The construction of 280 apartments is expected to begin later this year at the site of the former Merrimack Hotel and Conference Center.
This week, private investor Robert Singer sold the large parcel on Executive Park Drive to SMC Management Corp. of Watertown, Mass., for an undisclosed price.
The real estate development company hopes to break ground on the project as soon as possible, building 280 apartments that consist of studio, one- and two-bedroom units next to the WoodSpring Suites Hotel near Cinemagic.
“This is going to be spectacular for Merrimack,” said Singer, president of Merchants Auto.
In one U.S. city, 70% of households are renting rather than owning
A decade after the Great Recession, homeownership is on the rise (http://www.marketwatch.com/story/homeownership-rate- reaches-three-year-high-as-rebound-from-crisis-gathers-pace-2018-01-30) in the U.S. But for many residents of the country’s largest cities, renting is still the reality.
The share of people renting their home, rather than owning it, increased in all 50 of the largest cities in the country between 2006 and 2016, according to a new report from real-estate website (ZG). Renter households now represent the majority in 29 of those 50 cities — back in 2006 at the start of the housing crisis, only 16 had renter-household majorities.
Some states shine in health care. Some soar in education. Some excel in both – or in much more. The Best States ranking of U.S. states draws on thousands of data points to measure how well states are performing for their citizens. In addition to health care and education, the metrics take into account a state’s economy, the opportunity and quality of life it offers people, its roads, bridges, internet and other infrastructure, its public safety and the fiscal stability of state government.
Believe it or not, Manchester, NH, has the same percentage of high-tech jobs as the well-heeled tech hubs of Washington, D.C., Boston and Austin.
Of course, a metro such as Boston has an employment base 10 times larger than Manchester’s with three million total workers, so that means a lot more tech jobs too, but the health of high-tech is just as important to Manchester as it is to Boston.
January 30, 2018
LeBron James. Serena Williams. Lionel Messi. New Hampshire.
The Granite State might seem like an outlier in a group of historically dominant stars, but it joins their prestigious company with a fourth straight year atop POLITICO Magazine’s quasi-annual ranking of the 50 states of the union, including its tie in 2016 with Minnesota. New Hampshire leads the nation with its low poverty rate and infant mortality rate, as well as its high reading test scores and percentage of its population employed in STEM (science, technology, engineering, math) fields, while also cracking the top five in lowest levels of crime, income inequality and unemployment.
January 23, 2018
The Cross Point towers have changed ownership again in a $227 million sale, more than twice the price at which the property sold just three and a half years ago, documents show. Boston’s Anchor Line Partners sold the office buildings to CrossHarbor Capital Partners, a commercial real estate firm that has an office in Boston. The $227 million sale was executed by LLCs for the two businesses, both of which are based in Delaware, according to the official deed.
January 13, 2018
A majority of Americans are renting on the cheap — at least, compared to what they’d be paying if they bought a home.
Most Americans (64%) live in a county where renting takes up a smaller portion of one’s paycheck than buying, according to a report released Thursday by real estate data firm Attom Data Solutions. And yet in more than half (54%) of housing markets — 240 of 447 U.S. counties — buying a median-price home is actually more affordable than renting a three-bedroom property.
September 28, 2017
Conde Nast magazine named it the “#9 Most Underrated City for Millennials.’’ Wall Street Journal titled it one of the “New Silicon Cities.’’ Politico Magazine called it a “Millennial Marvel.’’ Men’s Health listed it as the “#2 Most Coffee Obsessed City in the U.S.’’
Manchester, N.H., a historic mill town with a scruffy, down-and-out reputation, is going through a slow renaissance. Infused with company start-ups, high-tech firms, and mega renovation dollars, this multiethnic city is buzzing with new energy.
“Manchester is on a really positive trajectory,’’ says Michael Skelton, president and CEO of the Greater Manchester Chamber of Commerce. “There are a lot of jobs available right now, and we have a relatively low cost of living compared to Boston and other cities, so it’s very appealing.’’
On July 31, 2017 SMC consummated the acquisition of The Terraces at Western Cranston, an existing 216 Class A apartment complex for $31.1MM. This property contains 216 residential units and a clubhouse | management | amenities building situated on 8.6 acres of well-landscaped grounds. The property sits on a knoll so that its attractive architecture and dramatic topography create very strong curb appeal. The property was sold by Aspen Square Management, a residential developer and investor with a national presence. Aspen Square acquired the property in 2013 from The Federal Home Loan Mortgage Corp. (“Freddie Mac”) who had acquired the property as the result of the well-publicized financial collapse of Fairfield Residential. As expected, the collapse of Fairfield was preceded by years of reduced capital budgets and staff turnover at the property level. Consequently, when Aspen acquired the property in 2013, it needed to invest a significant amount of “catch up” capital to restore the base property to market condition. Much of this capital was invested resulting in a spectacular new clubhouse/management office, a separate business center, and the renovation of 146 units. Since the time of the acquisition, Aspen has shifted its focus out of New England making the subject property an “outlier” in its portfolio. With a significant capital program already completed, Aspen selected SMC as the next owner.
Because the capital program was not completed, but results from the renovated units and upgraded clubhouse have already had a positive impact on the rent roll, SMC perceives additional upside potential in the completion of the capital program and an aggressive management style for the following reasons:
- The City of Cranston has strong demographics with above-average household income and an educated work force;
- Terraces is situated in close proximity to Providence and its major employers;
- Terraces is located close to Brentwood Apartments, a 240-unit complex located in North Providence which is owned by an affiliate of the sponsor. This property underwent a similar upgrade after its acquisition in 2014 and has performed well since its acquisition;
- The property is less than 20 years old and has been partially restored to a Class A property level;
- The property offers attractive floor plans and amenities which are very similar to the units at Brentwood as both properties were constructed by the same builder in the late 1980’s. Because of these similarities, the renovation program will be similar with both costs and timeline easier to track;
- The acquisition price reflects an approximate 20% discount to replacement cost;
- The redirection of the seller’s focus prior to the completion of the upgrade program results in an opportunity for SMC;
- Modest enhancements to the unrenovated units and common areas will keep the property competitive on the front edge of the market over time;
- According to the Q4 2016 REIS Report, the Providence market (which includes Cranston) will see an average vacancy rate of 2.9% for the next 5 years;
- According to the same REIS report, the 5-year inventory growth rate (new units coming on line) for the Providence market will be .8%. The absence of new product will keep rents in a growth mode;
SMC Management Corporation www.smcmgtco.com is a fully integrated, Boston‐based real estate investment, development and asset management firm. Located in Metro Boston with a satellite office in Manchester, New Hampshire, SMC acquires and manages commercial and residential properties in New England and other select markets on behalf of its investors.
By Micheal Cousineau
NH Union Leader
July 8, 2017
Rents in New Hampshire have gone up for a fourth year in a row while the vacancy rate continued getting worse for renters.
The statewide median gross rent, which includes utilities, for two-bedroom units clocked in at $1,263 a month, or more than 4 percent higher than last year, according to an annual survey by the New Hampshire Housing Finance Authority.
By David L. Harris
Boston Business Journal
April 17, 2017
Taurus Investment Holdings LLC, a private global real estate investment firm based in Boston, announced that it had acquired the Wellington Parkside apartment complex in Everett.
The 12 Valley St. property, built in 2015, is a 190-unit, Class A apartment complex. SMC purchased the lot that houses the complex in 2013 for $4 million, according to Middlesex County deeds.
“We are excited about our recent acquisition,” said Taurus CEO Peter Merrigan in a statement. “The combination of major area developments, including Assembly Row, Station Landing, and the future Wynn Casino, coupled with transportation infrastructure providing access to Boston were attractive attributes to the opportunity. With modest property improvements, combined with Taurus management and marketing approach, we believe the property will be well positioned to take advantage of the positive changes to Everett and the overall dynamics of Boston’s urban-infill submarket.”
Terence Scott of TMS Real Estate Investment Advisors, Simon Butler and Biria St. John of CBRE New England marketed the property for sale on behalf of SMC Management.
By John Laidler
April 19, 2017
The casino era in Everett took another step forward when Mayor Carlo DeMaria and other local officials helped celebrate the first hotel to open in the city in more than 70 years.
The 101-room enVision Hotel Boston-Everett is located at 1834 Revere Beach Parkway, about 2 miles from the future Wynn Boston Harbor casino.
After the success of enVision Hotel Boston Longwood, enVision Hotels is excited to announce their second hotel in the Boston area opening in Spring 2017. As a loyal guest of the enVision Hotel Boston Longwood, we want you to know first that we’re now accepting reservations for the new enVision location. We hope to see you soon.
New England Real Estate Journal
December 2, 2016
Fulcrum was selected by SMC Management Corporation of Watertown Mass. to construct the new Residences at Riverfront Landing project located at 62-70 Bridge St. Boasting scenic views of the Merrimack River, the project will include three separate residential buildings consisting of four floors of apartments above a deck of structured parking. Each residential building will consist of 76 units, for a total of 228, market-rate apartments and is a partnership between SMC Management and Master Developer Renaissance Downtowns. The site is commonly identified as the Bridge St. “skate park” site, and is situated adjacent to a levy that was constructed in 1947 and since has been maintained by the city. Read the full article
Housing Market Update November 2016
Increased employment and home prices signal economic growth.
One indicator of New Hampshire’s housing market recovery is rising prices in key areas of the state, specifically in Hillsborough and Rockingham counties. On a statewide basis, the inventory of
homes for sale has decreased and the pace of home sales has increased. Those New Hampshire households that are willing and qualified to take advantage of continued low interest rates may have an opportunity to get into homeownership. However, borrowers must still have an adequate
down payment and excellent credit to qualify for a mortgage under the tighter credit requirements in place since the Great Recession. Furthermore, the inventory of homes selling for under $300 thousand is very limited in those key areas of the state and there is little new construction.
By Catherine Carlock
Boston Business Journal
October 7, 2016
New York and San Francisco, the two cities with the highest apartment rents in the country, both saw negative rent growth in the third quarter from the second quarter. But Boston saw a 0.9 percent increase to an average effective apartment rental rate of $2,072, according to the third-quarter apartment sector survey by New York-based real estate research firm Reis Inc.
