Lights Out

The momentum to ban smoking in both public and private locales is growing at lightning speed. Each year, more cities and counties across the country prohibit smoking at restaurants and bars. Just a few months ago, hotel giant Marriot International became 100 percent smoke-free. And now, an increasing number of multifamily firms say it's time to join the movement to extinguish those lighters. The biggest such move: In September, senior housing developer First Centrum adopted a smoke-free policy for all new residents at 46 of its communities in six states.

"No other major, national apartment development and management company has done this before," says Jim Bergman, director of the Smoke-Free Environments Law Project of The Center for Social Gerontology in Ann Arbor, Mich. "The thing that really held apartment owners back from adopting smoke-free policies was they thought it was illegal and discriminatory." Bergman is helping to dispel that myth through the educational Web site, www.mismokefreeapartment.org, which is targeted to both owners and renters.

First Centrum, a Sterling, Va.-based firm, went smoke-free because of frequent resident complaints about second-hand smoke, says Rob Couch, president of Centrum Management, the company's management arm. The firm polled its senior housing residents to see how many actually smoked, discovered it was only 8 percent, and decided it made sense to implement the policy. "We are not pushing anyone out," reminds Couch. "Smoking residents are grandfathered in." New residents must sign a lease addendum agreeing to the policy–the standard procedure for banning smoking at multifamily properties.

In addition to resident satisfaction, smoke-free living offers multifamily owners a host of other economic benefits. These include a possible reduction in property insurance rates, lower turnover costs (nicotine smells and stains can be impossible to remove), and the elimination of cigarette-caused fires.

So are these financial paybacks reason enough to convince other big firms to follow in First Centrum's footsteps? "I certainly wouldn't say it's a trend at this point, but I know that firms are at least examining from a cost-benefit perspective [as to] whether it's a smart business decision, on a property by property basis," says Betsy Feigin Befus, director of property operations for Washington, D.C.-based National Multi Housing Council.

Rick Cavenaugh, president of Chicago-based Fifield Cos., says senior housing communities might be more likely to enact smoking bans for health reasons, but he doesn't expect conventional apartment firms to turn away potential renters and go smoke-free anytime soon. But sometimes even smokers appreciate the benefits of cigarette-free living. The Low Income Housing Institute recently opened a smoke-free apartment community in Seattle, and one of its first residents is a regular smoker. "He figured it's good for him," says Sharon Lee, executive director of the Seattle-based nonprofit developer. "He said it's good for his health not to smoke in his unit, and he will get lots of exercise walking up and down the stairs [to go outside the property and smoke]."

–Rachel Z. Azoff

Smoking Break

Here's a look at three housing providers with smoke-free policies:

Company Smoking Policy

Low Income Housing Institute: No smoking in units and common areas at three properties (senior and family), with plans for more smoke-free buildings
Seattle-based nonprofit affordable developer, owns/manages nearly 50 properties

First Centrum Communities: No smoking in units and common areas at its 46 senior housing communities Senior housing developer and manager based in Sterling, Va.

Philadelphia Housing Authority: No smoking in common areas of all communities Houses more than 80,000 people in Philadelphia

Big Deal

A major New York portfolio hits the market.

Two New York portfolios just grew by 11,000 apartment units–overnight.

In October, the MetLife affiliate Metropolitan Tower Life Insurance Co. sold Peter Cooper Village and Stuyvesant Town in New York to two local firms– Tishman Speyer, a real estate owner, developer, and investor, and BlackRock Realty, the real estate arm of BlackRock–for a staggering $5.4 billion. It's believed to be the largest real estate transaction in U.S. history.

The complex extends across 80 contiguous acres with 110 buildings containing 11,232 apartment units. The property is located between Midtown and Downtown Manhattan on the East River and extends north to south 10 city blocks. It has 2,260 enclosed parking spaces in six garages and more than 111,000 square feet of retail space.

"It's big," says Dan Fasulo, director of market analysis for Real Capital Analytics, a New York based firm that tracks apartment sales. "It's certainly an offering that doesn't come around very often. It's very unique."

