News and Links

Phillips Development's $6M land deals deepen luxury rental pool
A year after it was part of a complex land deal that helped divvy up 576 acres of land near Brandon, Centex Homes has sold 19 acres near the corner of Falkenburg Road and Progress Boulevard. It could soon become home to a 300-unit, luxury rental community. (Tampa Bay Business Journal...subscription required)

Michigan Developers Unveil Affordable Housing Projects with Amenities and Design
Brookstone Capital and Hooker DeJong have completed construction of two affordable housing developments in Kalkaska and Jackson, Mich. Both the projects have architecture and amenities seldom offered in affordable housing projects in the U.S. (multihousingnews.com)

Apartment Reports Upbeat Despite Foreclosure Crisis

There is a fascinating article in the January/February 08 Multihousing Professional that is also online (see link below). The article recaps the downturn in housing, looks at the shadow markets in Tampa, Orlando, Phoenix, and Southern Florida, reports on the top REIT's in the country including Equity, AIMCO, and Camden, and talks about the future of apartment community ownership and living. Enjoy!

Apartment reports upbeat amid housing downturn (multihousingpro.com)

News and Links

Condo Prices Fall by a Smaller Percentage than Home Prices
Average condo and co-op prices across the country have been falling in the last year, according to the National Association of Realtors’ 2008 research on existing home prices. (multihousingnews.com)

More stores, more road for Shops at Wiregrass
Pasco County officials and developers of The Shops at Wiregrass broke ground Wednesday on the much-anticipated extension of State Road 56. The $24 million, 3.8-mile road extension will provide access to the 800,000-square-foot, outdoor shopping center located at S.R. 56 and Bruce B. Downs Boulevard in Wesley Chapel and to the Meadow Pointe/Wesley Chapel Lakes project. (Tampa Bay Business Journal)

Spring 2008 Executive Summary - Part III

Today we present Part III of our Spring Executive Summary where we take a look at the development outlook for 2008 for the Tampa Bay area. Enjoy!

The Tampa Bay market both geographically and financially is creating new areas of growth for the multi-family housing industry. Three particular submarkets sum up the majority of the new activity:

• Hillsborough County is experiencing above-average growth in Brandon and the Westshore/Westchase/Wesley Chapel districts of Tampa. The continued current growth of Brandon, which has been going on for some time now, saw more high-end product come online in 2007, and the same will be said for 2008 with several projects near completion. Continued construction on multiple projects will inject more A and high B product into the area to support the continued influx of middle and upper middle class economies. The Westshore/Westchase districts, like Brandon, house many current to near complete projects. Yet more projects will break ground in 2008 as competition for housing the growing urban professional intensifies. Already five new developments are scheduled to either break ground or begin opening ‘Phase I’ type units in ’08.

• In Pasco County, a mini-migration out of Hillsborough and Pinellas Counties has created an influx of new families that need infrastructure support. Thus new malls, new housing developments and job creation indicate that Pasco is a prime location for new apartment development. On top of the easy proximity to Clearwater via US 19, and Tampa proper via the Suncoast Parkway, as well as accessibility to I-75, Pasco is a development dream. The growing economy, land availability and the need for new housing choices, makes Pasco County an attractive market.

• Polk and Manatee Counties are the wildcards of the group with serious growth potential yet there is limited activity in the new construction pipeline. With urban and rural expansion increasing along the I-4 corridor, it would stand to reason that there is a high potential for growth. However there is little to moderate growth projection in these areas. Lakeland is the preferred destination for build-up with several projects ready to break ground or expand. Manatee County will continue to attract expansion projects into 2008 as activity grows along the I-75 corridor. This is consistent with the continued push of Tampa Bay metro growing into the outlying areas as land becomes more and more scarce..

Taking this snapshot then, combined with leading indices from other submarkets, we see two main trends for 2008. The first is continued growth towards the outlying areas of the metro area. The second trend, is the increase in A and high B product exposure in the Westshore/Westchase/Wesley Chapel districts. This increase in urban living appeals to the urban and peri-urban professional who would like to live closer to the city for the purposes of work, personal economies, the environment and creating community.
While growth is projected for 2008 and beyond for these submarkets, specific economic factors will have their say in the success of these developments. While the success of the pre-condo market allowed multi-family communities to flourish, the environment created by the re-introduction of these single-family housing and condos as rentals has now taken away that edge.
Innovation in multi-family housing is another subject that few can argue is not essential to the industry. The easiest and most effective way to innovate the industry, and thereby differentiating apartment dwelling from housing and condo dwelling, is through the very features and amenities the multi-family housing industry provides. New technologies, community building and lowering environmental waste will attract new renters in 2008 and beyond.