Boston’s $2,072 average rental rate is the third-highest in the U.S., the Reis report said. The city outstripped San Jose, California, which posted an average effective rent of $2,053 in the third quarter. New York’s average effective rent declined 0.1 percent in the quarter to $3,441, while San Francisco’s declined 0.8 percent to $2,481.
Joint Center for Housing Studies of Harvard University – The State of the Nations Housing 2016
By MICHAEL COUSINEAU
New Hampshire Union Leader
MANCHESTER – Quartz countertops and balcony views of the Merrimack River will greet some renters of apartments rising next to Northeast Delta Dental Stadium.
The first renters are expected to move next month into Riverwalk Apartments, where monthly rents will run from $1,050 for a studio (502 square feet) to around $2,000 for a two-bedroom unit (1,020 square feet).
Boston-area developer Stephen Chapman is putting his firm’s money where he thinks the market is.
SMC Management Corp. out of Watertown, Mass., is building 238 apartments in Manchester – including 88 apartments in the building that once housed Hesser College – with plans for another 228 units in Nashua.
“I’m very bullish on southern New Hampshire, and I’m very bullish in the area in and around Manchester because it has demographics superior to any other city in New Hampshire,” Chapman, SMC’s principal partner, said last week.
SMC also late last year bought Waterford Place Apartments, 384 units off of Hackett Hill Road in Manchester.
The vacancy rate for rental housing is running at less than 2 percent in Hillsborough County, which includes Manchester and Nashua, according to a study released last month by New Hampshire Housing, which helps people obtain affordable housing.
“Low vacancy rates suggest that there is a need for additional rental housing construction to meet demand,” said Executive Director Dean Christon.
Mike Skelton, president and CEO of the Greater Manchester Chamber of Commerce, said the area’s economy is expanding.
“The growth in the Millyard from companies like Dyn, SNHU, PillPack and many others along with development around the airport and in Bedford are all fueling the need to ensure we have a diversity of housing options available to match the expectations of consumers,” Skelton said.
SMC is spending $31 million on Riverwalk Apartments, which borders the riverwalk and is near the footbridge that spans the Merrimack.
“I happen to like what Manchester’s doing in terms of the riverwalk, trying to make that a people-friendly area,” Chapman said.
That site was initially being developed by Chinburg Builders with property taxes from residences helping to pay for the $27.5 million ballpark. SMC purchased the property, with most of the permitting already done, for $1.05 million, Chapman said.
Three five-story buildings, each with 50 apartments and one level of underground parking, includes brick and vinyl siding with the last building scheduled for completion by year’s end. Renters in a few top-level apartments in the building closest to the ballpark will be able to see into right field, according to Sharon Breighner, senior regional manager at CP Management in Exeter, the property manager.
Chapman also is putting in 88 apartments in The Sundial Center of Commerce and Education off Queen City Avenue that should be finished by January. Square footage will range from 608 to 920 square feet with monthly rents between $1,200 and $1,700, though, they are subject to change, Brieghner said.
Chapman hopes to capture people taking newly created jobs in Londonderry, near Manchester-Boston Regional Airport, as well as those working within a few miles.
Meanwhile, another developer who built apartments units in the Citizens Bank building on Elm Street is asking between $1,400 and $3,000 a month, with the largest units covering 1,500 square feet.
“The cost of newer projects has not been a concern I have heard as I think everyone recognizes that we need a diversity of options that ranges from affordably priced units to higher-end luxury units,” Skelton said. “The higher-end units are newer additions to our housing stock but are in line with the expectations of the employees of quality, high-paying jobs being offered in the Millyard and the region.”
In Nashua, Chapman’s company hopes to break ground in a month or two on the first two buildings of Residences at Riverfront Landing at Bridge Street where it crosses the Merrimack River, immediately south of where the Nashua and Merrimack rivers come together, according to Robert Simonds, SMC’s director of capital projects.
The first 152 apartments should be finished by fall 2017. Work on the third building is expected to start in fall 2017 and be completed about a year later.
“People are choosing apartment living as a lifestyle choice,” Chapman said.
By Suzanne Woolley
July 28, 2016
We’re all looking for a safe but adequate income stream, and that includes the very wealthy. Like most investors, they’re having a hard time finding it. That’s clear in the latest portfolio update on the asset allocation of the “ultra-high-net-worth investors” that make up Tiger 21,1 a peer-to-peer learning network. They just can’t find passive assets that produce enough income to let them put their portfolios on autopilot, said the group’s founder and chairman, Michael Sonnenfeldt.
This is hardly a tragedy; there is that big pile of principal they can dip into. The group’s 440 members, whose average age is 54, are managing more than $40 billion worth of personal investable assets. Still, many are lowering their annual portfolio withdrawal rates and trying to work their assets harder.
Read the full article here
Housing Market Update July 2016
2016 Residential Rental Cost Survey
New Hampshire rents increase nearly 15 percent over last five years.
New Hampshire’s housing market continues to pose challenges for renters, a recent survey finds. New Hampshire Housing’s annual residential rental cost survey, which canvasses market-rate units across the state in order to gauge the condition of the rental market, found that vacancy rates dropped while rents increased – a continuation of a long-term trend. The state vacancy rate fell to 1.5 percent, while the median rent for a two-bedroom apartment, including utilities, is at $1,206. Seven of New Hampshire’s ten counties have lower vacancy rates than last year. Vacancies are significantly lower in the state’s most populous southern tier, where the bulk of New Hampshire’s rental housing is located. Hillsborough, Merrimack, and Rockingham counties all have vacancy rates below two percent and are lower than their 2015 rates.
April 28, 2016
In April 2016, an affiliate of SMC Management Corp. of Watertown finalized the acquisition of a 54,000 square foot mill-style industrial building located at 1834 Revere Beach Parkway in Everett. On April 11th, a ceremonial ground breaking officially kicked off the renovation of the building into a 101 room boutique hotel.
The property commands an excellent location on Revere Beach Parkway, with extensive frontage and visibility in both directions. Furthermore, east-west access to Revere Beach Parkway is facilitated by a controlled intersection directly in front of the property. The location is less than .6 miles from US Route 1, and less than 2 miles from Boston’s Central Business District and Logan airport. Institutional demand generators such as Tufts, Harvard and MIT as well as the proposed Wynn casino development are all less than 10 minutes away.
This SMC partnership has executed a 20 year operating lease with Global Vision Hotels (GVH), a regional hotel operator based in Needham, MA that will lease the property on a fully net basis and operate it under the name enVision Hotel. This will be the 3rd “joint venture” between SMC and GVH.
The first venture, started in 2010, renovated a vacant nursing home in to a 39 room boutique hotel in the Longwood Medical Area under the Ascend flag. GVH initially signed a 10 year operating lease for this property; however, GVH acquired that property in 2014 for its own portfolio and continues to operate the property today. According to recent Trip Advisor rankings, the enVision ranks 16th of 82 Boston hotels including all of the full‐service hotels located in the Central Business District.
The second venture was the acquisition of a full‐service Holiday Inn in Mansfield in 2015. The SMC / GVH business plan calls for a $4.0MM Property Improvement Plan (“PIP”) and the maintenance of the Holiday Inn franchise. To date, the PIP is well‐underway and preliminary market feedback has been very positive. Current Trip Advisor ratings average 4/5.
By John Laidler
April 28, 2016
As Everett awaits the development of Steve Wynn’s planned $2 billion casino resort on the Mystic River, another company has begun construction of the city’s first hotel in decades.
Public officials and business leaders recently took part in a groundbreaking for the 101-room enVision Hotel Boston Everett at 1834 Revere Beach Parkway, about 2 miles from the site of the future casino.
The hotel is being developed by rehabilitating an existing 94-year-old factory building. Needham-based Global Vision Hotels is developing the project.
The upscale, boutique hotel will be a big contrast to the Prescott House, a former family hotel that continues to operate as a hostel and for long-term stays on Church Street, according to Everett City Clerk Michael Matarazzo. The Prescott House is currently being renovated, Matarazzo said.
“We will be catering to the business and leisure traveler who is looking for a unique, local experience,” Gautam Sharma, president of Global Vision Hotels, said by e-mail.
Sharma said the future development of the casino did not figure in his firm’s decision. The Wynn resort, which will include more than 600 hotel rooms, is targeted to open in 2018.
Set to open in early 2017, the four-story, 54,000-square-foot enVision Hotel Boston Everett will feature a cafe and lounge, a small conference room, and a fitness center. The project provides for about 70 surface parking spaces.
The building originally was constructed in 1922 as a shoe factory and later was converted into a sewing factory. Most recently it was used as mixed-use retail space, Sharma said.
Global Vision Hotels operates nine hotels, six in Massachusetts. The construction in Everett will mark the expansion of the firm’s enVision Hotel line, which began with the opening of the 39-room enVision Hotel Boston on South Huntington Avenue in 2012.
Like the Boston hotel, the Everett hotel will be a member of Choice Hotels International’s Ascend Hotel Collection, which are a “network of historic, boutique, and unique hotels that offer guests an authentic, local experience,” according to the company’s website.
The Everett hotel “will highlight the rich history and local character of the community outside its doors much like its sister property on South Huntington Avenue,” Janis Cannon, senior vice president for Choice Hotels, said by e-mail.
“We were looking for sites in the suburban Boston market to develop hotels and this one fit the bill as a historic hotel encompassing the enVision brand,” Sharma said of the Everett location.
Mayor Carlo DeMaria and US Representative Michael Capuano, a Massachusetts Democrat, took part in the groundbreaking.
In a statement, DeMaria welcomed a project he said would revive an underutilized property. He said the development team has “designed a facility that reflects Everett’s history and acknowledges how unique and special our community is.”
Rent growth continues, albeit at a slower pace, amid hefty new supply pipeline. Download report : United States of America Multifamily MarketView Q4 2015
By Colin Woodard
Feburary 18, 2016
When Hunter S. Thompson came to New Hampshire’s largest city to cover the 1972 presidential campaign, he described it as “a broken down mill town with an aggressive Chamber of Commerce and America’s worst newspaper. There’s nothing much else to say for it.” Manchester’s downtown business district was drying up, its sewers poured excrement into the Merrimack River and most of the massive brick mills sandwiched in between were empty husks, awaiting a revival of U.S. manufacturing that would never arrive. For a quarter-century thereafter, there was little to prompt the casual visitor to reappraise this fallen industrial city of 110,000, an hour north of Boston.
