Rental Housing Journal - Colorado - January 2014 by Professional Publishing, Inc

Rental Housing Journal Colorado

January 2014 - Vol. 6 Issue 1

DENVER • COLORADO SPRINGS • BOULDER

www.rentalhousingjournal.com • Professional Publishing, Inc

Monthly Circulation To More Than 7,000 Apartment Owners, Property Managers, On-Site & Maintenance Personnel

Bustling Economy Eases Concerns, Light Rail Paves the Path for Investment Activity Inset of Downtown Denver

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6 nomic outlook6 and an increase in household formation instill confidence in investors. However, a limited3Ltd number of properties available

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6TH AVE Denver Up 8 Places 6 2014 Rank: 3 2013 Rank: 11

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for mid-cap deals. Equity funds and risk to their position to reassure the EVANS AVE capital provider, via lenders are increasingly willing to institutional 21 transact below their stated minimum such measures as personal recourse, Yalelarger equity contributions or subordeal size. Many are forming subYALE AVE 27 YALE AVE ventures to pursue small and mid- dinating their fees and returns. Our H G cap opportunities. Some are working most successful clients today adjust Steven Orchard and Michelle Lee: Asset values27are generally high rela- in secondary and tertiary markets in to these shifting dynamics and make itTeasy for institutional money to say tive to underlying fundamentals due order to find yield. Southmoor HAMPDEN AVE H “yes.” to the ample35 supply of investment These bigger 35 platforms, however, F E Ni U want to accept less risk on smaller capital in the soft economy, making 46 distressed assets with attractive pric- deals. As such, those looking for Garfield: Englewood es difficult to find. Non-institutional capital should proactively adapt to Where should investors look for Dayton QUINCY AVE investment opportunities in 2014? For buyers can best compete for mid- the demands of capital sources. 105 Continued on page 4 cap, value-add investments, and are example, they might need to most likely to find Oxfordthose deals out- strengthen their sponsorship profile U Get Social With Rental Housing Journals E AV and financial capacity by securing aT side of primary markets. N G O I N F City of Sheridan EU E relationship. They Fortunately for non-institutional co-general partner BELLEVIEW AVE BELLEVIEW AVE Belleview buyers, more capital is coming online should prepare to accept meaningful SANT A FE DR

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investors, in particular, are finding EVANS AVE 21 themselves outbid on acquisition targets. WhatEvans is your advice to these investors?

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George Garfield: Many investors are frustrated by today’s frothy pricing of commercial real estate. Non-institutional

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sk The Expert is a Q&A with TRANSWESTERN experts and leaders. In this edition, George Garfield, Transwestern’s West president, talks to Steven Orchard and Michelle Lee, leaders of the firm’s structured finance group in the West, about strategies for noninstitutional investors in light of aggressive asset pricing, as well as current capital markets, economic and monetary conditions. 1st Quarter 2014

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for sale could hinder transaction velocity in the coming months. Light rail expansion is guiding many investors to purchase assets along the planned routes and the area along the I-225 rail line has also been especially popular. The anticipated opening of this rail line, as well as job cultivation and development near the Fitzsimons Life Science District are spurring interest in area properties. Pre-1980s assets in need of repositioning are garnering strong investor interest and range in quality, amenities and size. The recently opened West Rail Line105will continue to draw significant attention as COLFAX AVE 15Ltd investors who have stabilized assets seek to cash out and search for additional opportunities. 73

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enver employment will rise at one of the fastest paces in the nation this year, supporting housing demand as a wave of new inventory comes online. A highly educated workforce is fostering expansion in several of the metro’s high-tech industries, including energy, financial services, bioscience and healthcare. In addition, the highly anticipated redevelopment of Union Station in downtown Denver will be completed midyear, creating a multimodal transportation hub that connects train, light rail, bus and other transportation options in one central location. This project has been a catalyst for development throughout the area as nearly 4,000 apartments are under construction in the CBD and several projects have been established in the path of rail lines. Though a surplus of inventory will threaten to soften select submarkets this year, strong job growth and household

