Expert: Real Estate Cycles Exist and Are Predictable

In the recent PSU Center for Real Estate Report, Christopher E. Lee, a nationally recognized expert in the area of real estate, authored an article arguing that real estate cycles exist … and are predictable. He poses the question: How will you take advantage of the current and next real estate cycle? Read the full article.

PSU Releases Quarterly Commercial Real Estate Report

The PSU Center for Real Estate has released its quarterly real estate report. The report contains the news that Reis, Inc. predicts apartment rents will jump 4.3 percent this year, marking the biggest annual increase in four years. MPF Research, which also monitors apartment rents, expects them to rise more than 5 percent this year.  Click here to download the PDF of the apartment market analysis. For the complete analysis on industrial, retail and office properties, read the full report.

Current Demographics a Recipe for an Apartment Development Boom

Changes in renter demographics, pent-up apartment demand and an improving economy have experts predicting and preparing for a major period of development, perhaps akin to the suburban apartment boom of 1969 to 1973, when monthly multifamily startups hit the 1 million mark. Multihousing News reports > > >

Freddie Mac Loans Are Available, But can Trip up Some Borrowers

by Joel Kaplan and Elia Popovich
Attorneys at Law - Oregon Law Group

In today's challenging financing environment, apartment owners have increasingly turned to Freddie Mac as a ready source of financing for apartment acquisitions. Freddie Mac’s new and sometimes onerous loan process may, however, present obstacles for borrowers not familiar with Freddie’s Capital Markets Execution (CME) loan product.

CME loans were developed in the summer of 2009, after the residential real estate bubble burst. These loans are pooled, tranched and sold as mortgage-backed securities. By securitizing the CME loans, Freddie is able to provide greater liquidity and stability to the residential markets. However, along with this greater liquidity comes less flexibility and more stringent legal requirements than the standard portfolio loan.

The following Freddie Mac requirements are particular to the new CME loans:

1. All borrowers must be special purpose entities (SPEs) that own only a single asset. This provides protection against the risk of borrower bankruptcy for activities unrelated to the collateral.
2. All SPEs must be formed in Delaware, and have either one springing corporate member or two springing members who are natural persons. This requirement provides Freddie with protection against the inadvertent dissolution of the borrowing entity. 
3. Opinions from the borrower's counsel about the enforceability of the loan documents will be required. This provides the lender with assurance that in the event of a default, Freddie will be able to recover the loan proceeds.
4. Borrowers have less ability to modify loan terms. CME loans demand greater document uniformity to facilitate cost-effective securitization.
5. Escrow for immediate repairs and reserves for long-term capital replacements are required, in part because the SPE limitations leave the borrower with no assets other than the mortgaged real estate.
6. CME loans may not be prepaid if the loan is securitized within a year after origination. As a consequence of securitization, they must instead be defeased, but even then only after a two-year lockout.

If you think a Freddie loan might be appropriate for an acquisition or if you have any legal questions about multifamily projects, please feel free to give Oregon Law Group a call.

Joel and Elia are partners in Oregon Law Group, a Portland-based law firm that specializes in the acquisition, development and management of multifamily projects. Joel Kaplan can be reached by phone at 971.285.4260 or email joel@oregonlawgroup.com. Elia Popovich may be reached by phone at 971-285.4261 or email elia@oregonlawgroup.com.

Multifamily Executive: Portland's Apartment Market Turning Heads

Portland’s multifamily market has been turning a lot of heads this year, as institutional investors double down and vacancies trend below 4 percent. About $135.2 million in multifamily has traded hands year-to-date—a gargantuan 936 percent improvement over the first four and a half months of 2010, according to New York-based market research firm Real Capital Analytics. 

“The real question is, when will the A assets start to pull on the B and C stuff? We’re just starting to see that happen,” says Greg Frick, a partner at Portland-based brokerage HFO Investment Real Estate. “There’s a lot of private equity coming in that doesn’t want to compete with institutions, but is looking for quality B assets.” Read the full story.

Greg Frick Interviewed by Multi-Housing News in the Latest Portland Market Focus

HFO Partner Greg Frick shares his thoughts on the Class-A apartment buying fever and the recent U.S. Census report on Portland holding the nation's lowest rental vacancy rate in today's Multi-Housing News online.  Read More.

U.S. Census Bureau: Portland Metro Scores America's Lowest Apartment Vacancy Rate

The U.S. Census Bureau reports Portland has lowest vacancy rate among the top 75 U.S. Metropolitan Statistical Areas (MSAs).

The Census estimate pegging the Portland area's vacancy rate at 4.0 percent is on track with the spring 2010 Metro Multifamily Housing Association vacancy estimate of 3.8 percent.

Seattle-Tacoma-Bellevue, WA had a Q1 2011 vacancy estimate of 6.8 percent, up from 6.2% the prior quarter and the nation's 15th lowest.

The nation's 10 lowest vacancy rates were:

• Portland-Vancouver-Beaverton, OR-WA - 4.0%
• Allentown-Bethlehem-Easton, PA-NJ - 4.1%
• Grand Rapids-Wyoming, MI - 4.2%
• Boston-Cambridge-Quincy, MA-NH - 5%
• Bridgeport-Stamford-Norwalk, CT - 4.6%
• Nashville-Davidson-Murfreesboro, TN - 5.0%
• Bakersfield, CA - 5.2%
• Los Angeles-Long Beach-Santa Ana, CA - 5.3
• Charlotte-Gastonia-Concord, NC-SC - 5.5%
• New York-Northern New Jersey-Long Island, NY - 5.5%

The MSA's with the five highest vacancy rates were as follows:

• Tucson, AZ - 16.7%
• Birmingham-Hoover, AL - 17.3%
• Detroit-Warren-Livonia, MI - 18.9%
• Jacksonville, FL - 19.1%
• Orlando, FL - 22.6%

Read the full report online

Apartment Rents Rise Sharply as a National Job Market Improves

REIS reports that rents started edging up nationwide last year after several years of no growth and some declines.  REIS predicts apartment rents will jump 4.3% this year, marking the biggest annual increase in four years. REIS reported that markets seeing first-quarter year-over-year rent increases in excess of 3% included suburban Virginia and Maryland; San Francisco; Rochester, N.Y.; Portland, Ore.; and Denver.  Read More >>

Hoyt Street Properties Nears Sale of Kearney Plaza

The Portland Business Journal reports that Hoyt Street Properties is close to selling its first and only apartment property, the 131-unit Kearney Plaza in Portland's Pearl District.  Read More.

First Quarter Apartment Deals Jump 50% From 2010 Levels

The New York based research firm Real Capital Analytics reported that  that year-over-year Q1 apartment deals jumped almost 50%.  Read more in Multifamily Executive.

70 Market Rate Units Approved for Construction at NE 6th and Davis

The Southeast Examiner reports that the Portland Design Commission has approved construction of two apartment buildings containing a total of 70 units on a half block site at NE 6th and Davis. Read More.

Two Major Apartment Chain Owners Raise The Rent

Reuters reported last week that two of the largest U.S. apartment owners -- Avalon Bay Communities and Equity Residential -- posted higher funds from operations, meeting Wall Street expectations.  "...fueled by higher rents... the sector continues to be one of the brightest spots in commercial real estate." Read more > > >