Pappas Realty Co... "Commercial Real Estate...Exclusively" in Northeast Ohio since 1957

Tuesday, October 28, 2008

Seiders, Witten Predict Multifamily Starts to Fall Off

Publication date: October 23, 2008

By Les Shaver

Financing for new apartment projects is almost impossible to find. Building materials costs continue to rise. And the shaky economy means that many of these buildings will open to uncertain demand. Yet, after dipping below 200,000 units in early 2007, apartment starts to date are now back above that magic number.

So what gives?

Right now, projects that were already in the pipeline are driving up starts, but that number will come down. At least that was the consensus reached by Ron Witten, founder of Witten Advisors, an apartment market advisory firm, and Dave Seiders, chief economist for the National Association of Home Builders, during Wednesday's NAHB Fall Construction Forecast.

"We don't think this is a sustained trend," Witten said.

The decline in starts will likely come soon. Witten predicts that by 2011, starts could fall to around 125,000 units—numbers not seen since 1993. "We're going to be in for a couple of years of deterioration in multifamily starts," Witten added.

At the core of this drop-off is financing. The amount of equity needed to completed apartment construction deals has risen significantly. During the boom, apartment developers could get by with 25 percent equity or less on deals. Now, lenders are asking for around 40 percent equity. And even with financing, apartment owners don't know what the economy will look like when the properties open in a year or two.

"A decision to start today exposes me to a lot of risk going forward," Witten said.

The reality is that, right now, anything that opens faces a lot of competition. There are more than 1 million excess housing units on the market. That's down from the 1.2 million on the market earlier in the year.

Whether these housing units are for-sale or rentals, apartment owners should be concerned (even though Witten did acknowledge single-family rentals were losing their appeal because of their distance from the urban core and rising commuting costs). "It's pretty fluid whether I'm renting or selling my home, depending on who knocks on the door," Witten said.

Come 2009, Witten doesn't see a lot of interest in this excess inventory. "We'll make very little progress in excess inventory in most of 2009," he said.

By 2010, however, Witten thinks much of the excess inventory will be burned off. With little new construction coming online, that bodes well in the long-term for apartment owners—provided job losses didn't cut too deep. "The fundamentals are relatively good in the apartment business," Witten said.

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Sunday, October 26, 2008

17-Unit Apartment Building ** 1724 Bailey Rd, Cuyahoga Falls, Ohio 44221 ** Tenants pay heat

17-Unit Apartment Building ** 1724 Bailey Rd, Cuyahoga Falls, Ohio 44221 ** Tenants pay heat (edit/delete)
1724 Bailey Rd, Cuyahoga Falls, Ohio 44221
17-Unit Apartment Building (12-2 Bdrms & 5-1 Bdrms)
Electric Heat - Tenants Pay
Property Details


1724 Bailey Rd
Cuyahoga Falls, OH

Area & Property Description
Separate Electric ** Electric Heat (Tenants Pay)** Owner pays Water/Sewer & Trash & House Electric & Hot Water Gas (H20 Heater) ** Peaceful residential setting, with church, golf course and single family homes surrounding property. ** Contact Sean Dreznin for an Income/Expense report or to schedule a showing.
Neighborhood: Cuyahoga Falls
Type: Multi-Unit Residential for Sale
Floors: Two or More Stories
Projected Gross Income - $106,000: Built 1969
No Hallways: Laundry Room on Site (Leased)
DO NOT DISTURB TENANTS: Cuyahoga Falls Water & Electricity Rates - Save $

Sean Dreznin
Direct: (330)762-0535
Fax: (330)7620537

Thursday, October 23, 2008

Deutsche Offers Debt on Manhattan Portfolio

Oct 17, 2008 - CRE News

Deutsche Bank is offering for sale the debt it had provided last year for a portfolio of apartment properties with 384 units on Manhattan's Upper West Side.The lender has tapped New York broker Massey Knakal Realty Services, which specializes in the sale of New York-area apartment properties, to solicit investor interest. Offering material the company has made available to investors noted, "Lender requests proposals." It did not include an asking price.

City records show that the properties are encumbered by a combined $75.5 million of debt, but sources said they might have another $15 million to $20 million of mezzanine debt as well. In any event, it's not likely that the debt is worth anywhere near $75.5 million today, given the state of the credit markets and the collateral's relatively low net operating income.

The portfolio is comprised of 22 buildings on 109th Street between Columbus Avenue and Broadway. All but 29 of their 384 units are subject to either New York's rent stabilization or more restrictive rent-control laws. A total of 282 units are subject to rent stabilization and generate rents that average $1,063/month.

Another 65 units are subject to rent control and pay an average of only $240/month in rent. Those units average 650 square feet. The 29 market-rate units pay an average of $2,156/month in rent.

The portfolio is owned by a venture led by Pinnacle Group, which is believed to have picked it up as part of a larger acquisition in 2005 for which it paid $500 million.

It had teamed with Praedium Group on that acquisition, but it's not known whether Praedium maintains an interest in the 22 buildings that back the Deutsche debt being offered.

Thursday, October 02, 2008

Apartment Buildings Lose Their Immunity To Housing's Chill

August 20, 2008 from the Wall Street Journal
written by: By NICK TIMIRAOS

Job-Loss Worries Pressure the Sector; Rent Rates Decline

For the past year, apartment buildings have been one of the few bright spots in the real-estate industry as people forced out of the home-buying market by foreclosures or the credit crunch have turned to renting.
But now the specter of job losses is beginning to spread the gloom into that sector as well. As would-be renters are doubling up in apartments or moving in with friends and families, rents and occupancy rates are beginning to fall in many cities.
"In many markets, our new prospects are beginning to resist the current and increasing ...