Washington, D.C. – The National Multifamily Housing Council (NMHC)’s Rent Payment Tracker found 86.2 percent of apartment households made a full or partial rent payment by September 13 in its survey of 11.4 million units of professionally managed apartment units across the country.

This is a 2.4-percentage point, or 279,457-household decrease from the share who paid rent through September 13, 2019, and compares to 86.9 percent that had paid by August 13, 2020. These data encompass a wide variety of market-rate rental properties across the United States, which can vary by size, type, and average rental price.

“While it remains clear that many apartment residents continue to prioritize their housing obligations and that apartment owners and operators remain committed to meeting them halfway with creative and nuanced approaches, the reality is that the second week of September figures shows ongoing deterioration of rent payment figures – representing hundreds of thousands of households who are increasingly at risk,” said Doug Bibby, NMHC President.

“This sadly comes as little surprise given that Congress and the Administration have failed to come back to the table and extend the critical protections that supported apartment residents and the nation’s consumer base during the initial months of the pandemic.

“Instead of being satisfied with a half-baked nationwide eviction moratorium which does nothing to deal with renters’ real underlying problem – financial distress – lawmakers should instead look to the successful model of the CARES Act and provide economic support to those who need it most – the tens-of-millions that call an apartment home, revitalizing the recovery at the same time.”

The NMHC Rent Payment Tracker metric provides insight into changes in resident rent payment behavior over the course of each month, and, as the dataset ages, between months. While the tracker is intended to serve as an indicator of resident financial challenges, it is also intended to track the recovery as well, including the effectiveness of government stimulus and subsidies.

However, noteworthy technical issues may make historical comparisons imprecise. For example, factors such as varying days of the week on which data are collected; individual companies’ differing payment collection policies; shelter-in-place orders’ effects on residents’ ability to deliver payments in person or by mail; the closure of leasing offices, which may delay operators’ payment processing; and other factors can affect how and when rent data is processed and recorded.

 

Source: National Multi Housing Council September 16, 2020

Market or MAKE a Market for Your Property

The housing market has found stability in a time of crisis because of the interventions in the CARES Act stimulus, unemployment benefits, and eviction moratoriums.

The cap rates for small multifamily properties barely budged between the first and second quarters of 2020, according to a new report by Chandan Economics and Arbor Realty Trust.

Cap rates narrowed by 5 bps in the second quarter, landing at 5.8%, explained the article, which was published on lender Arbor Realty Trust’s website.

“In the first quarter, cap rates widened by 21 bps, and there was some concern that they would further inch up as the economic downturn continued. However, small multifamily cap rates held steady due to a pricing tug-of-war,” said the article.

Cap rates are influenced both by falling risk-free interest rates, and by operational risks, it explained.

“When both phenomena happen at the same time, the net result is cap rate stability,” said the article.

Chandon examined the difference between cap rates and Treasury yields to estimate what the risk premium is in small multifamily properties. Although the spread was the highest level on record in the second quarter, when you compare it to the first quarter, it barely budged.

The article said the housing market has found stability in a time of crisis because of the interventions in the CARES Act stimulus, unemployment benefits, and eviction moratoriums. But there are repeated debate about how resilient property cash flows will be when the protective measures expire.

For example, one survey in mid-July said that 39% of renters who earn less than $75,000 per year had no confidence or slight confidence that they would be able to pay their rent in August, the article said. That rate was 5% higher than a survey in the middle of June.

In higher income brackets, there is less concern about the ability to pay rent.

“Small multifamily renters tend to earn less than their large multifamily neighbors, increasing the concern for rent collections with this asset class,” said the article. “Simultaneously, small multifamily renters are comparatively less transient and less likely to transition into homeownership over the medium-term. With COVID-19 causing many young households to reconsider their housing location preferences, the small multifamily subsector may prove more resilient in re-leasing and maintaining stable occupancies over the medium term.”

The article warned that because there are so many moving parts, there will be an ongoing discussion about how the small multifamily market deals with the risks, compared with the rest of the industry.

 

Source: Globe St Angela Morris | September 08, 2020, at 05:43 AM

Victorian Apartments

800-834 Victoria Dr.
Montgomery, IL 60538

Listing Price: $14,500,000

Cap Rate 6.38%
Number of Units 152
GRM 8.30
Occupancy 92.8%
Price/Unit $95395
Price/Gross SF $135.14
Gross SF 107200

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Investment Highlights

  • 152 Unit Suburban Multifamily Property
  • 32 Studios, 72 One-Bedrooms & 48 Two-Bedrooms
  • Clubhouse with Office, Laundry Facilities, Fitness Area, Outdoor Pool, and Courtyard
  • Located in Montgomery Illinois | 40 Miles Southwest of Downtown Chicago
  • Many Upgraded Kitchens and Baths
  • Tenant Paid Electric Baseboard Heat
  • Value-add component, upside in rents

Map Overview

Investment Overview

Marcus & Millichap is proud to present to market Victorian Apartments, a 152-unit apartment community located in west suburban Montgomery, Illinois bordering Kendall County to the South, the fastest growing county in Illinois, and the City of Aurora, IL to the East, the second-largest city in Illinois. The subject property is approximately 40 miles southwest of downtown Chicago.