DRY CREEK RD

Dry Creek

RENTAL HOUSING JOURNAL COLORADO

Love This Job

Bustling Economy ..continued from front page Denver

2014 Market Outlook

Up 8 Places

• 2014 NAI Rank: 3, Up 8 Places. The nation’s strongest rent-growth forecast propelled Denver eight spots in this year’s ranking to claim the third position. Employment Trends

2014 Rank: 3

2013 Rank: 11

Bustling Economy Eases Concerns, Light Rail Paves the Path for Activity more constrained times, there will I’mInvestment going In

enver Up employment the fastest paces the nation 4% 60 will create 49,100 positions Denver 8 Places will rise at one of2014 Rank:that 3 in be 2013 renters Rank: 11 with higher rents. • Employment Forecast: Denver employers more to bet this year,2013 supporting housing demand as a wave of new inventory Denver Up 8 Places 2014 Rank: 3 Rank: 11 this year, expanding payrolls 3.8 percent.45Employment growth was also estate investments are arguably you probacomes online. A highly educated workforce is fostering Real expansion 3% in several of the metro’s high-tech industries, energy,the financial 3.8 percent last year. most stable and secure types of blyincluding haven’t services, bioscience and healthcare. In addition, the highly anticipated re2% 30 investments you can make. As proph eDenver a rwilld beEases downtown completed • Construction Forecast: Completions will double from last year as build- development of Union Station inBustling Economy Concerns, midyear, creating a multi-modal transportation hubpeothat connects Bustling Economy Eases Concerns, ertytrain, owners, you are able to use tenmany ers deliver 10,000 units in 2014, increasing15 stock 3.7 percent. Employment Trends 1% Rail Paves the Path Investment Activity light rail, busLight and other transportation options in for one central location. ants’ money to pay your mortgage ple say that they love being a landEmployment Trends Absolute Change Y-O-Y % Change Light Rail Paves the Path for Investment Activity This project has been a catalyst for development throughout the area as 0% 4%by 0 basis points to 5 percent enver employment will rise at one of the fastest paces in the nation • Vacancy Forecast: Vacancy will tick up 6030 Absolute Change Y-O-Y % Change 10 11 12 13* 14** and build your equity, so that you lord. Ifinyear, anything, you’ve heard 4,000 apartments are under construction in thethe CBD and several enver employment will rise at one of thenearly fastest paces the nation 60 this supporting housing demand as a wave of new inventory year end, erasing the 30-basis4%point drop in 2013. projects have been established in the path of rail lines. Though a surplus can increase the cash flow to buy cons, hatred, and horrific stories of supporting housing demand new inventory online. A highly educated workforce is fostering expansion 45this year, 3% as a wave ofcomes Supply and Demand of inventory will threaten to soften select submarkets this year, strong job comes online. A highly educated workforce is fostering expansion Completions Vacancy 45 • Rent Forecast: Effective rents3% grew 6.1 percent last year and will advance indoing several of the formation metro’s high-tech industries, including energy,properties financial greater and/or create a such. But, in a world where growth and household should mitigate upswings in vacancy. 12 8% in several of the metro’s high-tech industries, including services, bioscience and emphasis healthcare. Inon addition, highly anticipated re30 2% 4.5 percent in 2014 to $987 per month. of retirement income. As a thereenergy, is sofinancial much nega-the stream services, bioscience and healthcare. addition, theInvestment highly anticipated re-remain 30 2% development of 11 Union Station inthrough downtown willecobe completed Denver Up 2014 In Rank: 2013 Rank: activity will brisk 2014 Denver as a bright 9 8 Places 7% 3 property manager, you can increase tivity, I’d like to bring our attention Union Station in downtown will be • Investment Forecast: Buyers seekingdevelopment assets inofthe path of growth will Denver midyear, creating a