars A New York City landlord was sentenced to 10 days in jail for failing to fix an apartment building found unfit for human habitation. The Manhattan building had water leaks in all apartments, exposed electrical wires, a defective heating system, and defective exits, according to New York's Department of Housing Preservation and Development.
– R.Z.A. Budget Battle Congress' $37.3 million in appropriations for HUD contained a provision from Sen. Richard Shelby (R-Ala.) requiring that housing officials don't participate in partisan political activities. The original proposal, which would've forbidden public housing officials to drive residents to the polls on Election Day, was shot down after strong opposition from the NAACP.
– L.S. Helping Hands Apartment firms contribute to tsunami aid efforts. Former presidents Bill Clinton and George H.W. Bush aren't the only ones coming together to raise money for victims of the devastating tsunamis that left millions of people homeless at the end of 2004. Apartment companies?large and small, public and private?are digging deep and contributing big bucks to the relief effort.
Since there's little multifamily companies have found they can do to directly help victims, companies are focusing their efforts on financial contributions. Many set up a dollar-for-dollar match for employee contributions. AvalonBay Communities, an Alexandria, Va.-based REIT, has raised more than $100,000 for the American Red Cross. Archstone-Smith, an Englewood, Colo.-based REIT, has raised about $50,000 to date for the Salvation Army Tsunami Relief Effort.
When Dana Hamilton, Archstone's executive vice president, national operations, sent out an e-mail alerting its 3,000 associates of the donation program, she received a flood of e-mails in return. "I think that when your associates want to do good, and they want to reach out, you can show your support for them by leveraging what it is that they do," she says.
Southern California Housing Development Corp., a nonprofit developer and manager, also is seeing huge interest from its 200 employees. The company's goal is to raise $5,000 from employees, and then match the amount to raise $10,000 for UNICEF. "One of our purposes [as a company] is to build community in the cities where we are doing business," says Olen Jones, the company's community relations director. "So this is just an extension of that to the greater community of the world."
Still Rising Multifamily debt reaches an all-time high. The five-year escalation in multi-family debt continues to soar to record levels, according to the
Mortgage Bankers Association's analysis of data from the Federal Reserve Board. From the second quarter to third quarter of 2004, the association reported that multifamily debt grew by $8.2 billion, or 1.4 percent, to $582 billion.
One big reason for the run-up is that capital sources abound.
“Commercial mortgages are performing very well,” says Jamie Woodwell, senior director of community and multifamily research for the Mortgage Bankers Association. “You have historically low delinquency rates on commercial and multifamily mortgages. This is making them all the more attractive as investment opportunities.”
These lenders are offering diverse products, such as mezzanine loans, that require smaller equity commitments than in the past. “Credit has been extremely loose, and most lenders have become increasingly more aggressive by reducing debt service coverage ratios and qualifying stress rates to stay competitive,” says Mark Kanter, owner of Commercial Realty Consultants, an owner of multi-family properties in Calabasas, Calif.
These products can also make a property more lucrative. “The more leverage you take, the higher an equity return you can get,” says Dan Palimer, president and CEO of Potomac Realty Capital, a lender in Needham, Mass.
Lower interest rates are also making debt more attractive to owners, according to Dale Gruen, a portfolio manager with SSR Realty Advisors, a real estate investment firm based in Morristown, N.J. “Locking in long-term lower interest rates gives us some protection in the event rates rise and creates some back-up in cap rates,” he said.
– Les Shaver
Controversial Conversions Localities begin to balk at condo conversions. Condo conversions have been one of the hottest multifamily trends lately, but developers and investors proposing to flip apartments to condominiums are beginning to face reluctant city councils and increased regulatory restrictions around the country.
Some municipalities are even considering prohibiting these conversions in an effort to preserve rental stock, particularly in the affordable price range. Cities like Key West, San Francisco, and Boston are considering temporary freezes and other restrictions to protect rental inventory.
“There's been an explosion of conversions in South Florida that correlates strongly with the rise in housing prices,” says Gleb Nechayev, research economist with Torto Wheaton Research. In the last two years, he estimates, about 20,000 rental units have been flipped in the South Florida region. “That's almost as much as all the new multifamily construction over the same period.”
Developers and property owners say conversion keeps rental vacancy low and provides relatively affordable for-sale housing for people increasingly priced out of the single-family market. (Those opposed say it decreases the supply of rental housing, displaces tenants, and leaves low-income residents with few options.)
But not everyone is convinced that condo conversions are the solution. In San Francisco, City Supervisor Chris Daly proposed legislation that would restrict conversions to 200 units annually in buildings of two or more units. But he was unsuccessful. In November, San Francisco's board of supervisors voted to allow unrestricted conversion of two-unit buildings except when the tenants are senior citizens, sick, or disabled. (Critics speculate that Daly, who declined to comment for this story, was motivated to propose the legislation because he was evicted from his apartment in a conversion deal.)
In Waltham, Mass., a city council committee approved a 120-day moratorium on all multifamily development, including conversions, until the council revisits its zoning ordinances.
Benjamin Lambert, a lawyer who specializes in condominium and real estate regulatory law, says cities' ability to use zoning laws against condo conversions varies state by state.
“Towns can use the letter of the law to impede condo development or condo flips,” says Lambert, a partner with Ohrenstein & Brown in Rutherford, N.J. “If strictly enforced, many of the laws ... are almost impossible for a developer to meet.”
Torto Wheaton's Nechayev says the long-term impact of conversions—and their restriction—remains to be seen. “There's a lot of discussion today about conversions, but very little data to get an idea of what's actually happening.”
– Margot Carmichael Lester
Project of the Month: Olympic Village Gateway Apartments at Northside Village, Atlanta Forget the Olympic fanfare that happens every four years. For the residents of Gateway Apartments at Northside Village, the connection with the historic international games is footsteps away—the property is within walking distance of Centennial Olympic Park, built for the 1996 Summer Games.
Developed by Southeast Capital Partners, Gateway Apartments is home to an economic mix of renters. “We would have done it all affordable,” principal Satish Lathi says of the $29 million project, but Atlanta, like many cities, wanted mixed-income housing for the project, which is part of a redevelopment area. The 261-unit property includes 39 market-rate apartments, 182 tax-credit units, and 40 units of government-subsidized units. The project, which was completed in late 2004, was 50 percent leased in February.
Those residents get to take advantage of a number of amenities, including a two-story common area with a view of Atlanta's skyline. “It's very nice,” admits Lathi, who says the property's aesthetics and amenities are an investment in the neighborhood's future. “We control about 12 acres on Northside Drive,” he says, “so we wanted to set the bar high.”
– Alison Rice
What green technologies are you watching in 2005?
A: “Green buildings can generate clean power by using photovoltaic cells that generate electricity from sunlight. The California Energy Commission has a rebate program that pays up to 40 percent of the installed cost of photovoltaic systems. Once you factor in the federal and state tax credits, the system pays for itself in five to eight years.” —Vikas Shrestha, associate and sustainable design coordinator, Steinberg Architects
A: “WCI is interested in the success of ultraviolet lights in purifying air passing through HVAC air handlers and is investigating the potential in conjunction with the Florida Solar Energy Center Building America team.” —Karen Childress, environmental stewardship manager, WCI Communities
A: “This year, I'm looking at green energy. Wind energy can be economically feasible for large power purchases. In addition to off-site wind turbines, I'm looking at electricity generation from integrated photovoltaic arrays and from smaller on-site wind turbines.” —Charles A. Segerman, senior project manager, The Tower Cos.