As residential real estate recovers from the impact of the subprime lending fallout in 2007, the multifamily sector is trying to determine if record foreclosures on the single-family side is a blessing or a curse.
In a panel moderated by Mark Fogelman, president of Memphis, Tenn.-based Fogelman Management Group, the panelists?executives James Maclin, senior vice president and director of corporate services for Memphis, Tenn.-based Mid-America Apartment Communities; Martha Logan, vice president of operations for Atlanta-based RAM Partners; and Daniel Ford, senior vice president and director of property management for Nashville, Tenn.-based Freeman Webb?agreed that dealing with rental applicants with damaged credit has been the most visible effect of subprime foreclosures on multifamily operations.
While vacancies and turnover rates have showed slight improvement, the panel unanimously agreed that?perhaps due to shadow rentals?there has not been a rush back to apartments, particularly for Class A and Class B-plus product. "We are surveying our managers and have just had a handful of foreclosures come in," Logan commented. "But we are screening for it now. The move-outs have definitely slowed down, and that's what was killing us."
While the panelists also observed that applications were up 10 percent on average, they noted that the quality of those applicants has also improved. "Our typical applicant credit scores are actually up," Ford said.
The panel also spent some time discussing the effects of subprime lending on their companies' approaches to property management, emphasizing that enterprising multifamily executives should partner up with applicant-screening companies to fine tune their lease-up policies. "If you are not meeting with your credit screeners, now is the time to do it," Fogelman said.