multi-modal transportation hubconfidence that connects train, nomic outlook andcompleted an increase in household formation instill 15 1% rents regularly to match current for a second to some of the positives midyear, creating a routes multi-modal transportation thatrail, connects inhub investors. However, atrain, limited number of properties available forcentral sale location. light bus and other transportation options in one 15 look along the East and Gold 1% 6% also lines, or6 planned to the north. could hinder transaction velocity in the coming months. Light rail expanlight rail, bus and other transportation options inThis onethe central location. market rent rates, of property indus- throughout project has been management a catalyst for development the area as and your manage0 0% 13* for development 14** sionthroughout is guiding many investors to are purchase assets along the planned 3 10 has11 5% This project been a12 catalyst the area asyou’ve nearly 4,000 apartments under construction in ment the routes CBD andbased several on gross rents will 0 0% fee try. So, whether chosen to be Bustling Economy Eases Concerns, 10 11 12 13* 14** andinthe alongand I-225 rail line has also been especially popular. The nearly 4,000 apartments are under construction thearea CBD several projects havethe been established in the path of rail lines. Though a surplus increase a landlord career, been and anticipated opening ofas thisa rail line, as or wellhave as job cultivation devel- simultaneously with your 0 4%for Investment Employment Trends Supply and Demand Light Rail Paves the Path Activity projects have been Though a surplus of inventory will threaten to soften selectare submarkets this year, strong job 11 established 12 13* in the 14** path of rail lines. 10 opment near the FitzsimonstoLife Science District spurring interest in income. Absolute Change Y-O-Y % Change Completions Vacancy Supply and Demand client’s It really can be a lucky enough have inherited the of inventory will threaten soften select submarkets thisinyear, strong job enver employment willtorise at one of 8% the fastest paces thePre-1980s nation growth and household formation should mitigateare upswings in vacancy. 60 4% 12 area properties. assets in need of repositioning garnering Completions Vacancy Effective Rent Trends win-win job of in managing thisand year, supporting housing should demandmitigate as a strong wave ofinvestor new inventory growth household formation upswings vacancy. 12 8% interest and rangerentals, in quality, there amenitiesare and size. The re- situation. Metro U.S. comes online. A highly educated workforce is fostering expansion Investment activity willcontinue remain through as a bright eco45 3% cently opened West Rail Linethat will tobrisk drawwith significant2014 attention 98% 7% Secondly, real estate is real. many benefits go along in several of the metro’s industries, including energy, as investors who have stabilized assets seek to cash out and search for ad- confidence Investment activityhigh-tech will remain brisk through 2014 as afinancial bright economic outlook and an increase in household formation instill 9 7% Managing rentals forces you to being in this business. ditional opportunities. services, bioscience andanhealthcare. addition, highly anticipated re30 2% nomic66%outlook and increase inInhousehold formation instill confidence in investors. However, a limited number of properties available for sale 6% the become more knowledgeable about First, and probably most obvious, development Union Station in downtown will be completed in investors.ofHowever, a limited number ofDenver properties available for sale velocity in the coming months. Light rail expancould hinder transaction 6 6% 4% midyear, creating a multi-modal transportation that connects train, property upkeep being aOutlook property manager creates 15 1% 2014 Market sion isLight guiding many investors to purchase assets along the planned routes and home repairs. could3 hinder transaction velocity in the coming months. rail expan5% hub light bus and