But today there’s no missing that Manchester—laid out in the 19th century as an American manufacturing utopia—has gotten its groove back, successfully resurrecting its massive riverside mill district into a teeming knowledge industry hive. Led by a world famous inventor colorful enough to have invited comparisons to Thomas Edison, Willy Wonka and Dr. No, high-tech firms have colonized the millions of square feet of red brick textile mills along the cleaned-up Merrimack. All is not quite perfect in Manchester—it struggles with the same heroin and opioid problem bedeviling much of New England—but developers have added restaurants, museums and hundreds of high-end loft apartments, while two of the state’s largest higher education institutions have nestled their programs among the new-economy businesses so hungry for skilled recruits.
By Tim Logan
The Boston Globe
January 7, 2016
Home prices in the Boston area are only going one direction: up.
So says a new report Thursday from Standard & Poors, which estimates that home values here will climb 24 percent by 2020. The Wall Street rating agency looked at 48 markets around the United States to see if the strong growth in home prices of the last few years was likely to continue.
Much of that prediction rests on how well the economy performs.
That 24 percent jump assumes that things continue more or less apace. If the economy performs better than expected, home prices could increase even more — as much as 49 percent, S&P predicts. Bully for homeowners, though not so much for those looking to buy.
But the real strength of Boston’s housing market shows up in the downside risk. There isn’t much.
If another recession hits of the magnitude of the economic downturn in 2007, S&P predicts, home prices in the Boston area would dip less than 2 percent. Even under the worst-case scenario envisioned by S&P, values in greater Boston would slip 6 percent, compared to a 27 percent plunge nationally.
Turns out Boston is one of the three or four lowest-risk markets in the country, said Darrell Wheeler, a structure finance researcher at S&P who coauthored the report.
“Boston is one of the more stable markets in the country,” Wheeler said. “It has a broad scope of industries that are able to withstand economic events much better than many other markets.”
Mix in a growing population of young professionals — who are entering prime home-buying age — and a flock of universities and medical institutions that are large employers and aren’t likely going anywhere, and Boston’s housing market is set in a good direction.
Unless, that is, you’re trying to afford a new home here
In November 2015, an affiliate of SMC Management Corp. finalized the acquisition of Waterford Place Apartments from Sentinel Real Estate for $53.0MM. Waterford Place is an existing 384 unit Class A apartment complex located in Manchester, New Hampshire, a market where SMC Management Corp. has more than 35 years of operating history. Waterford Place is 100% market rate units developed between 2003 – 2005 with a loan from HUD under its 221(d)4 program. The complex was started in 2003, completed in 2005 and acquired by Sentinel at stabilization in 2006 for $57.0MM. The property is located in the northern section of Manchester approximately 1 mile from the intersection of I-293 and I-93. This location offers outstanding highway access to Manchester to the south and Concord to the north as well as a densely populated retail district located at this intersection that includes Walmart, Market Basket, Kohl’s, Target and numerous other retailers.
The property has reached an age where significant capital typically needs to be injected in order to maintain the Class “A” status of the complex, however, Sentinel has made some minor upgrades over the past few years. The property has lagged the “high end” market and is in need of a more aggressive management program. In addition, the complex had been managed “long distance” by asset managers in New York rather than the on-site team resulting in a leasing program that had severely lagged the open market.
SMC Management Corp. believes that the location, site and unit designs are all fundamentally sound and that a more aggressive management style with a planned capital upgrade program will keep Waterford Place at the top of the suburban Manchester sub-market properties.
by Karla Bowsher, Daily Finance
The hottest housing market to watch in the new year is not among those that regularly make the news for high demand and quick sales.
Instead, Providence, Rhode Island, scored the top spot because it’s “just now seeing signs of recovery based on substantially better economic conditions forecasted for next year,” according to Realtor.com.
The real estate website identified the United States’ 10 most up-and-coming metropolitan markets for 2016 after predicting future values for home sales and prices for the 100 largest markets.
In Rhode Island’s capital, for example, existing home sales and median sale price are each projected to increase by 10 percent next year.
Realtor.com chief economist Jonathan Smoke explains to CNN Money:
“Providence is closely connected to Boston, which continues to show incredible economic growth. There is a quite a bit of positive spillover effect.”
Boston came in No. 10 on Realtor.com’s hot list for 2016. Its existing home sales are projected to increase by 10 percent and its median sale price by 6.09 percent.
Boston made the list for a different reason than Providence, however. Smoke explains on Realtor.com that several different underlying dynamics helped land cities in the website’s top 10 for 2016:
- Some markets have been hot and remain hot (San Diego, Sacramento, Boston, Atlanta).
- Some markets are just now seeing signs of recovery based on substantially better economic conditions forecast for next year (Providence; New Orleans; Virginia Beach, Virginia; St. Louis).
- Some markets are spillover markets from very hot markets (Providence; Sacramento, California).
Most markets have one or more key demographic driving demand. Those key demographics are:
- Older millennials (25 to 34 years old)
- Younger members of Generation X (35 to 44 years old)
- Retirees (65 to 74 years old)
The top-ranked cities are:
- Providence, Rhode Island
- St. Louis
- San Diego
- Sacramento, California
- New Orleans
- Memphis, Tennessee
- Charlotte, North Carolina
- Virginia Beach, Virginia
By Tim Logan, The Boston Globe
Harvard’s Joint Center for Housing Studies issued its big annual report on the rental market Wednesday.
Like other reports of its sort, it found that rents are high, and getting higher.They’re growing faster than incomes. And — despite a surge in multifamily construction in many cities — supply is having a hard time keeping up with demand.
All of it paints a picture of a rental crisis that shows few signs of slowing any time soon.
“The number of renters paying excessive amounts of their income for housing continues,” said Chris Herbert, the center’s managing director.
It’s a thick report, 44 pages. But we pulled out a few highlights:
■ There are a lot more renters than there used to be.
About 43 million American households rent their homes today, up from 34 million in 2005. That’s 37 percent of all Americans, the highest share since the mid-’60s. Who are these new renters? They’re former homeowners who lost homes to foreclosure and have struggled to get a mortgage since. They’re young workers in their 20s and 30s. And, increasingly, they’re baby boomers, who either never bought a house or have sold and downsized into a rental.
■ And more are coming.
Harvard projects another 4.4 million households will be renting by 2025, a more than 10 percent increase from today. More millennials will move out from under mom and dad’s roof. More seniors will age out of their current homes. And growing immigration will continue to increase demand as well.
■ New supply will help, to a point. All the apartment construction in Boston and many other big cities is keeping rent growth in check, but mostly at the higher end of the market.
Developers aren’t building enough units suitable for families or for senior citizens, and high development costs make it hard to produce new housing that a low- or middle-income renter can afford.
■ The rent crunch is becoming a middle-class phenomenon. The number of households paying 30 percent or more of their income in rent has soared, jumping by nearly half a percent since 2001. Among families earning $15,000 or less, 84 percent pay that much, with most forking over at least half their income to the landlord every month.
But as rents have grown and incomes stagnated, more middle-income households are cost-burdened, too. In the Boston area, 38 percent of households that earn between $45,000 and $75,000 a year report spending 30 percent or more of their income on rent.
■ It pays to stay put. People who’ve moved in the last year are paying a lot more for their apartment. In Boston, the average person who moved in the last 12 months has a monthly rent of $1,500, compared to $1,180 for those who’ve been in place at least a year. In a city where Sept. 1 is moving day for tens of thousands, that’s a lot of additional money in the pockets of landlords.
Associated Press, December 9, 2015
The majority of U.S. renters are now older than 40, a fundamental shift over the past decade that reflects the lasting damage of the housing crash and an aging population.
This finding in a report released Wednesday by Harvard University’s Joint Center for Housing Studies overturns the assumption that the rental boom is only the result of twenty-somethings flocking to hip urban centers.
Single-family houses are a growing share of rentals. And affordability problems are mounting as rents rise faster than wages, while apartment construction increasingly targets tenants with six-figure incomes.
Nearly 51 percent of renters have celebrated their 40th birthday, according to the report’s analysis of Census Bureau data. That amounts to 22.4million households.
A decade ago when the housing bubble peaked in 2005, 47 percent of renters – or 16.4million households – were older than 40. Their share was 43 percent in 1995.
The increase in older renters corresponds with a surge in foreclosures after the housing bubble burst.
Since the 2008 financial triggered by the housing bust, there have been roughly 6million completed foreclosures, according to CoreLogic, a property data firm.
Many of these are former owners transitioned to renting.
‘Middle-aged households in particular bore a big brunt of the housing crash,’ said Christopher Herbert, managing director of Harvard’s Joint Center for Housing Studies.
But Herbert also noted that more of the baby boomers born after World War II are growing older, which has also caused sharp increases in the number of renters between the ages of 55 and 69 during the past 10 years. During that same period, the United States has added a total of 9million renters — including younger millennials recent out of college.
But demand has outpaced supply and caused prices to rise.
Rents increased 7 percent between 2001 and 2014 after adjusting for inflation, while incomes fell 9 percent, the report said.
The result is that a larger number of Americans must devote more than 30 percent of their income to rent, a level that the government considers to be financially burdensome.
Over the past decade, that number has jumped from 14.8million to 21.3million, or 49 percent of all renters.
The share of renters being financially burdened has dropped from their 2011 peak, but their total numbers continue to climb.
Construction has done little to ease the problem. Permitting for multi-family construction has increased a robust 17 percent this year.
But the median rent on a newly built apartment was $1,372 a month in 2014, about $500 more a month than what about half of renters could afford without being financially burdened.
Much of the apartment construction has catered to wealthier households looking to live near restaurants, parks, gyms and offices. The number of rental households earning in excess of $100,000 has risen by 1.6million in previous decade.
Even people with decent incomes between $30,000 and $44,999 can’t keep up with the rent in the wealthiest markets. More than 70 percent of renters at this income level are classified as financially burdened in Washington, DC, San Francisco, Los Angeles, New York City and Miami.
‘We’ve gotten ourselves into a deep hole — and it’s not going to be easy to get out of it,’ Herbert said. ‘We expect the affordability problem will persist.’