Green Builder

'Going green' is our generations latest and greatest trend and culturally this is a necessary one. There is a battle going even know in our culture between the consumer culture and the conservation culture. Many times we find ourselves on both sides of the battle, fighting for conservation one day and for consumerism the next. As usual, balance is the key. Overconsumption is not a good thing naturally however consumption is inevitable. Overconservation can be anti-progressive while conservation can be just what a natural environment needs.

Which leads us into apartment building. Buildings by themselves naturally take up space and resources which can lead to vast amounts of material consumptions. Making buildings more efficient while consuming less seems to equal out the consumption vs. conservation equation thus incorporating a viable balance. So today we spotlight Swinerton Inc., a San Francisco based construction company.

"Today, our multifamily projects are stronger, constructed more efficiently, and built with less waste generated and fewer natural resources consumed in both the construction and operation," says Gordon W. Marks, chairman and CEO of Swinerton Inc. "These innovations in building technology equate to time and money saved for our clients."

Continue reading more about green buildings. (Multi-Housing News)

News and Links

Heights project gets a kick start
One of the area's largest general contractors, The Beck Group, plans to build its Florida headquarters at the Heights of Tampa -- a 48-acre, $500 million redevelopment project on the Hillsborough River north of downtown. (Tampa Bay Business Journal)

Employment Jackpot! Hard Rock Hotel needs to hire 1,000
The slots at the Tampa casino are about to get company. Baccarat and blackjack will be unveiled later this year and that means that approximately one thousand dealers will be needed to fill at the Hard Rock. (tampabay10.com)

Tampa Bay Area Lost Jobs, Despite Reports
In a release of revised employment figures Friday, Florida officials knocked the legs out from under the Tampa Bay area's long-standing reputation as a hotbed of job creation. (The Ledger)

Trump Tower Down To Its Last Hope
For the past three years, the developers of Trump Tower Tampa searched coast to coast for a lender willing to finance the $300 million luxury condominium. After being turned down by numerous traditional lenders and 10 hedge funds, they're poised to walk away and sell the waterfront site along Ashley Drive in downtown Tampa, the project's developer says. (MultiFamily Executive Online)

News and Links

Apartment Developer Lobbying Florida City for Density Increase
Leonard Garner, developer of a high-rise apartment community in downtown Sarasota, Fla., has petitioned city commissioners for a density increase from 42 apartments to 168. In exchange for the increase, Garner has vowed to make the community affordable. Under his plan, apartments will range from $530 a month for a 400-square-foot studio to $1,800 for a three-bedroom unit. (HeraldTribune.com)

Capturing Failed-Condo Opportunities: an Interview with Dave Woodward, CEO, Laramar Group
In a time of economic change, Laramar Group remains focused on its specialty for over 20 years—value-added investment. The company has raised a $350 million fund (up to $1.4 billion leveraged) to acquire value-added apartments across the country. Keat Foong, MHN executive editor, talks to Laramar CEO Dave Woodward regarding how the company is making the most of the challenging economic conditions.
(multihousingnews.com)

Spring 2008 Executive Summary - Part II

Today we present Part II of our Spring Executive Summary where we take a look at the economic outlook for 2008. Enjoy!