otherinvestors transportation options in along one central location. and the planned area along theisI-225 rail line has also been especially popular. The involved you may sionrail, is guiding many to purchase assets the routes No matter how wealth. There no denying that 3 5% 2% u 2014 NAI Rank: 3, Up 8 Places. The nation’s strongest rent-growth This has been a catalyst for development throughout thepopular. area as The 0 0% anticipated opening of thisspots rail in line, asyear’s wellranking as jobtocultivation and develandproject the also been especially 0 area along the I-225 rail line has4% be in caring for the actual residence, owning and managing property 10 11 12 13* 14** forecast propelled Denver eight this claim the 10 apartments 11 13* construction nearly 4,000 are theopment CBD and several near thedevelFitzsimons Life Science District are spurring interest in anticipated opening of12 thisunder rail line,14** as well asinjob cultivation and 0 4% 0% third position. VALLEY, METRO, ARIZONA APT. NEWS you will have to over the long term is a great money 11 12 13* 14** 10 projects path 14** ofDistrict rail lines.are Though a surplus 10 been11 12 in the area properties. Pre-1980s assets in need of repositioning are garnering understand someopmenthave near the established Fitzsimons Life13*Science spurring interest in Supply and Demand Effective Rent Trends ofarea inventory will threaten to soften select submarkets this year, strong job about repairs and mainteearner. There will always be amenities a thing u Employment Denver create 49,100 positions strong investor interest andemployers range inwill quality, and size. The reproperties.Metro Pre-1980s assets in need of repositioning areForecast: garnering Completions Vacancy Salesformation Trends U.S. Effective Rent Trends growth and household should mitigate upswings vacancy.West this year,in expanding payrolls 3.8 percent. Employment growth was alsoeven 12 8% cently opened Rail Line will continue to draw significant attention nance, if you hire out the work demand for housing. However, the strong investor interest and range in quality, amenities and size. The re8% Metro U.S. 3.8 percent last year. $82 asearning investors potential who have stabilized assets seekwith to cash out and search for ad-others. So, whether cently opened West Rail Line will continue to draw significant attention to be done by will fluctuate 8%9 Investment activity will remain brisk through 2014 as a bright eco7% ditional opportunities. as investors who have stabilized assets seek to cash out andconfidence search for adu Construction Forecast: Completions and will double from last year as lining up the contractors, or $77 nomic6%outlook and an increase in household formation instill you’re the state of the economy various builders deliver 10,000 units in 2014, increasing stock 3.7 percent. ditional opportunities. 6%6 in investors. However, a limited number of propertiesconditions available for sale 6% within th4 housing mar- putting in your own elbow grease, $72 2014Forecast: Market Outlookwill tick up 30 basis points to 5 percent by could4% hinder transaction velocity in the coming months. Light rail expanu Vacancy Vacancy ket. In good credit conditions, there you’ll notice that you are more dili4%3 sion2014 is guiding many investors to purchase assets along theend, planned year erasingroutes the 30-basis point drop in 2013. Market Outlook 5% $67 Feb, Apr, Jun, Aug, Oct, Dec 2% u 2014 NAI Rank: Up 8ofPlaces. Theoccunation’s strongest rent-growth gent about ensuring quality work. will be a higher owner and the area along the I-225 rail line has also been especially popular. The 3,rate Rent Forecast: Effective rents grew 6.1 spots percentinlast andranking will ad- to claim the forecast propelled Denver eight thisyear year’s 2%0 u 2014 NAI Rank: Places. Theasnation’s strongest rent-growth anticipated opening of 3, thisUp rail8line, as well jobu cultivation and develContinued on page 3 4% pation and increasing capital values. $62 vance 4.5 percent in 2014 to $987 per month. 11 12 13* 14** 10