Before the transaction, speculators wondered how the complex would be priced, considering its enormous size and a lack of comparable sales. Another pre-sale concern was the rent-controlled units–almost 75 percent of the total–on the site. Some housing advocates were worried these may go away after the sale. In official statement about the purchase, though, Tishman Speyer says that won't happen. But that also means returns for the new buyers could be very low in the beginning.

"They are going to have to have an enormous amount of patience and take a very long-term view of the asset in terms of making reasonable amount of return on their investment," says Seth Weinstein, principle at Hannah Real Estate Investors, a real estate investment and development corporation based in New York and Stamford, Conn.

"Tishman Speyer is one of the best operators in Manhattan ... and BlackRock is a very deep-pocketed investment group," Weinstein says. "They will work as hard they can to optimize the value of the investment. These are quality players who buy high-end, high-profile properties and hold it for a long a time."

–Les Shaver

Head of the Class

Class B product is making an upward move in two Southern markets: Atlanta and Charlotte, N.C. Occupancy in Atlanta's 1980s-era apartment stock has shot to 95 percent, up nearly five percentage points from the low point in 2002, according to M/PF YieldStar. Similarly in Charlotte, occupancy in 1980s communities has climbed more than four points since late '02 to reach 94.4 percent.

–Rachel Z. Azoff

New Deal

JPI, an apartment, owner, manager, and developer based in Irving, Texas, scored a big coup when it won property management and accounting services contracts for 59 properties from RREEF North America, a property owner based in San Francisco. JPI is not assuming interest in any of the properties and will manage the RREEF employees.

–Les Shaver

Racial Tension

The National Fair Housing Alliance has filed an administrative housing discrimination complaint with HUD against Coldwell Banker Residential's office in Chicago's Gold Coast and its parent company NRT. The alliance claims that real estate agents blatantly steered home buyers by race and denied basic services to African Americans. The alliance discovered the alleged discrimination during its multi-year, twelve-city project to test for housing discrimination in real estate sales and rental markets.

–Rachel Z. Azoff

Young Voices

Want to find out what echo boomers really want? Just ask them. This past summer, The Lane Co. learned about this young renter cohort through the eyes of college interns. Armed with cameras, the interns took photos of what they loved and hated about Lane's rental properties. Their likes: green space, group seating in outdoor areas, concierge services, locations near restaurants and stores, recycled products, and secure garage parking. And some dislikes: small closets, large bathtubs, lack of guest parking, and small workout rooms. Lane plans to incorporate some of these suggestions at future properties.

–Rachel Z. Azoff

Branching Out

The Picerne Group, a private real estate firm based in San Juan Capistrano, Calif., acquired Crown Pacific Properties, a real estate investment company in Carlsbad, Calif., to form TPG Apartment Group. TPG will focus on investments in the Western United States in markets like Seattle, Denver, Phoenix, Dallas, Austin, San Francisco, Los Angeles, and San Diego.

–Les Shaver

Mark Your Calendar

Make a note in your datebook today for the 2007 Multifamily Executive Conference, which will be held Oct. 2-4, 2007, at The Venetian in Las Vegas. See you there!

Bidding War

A new apartment rental site follows eBay's lead.

Though apartment companies have attracted media attention for placing properties up for auction on eBay, no one had stepped up with a site that specifically put apartments up for bid. But that changed this summer when BidRent.com, a wholly owned subsidiary of YellowPages Online Corp., launched an auction site targeting apartment and house rentals nationwide.

The site enables landlords to list vacancies for free, while potential renters can bid for units on the site. Right now, potential renters can find ads for the site online at MySpace.com, craigslist.com, and backpage.com. "It opens the doors to negotiations," says Robert Roth, who handles customer service and public relations at BidRent.com. "Right now, people don't bid on rental prices. Because people don't make the offer, the landlord never receives it. So that door to negotiation is always shut."

So far, mainly smaller landlords with apartments or single-family homes have been using the site, but Roth hopes to appeal to larger players, too. "I don't see why the bigger apartment companies wouldn't have an interest," Roth says. "It's free. I don't see how it could hurt them."

Dave Woodward, managing partner and CEO of Laramar Communities in Greenwood Village, Colo., doesn't see larger owners putting massive amounts of apartments up for bid, but he says it could work in certain situations.