The economic outlook for 2008 can be summed up in one word: uncertainty. The ramifications of a tumultuous 2007 will have serious carry-over into 2008, but how far into 2008 remains a looming issue. Both jobs and the credit crisis will remain at the top of the list of serious economic issues.
In a new report released by the Florida Chamber Foundation (revised 2007), titled "New Cornerstone Revisited”, the paper reported that "Florida's population increased by about 320,000 residents in 2006 -- down from the torrid pace of 2004 and 2005. Most of the decrease was in domestic migration. Florida continued to attract residents from the Northeast and the Midwest, but Florida became a net exporter of residents to other Southern states." This is a dangerous precedent for the multi-family housing industry because while Florida may be attracting new residents, many are leaving for other states, so much so that the net increase in population decreased dramatically from 2004 and 2005. Logically, the number of hurricanes in those seasons, higher insurance rates and property taxes has also been influential in these migrations.
Again, the numbers show that while many of these new Floridians and residents of Tampa Bay may be new renters, many are retirees and home owners. While the population grows here in Tampa Bay, the real question is how can that growth be turned into wealth? Again, the clear answer is job growth to counteract this impending imbalance.
The report goes on to state that, "Good progress has been made in the past three years" to strengthen the state's economic foundations and diversify the economy”. However, "significant challenges remain. At stake are the State's most vital current and future interests: the growth and competitiveness of its economy; the quality of life for its citizens; and the livability and sustainability of its communities." This job market diversity may be closer to Floridians than many analysts think if a few regional, national, and international economic factors occur. Florida is in a unique position geographically, and can take advantage of several international markets, specifically the future widening of the Panama Canal, increasing of ties with Asian markets, and the potential reopening of a democratic Cuba. Via government and local industry associations these organizations can encourage all Florida businesses to take full advantage of international market opportunities while also attracting more foreign direct investment in Florida businesses. Also, through local community involvement and association involvement, we can encourage a relief of legal immigration bottlenecks, capacity constraints, and other factors that may be impeding the flow of visitors and goods through the State’s seaports and airports. If and when these things happen, then we will grow and be prosperous thus bringing new renters.
Additionally, the credit crisis has impacted the multi-family industry and will prove to be an issue for some time, in regard to both tightened qualifications for home buyers, and the result of the sub-prime collapse. Mortgage lending has tightened the qualifications for credit so much that purchasing a home is no longer an option for many. This identifies a new sub-sector of renters, one that would have previously chosen home ownership but now does not qualify for purchasing.
The recent sub-prime mortgage collapse and subsequent credit crunch have left many homeowners and potential homeowners in a credit lurch. Doug Bibby, President of the National Multi Housing Council, lays much of the blame on the government. In a recent press release, The NMHC President said, “Unfortunately, while there was much the government could have done to prevent this crisis, there isn't much it can reasonably do now to alleviate it. What it can do, however, is recognize its own mistakes and ensure that this doesn't happen again. And that means, among other things, recognizing that homeownership isn't the right housing choice for all households at all points in their lives. Housing our diverse nation well means having a vibrant rental market along with a functioning ownership market.”
Concerning credit therefore, some homeowners or potential homeowners who are no longer able to qualify for a mortgage will turn to renting. Current credit checks and credit programs, however, are disallowing many of these potential renters because of recent credit problems. Several credit experts are suggesting keeping the same strict qualifications, but taking a closer look at renters on a case-by-case basis and exploring if their credit issues are of the more recent nature. In many cases, a more flexible approach in allowing these potential renters to rent may be called for.
While the opportunity to obtain credit for mortgages dramatically increased over the past 4 years, including skyrocketing loans for sub-prime mortgages, and while the government on all levels, as Doug Bibby suggests, did encourage more homeownership as opposed to rent options, the fault for competition amongst homeowners and apartment communities cannot rest solely outside the multi-family housing industry. While the obvious signs for coming shortfalls in credit and economic slowdown were evident, the multi-family industry in many ways did not plan for the impending bubble burst and was slow to react. This may have contributed inversely to long-term economic growth.
To further explore this one simply needs to analyze the vacancy to rent increase ratio over the past few years, particularly in light of per capita growth per in the state of Florida. Job growth increased in Florida 2.1% per annum between the years 2000-2006 ranking 5th nationally. Wages also increased 3.2% per capita over that same span ranking 20th nationally. More people and more wealth created great rental pools for the local apartment industries. However, with the inflation index and increase in everyday costs like oil, the wage increase was practically nullified. While an abundance of new jobs were created, wages did not outpace the general cost of living and certainly did no support the dramatic increase in home costs and subsequent increase of rental rates. Coupled with the migration out of Florida and the elimination of the investor market, the result was rising vacancy rates. The following chart shows this trend more clearly.

County	Vacancy Rate Movement		Rent Rates
			2001-2007
	2001-2006	2007	$ increase	% increase
Hillsborough	2.80%	-3.00%	$120	16%
Pinellas	2.60%	-3.50%	$190	23%
Sarasota	5.20%	-8.00%	$140	13%
Polk	2.90%	-5.50%	$160	19%
Manatee	1.10%	-4.60%	$130	16%
Pasco	0.50%	-3.20%	$180	22%

Much of the uncertainty forecast for 2008 is caused not just by one mitigating factor but by several factors. However, the outlook is not all gloom. If the job market can increase, and more importantly come with a wage increase: if the credit crisis can come to a slowdown: and if the multi-family housing industry can stave off rate increases; then market normalcy could resume in the second half of 2008. Then, 2009 could bring a much more positive outlook to the economy. For the time being however, the collapse or ignoring of any of these arenas could spell further problems deep into 2008 and into 2009 as well.
From an optimistic viewpoint, job growth, wage increase and development have historically been a spark economically for the multi-family housing industry. And, in fact, there is already movement in several submarkets with current, active growth and more planned for 2008.