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0% nearpropelled third position. forecast eight spotsDistrict in 14** this are year’s ranking to claim opment the Fitzsimons Science spurring interest in the 11Life 1213* 13* 10 09 1110 Denver 12 position. areathird properties. Pre-1980s assets in need of repositioning are garnering Sources: CoStar Group, Inc., Real Capital Analytics u Investment Forecast: Buyers seeking assets in the path of growth will u Employment Forecast: Denver employers will create 49,100 positions strong investor interest and range in quality, amenities re- and Gold lines, or planned routes to the north. also and look size. alongThe the East Sales Trends this year, expanding u Employment Forecast: employers will significant create 49,100 positions payrolls 3.8 percent. Employment growth was also * Estimate Forecast cently opened**West Rail LineDenver will continue to draw attention ..continued from front page 3.8 percent $82 this year,who expanding payrollsassets 3.8 percent. Employment growth was also as investors have stabilized seek to cash out and search forlast ad-year. Market Forecast Employment: 3.8% s Construction: 5,300 s Vacancy: 30 bps s Effective Rents: 4.5% s 3.8 percent last year. ditional opportunities. u Construction Forecast: Completions will double from last year as $77 lating a restructure plan in which it Orchard and Lee: deliver 2014,TEXT increasing stock 22 Annual 3.7 Reportpercent. VERSION 2014 u page Construction Forecast: Completions will doublebuilders from last year10,000 as units in BLACK We advise our clients to look at what will contribute the building into a 2014 Market Outlook builders deliver 10,000 units in 2014, increasing stock 3.7 percent. $72 u Vacancy Forecast: Vacancy willbest tick up 30 basis points 5 percent by new tojoint venture; secure a bridge they already own as their investu 2014 NAI Rank: 3, Up 8 Places. The nation’s strongest year rent-growth end, erasing the 30-basis point drop in 2013. u Vacancy Forecast: Vacancy will tick up 30 basis points to 5 percent by mentto opportunity instead of over- loan and venture equity; and rede$67 propelled Denver eight spots in this year’s ranking forecast claim the TEXT VERSION year end, erasing the 30-basis point drop in 2013.paying for new assets.WHITE velop Investing third position. u Rent Forecast: Effective rents grew 6.1 percent last year the and asset will ad-into a creative office $62 vance 4.5 percent in 2014 to $987 per month. building. Our client is thereby posito upgrade or reposition curu Rent Forecast: Effective rents grew 6.1 percent capital last year and will ad09 Forecast: 10 11 12 13* u Employment Denver employers will create 49,100 positions vance 4.5 percent in 2014 to $987 per month. tioned to deliver rent assets can create value and Sources: CoStar Group, Inc., Real Capital 3.8 Analytics this year, expanding payrolls percent. Employment growth was also u Investment Forecast: Buyers seeking assets in the path of growth will an office building 3.8 percent last year. for lesstothan could a competitor that maintains a lower also look along the Eastcomparative and Gold lines, orcost planned routes the north. u Investment Forecast: Buyers seeking assets in the path of growth will