Read more: http://www.dailymail.co.uk/news/article-3352601/More-half-US-renters-older-40-study-says.html#ixzz3uUbtygVu
By Tim Logan
The Boston Globe
July 31, 2015
These are good days to be a landlord in Greater Boston.
The region is one of the tightest rental markets in the country, according to new data from the Commerce Department this week, and the homeownership rate has fallen to its lowest level in at least a decade.
Just 2.6 percent of apartments here were empty in the second quarter, according to new figures from the Census Bureau. Among the nation’s 25 biggest metro areas, only San Diego recorded a lower figure.
And the region’s homeownership rate, which had held relatively stable around 66 percent for several years even as the nation’s plunged in the aftermath of the housing crash, sunk for the second straight quarter to 58.2 percent. That’s the lowest since the Census began counting in 2005.
While the numbers reflect the hard time many Bostonians have buying a house in this pricey market, experts say they may also herald some good news: A surge of young adults moving to Boston, and out of their parents’ house, as the economy improves. They may not be buying houses just yet. But they’re paying rent.
By Laurie Goodman, Rolf Pendall, and Jun Zhu
June 24, 2015
After completing a major demographic study projecting headship and homeownership rates through 2030, we concluded that demand for rental housing over the next 15 years will dramatically increase—and we as a nation are not prepared.
Our analysis projects that from 2010 to 2030, the growth in rental households will exceed that of homeowners by 4 million, with an increase of 13 million rental households and 9 million homeowner households. That’s five renters for every three homeowners. Compared with the previous 20 years, the increase in homeowners was almost twice that of renters, even with the housing crash: 8.8 million new rental households and 16.1 million new homeowner households.
But what’s driving the large growth in renters? It’s a perfect storm of factors.
- Millennials are finally launched: The large millennial generation—still mostly in their mid- to late 20s—is beginning to build their first independent households, which has always meant more renting. Once they enter their late 30s and 40s, about 10 years from now, they will help homeownership recover, as it historically has as generations have gotten older.
- The young population is becoming increasingly ethnically diverse, a trend that will almost certainly intensify. We estimate household formation will be 77 percent non-white from 2010-2020 and 88 percent non-white from 2020-2030, and African Americans and Hispanics typically have higher rental rates than whites.
- Behavior has changed. Longer-term trends have also reduced young adults’ homeownership rates. They’re delaying marriage and childbearing, and fewer may want to buy houses than in the past.
The recession still lingers. We’re still recovering slowly from the recession, in which 7.5 million homes were lost to foreclosure. Many of these borrowers have not re-entered the market. Stagnant incomes and, to an extent, even greater student loan debt also are partly hangovers from the recession.
- Credit is tight. Mortgage credit is overly tight, making it difficult for many to qualify for a home loan.
- Older homeowners are declining. Since the growth in renters and owners is a product of new household formation as well as attrition, we also have to look at older generations’ roles. Gen X is transitioning out of rental housing, but it has fewer renter households than the incoming millennials, so renter household formation will outpace renter attrition. On the owner side, attrition will increasingly rival formation as baby boomers pass away.
Rental supply must increase
Every one of these factors suggests a falling homeownership rate from now until 2030. The homeownership rate in 2010 was 65.1 percent. Under our average scenario, which assumes that the economy sees modest growth in the coming years, we expect the rate to drop to 62.7 percent in 2020 and to 61.3 percent in 2030. Even so, the absolute number of homeowners will grow because of continued growth in the total number of households, but renters will grow more.
The rapid growth of the rental population will create significant demand for new rental housing construction. The rental demand will shift owner-occupied dwellings to rental units, a change already in motion: 35 percent of renters were in single family homes in 2012 (the latest data available), up from 31 percent in 2005. But shifting houses into rental units alone will not meet the growing demand; more construction is necessary. The last major burst of rental housing construction was in the early 1980s, when federal tax law encouraged the construction of hundreds of thousands of apartments (see the figure). Since then, rental construction has been slower and steadier. And the only affordable new construction has been a result of the Low Income Tax Credit, which produces around 100,000 new apartments annually.
Against this backdrop of limited growth in rental supply are the current low vacancy rates and already rapidly rising rents—trends likely to continue to in the coming years.
by Jay Fitzgerald
The Boston Globe
The American Dream of home ownership is slipping away for an increasing number of people.
The percentage of US households owning their homes slid last year to 64.5 percent, the eighth consecutive year of declines and the lowest level in two decades, according to a report released Wednesday by the Joint Center for Housing Studies at Harvard University.
In Greater Boston, the ownership rate is even lower: 60.9 percent, down from 64.2 percent prior to the recession, according to the latest data.
The culprits for the homeownership decline are easy to identify: rising home prices, stagnant incomes, tougher lending standards, and a lack of housing construction to meet demand, the report said.
These same trends are driving up demand for rental housing and pushing rents higher — rising nationally at about double the rate of inflation, according to the report.
In Massachusetts, the rising cost of rent is particularly acute for lower- and moderate-income households. More than two-thirds of Massachusetts households earning $30,000 to $45,000 a year spend 30 percent or more of their incomes on rent, compared to less than half nationally, according to the report. One in three households earning $45,000 to $75,000 here devote more than 30 percent of their income to rent, compared to one in five nationally.
“They’re getting squeezed,” said Chris Herbert, managing director of Harvard’s Joint Center for Housing Studies. “More or less, this squeeze is happening across the country.”
The center, using data from the US census, assesses the nation’s housing markets each year. Homeownership rose steadily during the 1990s, peaking at about 69 percent of US households in 2004. But homeownership began to slide when the last housing boom turned to bust shortly after that.
“This erases nearly all of the increase from the previous two decades,” Herbert said, “and the trend does not appear to be abating.”
Indeed, an increasing number of people 45 to 64 years old — prime ages for owning a home — are jumping into the rental market, dispelling the notion that it’s mostly struggling young people frozen out of the market who are resorting to renting, the report said.
Millennials, those born between 1985 and 2004, are facing their own obstacles to homeownership, particularly high student loan debt, the report notes.
In Boston, the hurdles may be a bit higher. The city’s housing costs rank in the top 10 among metropolitan areas, according to the study. The median home price in the Boston metro area, about $390,000 in 2014, was nearly double the national median of $209,000, according to the National Association of Realtors.
The median home price in Greater Boston is more than five times the median income, compared with less than four times nationally, according to the Harvard report.
But some positive trends are underway, the report noted. Fewer home foreclosures are taking place across the nation.
Home construction starts have increased in recent years, rising to just over 1 million last year from 554,000 in 2009, during the depths of the recent recession. But new construction still lags the peak of 2 million housing starts in 2005, the report said.
In Massachusetts, housing permits hit nearly 15,000 units last year, up from 7,725 in 2011, the low point for starts following the downturn, said Guy Webb, executive director of the Homebuilders and Remodelers Association of Central Massachusetts, citing census data. But that’s down from the prerecession high of 24,600 units in 2005 and 45,200 housing starts in Massachusetts in 1986, the peak of the 1980s housing boom here, he said.
Home builders mostly blame restrictive zoning regulations in many municipalities for the lack of construction in Massachusetts. “We just aren’t building enough homes,” said Brad Campbell, executive director of the Homebuilders and Remodelers Association of Massachusetts.
The Harvard report noted that the historically low construction levels here and nationally are contributing to low inventories of homes for sale.
SMC Purchases The Holiday Inn Mansfield, a 204 Room Regional Hotel in the “Cabot Industrial Park – Gillette Stadium Market”
June 1, 2015 – Sentry Management Holding LLC, an affiliate of SMC Management Corporation has purchased the Mansfield, MA Holiday Inn, an existing 204 room regional hotel. The Mansfield Holiday Inn was originally developed by Sheraton in 1970 as full service hotel with 70,000 SF of meeting & function space situated on 11.2 acres of land South of Boston at the intersections of Route 95 and 495 in the Gillette Stadium – Cabot Industrial Park market.
As with the Envision Boston Hotel at 81 South Huntington Avenue (Hospital District), SMC will lease the property for 20 years on a fully net basis to Global Vision Hotels www.globalvisionhotels.com. GVH is a privately held regional operator of hotels based in Needham, MA.
While the current owners have maintained the property in good condition, it is reaching the end of its current life cycle. SMC, with operating partner Global Vision Hotels, will completely renovate the entire property, enabling it to compete effectively for the next 7-10 years. SMC and GVH believe that the core features of the property provide it with a competitive edge over other full service competitors such as:
The Holiday Inn’s location, in the Cabot Business Park, whose 850‐acres contain five million square feet of office and light industrial space, is also within a 15 mile radius of over 3.5 million square feet of occupied commercial space. The hotel’s location at the intersection of routes I‐95 and I‐495 provides excellent proximity to premier leisure attractions such as Gillette Stadium, (New England Patriots ‐ National Football League and New England Revolution – Major League Soccer), Xfinity Center (19,900 seat entertainment venue), and the TPC Championship Golf Course. The hotel is only a short drive from the popular tourist destinations of Cape Cod, Providence, Boston, and Plymouth. The Holiday Inn is also surrounded by several retail amenities such as Mansfield Crossing, Emerald Square Mall, Patriot Place, and Wrentham Village Premium Outlets.
SMC Management Corporation www.smcmgtco.com is a fully integrated, Boston‐based real estate investment, development and asset management firm. Located in Metro Boston with a satellite office in Manchester, New Hampshire, SMC acquires and manages commercial and residential properties in New England and other select markets on behalf of its investors.
SMC Purchases Washington Mills, a class “A” 155 Unit Mill Rehabilitation, from Bank of America
April 1, 2015 – Sentry Management Holding LLC, an affiliate of SMC Management Corporation has purchased Washington Mills Apartments (“Washington”) from Bank of America (“BOA”) for $17.9MM. Washington Mills is an existing 155 unit Class A mill rehabilitation apartment complex located in Lawrence, Massachusetts. Redeveloped in 2006 – 2007, the property is less than 10 years old, has been maintained as a Class A property and offers exceptionally large units with a variety of floor plans. Washington Mills was redeveloped by The Architectural Foundation, a non-profit housing company located in Boston. Using both Federal and State tax credits, TAF partnered with Bank of America who provided both the construction loan and purchased the tax credits. Total redevelopment costs were +/- $43,000,000 ($277,400/unit).
