Multifamily Executive Insight: Vendor Selection

Here is additional insight on product specification when it comes to renovations in multifamily housing.

Steve Heimler states the following:
"When looking for the right supplier we look to integrated ordering methods that sync to our construction module software so that data is only entered once from ordering, inventory tracking, to completion and loan draw. The vendors that understand these processes are the same who bring other added value suggestions and products. Ease of communication and technological 'bridges' are vital to reducing human capital expenditures and manual entry errors. Frankly, the product is not as critical as the partner."

If there is anyone who is widely known as an expert on this topic it would be Steve. Prior to selling his portfolio of more than 22,000 managed multifamily units to Riverstone Residential Group he was the founder and CEO of Stratus Real Estate, Inc. He quickly developed a reputation as a reposition specialist in "C" to "B" quality apartments.

Since 2000 he has been responsible for more than $200,000,000 in renovations. As Steve puts it: "We buy a ton of appliances, cabinets, lighting, hardware, flooring, etc."

Steve is a regular at the major industry events (MFE Conference, MFE Leadership Summit, NMHC etc.) and has been an active contributor to Multifamily Executive over the years. With multifamily investment looking solid for the long haul, and the average apartment property being more than 37 years old, it makes sense to get engaged with this industry and get to know folks like Steve.

We wish him all the best with his new company.

Pacific Northwest: Multifamily and Mixed-Use

There are a couple more markets making the news with some solid headlines. Both Portland and Seattle experts are optimistic about multifamily and mixed-use fundamentals going forward.

Vacancies are down, rents are on the rise and investors/lenders feel strongly about long term prospects for the market.

The return of the renters: Upended housing market spurs Portland's apartment market

Jitters send the developers running to rentals

Once again, the national trends we are hearing all seem to be well-supported on a regional basis.

Renovation Project

Moving from Atlanta to the suburbs of Houston.

Here is another deal that involves an existing property that investors are looking to reposition. Occupancy rates are rather low at Whispering Winds but the $17MM refi should help fill some empty units and drive rents.

Here are the details courtesy of our friends from HFF:

The Houston office of HFF (Holliday Fenoglio Fowler, L.P.) announced today that it arranged financing and joint venture equity with a total capitalized value of approximately $17 million for Whispering Winds Apartments, a 286-unit multifamily community in suburban Houston.

“The borrower is going to complete a substantial renovation to both the interiors and exterior of Whispering Winds,” added Tucker Knight (HFF). “Given the low vacancy rate in the submarket, the property should attract significant interest post-renovation.”

The new owner of this property is Post Investment Group out of Los Angeles. Sounds like they might be in the market for a few new windows.

Return of Renters?

The multifamily bandwagon is filling up these days, but as I mentioned before, it can be very misleading to take a few national statistics or headlines and blow them out of proportion.

That said, these two recent articles from the Atlanta Business Chronicle showcase some interesting anecdotal evidence on apartment activity and investment.

"Atlanta-based Pollack Partners LLC, in partnership with New York-based investment firm The Goldman Sachs Group Inc., has raised $56 million to acquire and develop apartments in the metro area and the Southeast. With additional investment from third parties and debt, Pollack Partners hopes to leverage the fund into $800 million to $1 billion worth of multifamily projects."

Mixed-use momentum also continues to build in Atlanta and in other major markets.

"Now Coro is planning a $55 million 20-story, 155-unit luxury apartment tower, which will include 9,100 square feet of office/retail space."

Return of renters: Money pours into apartments
Developers ditch condos in favor of apartments

The piece quotes several area developers who are placing some large bets on the strong industry fundamentals. Some of these firms include: Pollack Partners, Williams Realty Advisors, Lane Company, Coro Realty Advisors, Wood Partners and Julian LeCaw.

These projects will not come online into the Atlanta market overnight but is exactly what keeps multifamily fundamentals consistently favorable for investors and a relatively predictable market to serve versus other segments of real estate.

Multifamily Renovation & Construction Roundtable

In light of the recent renewed interest in multifamily housing I thought I would re-visit a focus group that we conducted a few years ago in Washington, DC. The editorial staff gathered a group of prominent multifamily owners and developers to learn more about the factors that drive decisions for building products.

Even though the market conditions have changed some since this video was first produced, the insight is still extremely valuable and relevant today.

Click Here for Video



An extensive readership study for Multifamily Executive was also conducted that validates much of the anecdotal information you will see in the video. The fundamentals remain strong, and rents are on the rise in most markets. The key takeaway is that product decisions are made by different people and for unique reasons in this market. Having a better understanding of these factors can open up a new growth market for your firm.

New Take on the "Shadow Rental Market?"

There has been much discussion about how the rise in single-family foreclosures will impact vacancy rates in rental housing nationwide, but not much press has been given to the fact that renters are actually being evicted from foreclosures these days.

Until the New York Times article that was published on November 18th.

According to a Mortgage Bankers Survey Association survey, 1 in 7 foreclosures are non-owner occupied and 1MM foreclosures are expected this year alone. This is a major dilemma for renters who are living in these homes but maybe there is a silver lining in this otherwise bad news for apartment owners: an increase in demand (renters looking for a new home) without an increase in supply (foreclosures remaining empty).

As the article points out: “Banks don’t want to be landlords, They’re in the business of making mortgages. You need to recoup the money to keep the process moving.”

It is also important to realize that many homeowners also do not want to be landlords. And there are many speculators who are just flat out abandoning the homes that they can no longer afford. In some cases these owners are selling the toilets and cabinets before they leave town.

When they are forced into foreclosure, Butera says some owners trash their homes before they are repossessed. "They are selling everything inside — their kitchen cabinets, their toilets, their AC units … and it's hurting the neighborhood," Butera said. "The house now looks like a crack house — it's missing all its windows."

It is certainly not safe to generalize that most empty homes will be coming online as rental housing.