Favorable Strategies

Median Price per Unit (thousands)

Sales Trends

ON-SITE-NW SEATTLE

Median Price per Unit (thousands)

Total Nonfarm Jobs (thousands)

Units (thousands) Total Nonfarm Jobs (thousands)

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Vacancy Rate

Year-over-Year Change Units (thousands)

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** Forecast basis than or acquiring had to purchase a redevelopment also look along the EastCompletions and Gold lines, planned routes the developing north. Construction Forecast: willordouble from lasttoyear as property, which allows it to drive new assets. Investors are builders deliver 10,000 unitsEmployment: in 2014, increasing 3.7 percent. 5,300 s Market Forecast 3.8% sstock Construction: Vacancy:advised 30 bps s to Effective Rents: 4.5% s

* Estimate

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evaluate each property in their port- leasing with competitive rents. page 22 BLACK TEXT VERSION 2014 Annual Report year end, erasing the 30-basis point drop in 2013. folio and reposition them for a long$67 A less extensive reposition may be term hold. page 22 2014 Annual Report BLACK TEXT VERSION u Rent Forecast: Effective rents grew 6.1 percent last year and will adfunded with equity from the prop$62 vance 4.5 percent in 2014 to $987 per month. 09 10 11 12 13* itself, using higher leverage An owner seeking to redevelopWHITE an TEXTerty VERSION Sources: CoStar Group, Inc., Real Capital Analytics u Investment Forecast: Buyers seeking assets in the path of growth will older property might need to use fixed-rate term debt. If no additional WHITE TEXT VERSION also look along the East and Gold lines, or planned routes to the north. third-party, joint venture equity in capital investment is needed, the * Estimate ** Forecast 1010 East 62nd Street, Los Angeles, CA 90001-1598 concert with a bridge loan to fund best strategy may simply be recapiMarket Forecast Employment: 3.8% s Construction: 5,300 s Vacancy: 30 bps s Effective Rents:project. 4.5% s For example, one of Phone: 1-800-624-5269 • Fax: 1-800-624-5299 talizing the financing for a longer their our clients owns an industrial build- term hold. In any case, we encourpage 22 BLACK TEXT VERSION 2014 Annual Report ing in downtown Los Angeles that age clients to plan for at least a five might garner $17 million if it was to seven year horizon with respect to sold. But then the client would be their financing. WHITE TEXT VERSION hard pressed to find another suitable asset to purchase; a dilemma it has Regardless of the strategy that is Continued on page 4 already encountered. We are formu$72 Forecast Market

Employment: 3.8% s u Construction: 5,300Vacancy s Vacancy: s Effective 4.5% Vacancy Forecast: will tick 30 up bps 30 basis points to 5Rents: percent by s

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Rental Housing journal Colorado • January 2014

Bending The Cost Curve

RENTAL HOUSING JOURNAL COLORADO

A New Report from the Urban Land Institute and Enterprise, Explores Solutions to Expand the Supply of Affordable Rental Housing WASHINGTON – Solutions to increase the supply of affordable rental housing are explored in a new report from the Urban Land Institute’s (ULI) Terwilliger Center for Housing and Enterprise Community Partners, Inc (Enterprise). Bending the Cost Curve: Solutions to Expand the Supply of Affordable Rentals outlines factors that impede the development of affordable rental housing – causing the supply in many markets to fall far short of the demand – and offers specific, actionable solutions to overcome the barriers. Nationally, there were only 6.9 million rentals affordable to 11.8 million extremely low-income renters in 2011, a supply gap that grew by three million renters between 2001 and 2011—and continues to grow. "In an era of growing demand and declining government financial support for affordable rental housing, it is more important than ever to deliver affordable housing as effectively as possible,” the report says. “Bending the cost curve will enable developers to deliver additional affordable rental homes and help jurisdictions provide more housing choices, meet the growing need for affordable rentals, and ensure that individuals and families across a range of incomes have a place to call home within the community.” The report, released in Washington, D.C. at the ULI/ Carolyn and Preston Butcher Forum on Multifamily Housing, is based on a series of interviews and roundtable discussions co-hosted by the Terwilliger Center and Enterprise over the past 16 months with nearly 200 developers, financiers, and policy makers in ten markets – Chicago, Denver, Los Angeles, New York City, San Francisco, Boston, Houston, Minneapolis, Pittsburgh, and Seattle. Conclusions drawn from the discussions formed the basis for the research, which is intended to help fill the void of material examining how to overcome regulatory barriers to affordable rental development, such as land use, zoning and building code restrictions, processing delays, and financing obstacles. While economic conditions and demographics vary widely among different markets and play a significant role in local affordable housing development, the report identifies several over arching cost drivers, including:

land, legal expenses, and funding application fees, are not correlated to the number of units and often make smaller projects less economical on a per unit basis.