Washington Mills www.wmlofts.com is located on the banks of the Merrimack River, walking distance to the Lawrence commuter rail station, and within 1 mile of I-495 offering outstanding access to all of the Merrimack Valley as well as Metro Boston and Southern New Hampshire. The property is one of many located within the Washington Mills complex that was originally developed as a cotton mill and, as that industry headed south, retrofitted to many other uses.
SMC Management Corporation www.smcmgtco.com is a fully integrated, Boston‐based real estate investment, development and asset management firm. Located in Metro Boston with a satellite office in Manchester, New Hampshire, SMC acquires and manages commercial and residential properties in New England and other select markets on behalf of its investors.
Published: May 3, 2015, Manchester Union Leader
MANCHESTER — A Massachusetts developer is close to securing the rights to develop 150 apartments adjacent to the Fisher Cats’ baseball stadium, the final linchpin in a decade-old city strategy that promised a city ballpark paid for by residential and commercial development.
Stephen Chapman, a principal partner with the Watertown-based SMC Management Corporation, said he has worked out an agreement to acquire the development rights for the project from Chinburg Builders.
He said the deal could close the middle of this month, and construction on the $22.5 million project would begin shortly afterward.
“I think this will work,” said Chapman, who said he has tried to work out a deal for the last three to four years. “It looks like this is all going to happen.”
Plans call for three buildings on a lot just south of the Northeast Delta Dental Stadium, where the Riverwalk intersects with the Hands Across the Merrimack Bridge.
Parking would be on a ground level, topped by four stories of apartments. Chapman, whose area holdings include the Sundial Center in Manchester and University Heights in Hooksett, estimated that two-bedroom, two-bathroom apartments will rent for about $1,500 a month.
“We are confident there will be subscribers to the units,” he said. “There is a group of people who want to live in Class A apartments as a lifestyle choice.”
The development could make the long-ago promise of a no-cost city baseball stadium, now 10 years old, a reality. Under former Mayor Bob Baines, the Board of Mayor and Aldermen devoted $27 million to build the stadium, with the expectation that ballpark fees and property taxes generated from a hotel and nearby condominiums would cover the debt on the stadium.
Although the Roedel Companies quickly built a Hilton Garden Inn and Chinburg slowly added townhouse-style condominiums, the larger condominium structure never materialized.
That means city taxpayers have been covering any shortfall. This year, the development fell about $609,000 short of its break-even point, according to City Finance Director Bill Sanders.
In the last 10 years, shortfalls in the baseball development have added up to $5.16 million, Sanders said.
If the city’s current tax rate of $23.50 is applied to Chapman’s all-cost estimate of the project, the city would be less than $100,000 short of the break-even point.
Chapman stressed that his company does not build and sell condominiums, and the units will be apartments. About half will be two bedrooms; the rest will be one bedrooms and a few studios.
He expects it will take 12 to 15 months for construction to be completed; his company is in discussions with Pilot Construction of Portsmouth to oversee the project.
Robert Duval, a designer with TF Moran, said the project design incorporates elements of the Millyard and the nearby condominiums. A courtyard will be in the middle.
Duval said the exterior will comprise both brick and conventional siding, and a tower element will be on the roof.
Plans also call for balconies in some units. Chapman said the development will have a fitness center and a business center, where wifi, printers, computers and office furniture will be available.
Chapman said his company is a downstream developer. It purchases development rights from someone who has already obtained regulatory approvals. When he acquires a project, he expects all approvals will be in hand except for a building permit, which can be quickly obtained.
“Cleaning up loose ends in a permitting process can take months,” he said.
He said companies are moving to Manchester to avoid high rental costs in Boston. He said New Hampshire is one of his favorite markets because of the barriers potential competitors face when they approach planning boards.
“The permitting process is long and arduous in New Hampshire,” he said.
See more at: http://www.unionleader.com/apps/pbcs.dll/article?AID=/20150504/NEWS13/150509822/1015/news13&template=printart#sthash.JsHijy9f.dpuf
Published: November 12, 2014
240-unit apartment community sold for $25.8 million
CBRE/New England’s Capital Markets team announces the sale of Windsor at Brentwood, a 240-unit, garden-style apartment community located in North Providence, Rhode Island, for $25.8 million. CBRE/NE’s multifamily experts Simon Butler, Executive Vice President/Partner, and Biria St. John, Executive Vice President/ Partner, exclusively represented the seller, Bower Hill Associates, an affiliate of GID Investment Advisers LLC, and procured the buyer, Brentwood Apartments Limited Partnership, an affiliate of SMC Management LLC.
“We are pleased to have facilitated this transaction on behalf of the seller,” said CBRE/NE’s Butler. “Windsor at Brentwood represents an outstanding opportunity for SMC Management to acquire a true value-add opportunity and marks a successful investment for our client.”
Built in 1988, Windsor at Brentwood is located in North Providence, Rhode Island. The community consists of 12 two- and three-story garden-style buildings with a mix of 178 one-bedroom apartments and 72 two-bedroom apartments on approximately 12 acres of land. The apartments range in size from 541-965 square feet with an average size of 692 square feet. The community had been partially renovated at the time of the sale with 166 units having received both kitchen and bathroom renovations along with the community amenities.
About GID Investments Advisers, LLC
GID is a privately held, globally diversified, and fully integrated real estate organization founded in 1960 that employs over 600 real estate professionals in multiple offices throughout the United States. During its 54-year history, the company has acquired or developed over 60,000 residential units and in excess of 15 million square feet of commercial space. GID controls a real estate portfolio consisting of 82 existing properties located in 15 states, comprised of 68 multifamily properties totaling 18,633 residential units (including 586,615 square feet of commercial and retail space) and 14 office and flex/industrial properties totaling 4.3 million square feet. In addition, GID has 12 multifamily properties under development in five states consisting of 3,279 residential units.
GID is involved in a variety of asset classes and real estate disciplines, and pursues opportunities both nationally and internationally. The company is engaged in all aspects of real estate investment, ownership, and operation and has divisions that specialize in development, acquisitions, real estate investment funds and separate accounts, international real estate investing, real estate hedge funds, property management, portfolio and asset management, and advisory services.
About SMC Management, LLC
Stephen M. Chapman founded Heritage Associates in 1978, which later became SMC Management Corporation. Steve has 33 years of active involvement in the development and management of residential and commercial properties in the Greater Boston area. SMC Management Corporation and its affiliates have owned and operated over 8,000 residential apartments and 500,000 square feet of commercial space in over 40 individual private partnerships.
SMC values its long-term relationships with our investors, various deal sources, partners and employees. SMC hires and partners with dependable individuals and organizations with the integrity and experience to deliver on company commitments to tenants and investors alike. A hands-on, service-oriented property owner and manager, SMC is intently focused on providing outstanding service while growing NOI and investment returns. A strong capital base, agility in decision-making, and strategic alliances enables SMC to provide significant capital appreciation for their equity investors.
SMC’s team has been together for many years and maintains a large network of industry professionals including Simon Butler and Biria St. John’s team at CBRE/New England.
About CBRE/New England
CB Richard Ellis – N.E. Partners, LP, a joint venture with CBRE Group, Inc. has offices in Massachusetts, Connecticut, Rhode Island, Maine and New Hampshire. Please visit our website at www.cbre-ne.com. CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2013 revenue). The company has approximately 44,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through approximately 350 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting.
Published: September 2014
By: Marie Szaniszlo, Bostonherald.com
Without making changes, the nation will be unprepared to meet the housing needs of an aging population that is experiencing unprecedented growth, according to a new study by Harvard University’s Joint Center for Housing Studies and the AARP Foundation.
By 2030, one in five Americans will be 65 or older, compared to one in seven today, but the current supply of housing that’s affordable, physically accessible and coordinated with services will not be enough to meet the demand, according to “Housing America’s Older Adults: Meeting the Needs of an Aging Population.”
“Housing is so critical to so many elements of wellbeing,” said Chris Herbert, acting managing director of the Joint Center for Housing Studies. “Aging brings increasing risks of disability, isolation and financial stress. We do have time to prepare, but we have to start now.”
This can be done through incentives or mandates for accessibility features in new housing; tax credits for homeowners or builders adding such features; and federal, state and local funds to help homeowners modify their homes, Herbert said.
Calling the report a “wake-up call,” Henry Cisneros, former U.S. Secretary of Housing and Urban Development, said most people prefer to age at home, and it’s cheaper to build accessibility features into new housing than to renovate existing homes.
Sue Temper, assistant secretary of the state Executive Office of Elder Affairs, said the Patrick administration has taken steps to prepare for the aging population, including expanding its Supportive Housing Program, which offers “an assisted living-like” environment, to 41 sites in public housing for seniors.
Published: February 2014
By: Jim DeStefano, Colliers International, Manchester NH
We are happy to announce that the former Hesser Center on Sundial Avenue in Manchester has changed names to The Sundial Center. The Sundial Center is recognized for its extensive telecommunications bandwidth capability and significant electrical infrastructure with hardened infrastructure for multiple, diverse, communication path for backup and redundancy. It has large carrier-class infrastructure equipment facilitating rapid hookups and minimizing lead times and supports inside cable plant and cross-connects for large scale operations.
Exposed brick and natural lighting enhance the space. Suite sizes vary. There are 4 common dock height loading doors and 2 renovated 4,000 lb. capacity freight on site. Ample on-site parking with 3-4 spaces per 1,000 SF exists. Perfectly located minutes from the Manchester-Boston Regional Airport, downtown and major highways, including Interstates 93 and 293, as well as Routes 101 and 3.
Added benefits include on-site property management and daycare, space planning and beautiful views of Mount Uncanoonuc and the Merrimack River. Please call for more information or to set up a showing at The Sundial Center.
Published: January 2014
By: Urban Land Institute
Read Entire PDF
Commercial real estate is reaching an inflection point where “valuations will no longer be driven by capital markets.” In 2014, Emerging Trends interviewees expect “space market fundamentals and property enhancements to emerge as the primary drivers of total returns,” reducing the reliance on falling capitalization rates and high amounts of leverage. The real estate recovery will gain momentum in 2014. This should be good news to an industry that has experienced a recovery of fundamentals that has been much slower than it is used to after a recession. In fact, the pace of the recovery can make it difficult to spot the signs of improvement until they are in full swing. At first glance, many of the trends identified for 2014 are similar to those identified in previous years.