"If you have a challenging unit that overlooks a Dumpster, maybe you will rent it for whatever someone will pay," Woodward says. "By doing it selectively, you aren't undermining your rent structure, because it's a unit that's discounted for a specific reason."

–Les Shaver

Think Small

Will home sizes shrink?

Americans love big things. Super-sized cars and spacious houses are just the tip of the gigantic iceberg.

But the Urban Land Institute says that the size of new, for-sale houses could be diminishing.

"We think it [housing size] will go down in the next couple of years," says John McIlwain, senior resident fellow and J. Ronald Terwilliger chair for housing at ULI.

While the shrinking housing size hasn't yet shown up in national numbers, ULI is confident in its projections, which it developed from research and anecdotal comments from different home builders.

One major influence, according to McIlwain: the popularity of condos, which tend to have a smaller square footage than single-family homes. Such a trend pulls the overall housing size numbers down. Demographic changes also play a major role. Many singles are buying homes and living on their own. "We're getting more people living alone than before," McIlwain says.

McIlwain reasons that once these people get married, they may stay in smaller housing units near urban areas. "They're having kids at later ages," McIlwain says. "People in their late 20s or early 30s would much rather be in a condo or townhouse downtown."

Not everyone sees this trend, though. "Our consumer preference surveys continue to show people wanting to move to bigger houses, and the data on construction sales do not show any reversal," says Michael Carliner, an economist at NAHB. He also has a different view on demographics and their influence on American home size. "Increased shares of homes will be bought by immigrant households, who tend to have larger households," he asserts.

–Les Shaver

Executive Feedback

What best practices from other industries have you adapted for use at your company?

A: "Four Seasons is legendary for exceeding customer expectations. We try to emulate that even at lower price points. We also love a West Coast fast food chain called In-N-Out Burger. They keep it simple, offer a better product, and anticipate their customers' needs. Both organizations have a devoted following.'" –Tom Bruin, CEO, Silverstone Communities

A: "Our management philosophy is based on two pillars: mutual respect and what we call 'Kaizen,' which means continuous improvement in Japanese. We actively encourage our employees to suggest new ways that can improve our system. Inventiveness comes naturally to those who are encouraged to contribute. This core value is the centerpiece of Toyota's production system and is credited as the driver of their market leadership position in their industry." –Joel Cantor, CEO, Cantor Development

A: "Crosland studies the hospitality industry, particularly Ritz-Carlton and Marriott. Those organizations comprehend that customer interaction is just as critical as their physical assets. Our associate training is based upon this philosophy, which is one reason we've won CEL's national customer service award for six straight years." –Justin F. (Jud) Little, president, Crosland apartments division

---

Project of the Month: The Towers at University Town Center

Hyattsville, Md.

The Towers at University Town Center is a cutting-edge example of what student living should be like–or at least what every student fantasizes about when they think dormitory living. The 910-bed facility, located in Hyattsville, Md., offers student housing to nine different colleges and universities, including the University of Maryland, Catholic University, Howard University, Trinity College, American University, George Washington University, Georgetown University, Prince George's and Montgomery community colleges.

The age range of students leasing at UTC goes from 18 to 43–making the project one of the most diverse student housing communities in the nation. The coolest aspect of the facility–every student gets their own private bedroom and bath, a feature unheard of in dormitory living of the past. Some of the perks exceed even traditional apartment or condominium living (read: non-student living).

Furnished suites will have either two or four-bedroom floor plans, with a shared a living area, dining area, a full kitchen with high-end appliances, high-speed Internet connection, and washer-dryer. The property is cable and wireless Internet ready.

Other amenities at UTC include 24-hour access control, parking, a full gym with two tanning beds, rooftop pool and sundeck, a game room with 92-inch projection screen TVs and 13 32-inch flat screen TVs.

The Towers at UTC is 16-stories tall and will offer more than 250,000 square feet of retail and entertainment including a large-scale grocery store and a movie theater. No surprise here–the project is expected to be fully occupied once this year's school season starts up. UTC is managed by JPI Student Living.

–Abby Garcia Telleria