• Project design and construction – Community concerns, site selection, the price of construction labor, and state and local regulations affect the ability to produce high quality units at an affordable cost. • Financing and underwriting – Because affordable rentals produce a lower level of profit, developers face several financing obstacles, such as difficulty attracting investors who are strictly yield driven; complicated deals requiring multiple layers of funding; and limited or no availability of financing for smaller projects and for mixed income projects. • Complex deal structures – Project fees, timing of tax credit use, higher risk, greater due diligence, longer timelines, and the need to set aside capital reserves all drive up costs. “Drivers of cost come at all points in the development process and are deeply intertwined, but the need for more affordable rentals compels us to take on the challenge of understanding the drivers and work to mitigate them,” said Lynn Ross, executive director of the Terwilliger Center. “Enterprise and ULI will use the joint research to spark federal, state and local conversations that lead to

policy change and financial innovation, ultimately stretching limited resources for affordable housing,” said Ali Solis, senior vice president of public policy and external affairs at Enterprise. “At the same time, we must maintain high quality, green standards so that affordable homes can be sustainable for the long haul. That is our challenge as an industry.” To address the cost drivers, the report offers several recommendations:

• Promote cost-effectiveness through consolidation, coordination, and simplification. This includes consolidating monitoring and due diligence activities; coordinating competitive funding competitions; improving codes, zoning and regulation; and streamlining HUD financing. • Remove barriers to reducing construction costs and delays. This includes implementing smart parking requirements; reviewing unit size and amenity requirements; reforming codes and other rules that make rehabilitation difficult; finding ways to better coordinate development teams; and supporting innovative building techniques like micro-units and prefabricated housing. • Facilitate a more efficient deal assembly and development timeline. This includes eliminating zoning barriers to by-right housing development; creating Continued on page 3

Love ..continued from page 2 Fixing up an older property, or turning over a rental that had been trashed or damaged by past tenants, can instill a true sense of accomplishment. The third reason why I love what I do is the people. I like my tenants. I would be lying if I said that I’ve liked every resident I’ve ever rented to, but if you can hit it off initially, working with them during their tenancy can be quite a pleasure. Some of my tenants have even become friends as well as business acquaintances. Providing nice, well-kept homes at affordable rates is powerful. I’ve had the pleasure of supplying homes to some who otherwise wouldn’t be able to rent anywhere else based on their circumstances. Experiencing their joy of having a place to call home fueled my passion and purpose of being a landlord. I have been able to enjoy watching many families grow together through marriage, children and other life accomplishments. And let’s not forget the hundreds of encounters with some very interesting people who have either inquired about a property, or the many contractors that I employed to perform maintenance duties -- many of whom I would have never met if I were not a property manager. These are only a few reasons why I love being a landlord. I encourage you all to take the time to step back from the weight of the job, and ask yourself, “Why am I in rental housing?” We all know that being a landlord is complex, but I believe that if you’re able to outline the positives of the industry for yourself, then when the unavoidable negatives arise you will be able to make decisions based on love and not hate. Katie Poole – Hussa is a Licensed Property Manager, Continuing Education Provider and Principal at Smart Property Management in Portland, OR. She can be reached with questions or comments at Katie@ SmartPM.co

• Project scale–Fixed costs such as

Rental Housing journal Colorado • January 2014

RENTAL HOUSING JOURNAL COLORADO

Strategies

Bending ..continued from page 3

..continued from page 2 ultimately selected, investors should evaluate individual assets and their portfolios as a whole to unlock capital, value and potential profit in 2014. Garfield: Should owners consider refinancing assets in light of today’s capital markets? Orchard and Lee: Investors should be thinking about debt as an asset in 2014. One has to use leverage advisedly, obviously. But with debt this cheap and strong inflationary pressure looming in the long term, procuring long-term fixed-rate debt is a smart investing strategy. We helped a number of clients implement this in 2013 while rates rose approximately 100 basis points. Rates are fairly stable again today, but in light of the Fed’s tapering and economic growth, many experts agree rates will increase further in 2014. It’s also important to consider the relationship between net operating income and interest rates at the time of refinancing. If rates rise and NOI doesn’t, then loan proceeds are reduced. Does the owner expect interest rates to rise next year? Will the NOI on the property increase commensurately? How will this dynamic affect their ability to refinance when the existing loan comes due? Refinancing early may be a good choice, both from an economic and risk management standpoint.

clarity and structure in the public engagement process; adopting state and local policies to streamline local development; promoting consistency in state Qualified Allocation Plans (QAPs); and adopting efficient deadlines for deal assembly and project development.

regulatory flexibility; facilitating more efficient use of project reserves; and providing greater flexibility in 4-percent LowIncome Housing Tax Credit allocations (such as alternate sources of debt financing, private placement of bonds or direct bond purchases).