These trends were relevant when originally identified, but the slower pace of this economic recovery prevented them from coming to fruition in the expected time frame. The difference for 2014 is that the market has progressed further through the economic and real estate cycles and we are now seeing real evidence that the trends have the momentum to finally make an impact on the real estate market.
Published: January 2014
By: Dawn Wotapka, Wall Street Journal
Apartment landlords continued to push through higher rents in many cities in the fourth quarter, offering little relief for renters who have seen increases over the past few years. Nationwide, landlords raised rents by an average of 0.8% to $1,083 a month in the quarter, according to a report to be released Tuesday by Reis Inc., a real-estate research firm. While that is below the previous quarter’s 1% increase, it is above the 0.6% gain seen in 2012’s final quarter. Rents climbed 3.2% for all of 2013.
The vacancy rate, meantime, fell to 4.1% in the fourth quarter from 4.6% in the year-earlier quarter, remaining well below the 8% peak at the end of 2009.
“Demand for apartments remains strong,” wrote Ryan Severino, a senior economist with Reis. “Not even the seasonal weakness normally observed during the fourth quarters of calendar years had much if any impact on the market dynamics.”
Landlords have enjoyed the upper hand since the housing crisis as increased interest from renters coincided with little new supply of rental units. But developers are racing to deliver new apartments, raising the prospect that rental increases will slow—or rents could flatten—amid a flood of new developments.
Nearly 42,000 units were completed in the fourth quarter, the most since the fourth quarter of 2003, and about 127,000 for all of 2013, according to Reis. “New construction’s Pandora’s box has most definitely been opened,” Mr. Severino said. This is “a harbinger for what is to come over the next year.”
In 2014, completions should total more than 160,000 apartments, roughly one-third more than the long-term historical average, according to Reis. That could cause the national vacancy rate to rise slightly for the first time since 2009.
CoStar Group, another real-estate research firm, predicts new-apartment supply will peak this year at 220,000, but an additional 350,000 units will hit the nation’s 54 largest markets in 2015 and 2016 combined.
Much of the construction is in large cities with extensive public transportation, such as Washington, D.C., and San Francisco. Developers are targeting younger renters willing to pay top dollar for smaller units in buildings with lavish shared amenities, such as outdoor theaters and large gourmet kitchens for groups. Industry-watchers warn these markets in particular could see a correction.
But so far, none of the markets tracked by Reis saw average rents decline. A key reason is that rentals are attracting people who are unable to buy.
Rising mortgage rates, tighter borrowing requirements and higher home prices have put many people out of the housing-purchase market. Plus, many people remain burned by the housing crash and don’t want to own a home “Many current renters have financial, credit and mobility constraints,” said Luis Mejia, CoStar’s director of multifamily research, adding he isn’t as worried about apartment oversupply as some of his peers.
Rent-price growth remained hot in markets benefiting from the tech boom: Seattle saw the highest year-over-year rise, according to Reis. Rents there soared 7.1% in the fourth quarter from the same quarter of 2012, to $1,139. San Francisco and San Jose both saw rent-price gains of over 5% from a year ago.
New York City remained the most expensive market: Rent climbed 4.1% from a year earlier to $3,105. But its vacancy rate rose 0.5% from the prior year to 2.7%.
Jason and April Richland recently moved from a cramped space in Manhattan to a larger unit in nearby Jersey City, N.J., where their apartment boasts space for a wine rack and a view. “Love it. We can entertain now,” Mr. Richland said.
New Haven, Conn., remained the tightest rental market, with a vacancy rate of 2.2% in the fourth quarter. San Diego and San Jose, Calif., followed at 2.6% and 2.7%, respectively.
Published: November 2013
By: Jason Schwartz, Boston Magazine
It was long assumed that Suffolk Downs had the inside track on the single casino license Massachusetts will issue in the Boston area. But that was before billionaire Las Vegas mogul Steve Wynn’s whirlwind courtship with the blue-collar city of Everett and its mayor, Carlo DeMaria. Now the race between Wynn and Suffolk Downs is entering the home stretch…even if, as he tells us, Wynn doesn’t think there’s any competition.
It was a muggy, overcast August day and Carlo DeMaria, the mayor of Everett, had called a press conference to pick a fight with Tom Menino. The affair was being held in the south of town, at the old Monsanto chemical site on the banks of the Mystic River. With shrubbery poking through the rock-and-gravel surface of the 37-acre plot, it looked like an overgrown moonscape, or, at the very least, the set of a bad dystopian action movie. The place has been all but abandoned for decades, too contaminated for use. But Las Vegas casino mogul Steve Wynn is proposing to clean it up in order to build a $1.2 billion gambling palace.
To escape the drizzle, the few dozen people in attendance crammed together under a small tent to hear DeMaria speak. “For too long, Everett has been treated like a second-class city to Boston and Somerville,” steamed the mayor, a big and wide fellow with a scrunched-up face and slicked-back hair. “We just want some respect.”
At issue was Menino’s recent claim that Wynn’s proposed casino site creeps over the Everett-Boston border. By the letter of the Massachusetts gaming law, that would have given the Boston mayor veto power over Wynn’s application for a casino license. The state will award only one license in the Boston area, and Menino, a loud supporter of a bid from the Suffolk Downs horse track in East Boston, would love to clear the field of any competition.
DeMaria thundered from the lectern that Menino would not be allowed to “bully the city of Everett.” For DeMaria, who, at age 40, has been mayor since 2008, this project is everything. His city and its 42,500 residents have long shouldered many of Boston’s burdens, serving as the region’s de facto engine room: Everett’s 3.36 square miles are crammed with industrial sites and scrap-metal yards, to say nothing of the 21 ExxonMobil oil tanks or the giant MBTA maintenance facility, without which the T could not function. And every week, tankers as long as three football fields carry millions of gallons of liquefied natural gas—a substance so volatile that an attack could spark a fireball a mile wide—down the Mystic River to dock in the city. The gas fuels an adjacent power plant that churns out 30 percent of Greater Boston’s electricity.
The plot where DeMaria stood is yet another example of Everett’s history of doing the region’s dirty work. In 1868 New England Chemical opened a plant there—sold to the Monsanto Company in 1929, after bouncing around between a few owners—that pumped out chemicals for the better part of a century. Those chemicals, shockingly, were not always disposed of properly. Today, the site is rife with arsenic, lead, petroleum waste, and the residues of sulfuric acid. Swimming in the water is not recommended.
Prosperity may not always be easily within reach in Everett, a city with a median household income of just under $50,000, compared with more than $60,000 statewide, but it is teasingly within sight. From where DeMaria stood, he could look in one direction and see the booming yuppie haven of Charlestown, and, in the other, resurgent Somerville and its new multimillion-dollar Assembly Row development.
It’s not as if Everett is unaware of the potential pitfalls of a casino: City officials have heard the arguments about traffic, crime, and gambling addiction. But standing at the podium, DeMaria could see opportunity around him where there used to be only an ugly, useless brownfield. And so the mayor had thrown himself behind the Wynn proposal, insisting that a rehabilitated Monsanto site, with a spectacular casino on it, would spark a renaissance in Everett and at last deliver success and stature to the blue-collar city. Behind him as he spoke was a giant red banner declaring, “It’s Our Time.”
As the press conference was about to conclude, a reporter, citing the struggles of other places that pinned their turnaround hopes on gambling, piped up with one last question: What will make this casino proposal different from all the others that have promised civic redemption, but failed?
“The difference,” DeMaria replied, “is Steve Wynn.”
“You’re telling me there’s no better part of Everett than where I was?” Steve Wynn asks. He’s talking about the proposed casino site. No, I explain, it’s not all quite like that. Sitting in his “villa” at the Wynn Las Vegas—essentially an apartment built into the hotel’s first floor—he tells me he has visited town three times and not seen much besides the site. “You can see now,” he says, speaking of Everett, “I know not very much.”
Dressed in black leather boots, navy pants, and a short-sleeve shirt with a couple of buttons open, exposing a tuft of chest hair, the billionaire Wynn gets up to show me around. On the far wall hangs a Picasso called La Femme au Chat. Across from it is another, the artist’s self-portrait Le Marin, which Wynn got as part of a swap for Le Rêve, the Picasso masterpiece he restored after accidentally sticking his elbow through it seven years ago. And nearby is Lichtenstein’s Deep in Thought, a colorful pop-art painting of a woman holding her head in her hands. That, Wynn says, “is a position I’m frequently in, ’cause I sit like this with a felt-tip pen, ’cause I’m a designer.”
In fact, throughout his nearly 50-year career, Wynn has been a visionary. From the moment the first neon light flickered on in the Nevada desert, casino operators had thought of their buildings as just four walls to hold slot machines. Wynn’s idea to turn them into palaces of opulent design and over-the-top amenities has been credited with revolutionizing Las Vegas. When he opened the Mirage in 1989, the unheard-of $630 million price tag was called reckless, but his bet paid off when gamblers flocked to the luxury resort. The $1.6 billion Bellagio repeated that success in 1998, and then, after MGM Grand launched a takeover of Wynn’s company and bought him out two years later, he started a new one. Wynn Resorts opened the $2.7 billion Wynn Las Vegas in 2005, adorning the Strip with its undulating bronze glass exterior. It’s since been joined by a sister resort next door, the Encore, and the Wynn Macao, in China. The 71-year-old Wynn is fond of pointing out how his buildings, heavy on glass and natural light, win top honors and accolades. And how 60 percent of his company’s revenue comes from non-gaming sources, such as hotel rooms, nightclubs, restaurants, and spas. Of course, for all the high-minded talk of choosing aesthetics over Las Vegas schlock, Wynn’s hotels are still subsidized by his take from the casino floor, where the costs are low and the margins are high. Even if downplayed, the slot machines remain vital.