News and Links

Crescent to start on Brandon complex
Crescent Resources LLC will start construction of 300 rental apartments this summer at Crosstown Center, the 260-acre, mixed-use project Crescent is developing east of the Tampa city limits on the Lee Roy Selmon Expressway, US 301 and Falkenburg Road.

Apartments Planned near Cypress Creek
Greystar Property Management has submitted for county review plans for a 451-unit complex on Cypress Creek Road.

Spring 2008 Executive Summary - Part I

We get asked all of the time for updated information regarding the multi-family housing industry not only for Tampa Bay, but for Florida and the nation as a whole. That request was a major driving force behind creating this blog. We honestly feel that knowledge is power and so the more information that is out there about and concerning our industry the better. Through all of the opinion, data, editorials, statistics, and news we hope that we can be a part of this discussion and thus help the industry move forward.

Part of that belief was born a year ago with the release of our first ever Executive Summary. This Summary gave a snapshot of the economic trends for apartment communities in Tampa Bay. Two months ago in January, we released our third Summary which we hoped would provide a snapshot of economic conditions both current and past, current and future development, and innovations in features and amenities. The response was so overwhelming that we are again releasing that Summary via this blog. In no particular order, the report will be released in parts over the next few days.

Today is Part I, a look back at 2007, how 2008 is shaping up to look, and what you can expect to see from the report in the next few days. Enjoy!

In my experience, in the real-estate business, past success stories are generally not applicable to new situations. We must continually reinvent ourselves, responding to changing times with innovative new business models.
-Akira Mori, President and Chief Executive of the Mori Trust

Overview
Innovative new business models may just be what is needed for 2008 and beyond. With the uncertainty and upheaval of the past two and a half years the industry continues its movement into an equally uncertain new year. It seems that at this point, the multi-family industry may have no choice but to be open to new ideas. As billionaire Akira Mori suggests in the quote preceding this article, the real estate sector cannot rely on past successes when responding to new challenges.

To understand where the industry is headed we need to briefly review a short history. In 2005 and early 2006 the condominium market soared, with excited buyers and investors creating an 18-24 month window of success for the real estate market. This includes the sales of apartments as condos after a ‘condo conversion’. It was classic supply and demand.

In mid to late 2006 however, the condo bubble burst, flooding the market back with available units. Supply suddenly outweighed demand. In addition, there was no sudden influx of new renters, and those available units became re-categorized as rental units---primarily all unoccupied. Even more prominent in 2007 was the buckling of the housing market, while simultaneously, the multi-family industry saw condo units and single family homes seep into the rental world. This economic decline in real estate began to filter throughout scores of industries, casting an ominous foreshadowing on things to come.

2007 saw the market scales tip heavily in favor of available supply, in single-family housing, condos and apartment units. 2008 then should see industry professionals creating new ideas that differentiate the apartment industry, and allow it to reclaim its prominence as the choice for renters.

Lakeland Market Summary

Our research team just completed a market summary for the Lakeland, FL area. The research was conducted by phone and information was provided via the onsite staff between the dates of 2/27/08 - 2/29/08. Twenty apartment communities responded to our survey. A few results have been highlighted and are below:

• Average occupancy in the area is reported at 92%.
• 60% of those surveyed are offering concessions.
• Concessions range from one month's free, a free tv with lease, no deposit, select units on prorated discount, as well as other concessions.
• The average rent rate range is $597-$800.

Lakeland has historically not been volatile as it's submarket counterparts in the Tampa Bay area. However, the toll of the subprime mortgage crisis, credit crunch, and shadow rental market has hit Lakeland albeit, again, not nearly as hard as the rest of Tampa Bay. Occupancies have dropped an average 6 percentage points over the last two years, however even now we are seeing signs of recovery. Indicators, both historic and economic, lead us to believe that we should start seeing a rise of 2-3 occupancy points on average by the end of the summer.