• Improve and align incentives. This includes evaluating lifecycle cost considerations in the underwriting process; creating incentives for green building and energy-efficient design; incorporating cost considerations in the QAP process; assessing the time frame in which costs are evaluated for the purpose of underwriting; providing local incentives for affordable housing development (such as land acquisition subsidies, property tax abatements, fee waivers and expedited permitting); and removing perverse incentives that can increase costs (potentially by adopting alternate compensation models or flexible tax credit allocations).

• Support the development and dissemination of information and best practices. This includes creating a cost competition to support innovative practice; determining appropriate units of measurement and comparison to guide decision making (such as costs-per-unit or costs-per-person); building a community of practice; and creating a forum for sharing data and best practices. In addition to the recommendations, the report identifies three lessons drawn from the research – 1) Cost drivers come at all points in the development process and are deeply intertwined; 2) Mitigating the cost drivers requires collaboration efforts involving multiple stakeholders from the private and public sector; and 3) Leadership is essential to implement the recommendations. About the Urban Land Institute The Urban Land Institute www. uli.org is a nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of

• •Improve the flexibility of existing sources of financing and create new financial products to better meet needs. This includes exploring entity-level financial products; facilitating the acquisition of existing multifamily properties through direct subsidies, public-private partnerships or

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land and in creating and sustaining thriving communities worldwide. Established in 1936, the institute has more than 30,000 members worldwide representing all aspects of land use and development disciplines. About the ULI Terwilliger Center for Housing The ULI Terwilliger Center for Housing engages in a multifaceted program of work that furthers the development of mixed-income, mixed-use communities with a full spectrum of housing affordability. The center was established in 2007 by J. Ronald Terwilliger, former ULI chairman and chairman emeritus of Trammell Crow Residential. About Enterprise Community Partners Enterprise Community Partners works with partners nationwide to build opportunity. Enterprise creates and advocates for affordable homes in thriving communities linked to jobs, good schools, health care services, and transportation. Enterprise lends funds, finance development, and manage and build affordable housing while shaping new strategies, solutions, and policy. Over more than 30 years, Enterprise has created 300,000 homes, invested nearly $14 billion, and touched millions of lives. Join us at www. EnterpriseCommunity.com or www. EnterpriseCommunity.org.

Jerry Kendall (720) 280-7431

www.multifamilycap.com Why do Customers keep coming back to Multifamily Capital Advisors. There are more than 700 reasons. We eat, breathe, and live apartment financing across Colorado and over the last 13 years we have closed more than 700 Apartment loans totaling more than 25,000 units. We get it and we get deals done.

We specialize in: 

Small Apartment Properties

Capital Sources include: 

Local Banks and Credit Unions

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Garden Apartments

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Fannie Mae/Freddie Mac

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High Rise Apartments

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FHA/HUD

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Affordable/Subsidized

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Insurance Companies

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Student Housing

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Conduits (CMBS)

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Senior Housing



Under Performing Projects

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Conceptualizing Your Deal, Representing Your Interests

Regional and Money Center Banks

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Mezzanine Funds

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Private Money

We work for our customers as advisors and analysts. Our customers benefit by getting our vast transaction experience and our strong lender relationships to ultimately execute their investment strategy, no matter where they are on the deal horizon. Use Multifamily Capital Advisors to accomplish your goals and build wealth. Call Us today!

Jerry Kendall Managing Director (720) 280-7431 direct jerrykendall@multifamilycap.com

Rental Housing journal Colorado • January 2014