Wynn leads me into the next room in his villa, where he keeps his drafting table. It’s here that he designed the Wynn Everett concept, which borrows heavily from another building he’s proposed for Philadelphia. Unveiled in March, the Everett plans call for a 551-room hotel tower featuring his signature “Wynn bronze” glass. At its base is the casino, with a long retail mall extending out from it, along with a lush indoor “winter garden” and an outdoor park on the Mystic waterfront. Greater Boston, Wynn tells me, “could use one real lulu of a hotel.” With a casino there to churn out a handsome profit, of course.
There is, however, no guarantee that he’ll ever get a shovel in the ground. When Massachusetts legalized casinos in November 2011, it split the state into three zones: west, southeast, and east, including Greater Boston. The state gaming commission is allowed to issue just one casino license for each region, and has encouraged multiple bidders to compete against one another. Final applications are due December 31, and the five-member commission’s decision on who wins each license is expected to be delivered around April 2014.
The presumed favorite to win the Boston license has long been the politically connected Suffolk Downs, which partnered in 2011 with Caesars Entertainment to create a proposal for a $1 billion project that includes a casino, 450 hotel rooms, restaurants, shops, and a renovated horse track. But that has not deterred Wynn, who for years has wanted in on Boston. Like many developers, he believes that the area’s wealth, tourism, and international appeal make it one of the last great untapped gambling markets in the country. He started looking here as far back as late 2007, when it first appeared that the state might legalize casinos. More recently, he poked around the Seaport with the developer Joe Fallon (Menino quashed that idea immediately, Wynn’s lobbyist says), before buddying up with Patriots owner Bob Kraft in late 2011 to pitch a casino beside Gillette Stadium in Foxboro. That bid—a direct challenge to Suffolk Downs—appeared to have a legitimate shot, but when town residents revolted five months later, electing anti-casino selectmen to oppose the project, Wynn had to go slouching back to Vegas. A developer named David Nunes was still out there with a proposal for a casino in Milford, but Gary Loveman, the Ceasars CEO, felt triumphant. In a Globe interview two months after Wynn’s retreat, Loveman dismissed Nunes’s suburban concept and said he doubted any other serious competitors would emerge in the region to challenge Suffolk Downs. “I think it’s unlikely [another bidder will surface] because the cost of now mounting a bid is substantial,” he told the paper. It all seemed in the bag.
Landlords See Vacancies Fall and Rents Rise
Published: September 30, 2013
By: Dawn Wotapka, The Wall Street Journal
Landlords passed along hefty rent increases to tenants this summer, an indication that rising home-buying costs are helping heat up demand for apartments. The average monthly rent in the third quarter was $1,073, up 1% from the prior quarter, the largest quarterly gain in a year, according to a report to be released Tuesday by Reis Inc., a real-estate research firm. Compared with the third quarter a year ago, average monthly rent was up 3%. None of the 79 markets tracked by Reis saw rents fall.
The rental increases were stronger than industry watchers expected and represent a turnaround from the past several quarters when it appeared that rent growth was slowing, reflecting falling demand for apartments as more families decided to buy homes. But as mortgage rates jumped over the summer, following big increases in home prices, the rising cost of homeownership has priced many families out of the housing market.
“Rising mortgage rates are definitely a speed bump for new- and existing-home sales and that certainly benefits landlords,” said Ryan Severino, a Reis senior economist.
After listing a two-bedroom Atlanta unit for rent in July, Chad Corley received a significant number of inquiries, he said. Within a few days, three prospective tenants were vying for the unit listed at $1,600 a month. Atlanta saw its rents climb 2.9% from the prior year to an average of $809. Its vacancy rate is 6.2%.
New York City remained the nation’s most expensive market in the third quarter, with average rents climbing 2% from the prior year to an average $3,049. But cities in the West had the strongest rental growth, particularly in technology-centered cities. Seattle led the nation with a 7% rent gain when compared with a year earlier, for an average rent of $1,124; San Jose, Calif., saw rents climb 5.2% to an average of $1,686.
Some argue that rents can’t keep climbing at the current pace. In the past five years, rents have risen 7.6% nationally, according to Reis, and in excess of 10% in some markets. “You just can’t have double-digit rent growth every year or rents would be a million bucks,” said Bob Faith, founder of Greystar Real Estate Partners, a Charleston, S.C.-based company that owns and operates about 216,000 rental units nationwide.
But there’s another reason why some expect the rent increases to slow: a flood of new supply on the horizon. Some 170,000 new units could hit the country’s largest 54 metropolitan markets this year—about 120,000 have already been finished—followed by 190,000 in 2014 and 300,000 more units in 2015-16, according to Luis Mejia, director of multifamily research for CoStar Group, a real-estate data firm. “We see a lot of supply coming, no doubt about it,” he said. “But, younger people are renting longer than previous generations.…There is the notion that homeownership will come, but will come later in life, not as quickly as it was before the recession.”
Multifamily construction typically takes several years, so developers who haven’t yet broken ground are likely to be more cautious about what they’re building and where. “At this point in the apartment cycle, they need to evaluate their options” by gauging local demand and housing preferences, he said.
San Jose, New York, suburban Virginia, and Washington, D.C., each saw inventory of apartments increase by at least 0.9% during the third quarter, one of the largest since Reis began keeping track in 1980. The firm expects new supply to affect the vacancy rate, which could slowly drift upward beginning next year.
During the third quarter, the national vacancy rate—which hit 8% in the aftermath of the financial crisis—slipped to 4.2% from 4.3% in the prior quarter and 4.7% a year ago.
New Haven, Conn., and Syracuse, N.Y., had the nation’s lowest vacancy rates, 2% and 2.1%, respectively, likely buoyed by the return of college students during the third quarter, Reis said.
With few apartments available, the concessions—from free rent to gift cards—seen after the financial crisis are rare. Brokers say they’re urging would-be renters to make decisions quickly, have their checkbooks and other documents on hand and to at least offer the asking rent. “It’s not worth haggling over a few bucks,” said T.J. Rubin, managing broker of Fulton Grace Realty in Chicago.”We’ve had people lose out because they’ve hesitated and we’ve had people lose out because there are multiple offers.”
Published: August 13, 2013
By: Craig Karmin, The Wall Street Journal
Private-equity firm Blackstone Group LP is making one of the biggest bets on rental apartments since the financial crisis. The New York firm has agreed to buy majority stakes in 80 apartment complexes from the financing arm of General Electric Co. in a deal that values the portfolio at $2.7 billion, according to people familiar with the agreement. The apartment buildings, with roughly 30,000 units, are in Dallas, Atlanta and other parts of Texas and the Southeast.
It isn’t clear how much equity Blackstone is putting up for the transaction, but it is expected to be close to $1 billion, these people said. A spokesman for Blackstone and a spokeswoman for GE declined to comment.
With the investment, Blackstone is wading into a debate in the real-estate-investment world over the future of the rental market. Apartment buildings have been the hottest real-estate sector since the downturn because of strong demand from people unable or unwilling to buy homes. Rents and occupancy rates have been rising while the prices investors have been paying for apartment complexes have moved into record territory.
But in recent months, some analysts and investors have begun to worry that the party is coming to an end. They have warned that the recovery of the single-family-home market will erode demand for apartments and that competition is increasing from new supply being developed in many parts of the country. “I would expect multifamily rent growth to begin decelerating because of the new construction,” said Tad Philipp, director of Moody’s Investors Service’s commercial-real-estate research.
Some big-name investors believe that the outlook remains bright. Earlier this year, AvalonBay Communities and Sam Zell’s Equity Residential paid $6.5 billion in cash and stock to Lehman Brothers Holdings Inc. for Archstone Inc. That deal, which valued Archstone at $16 billion, including debt, was closely watched partly because auditors cited Lehman’s investment in Archstone as a big contributor to that firm’s bankruptcy filing in 2008.
The apartment sector is being boosted in part because most of the recent job growth has benefited people 34 years old and younger, according to Richard Campo, chief executive of Camden Property Trust, a Houston-based real-estate investment trust that owns and operates apartment buildings. “Those are our customers,” he said.
Investors who purchased apartment buildings early in the downturn have enjoyed sharp increases in value. Moody’s apartment index, which tracks the national average price of multifamily rental buildings, is up 59% from its 2009 lows, compared with a 35% gain for its National All Property Index.
The rise in values has been propelled by rent increases of 2.3% in 2010, 2.4% in 2011 and 3.8% in 2012, according to Reis Inc., a property-research firm. Vacancy rates, which hit a 30-year high at 8% in 2009, are now at 4.3%, a 12-year low.
In Houston, for example, average apartment rents increased to $799 a month in the second quarter, up 4.4% from the second quarter of 2012. In Seattle, rents were up 6.2% in the same time frame to $1,096.
The big question now hanging over the market is whether or not these trends will continue to push values higher.
In the past year, investors in real estate investment trusts have been getting increasingly wary. The compounded return for the apartment sector declined 3.23% in the past 12 months, compared with an 8.76% increase for all equity REITs, according to the National Association of Real Estate Investment Trusts.
But others point to a number of market forces that could keep renters in place longer than they otherwise stay during an economic recovery. Despite low mortgage rates, many would-be homeowners are finding that they can’t qualify for a mortgage because lending standards remain tight or because they don’t have enough regular employment to qualify for a loan. Others have dings on their credit or have struggled to save for a down payment.
At the same time, the supply of homes for sale remains constrained, putting a crimp on sales. While home prices have been rising, they still are down sharply from their 2006 peak in many parts of the country and many owners have been unwilling to sell at these levels.
Investors bullish on the rental apartment sector also note that lending is plentiful thanks to Fannie Mae and Freddie Mac, which have been providing financing to owners of apartment buildings. Buyers of other kinds of commercial real estate have had a more difficult time getting loans for their deals.
Mr. Campo said that while construction of apartment building is picking up, it slowed considerably during the downturn when new supply fell from an average of 250,000 units a year to 75,000 units a year in 2009 and 2010. Builders are only now starting to address that imbalance, says.
“It will take at least three or four years to fill that deficit,” Mr. Campo said. “Everything today is being built to meet new demand.”
Blackstone’s apartment purchase from General Electric is its largest U.S. real estate investment in two years, as it continues to buy from a record $13.3 billion global real-estate fund it recently raised.
In the past couple of weeks, Blackstone has gotten attention for its plans to sell high-profile property and hotel companies. The New York firm recently tapped four banks to prepare Hilton Worldwide Inc. for what could be a multibillion-dollar public offering, and it has taken steps to sell or take public two other hotel companies and a retail-property company.