Victorian Apartments consists of 16 two and three-story apartment buildings and clubhouse spread out over almost 10 acres; offering 32 large studios, 72 one-bedrooms, and 48 two-bedroom apartment homes.​​​ Community amenities include a clubhouse, an on-site management office, laundry facilities, a fitness area, an outdoor pool, a central courtyard area with a playground, and ample off-street parking.​​​

Each unit has separately metered, tenant paid, low maintenance, electric baseboard heating, and ac sleeve units.​​​ Approximately 60 percent of units have recently updated kitchens & baths as well as other capital improvement made including new windows, parking lot repairs, replacement of all deck footings & supports and updated intercom system with integrated Alexa. Roofs are in good condition approximately 10-12 years old.

There is investor upside in this multifamily offering through the continued renewal and releasing of under-market rents and continued updating of units accounted for in a proposed 5-year capital budget updating ten units per year which have averaged $5-$7,000 per unit. Further upside may also be realized in future years from job growth and economic development in the area through the redevelopment of the recently sold 350-acre former Caterpillar manufacturing complex minutes from the property.

 

 

Apartment rental payments are holding up fairly well—at least for now.

The National Multifamily Housing Council reported that 79.3 percent of surveyed households made a full or partial rent payment by August 6. That’s slightly better than last month’s 77.4 percent, and just shy of the August 2019 level of 81.2, according to NMHC’s Rent Payment Tracker.

“Over the past few months apartment residents have largely been able to meet their housing obligations,” NMHC Chair David Schwartz said in a written statement.

“In no small part, this is due to the enhanced unemployment benefits enacted under the CARES Act and significant steps by apartment owners and operators to help their residents,” said Schwartz, who’s also chair and CEO of Chicago-based Waterman. “These unemployment benefits that have proven so important to so many households have now lapsed, meaning greater financial distress for millions and the potential worsening of America’s housing affordability crisis.”

The Rent Tracker covers 11.4 million units of professionally managed apartments across the country of varying sizes and rental prices.

Walt Smith, CEO of Seattle-based Avenue5, said on an August 10 webinar accompanying the Rent Tracker that most of the market stress has been on the more upscale end of the apartment segment during the COVID-19 pandemic. For those renters who lost their jobs, even enhanced unemployment benefits aren’t covering their income needs. Occupancy in some gateway international cities such as Manhattan, Chicago, San Francisco, Los Angeles, and Miami has sagged several percentage points during the traditionally strong summer leasing season, reflecting “unparalleled stress” in that segment, Smith said.

“That is in my view a portent of what could happen” across all economic levels if further income support isn’t forthcoming for the unemployed, Smith said.

NMHC is urging the Trump administration and Congress to restart negotiations on a new COVID-19 relief package. “It is critical lawmakers take urgent action to support and protect apartment residents and property owners through an extension of the benefits as well as targeted rental assistance,” Schwartz said in his statement. “That support, not a broad-based eviction moratorium, will keep families safely and securely housed as the nation continues to recover from the pandemic.”

 

Source: GlobeSt By Scott Graham | August 13, 2020 at 06:50 AM

With a broader pool of potential renters, close-in apartments exceed expectations for one company.

 

While COVID-19 has slammed many parts of the economy, suburban apartments are performing well for one company.

Chris Berry, managing director and co-portfolio manager for Barings, says several of the firm’s close-in suburban multifamily holdings “have exceeded expectations since fourth quarter 2019.”  Berry says that Barings these properties, some of which are located outside of Boston, Denver, and Austin, have experienced increasing rents and expect to keep occupancies high. 

These suburban properties often rent at a discount to urban apartments, which broadens the pool of potential renters. That’s valuable in times of economic dislocation.

“We see in our portfolio that the rents have been pretty strong in the suburban assets,” Berry says. “We’ve seen more strength in those suburban locations, and we’ve seen occupancies not really move at all. They are still very high for suburban locations.”

 

Even before the current crisis, the suburban product is better positioned to weather the current storm because its cost basis is lower. “Most of the product you find in the CBD [central business district locations] is mid- and high-rise construction,” Berry says. “Land is costly, or it’s tougher to build in those locations. So you need pretty strong rents to make those deals pencil out.”

In the suburbs, the land is usually cheaper, and construction is less complex. “That has created a competitive discount for the suburban assets relative to the CBDs,” Berry says. “Now that everyone is so focused on affordability, you’ve got a broader pool of renters who are looking at those suburban locations.”

While suburban performance has been strong so far, Berry isn’t ready to declare victory. The economic dislocation caused by coronavirus could take years to play out.

“It’s very early,” Berry says. “Right now, I think everyone is looking to see what’s going to happen with this extension or non-extension of the benefits right now, which I certainly think needs to get done. Since the start of the pandemic, we’ve had 50 million people put in for unemployment. So I think we do need something right now.”

Berry says the high unemployment numbers highlight why people are focused on affordability. “That is why we think those suburban locations are doing a little bit better right now than the urban stuff,” he says.

Berry said Bearings’ primarily Class A portfolio has achieved 96 percent collections so far. “The renters who are in class A apartments can generally work from home, and they haven’t been as impacted by what’s going on in the economy,” he says. “In general, Class A is still doing pretty well, which is where we focus our attention.”

Barings, which represents a $45 billion global real estate platform, owns properties in both close-in suburbs and downtown areas. “If you were thinking about Seattle, we would go to a Redmond or Bellevue—somewhere that’s still close in and still has good access to jobs,” Berry says.

 

 

Source: GlobeSt By Les Shaver | August 06, 2020, at 07:35 AM