But in the property market, Blackstone’s latest major acquisition shows that one of the biggest private-equity firms isn’t making a one-directional bet.
Blackstone has come relatively late to the rental apartment sector but it has been betting on the housing market in other ways. The firm has invested more than $5.5 billion to buy more than 30,000 single-family homes in about one dozen major U.S. markets. The strategy is to rent those homes out for now and sell them as home prices rise.
For GE, the sale is part of an effort to sell down its real estate portfolio. GE boosted its equity investments in commercial property in the years before the financial crisis, but its portfolio suffered during the downturn. The company has since taken steps to sell down its real estate holdings, which may have made it made it a motivated seller of the large portfolio.
It’s unclear if Blackstone plans to renovate these buildings, or how it intends to get the high-teen to 20% returns it usually seeks. Initial yields on apartment buildings nationwide are around 6%, and lower in popular markets, according to Real Capital Analytics Inc., a real estate data firm.
It’s also not clear how much equity Blackstone is putting into the transaction, but the firm typically relies on debt for about two-thirds the value of properties or portfolios it acquires. By that measure, Blackstone would be investing roughly $900 million in the GE transaction.
Published: July 26, 2013
By: Benjamin C. Klein, Union Leader Correspondent
HOOKSETT — As construction of the 204-unit University Heights apartment complex nears completion, developers of the $20 million development expect it to be fully rented within six months. Despite economic conditions over the last few years that have rendered the housing market occasionally stagnant, co-owner John Halvorsen said the market for rental properties has remained strong. “It’s always a risk when you undertake a project like this, but there seems to be strong demand for rental properties, and we did a lot of reconfiguring of the project, making more one-bedroom units to make it more affordable,” Halvorsen said.
With only two residential units left under construction and seven already built, Sharon Breigner of CPManagement of Exeter, which is managing the 15 Princeton Drive property for the owners, SMC Management Corp. of Boston, said University Heights is nearly 50 percent full. The complex is about five miles from Southern New Hampshire University.
“We don’t look at the economy as difficult now. Everyone needs a home, and this is one of the newest places in the area, and it has been very well received,” Breigner said. Breigner said the project is good for the local economy.
“Certainly it is an indication that Hooksett is a desirable place to live. It provides workforce housing for people starting out that might have a hard time finding affordable places, which is a good thing. And it adds to the types of housing that are available in town, and that is always good,” Hooksett Town Administrator Dean Shankle said.
However, Halvorsen said it might be years before he and his partners know if they have a profitable venture on their hands. “It takes several years to get a foothold of what your values, like rental streams, are. Right now a lot of it is projections, though so far they are materializing,” Halvorsen said.
Halvorsen, who said he and his partners purchased the project and its land nearly two years ago, added that Hooksett was an easy town to work with. “When we had to make changes and reconfigure the project, they were right along with us every step of the way,” Halvorsen said. However, he said he is paying more taxes on the property than he would like.
Under construction for nearly a year, Breigner said the plan is for all construction to be completed by Under construction for nearly a year, Breigner said the plan is for all construction to be completed by September. Calling the apartments a marriage of affordability and quality, Halvorsen said he has been pleased by the reactions of new tenants.
“I am comfortable with where the market and economy has been for a project like this, which has been good for rental properties. The market is asking for affordability and quality, and that is what we have tried to do here,” Halvorsen said.
While most of the units are one bedroom, Breigner said it is a misconception that they are targeting university students as tenants. “We are more looking for young professionals,” she said.
Published: Friday, January 25, 2013
By: Diana Olick, CNBC Real Estate Reporter
As the old adage goes, if you can’t beat ‘em, join ‘em. Precisely what some of the nation’s home builders are doing. Faced with heavy competition from a hot rental market, they are turning some of their resources to building multi-family, rental apartment buildings. “There is always a need for construction of multi-family, and it has always been an important part of the housing picture,” says Stuart Miller, CEO of Miami-based Lennar, one of the nation’s largest public home builders. New home sales are better than they were a year ago, but were still a big disappointment. Changing demographics have been driving rental demand, despite the improving housing market, reports CNBC’s Diana Olick.Lennar executives announced that the company has a development pipeline of over a billion dollars earmarked for multi-family and expects to build over 6500 units. It will start construction on 3000 of those in 2013. In partnerships with other developers, Lennar is already building 264 units in suburban Atlanta and 316 units in Jacksonville, Florida. Both are expected to be delivered by the middle of this year. Pennsylvania-based Toll Brothers also expanded into the rental market.
Since 2005, according to the U.S. Census Bureau, every new household formed has been a rental household. The sector has been underbuilt since 2004, so there is a lack of product available, which in turn has caused rents to rise steadily in most markets. New construction is increasing, but it is not even close to outpacing demand.
“This increase in new construction is congruous with the strength in market fundamentals – strong performance is serving as a catalyst for new development,” said Ryan Severino of Reis Inc. “If anything the amount of new completions that have been delivered up to this point is low relative to the strength of the apartment market.
” There were just over 200,000 multi-family housing starts in 2012, according to the U.S. Commerce Department, far lower than the annual average of 340,000 over the past decade.
“We are still woefully short of what’s going to be coming in terms of demand,” says Buck Horne, a housing analyst at Raymond James. “Lennar is going where the demand is going to be. They’re going where they know they can make money.”
Lennar has positioned itself with offices in Atlanta, Charlotte, Chicago, Dallas, Denver, Miami, Orange County, San Francisco and Seattle, all markets where apartment demand is high, despite a recovery in the housing market.
“You’ve got to be very selective about your locations,” warns Miller. “We stay pretty thoughtful about where there are imbalances and too much building going on. This is not a market where you can start building any place.”
Miller is not concerned with competition from investors in the single family rental market, again focusing on location as his leg up. A lot of the foreclosed properties being absorbed by hedge funds and the like are not concentrated in the top markets targeted by Lennar. They are either inner city or third-level suburban, according to Miller.
Expanding household formations, coupled with credit and down payment-challenged new home buyers will benefit the rental sector for the foreseeable future. Many renters will eventually move to home buying, especially as their families expand. For Lennar, getting those potential buyers into a Lennar rental can only benefit the builder in the future.
“In many instances, the very first introduction to housing is through rentals and through branding and knowing consumers. Being there gives us a leg up and advantage in terms of new home sales later,” says Miller.
Published: November 29, 2012
By: Michael J. Oyster CFA, Managing principal and portfolio strategist at Fund Evaluation Group
In a presidential election year, we often discuss how public policy shapes the investment landscape. We know that trends in policy can impact investment returns as some investments perform well in one part of a cycle, but not as well as in others. In the current environment, we advocate a greater allocation to real assets and diversifying strategies with low correlations to the stock and bond markets.
To explain why these asset classes are attractive, and why scaling back a portfolio’s allocation to traditional equities and fixed income makes sense, we must examine the bigger picture of the market cycle in which we find ourselves currently.
In 2004, economist Paul McCulley, formerly of Pimco, spoke at a CFA Institute conference at which he described the interaction between democracy and capitalism, where democracy can be described as “one person, one vote” and capitalism as “one dollar, one vote.” Democracy is “we the people” while capitalism is “we the markets.”
McCulley described the 1960s and 1970s as a “bull market in democracy,” where the order of the day was a focus on individual citizens’ rights and support for the populace, even if it came at the expense of business. McCulley pointed to the end of the Carter administration as the inflection point when we moved from a “bull market in democracy” to a “bull market in capitalism.” A bull market in capitalism is characterized by greater competition among business, lower barriers to entry and fewer regulations, the combination of which is expected to lead to lower prices for goods and services.
This brings up an important point – a bull market in capitalism is expected to coincide with low inflation, which generally favors financial assets, that is, stocks and bonds. At the start of the bull market in capitalism in 1981, the 10-year Treasury yield was above 15%. As the rate of inflation dropped, interest rates declined over the subsequent 30 years. This “duration tailwind,” as it is sometimes known, provided the ideal environment in which to own financial assets.
Fast forward to 2008. In the midst of the financial crisis, the government intervened in order to prevent a financial market collapse. Power and influence shifted from the markets to the government in a variety of ways, perhaps the most significant of which being the Dodd-Frank Act.
The environment appears to be moving toward re-regulation, considering Dodd-Frank, the Sarbanes-Oxley Act and a variety of other laws enacted in recent years. As the regulatory environment becomes more onerous and the ability of market forces to keep prices low is diluted, we can imagine a future where economic growth is slower and inflation is higher. That would be a tougher environment for bonds and stocks.
From an investment perspective, the question of what works in a given environment is largely dependent on the inflation rate. The duration tailwind led to one of the greatest periods for financial assets in history. However, at this point in time, we must question the significant weighting to financial assets – that is, primarily stocks and bonds – common in investment portfolios today. In other words, why do we have we so much invested in stocks and bonds while neglecting other asset classes?
If stocks post no better than the mid-single-digit returns going forward (as we expect) then investors will face a difficult challenge. The need for investment growth does not go away simply because the stock market no longer easily accommodates it.
With that in mind, we advocate a “flattening” of the investment portfolio where the typically large allocation to stocks and bonds is distributed among other investment opportunities, including real assets and diversifying strategies (such as hedge fund and other alternative strategies) with low correlations to the stock and bond markets. Source: FEG
Our research indicates that a flatter portfolio structure is expected to lower volatility without reducing expected returns. It could even modestly increase expected returns depending upon the specific allocation.
In addition to a reduction in expected volatility due to greater diversification, a flatter portfolio can protect against more specific investment risks, such as inflation. If we witness a bull market in democracy, we could experience a more onerous regulatory environment, combined with spikes in commodity prices, amidst a flood of cheap money. In such a scenario, an inflationary environment like that of the 1970s is possible, which could be highly damaging to financial assets.
Ultimately, if stocks are no longer expected to provide returns well in excess of other investment opportunities, then we prefer a flatter portfolio structure that distributes risks more uniformly while not sacrificing expected returns.
November 8, 2012 Why QE3 Does Not Spell Fixed Income Doom
October 9, 2012 How to Adjust for Inflation, Good or Bad
October 8, 2012 What Should Drive Portfolio Rebalancing?
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